On March 28, 2024, significant new regulations concerning short-term health insurance were introduced by the Biden administration. The Departments of Health and Human Services, Labor, and the Treasury have collectively issued final rules to reign in the scope of short-term, limited-duration insurance (STLDI) plans. Set to go into effect later this year, these regulations stem from proposals made on July 12, 2023.

The aim is straightforward: to reduce the financial burden on consumers who find themselves facing unexpectedly high medical bills under short-term plans. These changes are designed to better align with the Affordable Care Act’s (ACA) objectives by improving access to both affordable and comprehensive health coverage, strengthening the insurance market, and helping consumers make more informed decisions about their health insurance options.

What is short term health insurance?

Short-term health insurance plans are designed to provide temporary coverage for individuals between standard policies. These plans are particularly suited for those who find themselves without health insurance due to job changes, other life transitions, or when awaiting benefits from a new employer.

Background and Evolution of Short-Term Health Insurance

Initially introduced as a stopgap for health coverage gaps, short-term plans have evolved significantly, particularly influenced by changing administrations and healthcare laws.

Under the Trump administration, the duration of short-term health insurance policies was extended, allowing longer periods of coverage that deviated from the original intent of providing only brief coverage gaps.

The Biden administration has introduced reforms that focus on increasing consumer protections, ensuring that short-term plans are not a substitute for comprehensive health insurance but a temporary solution as originally intended.

The ACA’s emphasis on comprehensive coverage has highlighted the limitations of short-term health insurance, prompting ongoing adjustments to ensure these plans do not undermine the broader goals of the ACA.

Recent Policy Updates for Short Term Insurance

2024 brought forth final rules that aim to safeguard consumers by imposing stricter regulations on what short-term plans must cover and how they are marketed. These changes include enhanced disclosures about what short-term plans do not cover and limitations on pre-existing condition exclusions. While these plans are not meant to offer the same level of coverage as ACA plans, the new rules try to make sure consumers are properly informed about the limitations of short-term plans, often referred to derogatively as “junk” insurance. Recent policy adjustments have aimed to close loopholes that previously allowed short-term plans to be used for years instead of for a short-term period of a few months.

Duration of coverage and renewal policies

The final rule clarifies the maximum duration of short-term plans and sets clear guidelines on renewability to prevent these plans from being used as long-term health insurance alternatives. Under the new rules, the initial contract term for STLDI is capped at three months, with a possible one-month renewal for a maximum potential coverage period of four months. This is a significant shift from the previous rules, which allowed initial terms of less than 12 months and total coverage of up to 36 months with renewals.

These changes aim to make it easier for consumers to distinguish between STLDI and more comprehensive insurance options, minimizing the risk of individuals relying on these short-term plans as a substitute for long-term, comprehensive coverage. This adjustment reinforces STLDI’s role in providing temporary safety during brief coverage gaps, helping to protect consumers from unexpected financial and health risks.

Additionally, the latest updates to the rules concerning short-term, limited-duration insurance (STLDI) tackle the issue known as “stacking.” This occurs when insurers, directly or through associated companies, provide back-to-back STLDI policies to the same policyholder within a single year. The goal is to sidestep regulations limiting the short-term nature of these plans. Now, any renewal or extension from the same insurer or its affiliates within 12 months counts towards the overall permitted duration. This change ensures that STLDI remains truly temporary and prevents consumers from inadvertently relying on it as a long-term insurance solution, which it’s not designed to be.

Coverage and benefits

While short-term health insurance can be a vital safety net, it’s essential to weigh its limitations against your specific health needs and circumstances.

Short-term health insurance is characterized by its limited scope and duration, and it’s important to recognize what it does and doesn’t cover:

What Short-Term Insurance Covers:

• May cover basic medical services for unexpected illnesses and injuries.
• Can provide some level of emergency service coverage.

