38212 Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Rules and Regulations 

1Public Law 104–191, 110 Stat. 1936 (August 21, 

1996). 

2Public Law 104–204, 110 Stat. 2944 (September 

26, 1996). 

3Public Law 110–343, 122 Stat. 3881 (October 3, 

2008). 

4Public Law 104–204, 110 Stat. 2935 (September 

26, 1996). 

5Public Law 105–277, 112 Stat. 2681–436 

(October 21, 1998). 

6Public Law 110–233, 122 Stat. 881 (May 21, 

2008). 

7Public Law 111–3, 123 Stat. 64 (February 4, 

2009). 

8Public Law 110–381, 122 Stat. 4081 (October 9, 

2008). 

9The Patient Protection and Affordable Care Act, 

Public Law 111–148, was enacted on March 23, 

2010, and the Health Care and Education 

Reconciliation Act of 2010, Public Law 111–152, 

was enacted on March 30, 2010. These statutes are 

collectively referred to as PPACA. 

10 82 FR 48385. 

11The eligibility standards for exemptions can be 

found at 45 CFR 155.605. Section 5000A of the 

Code and Treasury regulations at 26 CFR 1.5000A– 

3 provide exemptions from the requirement to 

maintain MEC for the following individuals: (1) 

Members of recognized religious sects; (2) members 

of health care sharing ministries; (3) exempt 

noncitizens; (4) incarcerated individuals; (5) 

individuals with no affordable coverage; (6) 

individuals with household income below the 

income tax filing threshold; (7) members of 

federally recognized Indian tribes; (8) individuals 

who qualify for a hardship exemption certification; 

and (9) individuals with a short coverage gap of a 

continuous period of less than 3 months in which 

the individual is not covered under MEC. 

12Public Law 115–97, 131 Stat. 2054. 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 54 

[TD 9837] 

RIN 1545–BO41 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Part 2590 

RIN 1210–AB86 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

45 CFR Parts 144, 146, and 148 

[CMS–9924–F] 

RIN 0938–AT48 

Short-Term, Limited-Duration 

Insurance 

AGENCY: Internal Revenue Service, 

Department of the Treasury; Employee 

Benefits Security Administration, 

Department of Labor; Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services. 

ACTION: Final rule. 

SUMMARY: This final rule amends the 

definition of short-term, limitedduration insurance for purposes of its 

exclusion from the definition of 

individual health insurance coverage. 

This action is being taken to lengthen 

the maximum duration of short-term, 

limited-duration insurance, which will 

provide more affordable consumer 

choices for health coverage. 

DATES:

Effective date: These final regulations 

are effective on October 2, 2018. 

Applicability date: Insurance policies 

sold on or after October 2, 2018 must 

meet the definition of short-term, 

limited-duration insurance contained in 

this final rule in order to be considered 

such insurance. 

FOR FURTHER INFORMATION CONTACT: 

Amber Rivers or Matthew Litton, 

Department of Labor, (202) 693–8335; 

Dara Alderman, Internal Revenue 

Service, Department of the Treasury, 

(202) 317–5500; David Mlawsky, 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, (410) 786–1565. 

Customer Service Information: 

Individuals interested in obtaining 

information from the Department of 

Labor concerning employment-based 

health coverage laws may call the 

Employee Benefits Security 

Administration (EBSA) Toll-Free 

Hotline, at 1–866–444–EBSA (3272) or 

visit the Department of Labor’s website 

(http://www.dol.gov/ebsa). In addition, 

information from the Department of 

Health and Human Services (HHS) on 

private health insurance for consumers 

can be found on the Centers for 

Medicare & Medicaid Services (CMS) 

website (www.cms.gov/cciio) and 

information on health reform can be 

found at www.HealthCare.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

This rule finalizes amendments to the 

definition of ‘‘short-term, limitedduration insurance’’ for purposes of its 

exclusion from the definition of 

‘‘individual health insurance coverage’’ 

in 26 CFR part 54, 29 CFR part 2590, 

and 45 CFR part 144. 

A. General Statutory Background and 

Enactment of PPACA 

The Health Insurance Portability and 

Accountability Act of 1996 (HIPAA) 1

added title XXVII to the Public Health 

Service Act (PHS Act), part 7 to the 

Employee Retirement Income Security 

Act of 1974 (ERISA), and Chapter 100 to 

the Internal Revenue Code (the Code), 

providing portability and 

nondiscrimination rules with respect to 

health coverage. These provisions of the 

PHS Act, ERISA, and the Code were 

later augmented by other laws, 

including the Mental Health Parity Act 

of 1996,2 the Paul Wellstone and Pete 

Domenici Mental Health Parity and 

Addiction Equity Act of 2008,3 the 

Newborns’ and Mothers’ Health 

Protection Act,4 the Women’s Health 

and Cancer Rights Act,5 the Genetic 

Information Nondiscrimination Act of 

2008,6 the Children’s Health Insurance 

Program Reauthorization Act of 2009,7

Michelle’s Law,8 and the Patient 

Protection and Affordable Care Act, as 

amended by the Health Care and 

Education Reconciliation Act of 2010 

(PPACA).9

PPACA reorganizes, amends, and 

adds to the provisions of Part A of title 

XXVII of the PHS Act relating to group 

health plans and health insurance 

issuers in the group and individual 

markets. PPACA added section 715 of 

ERISA and section 9815 of the Code to 

incorporate provisions of Part A of title 

XXVII of the PHS Act (generally, 

sections 2701 through 2728 of the PHS 

Act) into ERISA and the Code. 

B. President’s Executive Order 

On October 12, 2017, President 

Trump issued Executive Order 13813 

entitled ‘‘Promoting Healthcare Choice 

and Competition Across the United 

States.’’ 10 This Executive Order states 

in relevant part: ‘‘Within 60 days of the 

date of this order, the Secretaries of the 

Treasury, Labor, and Health and Human 

Services shall consider proposing 

regulations or revising guidance, 

consistent with law, to expand the 

availability of [short-term, limitedduration insurance]. To the extent 

permitted by law and supported by 

sound policy, the Secretaries should 

consider allowing such insurance to 

cover longer periods and be renewed by 

the consumer.’’ 

C. 2017 Tax Legislation 

Section 5000A of the Code, added by 

PPACA, provides that all non-exempt 

applicable individuals must maintain 

minimum essential coverage (MEC) or 

pay the individual shared responsibility 

payment.11 On December 22, 2017, the 

President signed tax reform legislation 

into law.12 This legislation includes a 

provision under which the individual 

shared responsibility payment under 

section 5000A of the Code is reduced to 


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13Sections 733(b)(4) of ERISA and 2791(b)(4) of 

the PHS Act provide that group health insurance 

coverage means ‘‘in connection with a group health 

plan, health insurance coverage offered in 

connection with such plan.’’ Sections 733(a)(1) of 

ERISA and 2791(a)(1) of the PHS Act provide that 

a group health plan is generally any plan, fund, or 

program established or maintained by an employer 

(or employee organization or both) for the purpose 

of providing medical care to employees or their 

dependents (as defined under the terms of the plan) 

directly, or through insurance, reimbursement, or 

otherwise. There is no corresponding provision 

excluding short-term, limited-duration insurance 

from the definition of group health insurance 

coverage. Thus, any health insurance that is sold in 

the group market and purports to be short-term, 

limited-duration insurance must comply with 

applicable group health insurance requirements 

established under Part A of title XXVII of the PHS 

Act, part 7 of ERISA, and Chapter 100 of the Code. 

14The definition of individual health insurance 

coverage (and its exclusion of short-term, limitedduration insurance) has some limited relevance 

with respect to certain provisions that apply to 

group health plans and group health insurance 

issuers over which the Departments of Labor and 

the Treasury have jurisdiction. For example, an 

individual who loses coverage due to moving out 

of an HMO service area in the individual market 

triggers a special enrollment right into a group 

health plan. See 26 CFR 54.9801–6(a)(3)(i)(B), 29 

CFR 2590.701–6(a)(3)(i)(B), and 45 CFR 

146.117(a)(3)(i)(B). Also, a group health plan that 

wraps around individual health insurance coverage 

is an excepted benefit if certain conditions are 

satisfied. See 26 CFR 54.9831–1(c)(3)(vii), 29 CFR 

2590.732(c)(3)(vii), and 45 CFR 146.145(b)(3)(vii). 

15 62 FR 16894 at 16928, 16942, 16958 (April 8, 

1997); see also 69 FR 78720 (December 30, 2004). 

16 81 FR 38019. 

17 81 FR 38019, 38032. 

18 Id. at 38032. 

19 81 FR 75316 (October 31, 2016). 

20 82 FR 26885. 

$0, effective for months beginning after 

December 31, 2018. 

D. Short-Term, Limited-Duration 

Insurance 

Short-term, limited-duration 

insurance is a type of health insurance 

coverage that was primarily designed to 

fill temporary gaps in coverage that may 

occur when an individual is 

transitioning from one plan or coverage 

to another plan or coverage. Section 

2791(b)(5) of the PHS Act provides 

‘‘[t]he term ‘individual health insurance 

coverage’ means health insurance 

coverage offered to individuals in the 

individual market, but does not include 

short-term limited duration 

insurance.’’ 13 However, the PHS Act 

does not define short-term, limitedduration insurance. In 1997, the 

Department of the Treasury, the 

Department of Labor, and the 

Department of Health and Human 

Services (together, the Departments), 

issued regulations implementing the 

portability and renewability 

requirements of HIPAA, which included 

definitions of individual health 

insurance coverage as well as shortterm, limited-duration insurance.14

Those regulations defined short-term, 

limited-duration insurance as ‘‘health 

insurance coverage provided pursuant 

to a contract with an issuer that has an 

expiration date specified in the contract 

(taking into account any extensions that 

may be elected by the policyholder 

without the issuer’s consent) that is less 

than 12 months after the original 

effective date of the contract.’’ 15

Short-term, limited-duration 

insurance is generally exempt from the 

Federal market requirements applicable 

to health insurance sold in the 

individual market because it is not 

considered individual health insurance 

coverage. For example, short-term, 

limited-duration insurance is not 

subject to the requirement to provide 

essential health benefits and it is not 

subject to the prohibitions on 

preexisting condition exclusions or 

lifetime and annual dollar limits. It is 

also not subject to requirements 

regarding guaranteed availability and 

guaranteed renewability. 

To address the issue of short-term, 

limited-duration insurance being sold as 

a type of primary coverage, as well as 

concerns regarding possible adverse 

selection impacts on the risk pools for 

PPACA-compliant plans, the 

Departments published a proposed rule 

on June 10, 2016 in the Federal Register 

entitled ‘‘Expatriate Health Plans, 

Expatriate Health Plan Issuers, and 

Qualified Expatriates; Excepted 

Benefits; Lifetime and Annual Limits; 

and Short-Term, Limited-Duration 

Insurance.’’ 16 The June 2016 proposed 

rule proposed changing the definition of 

short-term, limited-duration insurance 

that had been in place for nearly 20 

years by revising the definition to 

specify that short-term, limited-duration 

insurance could not provide coverage 

for 3 months or longer taking into 

account any extensions that may be 

elected by the policyholder with or 

without the issuer’s consent.17

The June 2016 proposed rule also 

proposed to require that the following 

notice be prominently displayed in the 

contract and in any application 

materials provided in connection with 

enrollment in short-term, limitedduration insurance, in at least 14 point 

type: 

THIS IS NOT QUALIFYING HEALTH 

COVERAGE (‘‘MINIMUM ESSENTIAL 

COVERAGE’’) THAT SATISFIES THE 

HEALTH COVERAGE REQUIREMENT OF 

THE AFFORDABLE CARE ACT. IF YOU 

DON’T HAVE MINIMUM ESSENTIAL 

COVERAGE, YOU MAY OWE AN 

ADDITIONAL PAYMENT WITH YOUR 

TAXES.18

After reviewing public comments and 

feedback received from stakeholders, on 

October 31, 2016, the Departments 

finalized the June 2016 proposed rule 

without change in a final rule published 

in the Federal Register entitled 

‘‘Excepted Benefits; Lifetime and 

Annual Limits; and Short-Term, 

Limited-Duration Insurance.’’ 19

On June 12, 2017, HHS published a 

request for information in the Federal 

Register entitled ‘‘Reducing Regulatory 

Burdens Imposed by the Patient 

Protection and Affordable Care Act & 

Improving Healthcare Choices to 

Empower Patients,’’ 20 which solicited 

public comments about potential 

changes to existing regulations and 

guidance that could promote consumer 

choice, enhance affordability of 

coverage for individual consumers, and 

affirm the traditional regulatory 

authority of the states in regulating the 

business of health insurance, among 

other goals. Several commenters stated 

that changes to the October 2016 final 

rule may provide an opportunity to 

achieve these goals. Consistent with 

many comments submitted on the June 

2016 proposed rule, commenters stated 

that shortening the permitted length of 

short-term, limited-duration insurance 

policies had deprived individuals of 

affordable coverage options. One 

commenter explained that due to the 

increased costs of PPACA-compliant 

major medical coverage, many 

financially-stressed individuals may be 

faced with a choice between short-term, 

limited-duration insurance coverage and 

going without any coverage at all. One 

commenter highlighted the need for 

short-term, limited-duration insurance 

coverage among individuals who are 

between jobs. Another commenter 

explained that states have the primary 

responsibility to regulate short-term, 

limited-duration insurance and opined 

that the October 2016 final rule was 

overreaching on the part of the federal 

government. 

In addition to considering these 

comments, the Departments also 

considered that, while individuals who 

qualify for premium tax credits (PTCs) 

under section 36B of the Code are 

largely insulated from premium 

increases for individual health 

insurance coverage (that is, the 

government, and thus federal taxpayers, 

largely bear the cost of the increases), 

individuals who are not eligible for 

PTCs are particularly harmed by 

increased premiums in the individual 

market due to a lack of other, more 

affordable alternative coverage options. 

Based on CMS data on Exchangeeffectuated enrollment and payment, 


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21Centers for Medicare and Medicaid Services, 

‘‘Trends in Subsidized and Unsubsidized 

Individual 

Health Insurance Market Enrollment’’, July 2, 

2018. Available at https://www.cms.gov/CCIIO/ 

Programs-and-Initiatives/Health-InsuranceMarketplaces/Downloads/2018-07-02-TrendsReport-2.pdf. 22Note, however, that the reduction in the 

number of unsubsidized enrollees is due to several 

different effects. As implied in the main text, some 

of the reduction is attributable to unsubsidized 

enrollees dropping coverage due to premium 

increases. Unsubsidized enrollees might also have 

left the Exchange because the labor market has 

improved, which might have resulted in increased 

availability of employer-sponsored coverage. In 

addition, because Exchange enrollees pay a fixed 

share of income for premiums with PTC covering 

the remainder, when premiums rise some 

unsubsidized enrollees become subsidized, even if 

enrollment does not change at all. Between 

February 2017 and February 2018, effectuated 

enrollment fell by about 209,000 among the 

unsubsidized but rose by 522,000 for the 

subsidized, suggesting some movement from 

unsubsidized to subsidized status without a change 

in enrollment. See ‘‘2017 Effectuated Enrollment 

Snapshot’’, June 12, 2017, available at https://

downloads.cms.gov/files/effectuated-enrollmentsnapshot-report-06-12-17.pdf and ‘‘Early 2018 

Effectuated Enrollment Snapshot’’, June 2, 2018, 

available at https://www.cms.gov/CCIIO/Programsand-Initiatives/Health-Insurance-Marketplaces/ 

Downloads/2018-07-02-Trends-Report-1.pdf. 

23 Kaiser Family Foundation, ‘‘Insurer 

Participation on ACA Marketplaces, 2014–2018,’’ 

November 10, 2017. Available at http://

www.kff.org/health-reform/issue-brief/insurerparticipation-on-aca-marketplaces/. 

24Centers for Medicare and Medicaid Services, 

‘‘Trends in Subsidized and Unsubsidized 

Individual Health Insurance Market Enrollment’’, 

July 2, 2018. Available at https://www.cms.gov/ 

CCIIO/Programs-and-Initiatives/Health-InsuranceMarketplaces/Downloads/2018-07-02-TrendsReport-2.pdf. 25 83 FR 7437 (February 21, 2018). 

average monthly enrollment for 

individuals without PTCs declined by 

1.3 million, or 20 percent, between 2016 

and 2017.21 Some of this decline is 

likely a response to increased 

premiums.22 Further, in 2018, about 26 

percent of enrollees (living in 52 percent 

of counties) have access to just one 

issuer in the Exchange.23 Such 

monopoly markets, which are more 

predominant in rural counties, do not 

provide meaningful choice for 

consumers and cause premiums to be 

higher than they would be in a 

competitive market. Additionally, 

although the October 2016 final rule 

was intended to boost enrollment in 

individual health insurance coverage by 

reducing the maximum duration of 

coverage in short-term, limited-duration 

plans, it did not succeed in that regard. 

Rather, average monthly enrollment in 

individual market plans decreased by 10 

percent between 2016 and 2017, while 

premiums increased by 21 percent.24

Therefore, the Departments determined 

that the expansion of additional 

coverage options such as short-term, 

limited-duration insurance is necessary, 

as premiums have escalated and 

affordable choices in the individual 

market have dwindled. 

