Minneapolis, MN – On Sept. 1, a new federal rule will apply a four-month limit on the duration of short-term health insurance plans – including renewals – unless a state has stricter rules in place. Healthinsurance.org is urging consumers to take note of the new rule – which is significantly stricter than current duration limits in most states – and to plan for replacement coverage.
“The point of the new rule is to ensure short-term health plans are only being used to cover short coverage gaps between other health plans,” said Louise Norris, a health policy analyst for healthinsurance.org. “But since that’s not how some consumers are currently using these plans, it’s important to let people know things are changing, and soon.”
As many as 1.5 million people were estimated by the Congressional Budget Office to be enrolled annually in short-term limited duration insurance plans as of 2019.
Here are three things for consumers to consider in light of the new limits:
The limits affect initial plan terms and renewals. The new federal rule, which will apply to plans sold or issued on or after Sept. 1, 2024, will limit initial terms to three months, and total duration – including renewals – to no more than four months. After a four-month policy has expired, a consumer will not be able to buy another short-term policy from the same insurer within 12 months of the effective date of the first policy. Since 2018, federal rules have allowed short-term health plans to have initial terms of up to 364 days and a total duration of up to 36 months with renewals, except where states adopted tighter restrictions.
“This is going to be a big shift for a lot of people in states across the country,” said Norris. “While these plans were never intended to be long-term plans, some people have been relying on them for extended periods of time in recent years. That won’t be an option moving forward.”
The rule’s impact will vary by state. The new federal rule is more restrictive than what is currently allowed in most states. However, there are 17 states, and the District of Columbia, where short-term health plans are either not allowed or not offered by insurers, or where duration limits are stricter than the new limits, so the rule doesn’t change anything for those states. In Washington, D.C. and 14 of those states, there are no short-term plans currently available for purchase. Three states – Delaware, Maryland, and Oregon – already limit short-term plans to three months in duration.
“It’s in the states where this will be a big shift – like in Florida, Texas and Pennsylvania, – where consumers need to be made aware of the pending rule change,” Norris said. “But anyone enrolled in a short-term health plan, or planning to take advantage of this insurance option, should make sure they understand how the rules are changing.”
Consumers have options, if they plan ahead. The timeline for the new short-term health plan rule allows consumers to buy a short-term plan on or after Sept. 1 and potentially keep it through the end of the year. They will then have an opportunity to enroll in an Affordable Care Act (ACA) health plan through the Marketplace for 2025.
Open enrollment for ACA-compliant individual health plans has a limited enrollment window that starts Nov. 1 and runs through Jan. 15 in most states. Consumers may be able to enroll in a Marketplace plan immediately if they are eligible for a special enrollment period.
“Whether you are enrolled in a short-term health plan before or after the new rule comes into play in September, it’s important to have a plan for enrolling in major medical coverage during the open enrollment window,” explained Norris. “If you don’t time things just right, you could end up with a gap in coverage until the next open enrollment period rolls around the following year.”
Healthinsurance.org provides online resources for consumers about individual and family health insurance. Healthinsurance.org, owned by HealthInsurance.org, LLC, has been providing consumer information about health insurance and health reform for over 25 years.
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