What Short-Term Insurance Does Not Cover:

• Does not cover preexisting conditions such as diabetes, cancer, stroke, arthritis, heart disease, and mental health or substance use disorders.
• Lacks coverage for essential health services including prescription drugs, preventive screenings, maternity care, hospitalization, pediatric care, and physical therapy.
• Many significant medical costs may not be covered because short-term insurance do not have a cap on out-of-pocket expenses and may stop paying any expenses after a maximum limit on insurance payouts is reached.
• Does not qualify for federal financial assistance for premiums and out-of-pocket costs.
• Does not meet federal standards for comprehensive health coverage typically found in Marketplace plans.

The latest updates to the federal rules also include changes to the notice requirements for short-term, limited-duration insurance (STLDI) to ensure that consumers can easily tell the difference between STLDI and comprehensive health coverage. The new notice standard adopts clear, straightforward language designed to be easily understood by consumers. This notice must be clearly visible on the first page of the insurance policy, certificate, or contract, including any documents for renewals and extensions. It’s also required to be included in all marketing materials, applications, and during the enrollment or re-enrollment processes. This step aims to enhance transparency and help consumers make more informed decisions about their health insurance options.  This notice is provided at the end of this article.

Enrollment in Short-Term Plans: What You Need to Know

Can Short-Term Insurance Be Canceled at Any Time?

Understanding the terms of cancellation is crucial as these plans can typically be terminated with much greater flexibility than standard ACA-compliant plans.

Processing Time: How Long Does It Take for Coverage to Kick In?

Enrollment in short-term health insurance can be swift, with coverage starting almost immediately after approval, which is often quicker than standard health insurance applications.

What Happens When Short-Term Insurance Expires?

It’s important to plan ahead as once short-term insurance expires, you must secure new coverage or potentially face a gap without any insurance protection.

Enrollment Period Considerations and State-Level Differences

Unlike ACA plans, enrollment in short-term plans is not restricted to an open enrollment period and can vary significantly from state to state. Staying informed about the latest changes and understanding how they affect your options will help you make the best choice for your situation. As the health insurance landscape continues to evolve, staying updated on short-term insurance trends and regulations will ensure you are well-prepared to navigate this option.

Some states prohibit or place significant restrictions on the sale of short-term policies. In 2024, these states include: Washington, California, Colorado, New Mexico, Hawaii, New York, Vermont, New Hampshire, Maine, Massachusetts, Connecticut, New Jersey, and District of Columbia. Other states are receptive to short-term health insurance as an affordable option for consumers and means of reducing the number of state residents who are uninsured.

Impact of Policy Updates

Health policy experts are weighing in on the recent changes to short-term health insurance, highlighting both the benefits and possible drawbacks. The updates are widely seen as a move to protect consumers by making these policies more transparent and less of a long-term alternative to comprehensive health insurance plans. Beneficiaries of these changes include individuals who need temporary coverage without the risk of misleading terms that could leave them underinsured. However, some experts caution that these tighter regulations might lead to fewer options in the short-term market, potentially leaving a gap for those who cannot afford comprehensive plans and do not qualify for subsidies under the Affordable Care Act (ACA).

Navigating Short Term Health Insurance Options

For those still considering short-term health insurance, understanding how to navigate and evaluate these plans is crucial. When exploring options, start by visiting the short-term plan landing page at eHealthInsurance to view available plans. Consider the cost implications: although premiums for short-term plans may be lower, the out-of-pocket expenses can be significant, especially if the plan covers little beyond emergency care. Assess your coverage needs thoroughly—understand what the plan covers and more importantly, what it does not. Be aware of limitations, such as exclusions for pre-existing conditions and the lack of guaranteed renewability. These factors are essential to keep in mind to ensure that the plan you choose truly aligns with your temporary coverage needs without unforeseen financial burdens.

Alternatives to Short Term Health Insurance

If short-term health insurance no longer meets your needs or if regulatory changes have made you reconsider your options, there are several alternatives to explore. Consider looking into ACA-compliant plans which offer comprehensive coverage and can be more financially accessible with subsidies available through the Marketplace. Other options include Medicaid, which is available to eligible individuals and families with limited income, or exploring employer-sponsored plans if you or your spouse are employed where such benefits are offered. Each of these alternatives comes with its own set of benefits and considerations, ensuring a range of choices to suit different health coverage needs and financial circumstances.