Accordingly, in light of Executive 

Order 13813 directing the Departments 

to consider proposing regulations or 

revising guidance to expand the 

availability of short-term, limitedduration insurance, as well as in 

response to continued feedback from 

stakeholders expressing concerns about 

the October 2016 final rule, the 

Departments published a proposed rule 

on February 21, 2018 entitled ‘‘ShortTerm, Limited-Duration Insurance’’ 

under which the Departments proposed 

to amend the definition of short-term, 

limited-duration insurance to provide 

(as did the regulations implementing 

HIPAA) that such insurance may have a 

maximum coverage period of less than 

12 months after the original effective 

date of the contract, taking into account 

any extensions that may be elected by 

the policyholder without the issuer’s 

consent.25

In addition, the Departments 

proposed to revise the content of the 

notice that must appear in the contract 

and any application materials provided 

in connection with enrollment in shortterm, limited-duration insurance, to be 

prominently displayed (in at least 14 

point type), and to read as follows: 

THIS COVERAGE IS NOT REQUIRED TO 

COMPLY WITH FEDERAL REQUIREMENTS 

FOR HEALTH INSURANCE, PRINCIPALLY 

THOSE CONTAINED IN THE AFFORDABLE 

CARE ACT. BE SURE TO CHECK YOUR 

POLICY CAREFULLY TO MAKE SURE YOU 

UNDERSTAND WHAT THE POLICY DOES 

AND DOESN’T COVER. IF THIS COVERAGE 

EXPIRES OR YOU LOSE ELIGIBILITY FOR 

THIS COVERAGE, YOU MIGHT HAVE TO 

WAIT UNTIL AN OPEN ENROLLMENT 

PERIOD TO GET OTHER HEALTH 

INSURANCE COVERAGE. ALSO, THIS 

COVERAGE IS NOT ‘‘MINIMUM 

ESSENTIAL COVERAGE’’. IF YOU DON’T 

HAVE MINIMUM ESSENTIAL COVERAGE 

FOR ANY MONTH IN 2018, YOU MAY 

HAVE TO MAKE A PAYMENT WHEN YOU 

FILE YOUR TAX RETURN UNLESS YOU 

QUALIFY FOR AN EXEMPTION FROM THE 

REQUIREMENT THAT YOU HAVE HEALTH 

COVERAGE FOR THAT MONTH. 

Under the proposed rule, the final two 

sentences of the notice would only be 

required for policies sold on or after the 

applicability date of the final rule, if 

finalized, that have a coverage start date 

before January 1, 2019, because the 

individual shared responsibility 

payment is reduced to $0 for months 

beginning after December 2018. 

The Departments proposed that the 

rule would be effective 60 days after 

publication of the final rule in the 

Federal Register, and with respect to 

the applicability date, the Departments 

proposed that policies sold on or after 

the 60th day following publication of 

the final rule would have to meet the 

definition of short-term, limitedduration insurance in the final rule in 

order to be considered short-term, 

limited-duration insurance. Further, the 

Departments proposed that group health 

plans and group health insurance 

issuers, to the extent they must 

distinguish between short-term, limitedduration insurance and individual 

health insurance coverage, must apply 

the definition of short-term, limitedduration insurance in the final rule as 

of the 60th day following publication of 

the final rule. 

Request for Comments 

The Departments requested comments 

on all aspects of the proposed rule, 

including whether the length of shortterm, limited-duration insurance should 

be some other duration. Also, the 

Departments requested comments on 

any regulations or other guidance or 

policy that limits issuers’ flexibility in 

designing short-term, limited-duration 

insurance or poses barriers to entry into 

the short-term, limited-duration 

insurance market. In addition, the 

Departments specifically sought 

comments on both the conditions under 

which issuers should be able to allow 

short-term, limited-duration insurance 

to continue for 12 months or longer with 

the issuer’s consent and the revised 

notice. 

The Departments requested comments 

on the economic impact analysis 

provided in the proposed rule, and 

welcomed other estimates of the 

increase in enrollment in short-term, 

limited-duration insurance under the 

proposal, and on the health status and 

age of individuals who would purchase 

these policies. 

The comment period on the proposed 

rule ended on April 23, 2018. The 

Departments received approximately 

12,000 comments. After careful 

consideration of these comments, the 

Departments are issuing these final 

rules. 

II. Overview of the Final Regulations 

After considering the public 

comments, the Departments are 

finalizing the proposed rule with some 

modifications. Under this final rule, 

short-term, limited-duration insurance 

means health coverage provided 

pursuant to a contract with an issuer 

that has an expiration date specified in 

the contract that is less than 12 months 

after the original effective date of the 

contract and, taking into account 


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26See section 715 of ERISA and section 9815 of 

the Code, which incorporate provisions of Part A 

of title XXVII of the PHS Act (generally, sections 

2701 through 2728 of the PHS Act) into ERISA and 

the Code. See also, section 104 of HIPAA. See also, 

sections 505 and 734 of ERISA, sections 2761 and 

2792 of the PHS Act, section 1321(a)(1) and (c) of 

PPACA and section 7805 of the Code. 

27As discussed in footnote 14, the definition of 

short-term, limited-duration insurance also has 

some relevance with respect to certain provisions 

that apply to group health plans and group health 

insurance issuers over which the Departments of 

Labor and the Treasury have jurisdiction. 

28See section 2792 of the PHS Act. 

renewals or extensions, has a duration 

of no longer than 36 months in total. 

This final rule also retains the 

requirement that issuers of short-term, 

limited-duration insurance display one 

of two versions of a notice prominently 

in the contract and in any application 

materials provided in connection with 

enrollment in such coverage in at least 

14-point type. However, the language of 

the notice in the final rule is revised to 

read as follows: 

This coverage is not required to comply 

with certain federal market requirements for 

health insurance, principally those contained 

in the Affordable Care Act. Be sure to check 

your policy carefully to make sure you are 

aware of any exclusions or limitations 

regarding coverage of preexisting conditions 

or health benefits (such as hospitalization, 

emergency services, maternity care, 

preventive care, prescription drugs, and 

mental health and substance use disorder 

services). Your policy might also have 

lifetime and/or annual dollar limits on health 

benefits. If this coverage expires or you lose 

eligibility for this coverage, you might have 

to wait until an open enrollment period to get 

other health insurance coverage. Also, this 

coverage is not ‘‘minimum essential 

coverage.’’ If you don’t have minimum 

essential coverage for any month in 2018, 

you may have to make a payment when you 

file your tax return unless you qualify for an 

exemption from the requirement that you 

have health coverage for that month. 

As under the proposed rule, the last 

two sentences of the notice are only 

required for policies sold on or after the 

applicability date of this final rule that 

have a coverage start date before January 

1, 2019. As explained in more detail 

later in this preamble, in response to 

comments, the notice in the final rule 

contains additional specificity, 

including a list of health benefits that 

might not be covered. However, the 

Departments do not have evidence that 

short-term, limited-duration insurance 

policies have not historically or are 

unlikely to cover hospitalization and 

emergency services. Further, this final 

rule provides that the notice may 

contain any additional information as 

required by applicable state law and 

that the notice typeface should be in 

sentence case, rather than all capital 

letters. 

Based on comments submitted, the 

Departments have also revised the 

estimates of the impact of short-term, 

limited-duration coverage on the 

individual health insurance market and 

the uninsured as explained further 

below. In addition, a severability clause 

has been added to this final rule. 

Finally, as was proposed in the 

proposed rule, this final rule is effective 

and applicable 60 days after publication 

in the Federal Register. 

Comments on Authority 

Several commenters questioned the 

Departments’ legal authority with regard 

to various aspects of the proposed rule. 

One commenter stated that because the 

PHS Act exempts short-term, limitedduration insurance from the definition 

of ‘‘health insurance coverage,’’ there is 

no delegation of Congressional authority 

giving HHS the power to define shortterm, limited-duration insurance. 

Several commenters questioned whether 

the Departments have legal authority to 

define short-term, limited-duration 

insurance as having a maximum 

contract term of less than 12 months. 

One commenter stated that allowing 

such coverage to last nearly as long as 

individual health insurance coverage 

would be arbitrary, capricious, and not 

in accordance with law. Another 

commenter stated that the Departments 

failed to provide any reasonable 

justification for the change and 

expressed concern that short-term, 

limited-duration insurance will harm 

consumers and the individual market, 

will increase premiums for individual 

market plans, and will increase PTC 

expenditures. The commenter noted 

that despite acknowledging these 

potential outcomes of the proposed rule, 

the Departments stated that they are 

proposing this action to provide more 

affordable consumer choice for health 

coverage. The commenter stated that 

this does not suffice to explain the 

decision for a rule change that is 

inconsistent with the Departments’ 

earlier position, cannot carry the force 

of law, and is not entitled to deference 

and therefore is arbitrary and 

capricious, and cannot stand. One 

commenter stated that none of the three 

preambles supporting the less-than-12- 

month duration (the 1997 rules, the 

2004 rules and the proposed rule that 

this rule finalizes) provide a ‘‘reasoned 

explanation’’ for this choice as the 

maximum length of coverage. Another 

commenter stated that 3 months is a 

reasonable, ordinary-English meaning of 

the word ‘‘short,’’ that the Departments’ 

adoption of it in 2016 was wellreasoned, and that neither the facts nor 

the statute have changed, only a policy 

agenda inimical to PPACA is new. 

Another commenter stated that the 

definition in the proposed rule is 

inconsistent with the statutory text of 

PHS Act section 2791(b)(5) because the 

proposed maximum duration for shortterm, limited-duration insurance 

coverage is not sufficiently shorter than 

individual health insurance coverage to 

be consistent with any reasonable 

reading of the statutory phrase ‘‘shortterm.’’ This commenter also asserted 

that the proposed definition is 

inconsistent with PPACA, because an 

issuer meeting the proposed definition 

could avoid all PPACA insurance 

reforms, which would deprive 

consumers of PPACA’s protections and 

damage individual market risk pools. 

Taking all this into consideration, the 

commenter asserted that the proposed 

definition is thus arbitrary and 

capricious. 

The Departments disagree with these 

commenters that questioned our legal 

authority. 

The Departments have clear statutory 

authority under the PHS Act to interpret 

undefined provisions of the PHS Act, 

ERISA, and the Code.26 In order to 

determine the scope of individual 

health insurance coverage, which is 

essential to allow enforcement of the 

rules that apply to individual health 

insurance coverage, the Departments 

must give meaning to the term shortterm, limited-duration insurance.27

Relatedly, Congress provided the 

Secretaries of HHS, Labor and the 

Treasury with explicit authority to 

promulgate regulations as may be 

necessary or appropriate to carry out the 

provisions of the PHS Act.28 Due to the 

absence of a statutory definition for the 

term short-term, limited-duration 

insurance, and the fact that the only 

reference to such coverage is as an 

exclusion from individual health 

insurance coverage, this includes the 

authority to issue regulations on shortterm, limited-duration insurance to 

define it and set standards that 

distinguish it from individual health 

insurance coverage. 

The Departments also disagree that 

the definition in the proposed rule and 

as revised in this final rule is 

inconsistent with PPACA. Both the 

proposed rule and the final rule 

establish federal standards for shortterm, limited-duration insurance in a 

manner that clearly distinguishes such 

insurance from the individual health 

insurance coverage that is subject to 

PPACA’s individual market 

requirements. Further, there are no 

explicit statutory standards governing 


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29See section 2792 of the PHS Act. 

the degree to which short-term, limitedduration insurance must vary from 

individual health insurance coverage, 

leaving it to the Departments to use 

their interpretive authority to 

distinguish between the two terms. 

Indeed, when the federal regulations for 

short-term, limited-duration insurance 

were first implemented in 1997, shortterm, limited-duration insurance was 

considered to be health insurance 

coverage with a period of coverage that 

was less than 12 months, as under the 

proposed rule. That standard was in 

place for nearly two decades without 

objection. As demonstrated by the 

definition of short-term, limitedduration insurance in this final rule, 

short-term, limited-duration insurance 

and individual health insurance 

coverage are distinguished by the 

differences in their initial contract 

terms, the maximum duration of a 

policy itself, and the types of notice 

requirements applicable to each type of 

coverage. The two types of insurance are 

further distinguished with respect to 

whether the coverage is considered 

MEC. In the Departments’ view, these 

differences are significant and sufficient 

to distinguish short-term, limitedduration insurance from individual 

health insurance coverage, and the 

definition of short-term, limitedduration insurance in this final rule is 

consistent with PPACA, is well 

reasoned, is clearly within the 

Departments’ authority, and is therefore 

not arbitrary and capricious. Rather than 

deprive consumers of PPACA 

protections, this final rule expands 

access to additional, more affordable 

coverage options for individuals, 

including those who might otherwise be 

uninsured, as well as to those who do 

not qualify for PTCs or who otherwise 

find individual health insurance 

coverage unattractive. Consumers who 

want comprehensive, individual health 

insurance coverage as defined by 

PPACA will continue to be able to 

purchase such coverage on a guaranteed 

availability and guaranteed renewability 

basis in the individual market. As to the 

comment regarding whether the rule is 

justified, see the discussion in the 

Regulatory Impact Analysis in this final 

rule for updated estimates of the impact 

of enrollment in short-term, limitedduration insurance on consumers and 

the individual market. 

As stated above, some commenters 

challenged the legal authority of the 

Departments to set a less-than-12 month 

maximum contract term, including 

extensions that may be elected by the 

policyholder without the issuer’s 

consent. In this final rule, the 

Departments instead set a less-than-12- 

month maximum on the length of the 

initial contract term. The Departments 

would have had the authority to do the 

former (had we chosen to do so), and 

also have the authority to do the latter. 

As explained above, the Departments 

have authority to establish regulatory 

standards for short-term, limitedduration insurance, including setting a 

limit on the length of the initial contract 

term. The Departments have explained 

in the proposed rule and elsewhere in 

this final rule that this regulatory action 

is necessary and appropriate to remove 

federal barriers that inhibit consumer 

access to additional, more affordable 

coverage options and support state 

efforts to develop innovative solutions 

in response to market-specific needs. 

This final rule recognizes the role that 

short-term, limited-duration insurance 

can fulfill, while at the same time 

distinguishing it from individual health 

insurance coverage by interpreting 

‘‘short-term’’ to mean an initial contract 

term of less than 12 months and 

implementing the ‘‘limited-duration’’ 

requirement by precluding renewals or 

extensions that extend a policy beyond 

a total of 36 months. See below for a 

discussion of the rationale for the 

interpretation of the ‘‘limited-duration’’ 

requirement to mean no longer than 36 

months. States remain free to adopt a 

definition with a shorter maximum 

initial contract term or shorter 

maximum duration (including renewals 

and extensions) for a policy to meet 

their specific market needs, including 

the adoption of strategies to mitigate 

adverse selection in the individual 

market. 

One commenter stated that unlike 

health insurance products sold in the 

non-group market, short-term, limitedduration insurance is exempt from 

federal regulation and is subject only to 

state regulation and that the extent of 

CMS’s statutory authority is to define 

what short-term, limited-duration 

insurance is. The commenter stated that 

the Departments have no legal authority 

to impose regulatory burdens or 

limitations on short-term, limitedduration insurance, such as the notice 

requirement. 

The Departments agree with the 

commenter that short-term, limitedduration insurance is exempt from the 

PHS Act’s individual market rules and 

is generally subject to state regulation. 

However, the Departments also have 

limited authority under the PHS Act to 

establish federal regulatory standards 

for short-term, limited-duration 

insurance, including standards related 

to the maximum length of the initial 

contract term, the maximum duration 

(including renewals and extensions) for 

a policy, and a consumer notice. This 

final rule establishes such federal 

standards for short-term, limitedduration insurance in a way that is 

necessary and appropriate to distinguish 

this coverage from individual health 

insurance coverage. As stated above, 

Congress provided the HHS, Labor, and 

Treasury Secretaries with explicit 

authority to promulgate regulations as 

may be necessary or appropriate to carry 

out the provisions of the PHS Act.29 The 

Departments believe that the federal 

regulatory definition of short-term, 

limited-duration insurance as set forth 

in this final rule, including the notice 

requirement, is necessary and 

appropriate to carry out the provisions 

of the PHS Act. As explained above, the 

Departments must give meaning to the 

undefined statutory term short-term, 

limited-duration insurance and the 

meaning must distinguish it from 

individual health insurance coverage. 

This is because the PHS Act imposes 

certain requirements on individual 

health insurance coverage, and does not 

impose those same requirements on 

short-term, limited-duration insurance. 

Further, the Departments believe it is 

necessary and appropriate for 

consumers considering the purchase of 

short-term, limited-duration insurance, 

and those actually purchasing such 

insurance, to be aware that such 

coverage is not subject to the federal 

individual market rules under the PHS 

Act. Therefore, one component of the 

federal standards for short-term, 

limited-duration insurance in this final 

rule is inclusion of the notice specified 

in this final rule, to inform applicants 

and enrollees that short-term, limitedduration insurance is not individual 

health insurance coverage and therefore 

is not required to meet the federal 

market requirements that apply to 

individual health insurance coverage. 

Defining short-term, limited-duration 

insurance in such a way that requires a 

short, standard description of how the 

coverage might vary from individual 

health insurance coverage allows for a 

clear determination by regulators that 

the policy is intended to be short-term, 

limited-duration insurance, facilitates 

compliance by issuers, and promotes 

ease of understanding by consumers. 

We further clarify that to the extent a 

health insurance policy sold to an 

individual in the non-group market 

includes the notice, and satisfies the 

other federal standards for short-term, 

limited-duration insurance in this final 

rule, it constitutes short-term, limitedduration insurance and is not subject to 


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the federal individual market rules 

under the PHS Act. As described 

elsewhere in this final rule, states can 

adopt a definition with a shorter 

maximum initial contract term and/or a 

shorter maximum duration of a policy, 

and can require issuers to provide 

additional information as part of the 

consumer notice. 

The proposed rule did not address 

whether any aspect (or standard) in the 

definition of short-term, limitedduration insurance should be 

considered independent of other 

provisions, and thus severable, if such 

part of the definition were to be 

determined invalid. Although there 

were no comments that directly 

addressed severability, from the 

comments received on the proposed 

rule, the Departments recognize there is 

a possibility that some stakeholders may 

challenge the 36-month maximum 

duration standard in court. The 

Departments expect to prevail in any 

such challenge, as this final rule and 

each of the federal standards for shortterm, limited-duration insurance 

finalized herein are legally sound. If a 

court should conclude that the 36- 

month maximum duration standard for 

short-term, limited-duration insurance 

in this final rule is invalid, the 

Departments wish to emphasize our 

intent that the remaining standards of 

the final rule will take effect and be 

given the maximum effect as permitted 

by law. Thus, we have added a 

severability clause as a new paragraph 

(4) to the final rule, which addresses 

two situations—one where the 36- 

month provision is invalidated ‘‘as 

applied,’’ and the other where it is 

invalidated ‘‘facially.’’ The severability 

provision reads as follows: ‘‘If a court 

holds the 36-month maximum duration 

provision set forth in paragraph (1) of 

this definition or its applicability to any 

person or circumstances invalid, the 

remaining provisions and their 

applicability to other people or 

circumstances shall continue in effect.’’ 

General Comments on the Proposed 

Rule 

Many commenters generally agreed 

that short-term, limited-duration 

insurance plays an important role in 

providing temporary health coverage to 

individuals who would otherwise go 

uninsured. Most commenters also stated 

that such plans are not meant to take the 

place of comprehensive health 

insurance coverage, and allowing them 

to be marketed as a viable alternative to 

comprehensive coverage would subject 

uninformed consumers to potentially 

severe financial risks, and would siphon 

off healthier individuals from the 

market for individual health insurance 

coverage, thereby raising premiums for 

such coverage. Commenters who 

supported the proposed rule stated that 

it would allow purchasers of short-term, 

limited-duration insurance to obtain the 

coverage they want (excluding services 

they do not want) at a more affordable 

price for a longer period of time. These 

commenters explained that currently, 

enrollees have to reapply for short-term, 

limited-duration insurance every 3 

months, have their deductibles reset 

every 3 months, and might lose coverage 

for conditions that develop during the 

initial 3 months. They also noted that 

many individuals may be unable to 

obtain more comprehensive coverage at 

the end of the 3-month coverage period 

because they may not qualify for a 

special enrollment period for individual 

health insurance coverage and might 

have a long time to wait for the next 

individual market open enrollment 

period. 

The Departments agree that shortterm, limited-duration insurance plays 

an important role in providing 

temporary valuable health coverage to 

individuals who would otherwise go 

uninsured. Short-term, limited-duration 

insurance can also provide a more 

affordable, and potentially desirable, 

coverage option for some consumers, 

such as those who cannot afford 

unsubsidized coverage in the individual 

market. This final rule balances the 

important role that short-term, limitedduration insurance plays in the market, 

while at the same distinguishing it from 

individual health insurance coverage 

and requiring issuers of short-term, 

limited-duration insurance to inform 

consumers of how coverage under the 

policy might differ from coverage under 

individual health insurance coverage. 

The rule does this by setting the 

maximum length of the initial contract 

term to less than 12 months, 

establishing the total maximum 

duration for a policy (including 

coverage during the initial contract term 

and renewals or extensions under the 

same insurance contract) of no longer 

than 36 months, and providing for a 

notice to inform consumers of how 

coverage under the policy might differ 

from coverage under individual health 

insurance coverage. Thus, under this 

final rule, issuers may offer coverage 

under a short-term, limited-duration 

insurance policy for up to a total of 36 

months, without any medical 

underwriting or experience rating 

beyond that completed upon the initial 

sale of the policy (as long as the 

applicable notice is provided to 

consumers and the initial contract term 

is less than 12 months). 

The Departments acknowledge that 

making short-term, limited-duration 

insurance more available, and for longer 

initial contract terms and periods of 

duration than is currently permitted, 

could have an impact on the risk pools 

for individual health insurance 

coverage, and could therefore raise 

premiums for individual health 

insurance coverage (see the discussion 

in the Regulatory Impact Analysis 

section). However, as discussed more 

fully below, we believe the critical need 

for coverage options that are more 

affordable than individual health 

insurance coverage, combined with the 

general need for more coverage options 

and choice, substantially outweigh the 

estimated impact on individual health 

insurance premiums. 

Initial Contract Term for Short-Term, 

Limited-Duration Insurance 

The proposed rule would have set a 

maximum length of short-term, limitedduration coverage, including any 

extensions that may be elected by the 

policyholder without the issuer’s 

consent, of less than 12 months. Given 

that the proposed rule did not include 

a proposal to permit renewal periods in 

addition to or longer than the less-than12-month period, we are addressing all 

comments related to the ‘‘less-than-12- 

month’’ aspect of the proposed rule as 

comments on the initial contract term. 

The Departments discuss and respond 

to comments related to renewals and 

extensions beyond the initial contract 

term, including comments on the 

permissible maximum duration for a 

policy (including renewals and 

extensions of the same insurance 

contract), later in this preamble. With 

respect to the maximum length of the 

initial contract term for short-term, 

limited-duration insurance, most 

comments suggested not extending the 

maximum duration beyond the current 

less-than-3-month maximum. Others 

suggested periods such as less than 6 or 

8 months. Most commenters who 

supported extending the maximum 

initial contract term suggested it should 

be 364 days. A few commenters 

suggested more than 1 year. Other 

commenters stated that any short-term, 

limited-duration policy should end by 

December 31 of the calendar year in 

which the policy period commences, 

while others stated that the maximum 

duration should be 1 year or until 

December 31 of the calendar year in 

which the policy period commences, 

whichever occurs later. Other 

commenters stated that the maximum 


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30CMS Exchanges Trend Report, July 2, 2018. 

31 42 U.S.C. 18052. 

length of the coverage should be left to 

the states. 

As explained in the proposed rule, we 

proposed to return to the less-than-12- 

month standard in order to expand more 

affordable coverage options to 

consumers who desire and need them, 

to help individuals avoid paying for 

benefits provided in individual health 

insurance coverage that they believe are 

not worth the cost, to reduce the 

number of uninsured individuals, and 

to make available more coverage options 

with broader access to providers than 

certain individual health insurance 

coverage has. The Departments disagree 

with the commenters who supported a 

shorter maximum initial contract term. 

To the extent the initial contract term 

would be limited to a shorter duration, 

for example, 3 months, this would mean 

that every 3 months, absent renewability 

of the policy, an individual purchasing 

short-term, limited-duration insurance 

would be subject to re-underwriting if 

they did not have a renewal guarantee, 

and would possibly have his or her 

premium greatly increased as a result. 

The issuer could also decline to issue a 

new policy to the consumer based on 

preexisting medical conditions. Also, to 

the extent that the policy has a 

deductible, the individual would not get 

credit for money spent toward the 

deductible during the previous 3 

months. In addition, to the extent that 

the policy excluded preexisting 

conditions for a specified period of time 

or imposed a waiting period on specific 

benefits, the individual might not get 

credit for the amount of the time he or 

she had the previous coverage, and thus 

the waiting period on preexisting 

conditions or on specific benefits would 

start over, leaving the consumer without 

coverage for the condition(s) or 

benefit(s) until the new waiting period 

expires. Although these circumstances 

would be somewhat mitigated if the 

maximum initial contract term was 

somewhat longer than less than 3 

months, for example, less than 9 

months, the Departments believe that 

mitigating these circumstances even 

further, by establishing a federal 

maximum initial contract term of less 

than 12 months, is preferable. The 

Departments find all of these to be 

compelling reasons in favor of 

permitting a maximum initial contract 

term of less than 12 months, rather than 

a shorter maximum initial contract term. 

With respect to the comment that any 

short-term, limited-duration policy 

should end by December 31 of the 

calendar year in which the policy 

period commences, this could result in 

many such policies having an initial 

contract term of far less than 12 months, 

which for the reasons stated above, the 

Departments believe is not desirable. 

With respect to the comment that the 

maximum duration should be 1 year or 

until December 31 of the calendar year 

in which the policy period commences, 

the Departments do not believe that a 

policy with an initial contract term of 1 

full year would satisfy the ‘‘short-term’’ 

component of short-term, limitedduration insurance, as it would have the 

same initial contract term as individual 

health insurance coverage. 

The Departments agree that states 

remain free to adopt a definition with a 

shorter maximum initial contract term. 

The maximum initial contract term of 

less than 12 months established in this 

final rule provides a uniform federal 

standard for the initial contract term for 

short-term, limited-duration insurance. 

As explained in the proposed rule and 

elsewhere in this final rule, this 

standard was selected in order to 

promote access to health coverage 

choices in addition to individual health 

insurance coverage, which, as stated 

above, may or may not be the most 

appropriate or affordable policies for 

some individuals. Therefore, this rule 

sets a federal standard for the maximum 

initial contract term for short-term, 

limited-duration insurance. This federal 

standard defines the ‘‘short-term’’ 

component of short-term, limitedduration insurance as less than 12 

months. The federal maximum duration 

for a policy (including renewals and 

extensions of the same insurance 

contract), discussed further below, 

implements the ‘‘limited-duration’’ 

component of short-term, limitedduration insurance. 

Many commenters that opposed the 

extension of the maximum initial 

contract term for short-term, limitedduration insurance generally expressed 

concerns about the lack of protections 

for consumers who purchase short-term, 

limited-duration insurance. Some of 

these commenters stated that such 

insurance is not a viable option for 

people with serious or chronic medical 

conditions because of potential policy 

exclusions. Commenters also stated that 

short-term, limited-duration policies 

discriminate against those with serious 

illnesses and other preexisting 

conditions including mental health and 

substance abuse disorders, older 

consumers, women, transgender 

patients, persons with gender-identityrelated health concerns, and victims of 

rape and domestic violence. 

The commenters did not provide 

persuasive evidence for concluding that 

short-term, limited-duration policies 

discriminate against individuals. The 

Departments acknowledge that shortterm, limited-duration insurance may 

not be suitable coverage for all 

individuals in all circumstances and 

that in some instances it may not 

provide coverage that is as 

comprehensive as individual health 

insurance coverage. However, shortterm, limited-duration insurance can be 

a viable health insurance option for 

many people in many circumstances. 

Also, no individual is required to enroll 

in short-term, limited-duration 

insurance; rather, it is simply an 

additional, and likely more affordable, 

option that may be available to them. 

Individual health insurance coverage is 

unaffordable for many consumers, 

particularly those who do not qualify for 

PTCs. Of uninsured consumers visiting 

the HealthCare.gov website in the past 

year, 63 percent of those who did not 

purchase a plan cited high premiums as 

the primary reason not to purchase.30

Furthermore, the availability of shortterm, limited-duration insurance 

provides an additional choice for many 

consumers that exists side-by-side with 

individual market coverage, with the 

end result that individuals are provided 

with more choices and have the 

opportunity to purchase the type of 

coverage that is most desirable and 

suitable for the individual and/or her 

family. Additionally, many individuals 

who have health conditions for which 

they desire coverage that might be more 

comprehensive than what is available 

through short-term, limited-duration 

insurance, can access individual health 

insurance coverage on a guaranteed 

available and guaranteed renewable 

basis and, if enrollment is pursued 

through an Exchange and the individual 

is otherwise eligible, may qualify for the 

PTC to offset the cost of such coverage 

and, in some cases, cost-sharing 

reductions. PTCs and cost-sharing 

reductions generally are not available to 

purchasers of short-term, limitedduration insurance. However, states 

may be able to provide subsidies to 

purchasers of short-term, limitedduration insurance with funds provided 

under waivers authorized by section 

1332 of PPACA 31 should they choose to 

do so and should the waiver satisfy all 

applicable requirements. 

Also, states have flexibility to 

establish a different, shorter maximum 

initial contract term consistent with 

state law. In addition, these final rules 

require the prominent display of a 

notice in the contract and any 

application materials provided in 

connection with enrollment in shortterm, limited-duration insurance to alert 


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32 Dania Palanker, Kevin Lucia, Sabrina Corlette, 

Maanasa Kona, ‘‘Proposed Federal Changes to 

‘Short-Term Health Coverage Leave Regulation to 

States’’, Commonwealth Fund, February 20, 2018. 

Available at https://www.commonwealthfund.org/ 

blog/2018/proposed-federal-changes-short-termhealth-coverage-leave-regulation-state. 

33See section 2724 (formerly section 2723) of the 

PHS Act and 45 CFR 146.143 and 148.210. See also 

62 FR 16894 at 16904 and 69 FR 78719 at 78739. 

consumers about how coverage under 

the policy might vary from coverage 

under individual health insurance 

coverage. See the discussion below for 

an explanation of the changes the 

Departments are making to the required 

notice in this final rule in response to 

commenters’ concerns about consumers’ 

potential misunderstanding of some of 

those variations. These changes include 

a clarification that states have the 

flexibility to require additional 

consumer disclosures. 

Many commenters who opposed the 

extension of the maximum initial 

contract term for short-term, limitedduration insurance expressed concern 

about what they viewed as a history of 

aggressive and deceptive marketing 

practices by individuals who market 

short-term, limited-duration insurance. 

One commenter stated that over the past 

2 years, state regulators have seen an 

increase in complaints about such 

insurance, with consumers saying they 

were unaware their plan did not provide 

comprehensive coverage or that they 

could be refused a new policy at the end 

of the contract term. Many commenters 

provided examples of specific issues 

states were dealing with, such as issues 

with claims handling. In a 10-state 

survey conducted by the 

Commonwealth Fund 32 cited to by 

some commenters, state regulators noted 

an increase in complaints about brokers 

using deceptive practices to enroll 

people in short-term, limited-duration 

insurance over the phone. Some 

commenters also mentioned the low 

levels of health literacy, particularly 

among younger adults, and how this 

could exacerbate deceptive marketing 

practices by short-term, limitedduration insurance issuers and brokers. 

Several commenters stated that they did 

not want state laws prohibiting the sale 

of short-term, limited-duration 

insurance preempted. 

This final rule establishes federal 

standards for short-term, limitedduration insurance only with respect to 

the maximum length of the initial 

contract term, the maximum duration of 

a policy (including renewals and 

extensions under the same insurance 

contract), and a consumer notice. States 

are free to regulate such coverage in 

every other respect. This contrasts with 

the federal regulation of individual 

health insurance coverage under the 

PHS Act, which touches many aspects 

of individual health insurance coverage, 

and therefore limits the degree to and 

areas in which states may regulate such 

coverage. This is yet another way in 

which the federal regulation of shortterm, limited-duration insurance in this 

rule is different from individual health 

insurance coverage. In fact, several 

commenters (both in favor of, and 

opposed to, the proposed rule) said that 

states should retain the authority to 

regulate short-term, limited-duration 

insurance, and that such authority 

should not be preempted by the PHS 

Act. Several commenters requested the 

Departments to coordinate with the 

states on the regulation of short-term, 

limited-duration insurance. The 

Departments have considered those 

comments, and we acknowledge and 

respect states’ authority to regulate the 

business of insurance. The Departments 

generally agree that states retain the 

authority to regulate short-term, limitedduration insurance and further note that 

this final rule does not change or 

otherwise modify the existing PHS Act 

preemption standard.33 As such, states 

may shorten the length of the maximum 

initial contract term, the 36-month total 

maximum duration (including renewals 

or extensions) discussed further below, 

or both, although they may not lengthen 

them. Relatedly, as discussed later in 

this preamble, in this final rule, the 

Departments added language to the 

notice to alert consumers to how the 

coverage they are purchasing might vary 

from individual health insurance 

coverage and also added a clarification 

to the regulation text that states may 

also impose additional requirements 

with respect to the language in the 

consumer notice. States remain free to 

regulate short-term, limited-duration 

insurance. We also clarify that this final 

rule does not preempt any state laws 

prohibiting the sale of short-term, 

limited-duration insurance. 

Renewability of Short-Term, LimitedDuration Insurance Coverage 

The proposed rule provided that in 

determining whether an insurance 

contract had a duration of less than 12 

months, extensions that may be elected 

by the policyholder without the issuer’s 

consent were taken into account. The 

Departments solicited comments on the 

conditions under which issuers should 

be able to allow short-term, limitedduration insurance to continue 12 

months or longer with the issuer’s 

consent. The Departments also solicited 

comments on whether any processes for 

expedited or streamlined reapplication 

for short-term, limited-duration 

insurance that would simplify the 

reapplication process and minimize the 

burden on consumers may be 

appropriate; whether federal standards 

are appropriate for such processes; and 

whether any clarifications are needed 

regarding the application of the 

proposed definition of short-term, 

limited-duration insurance to such 

practices. For example, the proposed 

rule preamble noted that an expedited 

process could involve setting minimum 

federal standards for what must be 

considered as part of the streamlined 

reapplication process while allowing 

issuers to consider additional factors in 

accordance with contract terms. The 

Departments were also interested in 

information on any state approaches 

(including any approaches that states 

are considering adopting) to minimize 

the burden of the reapplication process 

for issuers and consumers. 

Several commenters questioned the 

Departments’ authority to permit the 

duration of short-term, limited-duration 

insurance to extend to 12 months or 

longer through renewal or extension of 

such policies. One commenter stated 

that ‘‘limited-duration’’ means these 

policies cannot be made guaranteed 

renewable. Several commenters stated 

that establishing a guaranteed 

renewability requirement for short-term, 

limited-duration insurance would be 

contrary to the plain language of the 

statute since short-term, limitedduration insurance is excluded from the 

statutory definition of individual health 

insurance coverage. One commenter 

stated that short-term, limited-duration 

insurance issuers should be permitted to 

sell a policy with a duration of less than 

12 months, with a separate guaranteed 

renewability rider, allowing the 

customer to buy a new policy without 

underwriting. The commenter stated 

that the Departments have no statutory 

authority to prohibit or otherwise 

regulate such arrangements, and that the 

Departments have no authority to 

require guaranteed renewability, or 

prohibit it. One commenter suggested 

that issuers be allowed to sell multiple 

consecutive policies at the initial point 

of sale and be allowed to sell renewal 

options with and without preexisting 

conditions exclusions. One commenter 

stated that the term ‘‘short-term, 

limited-duration insurance’’ provides 

authority to define the length of time 

within which such insurance contracts 

must expire, but does not provide 

authority to limit how many contracts 

consumers enter into, or to regulate 

renewal guarantees. The commenter 


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34The 1997 HIPAA rule similarly addressed 

extensions for short-term, limited-duration 

insurance (that is, short-term, limited-duration 

insurance was defined as health insurance coverage 

provided pursuant to a contract with an issuer that 

has an expiration date specified in the contract 

(taking into account any extensions elected by the 

policyholder without the issuer’s consent) that is 

less than 12 months after the original effective date 

of the contract). 62 FR 16894 (April 8, 1997). 

asserted that renewal guarantees are not 

‘‘health insurance coverage,’’ explaining 

that such guarantees protect against 

premiums increasing, but do not 

provide benefits consisting of items and 

services paid for as medical care and 

therefore, the Departments cannot 

regulate these contracts. Since renewal 

guarantees are not ‘‘health insurance 

coverage,’’ the commenter asserted, it is 

reasonable to interpret the statute as not 

counting renewal guarantees against the 

time limit the Departments set for the 

contract for medical benefits. Another 

commenter stated that, should the final 

rule allow renewals, then changing the 

interpretation of this from the current 

rule, without support, would violate 

federal law. 

Other commenters commented on the 

renewal of short-term, limited-duration 

insurance coverage from a policy 

perspective. Most such commenters 

who supported the proposed rule stated 

that short-term, limited-duration 

insurance should be permitted to be 

renewable, while those who opposed 

the proposed rule and some who agreed 

with lengthening the maximum period 

were opposed to permitting such 

policies to be renewable. One 

commenter stated that a federal mandate 

for automatic renewability would limit 

the rights of states and the ability of 

state regulators to determine the design, 

length, and sales practices of short-term, 

limited-duration insurance plans in a 

manner that best protects their 

consumers and markets. A few 

commenters addressed the extent to 

which, and the circumstances under 

which, individuals should be permitted 

to reapply for coverage under an 

expedited application process. Some of 

these commenters opposed such an 

expedited process, while others favored 

permitting it. One commenter suggested 

that short-term, limited-duration 

insurance issuers could design a lessthan-12-month plan with an option to 

re-write at point of sale. This product 

would have a different set of 

underwriting questions at point of sale 

for the option. Upon expiration of the 

initial contract term, the issuer could 

elect to waive preexisting conditions 

and underwriting for the new less-than12-month period. One commenter stated 

that federal standards should regulate 

short-term, limited-duration insurance 

policies, including standards for 

reapplication, while one commenter 

asserted that states should maintain 

authority to regulate the application and 

reapplication process. Another 

commenter that supported the proposed 

rule suggested further expanding the 

proposed federal standards to permit 

guaranteed renewals for short-term, 

limited-duration insurance. 

Although some commenters 

questioned whether the Departments 

have authority to impose a guaranteed 

renewability requirement on short-term, 

limited-duration insurance, this final 

rule does not impose such a 

requirement. Rather, it permits, but does 

not require, issuers to renew or extend 

a short-term, limited-duration policy up 

to a maximum total duration of 36 

months and still have such coverage 

considered short-term, limited-duration 

insurance. This rule does so by 

establishing a maximum duration of a 

short-term, limited-duration insurance 

policy (inclusive of the initial contract 

term and renewals or extensions under 

the same insurance contract) of no 

longer than 36 months. 

Under this final rule, the total number 

of consecutive days of coverage under a 

single (that is, the same) insurance 

contract is the relevant metric to 

calculate the duration of the coverage to 

determine if it satisfies the 36-month 

maximum duration standard. In 

contrast, the total number of 

consecutive days of coverage under two 

or more (that is, separate) insurance 

contracts, even if one picks up where 

the last ended, is irrelevant to the 36- 

month maximum duration standard. 

The number of days of coverage in 

separate contracts is considered 

separately and the relevant question is 

whether each individual contract 

satisfies the 36-month maximum 

duration standard. Nothing in this final 

rule precludes the purchase of separate 

insurance contracts that run 

consecutively, so long as each 

individual contract is separate and can 

last no longer than 36 months. 

With respect to the comment that, 

should the final rule allow renewals, 

then changing the interpretation of this 

from the current rule, without support, 

would violate federal law, the 

Departments note that the current rule 

(the October 2016 final rule) also allows 

renewals.34 Accordingly, with regard to 

permitting renewals, there is no change 

of interpretation. The only difference 

between the two rules with respect to 

renewals is that the current rule allows 

renewals to the extent the total duration 

of coverage, including the initial 

contract term and any extensions or 

renewals, is less than 3 months, whereas 

this final rule allows renewals to the 

extent the maximum duration of a 

policy, including the initial contract 

term and renewals or extensions, is up 

to 36 months. 

The Departments have determined 

that the 36-month limit on coverage, 

including the initial contract term, plus 

renewals or extensions (without limiting 

consecutive periods of separate 

coverage, as explained above) satisfies 

the ‘‘limited-duration’’ component of 

the statutory term ‘‘short-term, limitedduration insurance’’ (while the lessthan-12-months limit on the initial 

contract term, discussed above, satisfies 

the ‘‘short-term’’ component of the 

term). The Departments note that 

Congress did not change the existing 

reference to short-term, limited-duration 

insurance as an exclusion from the PHS 

Act definition of ‘‘individual health 

insurance coverage’’ or otherwise 

address short-term, limited-duration 

insurance in PPACA, which indicates 

Congress was not concerned with shortterm, limited-duration insurance 

existing side-by-side, at least under the 

standard in place prior to the October 

2016 rule, with individual health 

insurance coverage. The Departments 

believe that a maximum duration of 36 

months for short-term, limited-duration 

insurance is consistent with these two 

insurance markets existing side-by-side, 

while still giving meaning and effect to 

the ‘‘limited-duration’’ component of 

short-term, limited-duration insurance. 

Likewise, the Departments’ 

interpretation is consistent with the 

canon of statutory construction that 

disfavors rendering one or more 

statutory words or phrases redundant. 

Here, Congress used two terms: ‘‘shortterm’’ and ‘‘limited-duration.’’ The 

Departments have concluded that these 

two terms are best interpreted to refer to 

periods of time of differing length; if 

they both referred to a time period of the 

same length (for example, if the 

Departments interpreted both words to 

refer to a time period of less than twelve 

months), then one of the terms would be 

rendered redundant, or nearly so. The 

Departments likewise conclude that the 

term ‘‘limited-duration’’ refers to a 

longer time period than ‘‘short-term,’’ 

because, while an insurance policy’s 

duration is (absent cancellation) never 

shorter than its term, a policy’s term can 

be shorter than its duration (if the policy 

is renewed or extended). Thus, the 

Departments conclude that the term 

‘‘limited-duration’’ refers to a period of 

time that is longer than the time period 

contemplated by the term ‘‘short-term,’’ 

and contemplates renewal of a shortterm policy for a time period potentially 


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35 26 U.S.C. 4980B(f), 29 U.S.C. 1161–1168, 42 

U.S.C. 300bb–1—300bb–8. 36 5 U.S.C. 8905(a). 

37Section 2703 of the PHS Act; see also 42 U.S.C. 

300gg–42. 

38See, for example, 83 FR 7440. 

longer than the maximum term length 

for which a short-term policy can be 

acquired (under this final rule, less than 

12 months). 

In determining the appropriate limits 

on the permissible range of renewals or 

extensions in giving meaning to the 

term ‘‘limited-duration,’’ the 

Departments were informed by the 

stakeholder comments and other 

circumstances under which Congress 

authorized temporary limited coverage 

options. In particular, the Consolidated 

Omnibus Budget Reconciliation Act of 

1985 (COBRA) requires certain group 

health plans to extend group health 

coverage to certain individuals 

otherwise losing that coverage.35

COBRA requires certain group health 

plan sponsors to provide a temporary 

continuation coverage option for a 

minimum of 18, 29, or 36 months, 

depending on the nature of the 

qualifying event that triggers the 

temporary coverage period. Under 

COBRA, the maximum period that 

COBRA coverage could extend is for a 

period of 36 months (where the 

qualifying event is employee enrollment 

in Medicare, divorce or legal separation, 

death of an employee, or loss of 

dependent child status (that is, ‘‘aging 

out’’ under the plan)). In certain 

circumstances, individuals experiencing 

a qualifying event such as job loss, 

which triggers an initial 18-month 

COBRA continuation coverage period, 

may experience a second qualifying 

event, making them eligible for a total 

maximum duration of 36 months of 

COBRA continuation coverage. 

Similar to COBRA, short-term, 

limited-duration insurance also serves 

as temporary coverage for individuals 

transitioning between other types of 

coverage, and accordingly the 

Departments believe that it is reasonable 

to look to COBRA in giving meaning to 

‘‘limited-duration,’’ as both types of 

coverage serve an analogous purpose— 

that is, to provide temporary health 

coverage for individuals who are not 

currently eligible for or enrolled in 

comprehensive medical coverage, and 

are transitioning between types of 

coverage. Unlike COBRA, where 

Congress explicitly authorized a sliding 

scale of maximum duration periods, the 

Departments decline to adopt a sliding 

scale approach to the maximum 

duration period for short-term, limitedduration coverage. We adopt the 

approach outlined in this final rule for 

simplicity in the absence of explicit, 

staggered statutory maximums and 

because no party is required to renew or 

extend coverage for the maximum 

duration with respect to a short-term, 

limited-duration insurance policy; 

instead whether to provide coverage for 

the maximum period is left to the states 

and/or contracting parties. Accordingly, 

in establishing federal standards for 

short-term, limited-duration insurance, 

the Departments interpret the term 

‘‘limited-duration’’ in a manner 

consistent with the temporary 

continuation coverage maximums 

available through COBRA and the 

somewhat similar statutory temporary 

continuation of coverage provisions 

under the Federal Employees Health 

Benefits Program,36 which permit 

continuation of coverage for up to a 

maximum duration of 36 months. 

Individuals may choose to purchase 

short-term, limited-duration insurance 

for a variety of different reasons, which 

may align with various COBRA 

qualifying events or not. Further, 

whereas COBRA describes the minimum 

period that certain group health plan 

sponsors must offer COBRA 

continuation coverage, these regulations 

describe the maximum coverage period 

during which insurers may renew a 

short-term, limited-duration insurance 

policy. However, the Departments 

conclude that the 36-month maximum 

coverage period is a reasonable and 

appropriate benchmark for interpreting 

the term ‘‘limited-duration.’’ By 

allowing COBRA coverage to last up to 

36 months in some circumstances, 

Congress recognized that 36 months 

qualifies as a temporary period of 

transition, during which coverage of 

limited duration may be useful. The 

Departments have strong policy 

considerations, as described elsewhere 

herein, for adopting an interpretation of 

the term ‘‘limited-duration’’ that 

provides a flexible period of insurance 

for individuals transitioning between 

other types of coverage, and COBRA’s 

36-month maximum provides precedent 

for a 36-month coverage period that is 

designed to be of limited duration. 

Therefore, in looking to COBRA as a 

guidepost for determining the maximum 

duration of short-term, limited-duration 

insurance (that is, the length of coverage 

under the initial contract term, plus 

renewals or extensions), the 

Departments believe the 36-month 

COBRA period, rather than the 18- 

month COBRA period, is more 

appropriate. 

The Departments also believe 

permitting renewal or extension of a 

short-term, limited-duration insurance 

policy, but only to the extent the 

maximum duration of coverage under a 

policy is no longer than 36 months, 

serves to further distinguish such shortterm, limited-duration insurance from 

individual health insurance coverage, 

which must be guaranteed renewable 

indefinitely, except under certain 

limited circumstances.37 As noted 

earlier in this rule, states have flexibility 

to establish a different, shorter 

maximum duration for a short-term, 

limited-duration policy (including 

renewals or extensions) consistent with 

state law. 

While the Departments did not 

specifically propose the 36-month 

maximum duration period for shortterm, limited-duration insurance 

coverage in the proposed rule, 

comments were solicited on all aspects 

of the proposed rule, including whether 

the length of short-term, limitedduration insurance should be a different 

duration than less than 12 months, and 

the circumstances, if any, under which 

issuers should be allowed to continue 

(that is, renew) such coverage for 12 

months or longer.38 Comments were 

also solicited on a potential 

reapplication process for short-term, 

limited-duration insurance, including 

whether there should be federal 

standards for such a process. In 

response, the Departments received a 

wide range of comments indicating that 

short-term, limited-duration insurance 

coverage should be required to be 

guaranteed renewable, should be 

permitted to be renewed or extended for 

a designated period of time, and also 

that it should not be allowed to be 

renewed or extended beyond the initial 

contract term. We also received a 

number of suggestions regarding the 

adoption of federal standards governing 

any reapplication processes. After 

consideration of all the comments 

related to the issue of renewability or 

extensions, and for the reasons stated 

above, this final rule permits a shortterm, limited-duration insurance policy 

to be renewed or extended so that the 

total duration of coverage under the 

policy may be up to 36 months. 

Renewal guarantees generally permit 

a policyholder, when purchasing his or 

her initial insurance contract, to pay an 

additional amount, in exchange for a 

guarantee that the policyholder can 

elect to purchase, for periods of time 

following expiration of the initial 

contract, another policy or policies at 

some future date, at a specific premium 

that would not reflect any additional 

underwriting. In 2009, shortly before 

enactment of PPACA, one of the 


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39Reed Abelson, ‘‘United Health to Insure the 

Right to Insurance,’’ New York Times, December 2, 

2008, https://www.nytimes.com/2008/12/03/ 

business/03insure.html. 

40See section 2792(b)(1) of the PHS Act. 

41 81 FR 75318. 

42However, the Departments may have the 

authority to regulate health insurance coverage 

issued pursuant to such an instrument. 

nation’s largest health insurance issuers 

received regulatory approval from 25 

states to offer renewal guarantees as a 

standalone product, for an annual 

premium equal to 20 percent of the cost 

of a guaranteed renewable health 

insurance policy.39 With respect to the 

comments on renewal guarantees, to the 

extent a contract for health insurance 

coverage is extended or renewed, 

whether due to a renewal guarantee or 

otherwise, the period of health 

insurance coverage that is covered by 

the renewal or extension of the policy 

is counted toward the 36 month 

maximum duration, as to not do so 

would ignore the meaning of the 

statutory phrase ‘‘limited-duration.’’ 

However, to the extent a contract does 

not provide health insurance coverage 40

and instead consists of a separate 

transaction or other instrument under 

which the individual can, in advance, 

lock in a premium rate in the future or 

the ability to purchase a new, separate 

short-term, limited-duration insurance 

policy at a specified premium rate at a 

future date without re-underwriting, 

such subsequent periods of coverage 

under the new, separate short-term, 

limited-duration insurance policies 

would not count toward the 36-month 

maximum. Through these mechanisms, 

it may be possible for a consumer to 

maintain coverage under short-term, 

limited-duration insurance policies for 

extended periods of time to protect 

themselves against financial 

vulnerabilities, such as developing a 

costly medical condition. The ability to 

purchase such instruments, which are 

essentially options to buy new policies 

in the future, is at present permitted 

under federal law, and this rule does 

nothing to forbid or permit such 

transactions. Furthermore, the 

Departments note that anyone, not just 

policyholders of short-term, limitedinsurance, can purchase such 

instruments under current federal law 

(which this rule does not alter). 

Similarly, the Departments also have 

not, and do not in this final rule, 

prohibit issuers from offering a new 

short-term, limited-duration insurance 

policy to consumers who have 

previously purchased this type of 

coverage, or otherwise prevent 

consumers from stringing together 

coverage under separate policies offered 

by the same or different issuers, for total 

coverage periods that would exceed 36 

months.41 The Departments are also 

significantly limited in their ability to 

take an enforcement action under the 

PHS Act market rules with respect to 

such transactions involving products or 

instruments that are not health 

insurance coverage.42 As commenters 

mentioned, we also recognize that the 

mechanisms and means by which 

coverage may be extended or renewed 

may vary from state to state. Further, 

states can shorten the maximum 

duration for a short-term, limitedduration insurance policy, but cannot 

extend the maximum duration beyond 

the 36-month federal standard. 

Therefore, as stated above, under this 

final rule, the total number of 

consecutive days of coverage under the 

same insurance contract is considered 

when calculating the duration of a 

policy for purposes of determining if the 

insurance satisfies the 36-month 

maximum duration federal standard. In 

contrast, the total number of 

consecutive days of coverage under 

separate insurance contracts is not 

considered when calculating the 

duration of coverage for such purpose. 

Rather, in such cases, the number of 

days of coverage under each contract of 

insurance is considered separately, to 

determine if the duration of the 

coverage under each contract satisfies 

the 36-month maximum duration 

standard, and coverage under each new 

contract commences a new period of 

coverage. The Departments generally 

defer to state law to determine the 

circumstances under which consecutive 

periods of coverage are under the same, 

or under separate, insurance contracts. 

In addition to having authority to 

allow renewals or extensions for a 

maximum duration of up to 36 months, 

the Departments also determined there 

are sound policy reasons to provide the 

ability for renewals and extensions as 

set forth in the final rule. Many of these 

reasons are discussed above with 

respect to the less-than-12-month initial 

contract term maximum finalized in this 

rule. As many commenters pointed out, 

to the extent that the maximum duration 

of short-term, limited-duration 

insurance is limited to a relatively short 

period of time, for example, less than 3 

months, or even less than 12 months, 

without permitting renewals or 

extensions, this would mean that every 

3 months or every 12 months, an 

individual purchasing short-term, 

limited-duration insurance would be 

subject to re-underwriting, and would 

possibly have his or her premium 

greatly increased as a result. Also, to the 

extent the policy excluded preexisting 

conditions for a specified period of time 

or imposed a waiting period on specific 

benefits, the individual might not get 

credit for the amount of time he or she 

had the previous coverage. The issuer 

could also decline to issue a new policy 

to the consumer based on preexisting 

medical conditions. The Departments 

find all of these to be compelling 

reasons in favor of permitting renewals 

and extensions as set forth in the final 

rule, such that the maximum duration of 

coverage under a single short-term, 

limited-duration insurance policy may 

be 36 months (including renewal or 

other extension periods), as opposed to 

less than 12 months. While the 

Departments anticipate that some 

issuers will choose to provide renewals 

without the restrictions described above 

(such as providing renewals without 

premium increases and without resetting preexisting condition exclusion 

waiting periods), we note that shortterm, limited-duration insurance issuers 

are not required to do so under this final 

rule and may determine the terms of the 

renewal in the short-term, limitedduration insurance contract, subject to 

the definition of short-term, limitedduration insurance in this final 

regulation and any permissible state law 

variations. Further, in consideration of 

Congress’ intent to exempt from the 

definition of individual health 

insurance coverage (and therefore, to 

exempt from the HIPAA and PPACA 

individual market requirements) shortterm, limited-duration insurance, the 

Departments are not imposing a 

guaranteed renewability requirement on 

short-term, limited-duration insurance. 

The Departments appreciate the 

comments and suggestions regarding 

simplified or expedited application and 

reapplication processes. The 

Departments decline to adopt or 

otherwise establish federal standards 

regarding such procedures at this time. 

Rather, the Departments defer to the 

states to define and regulate such 

practices. 

Notice 

In the proposed rule, the Departments 

proposed to revise the notice that must 

appear in the contract and any 

application materials provided in 

connection with enrollment in shortterm, limited-duration insurance. The 

Departments noted concerns that shortterm, limited-duration insurance 

policies that provide coverage lasting 

almost 12 months may be more difficult 

for some individuals to distinguish from 

coverage available in the individual 


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market, which is typically offered on a 

12-month basis. Accordingly, under the 

proposed rule, one of two versions of 

the following notice was proposed to be 

required to be prominently displayed 

(in at least 14 point type) in the contract 

and in any application materials 

provided in connection with 

enrollment: 

THIS COVERAGE IS NOT REQUIRED TO 

COMPLY WITH FEDERAL REQUIREMENTS 

FOR HEALTH INSURANCE, PRINCIPALLY 

THOSE CONTAINED IN THE AFFORDABLE 

CARE ACT. BE SURE TO CHECK YOUR 

POLICY CAREFULLY TO MAKE SURE YOU 

UNDERSTAND WHAT THE POLICY DOES 

AND DOESN’T COVER. IF THIS COVERAGE 

EXPIRES OR YOU LOSE ELIGIBILITY FOR 

THIS COVERAGE, YOU MIGHT HAVE TO 

WAIT UNTIL AN OPEN ENROLLMENT 

PERIOD TO GET OTHER HEALTH 

INSURANCE COVERAGE. ALSO, THIS 

COVERAGE IS NOT ‘‘MINIMUM 

ESSENTIAL COVERAGE’’. IF YOU DON’T 

HAVE MINIMUM ESSENTIAL COVERAGE 

FOR ANY MONTH IN 2018, YOU MAY 

HAVE TO MAKE A PAYMENT WHEN YOU 

FILE YOUR TAX RETURN UNLESS YOU 

QUALIFY FOR AN EXEMPTION FROM THE 

REQUIREMENT THAT YOU HAVE HEALTH 

COVERAGE FOR THAT MONTH. 

Given that the individual shared 

responsibility payment is reduced to $0 

for months beginning after December 

2018, the Departments proposed that the 

final two sentences of the notice must 

appear only with respect to policies sold 

on or after the proposed applicability 

date of the rule, if finalized, that have 

a coverage start date before January 1, 

2019. 

The Departments solicited comments 

on this revised notice, and whether its 

language or some other language would 

best ensure that it is understandable and 

sufficiently apprises individuals of the 

nature of the coverage. 

Many commenters generally 

supported the approach in the proposed 

rule that a short-term, limited-duration 

insurance policy must include such a 

notice. One commenter stated that the 

notice should not be part of the 

definition of short-term, limitedduration insurance, but should be a 

separate requirement that applies once a 

policy satisfies the short-term, limitedduration insurance definition. One 

commenter stated that requiring shortterm, limited-duration insurance issuers 

to use one of two different notices 

(depending on the year) is burdensome 

to issuers and state regulators with 

respect to filing policies, and suggested 

developing one notice that could be 

used for all years. A few other 

commenters also more generally 

supported the use of just one type of 

notice. One commenter stated that 

issuers should be permitted to modify 

the notice to provide additional 

disclosures about their short-term, 

limited-duration insurance product, 

subject to state approval, while another 

commenter said that states should be 

permitted to prescribe their own notice 

language, with the federal language as a 

default for those states that fail to do so. 

The Departments believe it is 

important and appropriate for issuers of 

short-term, limited-duration insurance 

to disclose the key potential 

characteristics of such insurance to 

applicants and policyholders. 

Consumers need as complete and 

accurate information as possible in 

order to make informed coverage 

purchasing decisions—whether it be for 

comprehensive, major medical coverage 

in the individual market or for shortterm, limited-duration insurance, which 

can consist of a wide variety of coverage 

options. Therefore, the final rule retains 

the notice requirement, with some 

changes to content and style, as 

discussed below. 

The Departments decline to adopt the 

suggestion that the notice should not be 

part of the definition of short-term, 

limited-duration insurance, but instead 

should be a separate requirement, once 

a policy satisfies the definition of shortterm, limited-duration insurance. The 

Departments do not believe there is a 

compelling reason to so change the 

regulatory structure. The Departments 

also decline to adopt the suggestion that 

one disclosure notice be used, 

regardless of the year in which the 

policy is issued. As previously stated, 

the amount of the individual shared 

responsibility payment will be $0 for 

months beginning January 2019. For 

short-term, limited-duration policies 

covering any months before January 

2019, the Departments believe it is 

critical that the disclosure notice inform 

applicants and policyholders that they 

could be liable for the individual shared 

responsibility payment, given the 

potential financial consequences for not 

maintaining MEC during that time. 

However, for policies not covering any 

such month, not only would such 

language be irrelevant, but the 

Departments believe it could be 

confusing. The Departments further note 

that the language in the two notices is 

verbatim with the exception of the final 

two sentences (which must not appear 

in notices provided with short-term, 

limited-duration insurance policies with 

a coverage start date on or after January 

1, 2019). Therefore, the Departments 

believe any burden associated with the 

two notices applying to different 

periods are outweighed by the benefits 

of mitigating the potential for consumer 

confusion that could result from 

maintaining the last two sentences in 

the notice, when provided for policies 

with an effective date on or after January 

1, 2019. 

With respect to additional flexibility 

to add language to the notices, the 

Departments have clarified as part of the 

final regulations that states may require 

additional language to be included in 

the notices, as discussed elsewhere in 

this rule. In addition, there is no 

prohibition on issuers including 

additional language in their notices, as 

long as the additional language 

accurately describes the coverage. 

Many commenters suggested specific 

changes to the content of the notices. 

Some commenters suggested expanding 

the notice to include details such as 

which benefits are not covered by the 

plan, whether preexisting conditions are 

covered, which PPACA protections will 

not be applicable, and more clearly state 

that loss of short-term, limited-duration 

insurance will not trigger a special 

enrollment period in the individual 

market. Several commenters stated that 

the notice should not only distinguish 

short-term, limited-duration insurance 

from available individual market plans, 

but should also distinguish the former 

from excepted benefits coverage. Some 

commenters suggested making the 

notice available in several languages. 

One commenter stated that the notice 

should illustrate how certain conditions 

would be covered. Several commenters 

stated that the notice should not be in 

capital letters. A few commenters stated 

that the notice should inform consumers 

that if they choose to purchase shortterm, limited-duration insurance 

following expiration of the policy, they 

will be underwritten again, while 

another commenter stated that the 

notice should state that, even if the 

consumer passes re-underwriting, he 

may not be covered for medical 

conditions that the previous policy 

covered. A few commenters stated that 

the notice should indicate that 

purchasers of short-term, limitedduration insurance cannot qualify for 

PTCs (although some purchasers of 

qualified health plans sold on the 

Exchange can). One commenter stated 

that the notice should say that the 

policy ‘‘does not comply,’’ as well as ‘‘is 

not required to comply,’’ with PPACA 

requirements. One commenter stated 

that the notice should have a CAUTION 

heading, be in bullet form, be written in 

dark-color type, be literacy-tested to a 

6th grade reading level, and have the 

MEC language listed first. One 

commenter stated that the notice should 

appear on the first page of the policy, 

rather than be displayed ‘‘prominently.’’ 

One commenter stated that the 


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43See also, for example, Bryan A. Garner, What’s 

Wrong With Initial-Caps Point Headings, https://

bit.ly/2uNHtNL (over use of capital letters may 

mean that ‘‘readers will probably skip over what 

you’re trying to make sink in.’’) 

statement that short-term, limitedduration insurance may not comply 

with PPACA and may require additional 

payment with your taxes should be 

removed. One commenter noted that in 

addition to PPACA, short-term, limitedduration insurance is also exempt from 

other specific federal laws and that 

should be included in the notice as 

well. One other commenter 

recommended that the notice include a 

link to the applicable state-based 

Exchange website or HealthCare.gov. 

The Departments agree with some of 

the commenters who suggested 

providing additional specificity in the 

notice. Therefore, the notice in the final 

rule has been revised to add language to 

make consumers aware of potential 

exclusions or limitations regarding 

coverage of preexisting conditions or 

health benefits (such as hospitalization, 

emergency services, maternity care, 

preventive care, prescription drugs, and 

mental health and substance use 

disorder services). The notice in the 

final rule also contains new language 

informing consumers that the policy 

might have lifetime and/or annual 

dollar limits on health benefits. The 

Departments did not incorporate the 

other additional language suggested by 

other commenters. The Departments 

believe the language added in this final 

rule provides important new 

information to consumers, without 

lengthening the notice to such an extent 

that would make it cumbersome to read, 

or cause consumers to not read it at all. 

The Departments are also cognizant of 

the burdens and costs on issuers that 

would be associated with a longer 

notice. However, states may require 

additional language in the notice, 

consistent with their authority to 

regulate short-term, limited-duration 

insurance. The Departments also agree 

with the commenters who suggested 

that the notice not be in all capital 

letters, as the Departments believe the 

notice will be more readable in sentence 

case.43 Therefore, the notice in the final 

rule is in sentence case. 

Given the varying demographics of 

different states, the Departments 

disagree with the comment that this 

final rule should require the notice to be 

available in several languages. Although 

the Departments believe it is important 

for the disclosure notice to be useful 

and informative to individuals who are 

most literate in a language other than 

English, the Departments decline in this 

rule to require that the notice be 

provided in additional languages. States 

as primary regulators of short-term, 

limited-duration insurance can impose 

additional requirements as may be 

necessary to meet local needs. The 

Departments disagree with the comment 

that the notice have a CAUTION 

heading, should be in bullet form, 

should be written in dark-color type, be 

literacy-tested to a 6th grade reading 

level, and should have the MEC 

language listed first. The Departments 

believe the form of this notice should be 

in straight text, which is the same form 

of most documents that individuals are 

accustomed to reading. The 

Departments also believe that a 

CAUTION heading might 

inappropriately bias the reader against 

short-term, limited-duration insurance; 

the Departments instead believe the 

notice should assist the consumer in 

making an informed choice about the 

type of coverage that is most appropriate 

for him or her. The Departments 

disagree with the comment that the 

MEC language should appear first in the 

notice. Although that language is 

important, the Departments believe 

most consumers would find the 

language that appears before the MEC 

language in the final notice to be more 

significant when deciding whether 

short-term, limited-duration insurance 

is the most appropriate type of coverage 

for their personal needs. 

In addition, the Departments believe 

the language in the notice in the 

proposed rule stating that ‘‘This 

coverage is not required to comply with 

federal requirements for health 

insurance’’ could be interpreted too 

broadly, as meaning that the issuer of 

such coverage is not required to comply 

with certain other federal requirements 

not related to health insurance market 

rules that apply generally to issuers as 

well as other entities. Therefore, the 

Departments revise that clause in the 

notice in this final rule to read: ‘‘This 

coverage is not required to comply with 

certain federal market requirements for 

health insurance.’’ In this final rule, the 

disclosure now reads as follows, with 

the first, second and third sentences 

differing from the proposal: 

This coverage is not required to comply 

with certain federal market requirements for 

health insurance, principally those contained 

in the Affordable Care Act. Be sure to check 

your policy carefully to make sure you are 

aware of any exclusions or limitations 

regarding coverage of preexisting conditions 

or health benefits (such as hospitalization, 

emergency services, maternity care, 

preventive care, prescription drugs, and 

mental health and substance use disorder 

services). Your policy might also have 

lifetime and/or annual dollar limits on health 

benefits. If this coverage expires or you lose 

eligibility for this coverage, you might have 

to wait until an open enrollment period to get 

other health insurance coverage. Also, this 

coverage is not ‘‘minimum essential 

coverage.’’ If you don’t have minimum 

essential coverage for any month in 2018, 

you may have to make a payment when you 

file your tax return unless you qualify for an 

exemption from the requirement that you 

have health coverage for that month. 

Importantly, the Departments note 

that we do not have evidence that erm, 

limited-duration insurance has not 

historically covered or is unlikely to 

cover hospitalization and emergency 

services. These benefits are included in 

the notice, however, due to an 

abundance of caution. Several 

commenters stated that, in order to meet 

the definition of short-term, limitedduration insurance, the issuer should be 

required to provide information through 

other means in addition to the notice. 

One commenter stated that, in addition 

to the notice, to satisfy the definition of 

short-term, limited-duration insurance, 

issuers should be required to include a 

plain-language explanation of the 

general limits of such insurance in the 

application, and that the application 

should have a signature line indicating 

that the consumer received and 

understood it. Several commenters 

stated that the notice should require the 

purchaser to initial several discrete 

statements about the limitations of the 

policy at the time of application. Several 

commenters stated that the Summary of 

Benefits and Coverage (SBC) 

requirement, as set forth in section 2715 

of the PHS Act, should apply to shortterm, limited-duration insurance. One 

commenter stated that the term ‘‘shortterm, limited-duration insurance’’ 

should display prominently in the 

footer on every page of the contract, and 

in any application, sales, and marketing 

materials, and the outline of coverage 

should include a ‘‘warning’’ that this is 

temporary coverage that provides 

limited benefits. Several commenters 

stated that the statement in the notice 

should also appear in marketing 

materials. One commenter stated that 

the notice should be read out loud to 

any prospective purchaser, particularly 

those with limited English proficiency. 

One commenter stated that, in addition 

to providing the notice, short-term, 

limited-duration issuers should be 

required to name their policies in such 

a way as to distinguish them from 

individual health insurance coverage, 

maybe by inserting the word ‘‘Limited’’ 

as part of the name of the policy. 

Several commenters stated that the 

notice should be accompanied by a list 

of network providers. 


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44See 26 CFR 54.9801–6, 29 CFR 2590.701–6, 45 

CFR 146.117. 

The Departments believe that the 

requirements relating to both the 

content and delivery of the notice as set 

forth in this final rule strike the 

appropriate balance to help each 

consumer make an informed choice 

about the type of coverage that is most 

appropriate for him or her, while not 

being overly burdensome to issuers of 

short-term, limited-duration insurance 

or inappropriately biasing the reader 

against short-term, limited-duration 

insurance. The Departments therefore 

decline to adopt these suggestions by 

commenters. However, as previously 

noted, states may specify additional 

methods and forms of disclosure, as 

well as mandate additional disclosure 

requirements that issuers of short-term, 

limited-duration insurance must comply 

with, consistent with their authority to 

regulate such coverage. Because shortterm, limited-duration insurance is not 

individual health insurance coverage 

under the PHS Act, it is not subject to 

the SBC requirements established under 

section 2715 of the PHS Act. 

Finally, the Departments note that to 

the extent an issuer of short-term, 

limited-duration insurance provides a 

contract or application materials in 

connection with extension or renewal of 

a short-term, limited-duration policy, 

the notice must be displayed 

prominently in any such materials, just 

as it must be displayed prominently in 

the contract and in any materials 

provided in connection with enrollment 

in such coverage. 

Short-Term, Limited-Duration Insurance 

as Student Health Insurance Coverage 

Some commenters asked whether 

short-term, limited-duration insurance 

may be sold as ‘‘student health 

insurance coverage’’ within the meaning 

of HHS regulations. It may not. 

‘‘Student health insurance coverage’’ 

is defined in HHS regulations at 45 CFR 

147.145(a), which provides that 

‘‘student health insurance coverage’’ is 

a type of individual health insurance 

coverage. Thus, ‘‘student health 

insurance coverage’’ under the 

definition of ‘‘student health insurance 

coverage’’ must satisfy the PHS Act 

requirements for individual health 

insurance coverage, except for those 

specified in 45 CFR 147.145(b). 

Accordingly, short-term, limitedduration insurance cannot be ‘‘student 

health insurance coverage’’ because it is 

by definition not individual health 

insurance coverage. However, to the 

extent permitted by state law, an issuer 

may sell short-term, limited-duration 

insurance to individual students in 

institutions of higher education (or to 

individual students in boarding or other 

pre-higher-education institutions). Some 

higher education institutions may 

require their students to either purchase 

‘‘student health insurance coverage,’’ or 

a type of coverage other than short-term, 

limited-duration insurance. 

Short-Term, Limited-Duration Insurance 

and Minimum Essential Coverage 

A few commenters asked whether, 

under the final rule, short-term, limitedduration insurance would be considered 

MEC. One commenter suggested that the 

Departments provide a special 

enrollment period to purchase 

individual health insurance coverage for 

individuals who lose short-term, 

limited-duration insurance coverage 

outside of the individual market open 

enrollment period, similar to how 

individuals who lose MEC are currently 

provided a special enrollment period. 

Short-term, limited-duration 

insurance is not individual health 

insurance coverage, nor is it MEC. This 

rule does not recognize short-term, 

limited-duration insurance as MEC. The 

Departments further note that the 

reduction of the individual shared 

responsibility payment to $0 beginning 

with coverage months after December 

31, 2018, mitigates the need to designate 

short-term, limited-duration insurance 

as MEC, given that individuals who do 

not have MEC during any such coverage 

months, including individuals who 

have short-term, limited-duration 

coverage, will not be subject to the 

individual shared responsibility 

payment. Additionally, this rule does 

not create a special enrollment period to 

enroll in individual health insurance 

coverage for individuals whose shortterm, limited-duration insurance has 

ended. The disclosure notice puts 

purchasers of short-term, limitedduration insurance on notice that no 

such special enrollment period is 

available. The Departments 

acknowledge that the loss of eligibility 

for short-term, limited-duration 

insurance creates a special enrollment 

opportunity to enroll in a group health 

plan (as opposed to individual health 

insurance coverage), either insured or 

self-insured.44

Other Federal and State Requirements 

Several commenters were in favor of 

imposing various additional federal 

requirements on short-term, limitedduration insurance that were not 

included in the proposed rule. These 

included requiring additional training 

for agents and brokers who sell such 

insurance, minimum federal standards 

such as a minimum range of benefits to 

be offered equally in rural and urban 

areas, basing premiums on statewide 

markets, coverage of preexisting 

conditions and preventive services and 

network adequacy standards, federal 

regulation and oversight of short-term, 

limited-duration insurance policies sold 

through group trusts and associations, 

and requirements for websites 

marketing both short-term, limitedduration insurance and individual 

health insurance coverage. 

For purposes of establishing federal 

standards for short-term, limitedduration insurance, the Departments 

believe that setting the initial contract 

term to less than 12 months, a 

maximum duration for a policy 

(including renewals or extension under 

the same insurance contract) of 36 

months, and a notice requirement, as set 

forth in this final rule, are the only 

necessary federal standards for shortterm, limited-duration insurance. In 

recognition of the states’ important, 

traditional role in regulating short-term, 

limited-duration insurance, the 

Departments decline to adopt any 

additional federal standards such as 

those suggested by the commenters. As 

discussed elsewhere in this final rule, 

states generally remain free to adopt 

these suggested standards, or other 

standards, as they see fit. 

In response to the Departments’ 

solicitation of comments on any 

regulations or other guidance or policy 

that limits issuers’ flexibility in 

designing short-term, limited-duration 

insurance or poses barriers to entry into 

the short-term, limited-duration 

insurance market, a few commenters 

mentioned section 1557 of PPACA as 

such a limitation. One commenter 

observed that the lack of standardized 

regulation of short-term, limitedduration insurance across state lines 

causes barriers to entry, and suggested 

the Departments encourage state 

insurance departments to participate in 

an interstate compact to create standard 

regulations that result in one policy 

form filing and approval that is effective 

in many states. 

Section 1557 of PPACA prohibits 

discrimination on the basis of race, 

color, national origin, sex, age, or 

disability in certain health programs or 

activities. This provision is 

administered by the HHS Office for 

Civil Rights, and it is beyond the scope 

of this rule to address the impact of 

section 1557 of PPACA on short-term, 

limited-duration insurance. With 

respect to the comment that state 

insurance departments should 

participate in an interstate compact to 

create standard regulations that result in 


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45As explained in the proposed rule, the 

reference in current regulations at 45 CFR 146.125 

to the applicability date of 45 CFR 

146.145(c)(5)(i)(C) was a drafting error. It was 

intended to be a reference to 45 CFR 

146.145(b)(5)(i)(C). 

46The applicability date for these amendments 

(policy years and plan years beginning on or after 

January 1, 2017) remains unchanged. 

47The applicability date for these amendments 

(policy years beginning on or after January 1, 2017) 

remains unchanged. 

one policy form filing and approval that 

is effective in many states, the 

Departments did not propose and are 

not adopting such federal standards and 

generally defer to state insurance 

departments on that issue. 

Effective Date and Applicability Date 

The Departments proposed that this 

rule, if finalized, would be effective 60 

days after publication of the final rule 

in the Federal Register. With respect to 

the applicability date, the Departments 

proposed that insurance policies sold on 

or after the 60th day following 

publication of the final rule, if finalized, 

would have to meet the definition of 

short-term, limited-duration insurance 

in the final rule in order to be 

considered such insurance. The 

Departments also proposed that group 

health plans and group health insurance 

issuers, to the extent they must 

distinguish between short-term, limitedduration insurance and individual 

health insurance coverage, must apply 

the definition of short-term, limitedduration insurance in the final rule as 

of the 60th day following publication of 

the final rule. The current regulations 

specify the applicability date for the 

definition of short-term, limitedduration insurance at 26 CFR 54.9833– 

1, 29 CFR 2590.736, 45 CFR 146.125, 

and 45 CFR 148.102. Therefore, the 

Departments proposed conforming 

amendments to those rules as part of 

this rulemaking. 

The Departments also proposed a 

technical update in 26 CFR 54.9833–1, 

29 CFR 2590.736, and 45 CFR 146.125 

to delete the reference to the 

applicability date for amendments to 26 

CFR 54.9831–1(c)(5)(i)(C), 29 CFR 

2590.732(c)(5)(i)(C), and 45 CFR 

146.145(c)(5)(i)(C) (regarding 

supplemental coverage excepted 

benefits).45 Given that the applicability 

date for the amendments to those 

sections has passed, the Departments 

explained that it is no longer necessary 

to mention the ‘‘future’’ applicability 

date.46 HHS similarly proposed to 

amend 45 CFR 148.102 to remove the 

reference to the applicability date for 

amendments to 45 CFR 148.220(b)(7) 

(regarding supplemental coverage 

excepted benefits).47

Some commenters supported the 

proposed effective and applicability 

date, suggesting that the rule should be 

effective and applicable as soon as 

possible, while others stated that the 

rule should be applicable as of January 

1, 2019. Others stated that it should be 

applicable January 1, 2020, to allow 

issuers time to plan and prepare new 

plan designs and regulatory filings and 

to allow states the chance to enact any 

legislation or promulgate regulations 

they felt necessary. One commenter 

asserted that if the rule were to become 

effective in 2018, it would disrupt the 

markets for 2018 and 2019 without 

providing a fair opportunity for health 

insurance issuers of individual market 

plans to adjust their rates to account for 

the potential impact on the individual 

market risk pool. This commenter also 

stated that a delayed effective date 

would allow states time to educate the 

public. Some states and the National 

Association of Insurance Commissioners 

(NAIC) expressed concerns about the 

timing of this rule, noting that some 

states may want to modify existing laws 

and regulations and asked the 

Departments to give such states time to 

review their rules and seek statutory or 

regulatory changes. These states asked 

for flexibility in overseeing short-term, 

limited-duration insurance plans 

according to market-specific needs, 

including the ability to postpone or 

otherwise delay the effective date to 

review existing state requirements to 

facilitate a smooth transition and 

educate the public about this coverage 

option. Another commenter asked for an 

effective date that would allow issuers 

to begin selling short-term, limitedduration insurance, as defined in this 

final rule, in 2019, stressing the collapse 

of its individual market. One 

commenter stated that, given that 

individual health insurance issuers have 

set their 2018 rates assuming that shortterm, limited-duration insurance is 

limited to less than 3 months, a change 

in the rule at this point would violate 

serious reliance interests. 

The Departments understand that an 

applicability date of 60 days following 

publication of this final rule might 

cause challenges for some states and 

issuers as they move to adopt, enforce, 

and comply with the final rule. 

However, as stated elsewhere in this 

final rule, the Departments believe there 

is a critical need to expand access to 

health coverage choices in addition to 

individual health insurance coverage, 

which, as stated above, may not be the 

most appropriate or affordable policies 

for many individuals. The Departments 

believe that a uniform federal standard 

of less than 12 months for the initial 

contract term, with renewals or 

extensions permitted for a maximum 

duration of up to 36 months under a 

policy, and with the notice set forth in 

the final rule, is the appropriate federal 

standard for the reasons stated earlier, 

and must be applicable as soon as 

possible. Therefore, this final rule 

provides that the new definition of 

short-term, limited-duration insurance 

applies to insurance policies sold on or 

after October 2, 2018. This effective and 

applicability date, which is 60 days after 

the date this final rule was published in 

the Federal Register, is the effective and 

applicability date that was proposed in 

the proposed rule. The Departments 

realize that some states may wish to 

retain the less-than-3-month duration 

standard that was set forth in the 

October 2016 final rule, or some other 

standard that is narrower than the 

federal definition but for whom it might 

be difficult to enact legislation, or 

promulgate a regulation before the final 

rules goes into effect. Thus, the 

Departments reiterate that included in 

states’ ability and authority to define 

and regulate short-term, limitedduration insurance, is the ability and 

authority to define and regulate such 

coverage in such a way as to impose a 

shorter (but not longer) maximum initial 

contract term and a shorter (but not 

longer) maximum duration for a policy 

than those included in this final rule. In 

addition, issuers of short-term, limitedduration insurance must comply with 

the notice requirement in this final rule, 

with respect to policies sold on or after 

October 2, 2018, with states having 

flexibility to require additional 

disclosures. 

Group health plans, to the extent they 

must distinguish between short-term, 

limited-duration insurance and 

individual health insurance coverage for 

purposes of the federal requirements 

under the PHS Act, may apply the 

definition of short-term, limitedduration insurance contained in the 

final rule, as of October 2, 2018. The 

Departments believe this approach 

might substantially reduce burden for 

group health plan sponsors, particularly 

sponsors of large group health plans that 

operate in multiple states, as the 

Departments believe it could be 

burdensome for sponsors of such plans 

to have to familiarize themselves with 

the definition of short-term, limitedduration insurance that applies in each 

state in which the group health plan 

operates. However, to the extent an 

insurance contract is subject to state law 

that requires short-term, limitedduration insurance to have a maximum 


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initial contract term and/or total 

duration of coverage that is shorter than 

the maximum periods under the 

definition of short-term, limited 

insurance in this final rule, and that 

requires the notice specified in that 

definition, a plan or a health insurance 

issuer may, or, if permitted or required 

by applicable state insurance law, must, 

as applicable, determine whether a 

given insurance contract is individual 

health insurance coverage or is shortterm, limited-duration insurance by 

applying that state law to the coverage. 

The Departments received no 

comments on the proposed conforming 

amendments and technical updates with 

respect to the applicability date, and are 

finalizing them in this final rule. 

III. Economic Impact and Paperwork 

Burden 

A. Summary 

This rule amends the definition of 

short-term, limited-duration insurance 

coverage so that the coverage has a 

maximum initial contract term of less 

than 12 months and a maximum 

duration (including the initial contract 

term and renewals and extensions of the 

same insurance contract) of no longer 

than 36 months. The final rule also 

requires a notice be included in the 

contract and any application materials 

provided in connection with enrollment 

in such coverage. 

The Departments have examined the 

effects of this rule as required by 

Executive Order 13563 (76 FR 3821, 

January 18, 2011, Improving Regulation 

and Regulatory Review), Executive 

Order 12866 (58 FR 51735, September 

30, 1993, Regulatory Planning and 

Review), the Regulatory Flexibility Act 

(September 19, 1980, Pub. L. 96–354), 

section 1102(b) of the Social Security 

Act, section 202 of the Unfunded 

Mandates Reform Act of 1995 (March 

22, 1995, Pub. L. 104–4), Executive 

Order 13132 on Federalism (August 4, 

1999), the Congressional Review Act (5 

U.S.C. 804(2)) and Executive Order 

13771 (January 30, 2017, Reducing 

Regulation and Controlling Regulatory 

Costs). 

B. Executive Orders 12866 and 13563 

Executive Order 12866 (58 FR 51735) 

directs agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 (76 FR 

3821, January 21, 2011) is supplemental 

to and reaffirms the principles, 

structures, and definitions governing 

regulatory review as established in 

Executive Order 12866. 

Section 3(f) of Executive Order 12866 

defines a ‘‘significant regulatory action’’ 

as an action that is likely to result in a 

rule: (1) Having an annual effect on the 

economy of $100 million or more in any 

1 year, or adversely and materially 

affecting a sector of the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

state, local or tribal governments or 

communities (also referred to as 

‘‘economically significant’’); (2) creating 

a serious inconsistency or otherwise 

interfering with an action taken or 

planned by another agency; (3) 

materially altering the budgetary 

impacts of entitlement grants, user fees, 

or loan programs or the rights and 

obligations of recipients thereof; or (4) 

raising novel legal or policy issues 

arising out of legal mandates, the 

President’s priorities, or the principles 

set forth in the Executive Order. 

A regulatory impact analysis must be 

prepared for major rules with 

economically significant effects (for 

example, $100 million or more in any 1 

year), and a ‘‘significant’’ regulatory 

action is subject to review by the Office 

of Management and Budget (OMB). The 

Departments anticipate that this 

regulatory action is likely to have 

economic impacts of $100 million or 

more in at least 1 year, and therefore 

meets the definition of a ‘‘significant 

rule’’ under Executive Order 12866. 

Therefore, the Departments have 

provided an assessment of the potential 

costs, benefits, and transfers associated 

with this final rule. In accordance with 

the provisions of Executive Order 

12866, this final rule was reviewed by 

OMB. 

1. Need for Regulatory Action 

This rule contains amendments to the 

definition of short-term, limitedduration insurance for purposes of the 

exclusion from the definition of 

individual health insurance coverage 

under the PHS Act. This regulatory 

action is taken in light of Executive 

Order 13813 directing the Departments 

to consider proposing regulations or 

revising guidance to expand the 

availability of short-term, limitedduration insurance, as well as continued 

feedback from stakeholders expressing 

concerns about the October 2016 final 

rule. While individuals who qualify for 

PTCs are largely insulated from 

significant premium increases, 

individuals who are not eligible for 

subsidies are harmed by increased 

premiums in the individual market and 

the lack of other, more affordable, 

alternative coverage options. This final 

rule aims to increase insurance options 

for individuals unable or unwilling to 

purchase available individual market 

plans and provide more flexibility to 

states to pursue innovative solutions to 

meet their market-specific needs. 

2. Summary of Impacts 

In accordance with OMB Circular 

A–4, Table 1 depicts an accounting 

statement summarizing the 

Departments’ assessment of the benefits, 

costs, and transfers associated with this 

regulatory action. The Departments 

believe the need for coverage options 

that are more affordable than individual 

health insurance coverage is critical, 

combined with the general need for 

more coverage options and choice. 

Therefore, the Departments believe that 

the benefits associated with this rule 

outweigh the costs. 

TABLE 1—ACCOUNTING TABLE

Benefits: 

Qualitative: 

• Increased access to affordable health insurance for consumers unable or unwilling to purchase available individual market plans, potentially decreasing the number of uninsured individuals and resulting in improved health outcomes for these individuals. 

• Increased choice at lower cost and increased financial protection (for consumers who are currently uninsured or face extremely high premiums and deductibles for PPACA coverage) from catastrophic health care expenses for consumers purchasing short-term, limited-duration insurance. 

• Potentially broader access to health care providers compared to available individual market plans for some consumers. 

• Increased profits for issuers and brokers of short-term, limited-duration insurance. 

• Economic efficiency gains from people buying unsubsidized coverage and minimizing overinsurance. 


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48National Association of Insurance 

Commissioners, ‘‘2016 Accident and Health Policy 

Experience Report’’, July 2017. Available at http:// 

www.naic.org/prod_serv/AHP-LR-17.pdf. 

49Reed Abelson, ‘‘Without Obamacare Mandate, 

‘You Open the Floodgates’ for Skimpy Health 

Plans’’, the New York Times, November 30, 2017. 

Available at https://www.nytimes.com/2017/11/30/ 

health/health-insurance-obamacare-mandate.html. 

50National Association of Insurance 

Commissioners, ‘‘2017 Accident and Health Policy 

Report’’, July 2018. Available at https://naic.org/ 

prod_serv/AHP-LR-18.pdf. 

51Other analysts also expect issuers to offer a 

greater variety of short-term limited-duration plans 

as a result of this rule. See Congressional Budget 

Office, ‘‘Federal Subsidies for Health Insurance 

Coverage for People Under Age 65: 2018 to 2028,’’ 

May 23, 2018. Available at http://cbo.gov/ 

publication/53826. 

52Michelle Andrews, ‘‘Sales Of Short-Term 

Insurance Plans Could Surge If Health Law Is 

Relaxed’’, NPR, January 31, 2017. Available at 

http://www.npr.org/sections/health-shots/2017/01/ 

31/512518502/sales-of-short-term-insurance-planscould-surge-if-health-law-is-relaxed. 53 Karen Pollitz, Michelle Long, Ashley 

Semanskee, and Rabah Kamal, ‘‘Understanding 

Short-Term Limited Duration Health Insurance’’, 

Kaiser Family Foundation, April 23, 2018. 

Available at https://www.kff.org/health-reform/ 

issue-brief/understanding-short-term-limitedduration-health-insurance/. 

TABLE 1—ACCOUNTING TABLE—Continued 

Costs: 

Qualitative: 

• Reduced access to some services and providers for some consumers who switch from available individual market plans and possibly reduced choice for individuals remaining in the individual market risk pools. 

• Potential increase in out-of-pocket costs for some consumers, possibly leading to financial hardship. 

Transfers: 

Qualitative: 

• Transfer from taxpayers (via the Federal government) to enrollees in individual market plans in the form of increased PTC payments. 

• Potentially higher premiums for some consumers remaining in the individual market as healthier than average individuals choose shortterm, limited-duration insurance to a greater degree. 

• Tax liability for consumers who replace available individual market plans and will thus no longer maintain minimum essential coverage in 

2018. 

• Potential increase in uncompensated care by hospitals. 

Short-term, limited-duration 

insurance represents a small fraction of 

the health insurance market. Based on 

data from the NAIC, in 2016, before the 

October 2016 final rule became 

effective, total premiums earned for 

policies designated short-term, limitedduration by carriers were approximately 

$146 million for approximately 

1,279,500 member months and with 

approximately 160,600 covered lives at 

the end of the year. During the same 

period, total premiums for individual 

market (comprehensive major medical) 

coverage were approximately $63.25 

billion for approximately 175,689,900 

member months with approximately 

13.6 million covered lives at the end of 

the year.48 One commenter stated, 

however, that the actual enrollment in 

short-term, limited-duration insurance 

was close to 500,000 covered lives in 

December 2016, once association based 

sales were taken into account. Another 

commenter cited a report 49 stating that 

enrollment in such coverage may be 

closer to one million. Based on data 

from the NAIC, in 2017, total premiums 

earned for policies designated shortterm, limited-duration by carriers were 

approximately $151 million for 

approximately 1,053,082 member 

months and with approximately 122,483 

covered lives at the end of the year.50

While sales of short-term, limitedduration insurance declined after the 

October 2016 final rule was finalized, 

the sales of such coverage were 

increasing prior to the issuance of that 

rule. In part because under the October 

2016 rule short-term, limited-duration 

plans may be offered only for periods of 

less than three months, fixed 

administrative costs for issuers, 

including underwriting, are likely to be 

high relative to premiums. In addition, 

the transactions costs of obtaining plans 

are high for consumers, relative to 

benefits claimed. Allowing plans to be 

sold for a longer period of time is 

expected to reduce these costs, making 

short-term, limited-duration plans more 

attractive for issuers and consumers. 

Given this and the trend we observed 

prior to issuance of the October 2016 

rule, the Departments expect more 

issuers to offer a greater variety of shortterm, limited-duration plans, and more 

consumers to purchase such plans, as a 

result of this rule.51

a. Benefits 

This rule will benefit individuals who 

have been harmed by the increasing 

premiums, deductibles and cost-sharing 

associated with individual market plans 

and by limited choices. This rule 

empowers consumers to purchase the 

benefits they want and reduce 

overinsurance. Short-term, limitedduration insurance is likely to represent 

more efficient amounts of coverage 

since it lacks distortionary price 

controls and regulation that can greatly 

separate price from value and lead some 

people to overinsure and others to 

underinsure. 

Lengthening the term of short-term, 

limited-duration plans will help reduce 

the fraction of the population that is 

uninsured by giving the uninsured a 

greater variety of plan choices. Similarly 

this rule also offers additional choice to 

persons who would otherwise be 

limited to the products offered on their 

local Exchange. By reducing the permonth transactions and administrative 

costs on such plans, this rule confers an 

economic benefit to its members 

because the insurance market passes on 

some or all of the cost savings as 

premium savings. This rule also helps 

the economic burden of PPACA to be 

shared more equitably by shifting some 

of the premium costs to general revenue 

from individual-market customers who 

are induced to purchase short-term, 

limited-duration plans rather than 

Exchange plans. 

Consumers who purchase short-term, 

limited-duration insurance for longer 

periods than currently permitted will 

benefit from increased insurance 

options at lower premiums, as the 

average monthly premium for an 

individual in the fourth quarter of 2016 

for a short-term, limited-duration policy 

was approximately $124 compared to 

$393 for an unsubsidized individual 

market plan—a premium savings of 70 

percent.52 This disparity may be wider 

given that unsubsidized premiums 

significantly increased from 2016 to 

2018. A recent study concluded that the 

least expensive short-term, limitedduration insurance policy often costs 20 

percent or less of the premium for the 

lowest-cost individual market bronze 

plan in the area.53 While there is a 

significant difference in the premiums 

for short-term, limited-duration 


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54Cynthia Cox, Selena Gonzales, Rabah Kamal, 

Gary Claxton and Larry Levitt, ‘‘Analysis of 2016 

Premium Changes in the Affordable Care Act’s 

Health Insurance Marketplaces’’, Kaiser Family 

Foundation, October 26, 2015. Available at https:// 

www.kff.org/health-reform/fact-sheet/analysis-of2016-premium-changes-in-the-affordable-care-actshealth-insurance-marketplaces/. 

55 Id. 

56Anna Wilde Mathews, ‘‘Sales of Short-Term 

Health Policies Surge: Some consumers opt for 

limited coverage, saying it is cheaper than 

conventional plans’’, Wall Street Journal, April 10, 

2016. Available at https://www.wsj.com/articles/ 

sales-of-short-term-health-policies-surge1460328539. The ability of short-term, limitedduration plans to provide broad provider networks 

has been touted by some in the insurance 

community. 

57The Departments note that the average duration 

of unemployment as reported by the Bureau of 

Labor Statistics is an arithmetic mean based on 

observed incomplete spells of unemployment. The 

actual average duration of completed spells of 

unemployment could be longer or shorter. 

insurance and unsubsidized individual 

market plans, individuals qualifying for 

PTCs may not find the difference in 

premiums as appealing, as the 

difference in their out-of-pocket 

premium costs is likely relatively small. 

A recent study estimated that in 2016 

the consumer portion of the premium, 

after the tax credit, for a 40 year old 

non-smoker making $30,000 per year 

ranged from $163 to $206 per month in 

most of the country.54 However, the 

premium cost for a 40 year old nonsmoker making $30,000, before 

accounting for any tax credit, ranged 

from $183 to $719 per month depending 

on location.55 This rule will provide an 

affordable alternative to individuals 

who do not qualify for PTCs and have 

been harmed by rising premiums in the 

individual market. This final rule will 

also benefit individuals who need 

coverage for longer periods, such as 

those who need more than 3 months to 

find new employment, or who find 

available individual market plans to be 

unaffordable. Individuals who purchase 

short-term, limited-duration insurance 

as opposed to being uninsured will 

potentially experience improved health 

outcomes and have greater financial 

protection from catastrophic health care 

expenses. Individuals purchasing shortterm, limited-duration policies may 

obtain broader access to health care 

providers compared to what they would 

obtain through individual market plans 

that have narrow provider networks.56

Issuers of short-term, limited-duration 

insurance will benefit from higher 

enrollment. They are likely to 

experience an increase in premium 

revenues and profits because such 

policies can be priced in an actuarially 

fair manner (by which the Departments 

mean the policies are priced so that the 

premium paid by an individual reflects 

the risks associated with insuring the 

particular individual or individuals 

covered by that policy) and issuers have 

experience pricing in this manner. In 

addition, the fixed costs of issuing plans 

will be reduced relative to premiums as 

issuers will not need to reissue plans 

every 3 months in order to cover 

consumers for a year or more. 

In response to the Departments’ 

request for comments on the benefits of 

having short-term, limited-duration 

insurance, many commenters stated that 

short-term, limited-duration insurance 

has served a critical role in providing 

temporary limited health coverage to 

individuals who would otherwise go 

uninsured. Some commenters also 

stated that the proposed changes would 

allow potential purchasers of shortterm, limited-duration insurance, 

especially those who find individual 

market plans to be unaffordable, to 

obtain the coverage they want (and 

exclude services they do not want) at a 

more affordable price for a longer period 

of time. Other benefits commenters 

stated would flow from extending the 

maximum duration for short-term, 

limited-duration insurance include the 

facts that deductibles will not be reset 

every 3 months and that health 

conditions that develop during this 

coverage period will continue to be 

covered for a longer period of time. 

Commenters also stated that increasing 

the length of coverage would expand 

access to affordable coverage options for 

those who otherwise would lose 

coverage and could not pass 

underwriting and would not qualify for 

a special enrollment period because 

they would not be forced to go without 

coverage until the next open enrollment 

period. One commenter cited Bureau of 

Labor Statistics data that the average 

length of unemployment in the United 

States (U.S.) is 24.1 weeks, or about 5.5 

months, as of March 2018; further 

stating that in 20.3 percent of cases the 

period of unemployment lasts 27 weeks 

or more, which means that 6 months is 

often not long enough to secure gainful 

employment.57 Therefore, limiting the 

duration of short-term, limited-duration 

insurance policies to 3 months, or even 

6 months, harms those Americans who 

find themselves unemployed for the 

average length of time or longer. 

The Departments agree with the 

commenters that increasing the 

maximum duration of a short-term, 

limited-duration insurance policy will 

benefit consumers who have been most 

harmed by PPACA (for example, those 

who cannot afford or do not want 

individual health insurance coverage) or 

who want to purchase such coverage for 

longer than 3 months; it also will 

provide states with additional flexibility 

to pursue innovative approaches to 

expand access to coverage options in 

addition to individual health insurance 

coverage. The final rule increases the 

maximum duration of the initial 

contract term, under the federal 

definition, to less than 12 months and 

permits such policies to be renewed or 

extended such that the maximum 

duration of a policy, including the 

initial contract term specified in the 

contract and renewals and extensions, is 

no longer than 36 months. 

One commenter asserted that shortterm, limited-duration insurance plans 

typically provide coverage for all major 

benefits such as: Doctor and specialist 

visits, preventive/wellness care, 

emergency care, x-rays, lab tests, 

transplants, intensive care, and 

hospitalization. In addition, the 

commenter noted, short-term, limitedduration insurance policies can include 

benefits for mental health disorders, 

substance abuse, physical therapy, 

speech therapy, home health care, 

ambulance, and other covered medical 

expenses. The commenter also claimed 

that these policies generally provide 

coverage for prescription drugs that are 

administered by a doctor in a setting 

covered by the policy and there is 

typically outpatient prescription 

coverage for drugs that require a written 

prescription and are necessary to treat a 

condition covered by the policy. 

One commenter stated that a key 

feature of typical short-term, limitedduration insurance is that the plan 

benefits are paid for covered expenses 

incurred from any provider in the U.S. 

and there is no referral required if a 

member would like to see a specialist. 

According to the commenter, members 

have the added benefit of receiving 

discounted network rates if they choose 

to use an in-network provider. 

The Departments agree that shortterm, limited-duration insurance could 

be a desirable and affordable option for 

many consumers. The Departments are 

therefore finalizing a definition in this 

final rule to remove federal barriers that 

inhibit consumer access to additional, 

more affordable coverage options while, 

at the same time, distinguishing it from 

individual market health insurance 

coverage. States remain free to regulate 

these products as set forth elsewhere in 

this final rule. 

Some commenters stated that the 

potential risks of high copayments and 

severely limited health coverage 

associated with short-term, limitedduration insurance significantly 

outweigh the cost savings from 

enrollment in such plans. A commenter 


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58Chad Terhune, ‘‘Top insurers overstated doctor 

networks, California regulators charge’’, Los 

Angeles Times, November 18, 2014. Available at 

http://www.latimes.com/business/la-fi-obamacarenetwork-probe-20141119-story.html. 

59National Association of Insurance 

Commissioners, ‘‘2016 Accident and Health Policy 

stated that the analysis in the proposed 

rule does not sufficiently explain how 

the benefits of expanding short-term, 

limited-duration insurance could 

possibly outweigh the disruption and 

consumer harm caused by the proposed 

changes. 

Some commenters stated that some of 

the benefits are mischaracterized; for 

example, people with short-term, 

limited-duration insurance don’t have 

broader access to health care providers, 

when many benefits and health 

conditions are entirely excluded from 

short-term, limited-duration plans. 

Commenters suggested that other 

purported benefits of the proposed rule 

(such as lower premiums for some 

healthier people) would be erased by its 

harmful impacts (higher premiums in 

the individual market as a whole). 

One commenter stated that potential 

increases in access to health care and 

choice are ‘‘illusory’’. The commenter 

provided an example where an issuer of 

short-term, limited-duration insurance 

claims not to restrict enrollees to a 

network, but in reality pays claims up 

to a fixed percentage of Medicare 

reimbursement rates, leaving enrollees 

responsible for any amounts above that 

threshold. The commenter explained 

that this essentially is equivalent to 

being enrolled in a PPO plan with an 

empty network that leaves enrollees 

faced with high out-of-pocket expenses 

after receiving care. 

With regard to the claim that shortterm, limited-duration insurance can 

offer broader network coverage, a 

commenter expressed concerns that the 

Departments relied on promotional 

material provided by an issuer. Another 

commenter stated that the coverage may 

have a very limited network of 

providers and may not provide any 

coverage for out-of-network providers, 

while others stated that the exclusion of 

services effectively limits the actual 

networks by excluding providers, and 

this could particularly affect rural areas. 

One commenter stated that while 

premiums for short-term, limitedduration insurance policies will likely 

be lower relative to individual market 

plans, using premiums as the sole 

measure of a benefit to consumers 

provides an incomplete analysis. This 

commenter noted that short-term, 

limited-duration insurance policies fail 

to provide comprehensive coverage and 

thus expose consumers who have a 

serious medical condition, such as 

cancer, to significant out-of-pocket 

costs. The commenter also suggested 

that the analysis fails to take into 

account that due to underwriting, 

premiums for short-term, limitedduration insurance policies can expose 

even relatively healthy older 

individuals to significant premiums, 

and could also result in individuals 

with preexisting conditions being 

denied coverage or charged significantly 

higher premiums due to their health 

conditions. 

A few commenters stated that shortterm, limited-duration insurance plans 

should also not be compared with being 

uninsured, rather they should be 

compared to individual market plans. 

Many commenters stated that the 

Departments should look at the benefits 

to all consumers and not just young and 

healthy individuals. 

This rule will benefit individuals who 

have been harmed by the increasing 

premiums, deductibles and cost sharing 

associated with individual market plans 

and limited choices—both in terms of 

coverage options and in terms of 

narrowing provider networks. The 

Departments’ judgment is that 

individuals are in the best position to 

evaluate the tradeoffs between the 

benefits and costs of various coverage 

alternatives. This rule empowers 

consumers to make decisions on the 

benefits they want and reduce the 

potential for overinsurance and 

underinsurance while expanding access 

to more affordable coverage options. As 

acknowledged previously, short-term, 

limited-duration insurance may not be 

the most suitable coverage for everyone. 

Individuals who desire comprehensive 

coverage subject to PPACA rules will 

continue to have the option of 

purchasing individual market health 

insurance coverage on a guaranteed 

available and guaranteed renewal basis. 

Also, individuals who receive PTCs 

generally will not experience an 

increase in out-of-pocket costs for 

premiums if they continue to purchase 

Exchange coverage. However, this final 

rule provides another choice in addition 

to individual health insurance coverage 

for consumers to consider, based on 

their own personal circumstances and 

needs. In many cases, short-term, 

limited-duration insurance will provide 

a more desirable option for individuals, 

especially those who would otherwise 

be uninsured, those not eligible for 

PTCs, those who have lost their 

employment and are unable to afford 

individual market coverage, and those 

with objections to purchasing coverage 

of certain services or products that are 

mandated to be covered by PPACA. In 

that regard, the Departments believe it is 

appropriate to compare having shortterm, limited-duration insurance to both 

being uninsured as well as having 

individual health insurance coverage. 

Uninsured individuals who purchase 

short-term, limited-duration insurance 

will experience an increase in financial 

protection and may gain greater access 

to certain health care providers. 

Moreover, individual market plan 

networks may also be quite restrictive, 

and short-term, limited-duration plan 

networks may very well cover a broader 

array of providers. For most individuals 

who switch to short-term, limitedduration insurance from individual 

market plans, lower premiums will 

provide the biggest benefit. Short-term, 

limited-duration insurance may also 

provide consumers with benefits that 

are more tailored to their individual or 

familial needs or circumstances. 

Commenters have valid concerns about 

the potential for misleading information 

about provider networks, which can 

also be a concern with individual 

market plans,58 and we generally defer 

to the states to address such concerns as 

part of their regulation and oversight of 

health insurance. 

Many commenters stated that issuers 

and brokers will receive higher profits 

and commissions for these plans, as 

issuers have made moves to reduce 

broker commissions for individual 

market plans. One commenter 

mentioned that according to available 

data from the NAIC, in 2015 the 

industry-wide average MLR for ‘‘ShortTerm Medical’’ was 69.76 percent, with 

smaller companies falling below 50 

percent MLR for the vast majority of the 

total market share. The commenter 

stated that health insurance products 

with an MLR at or below 50 percent 

raise a red flag because when a majority 

of the company’s revenue is not spent 

on medical services, consumer health 

becomes a secondary part of its 

business. 

The Departments acknowledge that 

issuers and brokers of short-term, 

limited-duration insurance will benefit 

from the changes finalized in this rule 

to varying degrees depending on state 

regulations of short-term, limitedduration insurance. Short-term, limited 

duration insurance is not subject to the 

federal MLR standards under section 

2718 of the PHS Act and this final rule 

does not establish a federal MLR 

threshold for short-term, limitedduration insurance. There is also a large 

variation in the reported MLR for shortterm, limited-duration insurance. 

Average MLR for short-term, limitedduration coverage was approximately 67 

percent in 2016.59 For the top 10 issuers 


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Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Rules and Regulations 38231 

Experience Report’’, July 2017. Available at http:// 

www.naic.org/prod_serv/AHP-LR-17.pdf. 

60 Id. 

61Scott E. Harrington, ‘‘Medical Loss Ratio 

Regulation under the Affordable Care Act’’, Inquiry, 

2013. Available at https://www.jstor.org/stable/ 

23480894. 

that accounted for almost 94 percent of 

the national short-term, limitedduration insurance market their MLRs 

ranged from 47.46 percent to 219.61 

percent in 2016.60 MLR may be of 

limited utility in evaluating the 

efficiency of insurance coverage and 

may result in higher medical costs and 

premiums, less innovation in plan 

design, less consumer choice, and 

increased market concentration.61 As 

previously mentioned, the majority of 

short-term, limited-duration insurance 

policies were sold as transitional 

coverage in 2016, and the duration of 

such policies typically was less than 3 

months. Increased administrative costs 

due to underwriting and the short 

duration may also explain the lower-end 

reported MLRs for short-term, limitedduration insurance policies in 2016. As 

the short-term, limited-duration 

insurance market grows, the 

Departments anticipate that in the long 

term more issuers will sell such 

coverage, increasing competition and 

limiting excessive profits. 

b. Costs and Transfers 

Short-term, limited-duration 

insurance policies are unlikely to 

include all the requirements applicable 

to individual market plans, such as the 

preexisting condition exclusion 

prohibition, coverage of essential health 

benefits without annual or lifetime 

dollar limits, preventive care, maternity 

and prescription drug coverage, rating 

restrictions, and guaranteed 

renewability. Therefore, consumers who 

switch to such policies from individual 

market plans will experience loss of 

third-party payments for some services 

and providers and potentially an 

increase in out-of-pocket expenditures 

related to such excluded services, as 

well as an exclusion of benefits that in 

many cases consumers do not believe 

are worth their cost (which could be one 

reason why many consumers, possibly 

even those receiving subsidies for 

Exchange plans, may switch to shortterm, limited-duration policies rather 

than remain in individual market 

plans). Depending on state regulation, 

issuer plan design, and whether 

consumers decline to purchase a 

separate renewal guarantee product, 

consumers who purchase short-term, 

limited-duration insurance policies and 

then develop chronic conditions may 

face financial hardship as a result, until 

they are able to enroll in individual 

market plans that will provide coverage 

for such conditions. 

Since short-term, limited-duration 

insurance is not MEC, any individual 

enrolled in short-term, limited-duration 

coverage that lasts 3 months or longer in 

2018 will potentially incur a tax liability 

for not having MEC during that year. 

Starting in 2019, the individual shared 

responsibility payment included in 

section 5000A of the Code is reduced to 

$0, as provided under Public Law 115– 

97, and thus no tax liability could 

accrue in that year and thereafter for not 

having MEC. However, the tax liability 

is not the sole consequence of not 

having MEC. Because short-term, 

limited-duration insurance does not 

qualify as MEC, those individuals who 

lose coverage in these plans may not 

qualify for a special enrollment period 

in the individual market and may face 

a period of time in which they have no 

medical coverage, and this will continue 

to be the case even after 2018. 

Purchasing a renewal guarantee, 

however, may eliminate the need for a 

special enrollment period. 

The Departments requested and 

received many comments on the 

potential costs of the proposed changes. 

Many commenters pointed out the 

possible negative impacts and costs 

associated with the proposed changes, 

especially the effect on consumers’ outof-pocket costs. Many commenters 

stated that consumers considering 

purchasing short-term, limited-duration 

insurance policies are unlikely to know 

the limitations of the policies and the 

non-applicability of the numerous 

PPACA consumer protections to these 

policies. Many commenters also stated 

that the comprehensiveness of items 

and services covered by short-term, 

limited-duration insurance coverage can 

be misleading; individuals who are 

expected to need expensive services 

because of preexisting conditions would 

likely either have services for those 

conditions excluded from coverage or be 

denied coverage altogether. Thus, 

consumer expectations for short-term, 

limited-duration insurance policies may 

be significantly different from the 

realities of these policies. Commenters 

are concerned that the differences 

between short-term, limited-duration 

insurance policies and plans offered in 

individual and group markets may not 

be clear to consumers. As a result they 

may be exposed to excessive out-ofpocket costs. 

This final rule requires issuers to 

provide a notice in application materials 

and the contract to alert consumers to 

the potential limitations of short-term, 

limited-duration insurance. States also 

have the flexibility to mandate the 

disclosure of additional information. 

This will help inform consumers about 

the limitations of short-term, limitedduration insurance and their choice of 

the coverage that best suit their needs. 

The notice language in the final rule 

provides more detail on the potential 

limitations of short-term, limitedduration insurance coverage than what 

was in the proposed rule to support 

informed coverage purchasing decisions 

by consumers, while those who are 

concerned about potential excessive 

out-of-pocket costs will continue to 

have the option to purchase individual 

market coverage that includes PPACA 

requirements. 

Many commenters noted that shortterm, limited-duration insurance often 

lacks consumer safeguards, generally 

excludes coverage for preexisting 

conditions, does not provide coverage 

for essential health benefits, often 

applies high deductibles and costsharing requirements, has lifetime and 

annual dollar caps on reimbursement 

for medical expenses, has no maximum 

limits on out-of-pocket costs, may be 

rescinded, and is generally available 

only for healthy consumers. As a result, 

consumers who purchase short-term, 

limited-duration insurance can 

experience significant financial 

hardship, especially if they require 

access to health care services not 

covered by their plan. These 

commenters noted that this is 

particularly problematic for people who 

have chronic or life-threatening 

conditions that require costly treatment, 

close monitoring and ongoing 

medication. 

Commenters also stated that the 

potential risks of unreasonable 

copayments and severely limited health 

coverage associated with short-term, 

limited-duration insurance significantly 

outweigh the cost savings from 

enrollment in such plans. For example, 

according to one commenter, out-ofpocket costs for short-term, limitedduration insurance policies may be 

excessive in many markets: In Phoenix, 

AZ, the out-of-pocket cost-sharing limit 

for a 40-year-old male can be as high as 

$30,000 for a 3-month period. While 

another commenter pointed out that in 

Georgia, a plan had a 3-month out-ofpocket limit of $10,000, but did not 

include the deductible of $10,000, 

resulting in an effective 3-month out-ofpocket maximum of $20,000. 

Some commenters are concerned 

about the lack of network adequacy 

requirements for short-term, limitedduration insurance. One commenter 

expressed concern that misleading 

claims related to provider networks 


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38232 Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Rules and Regulations 

62ASPE ‘‘Data Point—Individual Market 

Premium Changes: 2013–2017’’, May 23, 2017. 

Available at https://aspe.hhs.gov/system/files/pdf/ 

256751/IndividualMarketPremiumChanges.pdf. 

63ASPE ‘‘Health Plan Choice and Premiums in 

the 2018 Federal Health Insurance Exchange’’, 

October 30, 2017. Available at https://aspe.hhs.gov/ 

pdf-report/health-plan-choice-and-premiums-2018- 

federal-health-insurance-exchange. 

64Robert Pear, ‘‘Many Say High Deductibles Make 

Their Health Law Insurance All but Useless’’, The 

New York Times, November 14, 2015. Available at 

https://www.nytimes.com/2015/11/15/us/politics/ 

many-say-high-deductibles-make-their-health-lawinsurance-all-but-useless.html. 

65HealthPocket, ‘‘Average Market Premiums 

Spike Across Obamacare Plans in 2018’’, October 

27, 2017. Available at https://

www.healthpocket.com/healthcare-research/ 

infostat/2018-obamacare-premiums-deductibles. 

could result in consumers purchasing 

plans later finding that the provider 

networks may be non-existent in their 

specific market, as short-term, limitedduration plans are not subject to the 

network adequacy protections, leading 

to higher out-of-pocket costs. 

Many commenters stated that these 

policies could subject patients to 

catastrophic medical bills and medical 

bankruptcy. For example, short-term, 

limited-duration insurance enrollees 

suffering acute health emergencies, 

debilitating injuries that lead to 

permanent disabilities, or the onset of 

chronic conditions could end up facing 

financial hardship until they can enroll 

in an individual (or group) market plan 

that provides the coverage they need. 

Many commenters shared their past 

experience with short-term, limitedduration insurance (as well as prePPACA individual market coverage) and 

provided numerous examples of how 

annual and lifetime dollar limits 

resulted in consumers being left 

responsible for large medical bills and 

high out-of-pocket costs and concluded 

that short-term, limited-duration 

insurance is not really an affordable 

alternative to available individual 

market plans. Many commenters stated 

that the proposed changes would reduce 

access to maternity care, treatment for 

illnesses such as cancer, cystic fibrosis, 

multiple sclerosis, arthritis, eating 

disorders, visions and hearing loss and 

mental health and substance use 

disorders. Many commenters shared 

personal stories of struggles with 

illnesses such as cancer and the 

financial and emotional toll of such 

illnesses. These commenters expressed 

deep fears that as a result of this rule, 

they would lose coverage because 

issuers would stop offering individual 

market plans or because those plans 

would become too expensive. These 

commenters expressed fear of becoming 

bankrupt and losing their lives because 

of reduced access to the necessary 

health care. 

Commenters expressed concern that 

this would reverse the health coverage 

gains over the last few years, especially 

in minority communities and amongst 

women. One commenter stated that the 

design of short-term, limited-duration 

insurance in the proposed rule will 

discourage the pursuit of preventive 

services, so the public health will suffer. 

This rule will benefit individuals who 

have been harmed by the increasing 

premiums, deductibles, and cost-sharing 

associated with individual market plans 

and by limited choices. Individual 

market premiums increased 105 percent 

from 2013 to 2017, in the 39 states using 

Healthcare.gov in 2017,62 while the 

average monthly premium for the 

second-lowest cost silver plan for a 27- 

year-old increased by 37 percent from 

2017 to 2018.63 Individual market plans 

will continue to be available to 

individual consumers on a guaranteed 

availability basis and many individuals 

will have the opportunity to purchase 

the type of coverage that is most 

desirable and suitable for them and their 

families’ health care and budget needs, 

unless states take actions to restrict the 

short-term, limited-duration market. 

Also, individuals who receive PTCs 

generally will not experience an 

increase in out-of-pocket costs for 

premiums. However, consumer 

expectations for individual market plans 

have often not been met due to high 

deductibles,64 and short-term, limitedduration insurance provides an 

additional choice for individuals to 

consider, based on their own personal 

circumstances. In addition to 

dramatically higher premiums, high outof-pocket costs have harmed many 

individual market plan enrollees, with 

deductibles that average nearly $6,000 a 

year for bronze single coverage and 

more than $12,000 a year for bronze 

family coverage in 2018 as well as more 

than $4,000 a year for silver single 

coverage and more than $8,000 a year 

for silver family coverage in 2018.65 In 

addition, out-of-pocket maximums for 

individual market plans are only 

applicable to in-network care and thus 

actual out-of-pocket costs may be much 

higher for individuals who need to 

obtain care out of network. High 

deductibles may also be a deterrent to 

obtaining care for some individuals. In 

some cases, short-term, limited-duration 

insurance will provide a more desirable 

option for individuals and may be the 

only affordable alternative to being 

uninsured. To help consumers make 

informed coverage decisions, issuers of 

short-term, limited-duration insurance 

are required under this final rule to 

provide a notice to alert consumers to 

the potential limitations of the coverage. 

The Departments’ judgment is that 

individuals are in the best position to 

evaluate the tradeoffs between lower 

premiums and limitations of short-term, 

limited-duration insurance. This rule 

empowers consumers to make decisions 

on the benefits they want and to reduce 

potential overinsurance and 

underinsurance. As discussed below, 

rather than increase the number of 

individuals who are uninsured the total 

number of individuals purchasing either 

individual market or short-term, 

limited-duration insurance coverage is 

expected to increase, perhaps 

significantly. Uninsured individuals 

who purchase short-term, limitedduration insurance will experience an 

increase in financial protection and 

potentially an increase in access to 

health care. As previously mentioned, 

individual market plan networks may 

also be quite restrictive, and short-term, 

limited-duration plan networks may 

very well cover a broader or superior set 

of providers. State regulators have also 

taken compliance action against 

misleading claims regarding benefits 

and provider networks, which should 

act as a disincentive to such practices. 

In response to the concern raised 

regarding bankruptcy, the rule makes 

clear that individuals are free to 

purchase separate products that may 

provide protection against the 

possibility of getting sick in the future 

and facing higher premiums as a result. 

A few commenters also mentioned the 

potential increase in uncompensated 

care and the financial burdens that the 

increased use of short-term, limitedduration insurance could place on 

hospitals. Commenters stated that the 

proposed changes could have a 

devastating impact on hospital 

emergency rooms, since they are 

required to provide care regardless of 

coverage status or one’s ability to pay. 

If more consumers enroll in short-term, 

limited-duration policies that do not 

cover treatments received in emergency 

departments, it will result in an increase 

in uncompensated care. In addition, the 

lack of coverage of essential health 

benefits may also lead to an increased 

reliance on emergency departments as 

consumers delay or do not seek primary 

care, exacerbating existing acute and 

chronic conditions. One commenter 

stated that this may also lead to 

increased boarding of mental health 

patients in emergency departments, 

where mental health patients presenting 

to an emergency department have an 

average stay of 18 hours, compared to an 


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66 Karen Pollitz, ‘‘Surprise Medical Bills’’, Kaiser 

Family Foundation, March 17, 2016. Available at 

https://www.kff.org/private-insurance/issue-brief/ 

surprise-medical-bills/. 

67 Kevin Lucia, Jack Hoadley, and Ashley 

Williams, ‘‘Balance Billing by Health Care 

Providers: Assessing Consumer Protections Across 

States’ ’’, The Commonwealth Fund, June 13, 2017. 

Available at: https://www.commonwealthfund.org/ 

publications/issue-briefs/2017/jun/balance-billinghealth-care-providers-assessing-consumer and Berta 

Alicia Bustamante, ‘‘Most States Still Don’t Have 

Comprehensive Balance Billing Legislation’’, 

insideARM, October 3, 2017. Available at: https:// 

www.insidearm.com/news/00043325-most-statesstill-dont-have-comprehensive/. 

68The net premium reduction is a result of 

unsubsidized and less-subsidized enrollees exiting 

the market, leaving the remaining population 

receiving more premium tax credit, on average. Net 

premiums for individual enrollees do not fall. 

69 83 FR 28912. 

70Silver loading refers to issuers including the 

entire cost of un-funded cost sharing reduction 

(CSR) payments on silver metal tier plans which 

offer CSR plan variants, rather than spread the cost 

over all metal tier plans. 

average of only four hours for all 

emergency department patients. 

The Departments acknowledge that if 

a short-term, limited-duration insurance 

policy excludes treatment in hospital 

emergency rooms, there is the 

possibility that there could be increases 

in uncompensated care provided by 

hospitals. However, the Departments 

have no reason to believe that all shortterm, limited-duration insurance 

policies will exclude such coverage. The 

Departments note that individuals 

enrolled in individual market plans also 

frequently experience unexpected high 

out-of-pocket costs due to balance 

billing (charges arising when an insured 

individual receives care from an out-ofnetwork provider, the balance bill being 

the difference between the total charges 

incurred and what the issuer ultimately 

pays), when obtaining care at emergency 

departments and when treating 

providers are not part of in-network 

hospitals.66 Very few states have laws 

that protect consumers from this 

practice; 15 states offer limited balance 

billing protections, while only six 

provide comprehensive balance billing 

protections for consumers.67 In 

addition, for people who would 

otherwise have been uninsured and now 

purchase short-term, limited-duration 

insurance, the final rule will likely 

result in a decrease in uncompensated 

care. The Departments have no evidence 

that this rule will lead to increased 

emergency department boarding times 

for mental health patients in emergency 

departments. 

A few commenters stated that shortterm, limited-duration insurance 

coverage also poses a threat to the 

student health insurance market. 

Students may buy the cheaper, shortterm, limited-duration insurance 

erroneously thinking that it is 

comprehensive coverage. Commenters 

believe that losses to this insurance pool 

would result in increased premiums for 

student health coverage for those 

students that choose or need to stay on 

their campus student health insurance 

plan and this could also place 

considerable stress on the institutions’ 

student health and wellness 

departments. 

The Departments believe that all 

consumers, including but not limited to 

students, should have access to 

additional, more affordable coverage 

options. In fact, these policies may 

significantly benefit students since 

premiums for the young have risen most 

dramatically as a result of PPACA. 

However, since most educational 

institutions require students to obtain 

insurance through individual market 

plans or group coverage and often 

provide relatively inexpensive options 

to students, the Departments believe 

that losses to this insurance pool will be 

limited. As previously stated, the 

Departments believe that the notice, 

provided at the time of application and 

in the contract with the language 

specified in this final rule, will help 

consumers understand what they are 

purchasing. Consumers may also be able 

to obtain additional guidance and 

assistance from brokers and agents as 

well as additional plan documents in 

order to understand the products they 

seek to purchase. The Departments 

generally defer to the states’ authority 

over agents and brokers licensed in their 

respective jurisdictions, including 

taking appropriate action in response to 

unfair or deceptive practices, which 

should act as a disincentive to such 

practices. 

Some commenters stated that the 

proposed changes would be harmful for 

solo entrepreneurs and small business 

employees by raising rates for 

individuals dependent on the 

individual market Exchanges, which is 

where many small business employees 

and solo entrepreneurs purchase health 

coverage. These commenters asserted 

that in order for employees of small 

businesses to be able to receive 

affordable coverage, individual market 

risk pools must be robust and well 

balanced. 

The Departments acknowledge that 

the changes finalized in this rule may 

lead to a small increase in premiums for 

individual market plans and possibly a 

reduction in net premiums for Exchange 

plans. The CMS Office of the Actuary 

(OACT) estimated that the average net 

premium paid by Exchange enrollees is 

expected to decline by 14 percent as a 

result of the rule.68 The Departments 

note, however, that other regulations, 

such as this rule and the recently 

finalized rule titled ‘‘Definition of 

‘‘Employer’’ under Section 3(5) of 

ERISA—Association Health Plans’’,69

issued by the Department of Labor, will 

increase access to other alternative, less 

expensive options for small businesses 

and solo entrepreneurs. Moreover, many 

small business employees and solo 

entrepreneurs stand to benefit from this 

rule. States also maintain flexibility 

under this final rule to pursue 

innovative strategies to strengthen and 

protect their respective risk pools. 

Some commenters stated that these 

changes could result in counties with no 

Exchange plans available, otherwise 

known as bare counties. Many 

commenters stated that these changes 

would increase the number of 

uninsured. 

The Departments acknowledge that 

due to the potential increase in risk 

segmentation, in which healthier 

individuals choose products outside the 

individual market may result in an 

individual market risk pool with higher 

medical expenses, it is possible that 

fewer issuers may offer plans in the 

individual market. However, the impact 

on issuer participation in the individual 

market will vary depending on a 

number of different factors, such as the 

unique demographic and other 

characteristics of a state’s population, 

regulatory environment and insurance 

markets. Further, as a result of silver 

loading 70 and dramatically higher 

premiums as well as pricing power from 

markets with limited competition from 

other issuers, issuers have begun to turn 

a profit in the individual market and 

some issuers are looking to enter the 

individual market. Further, many 

enrollees already had access to just one 

issuer for Exchange coverage. In 

addition, as discussed below, it is 

expected that the total number of 

individuals with some type of health 

insurance coverage will increase, 

perhaps significantly. 

In response to the request for 

comments on the value of excluded 

services to individuals who switch from 

individual market coverage to shortterm, limited-duration coverage, one 

commenter expressed concern about the 

suggestion that consumers would be 

willing to switch from individual 

market plans that provide more robust 

coverage to short-term, limited-duration 

insurance policies that provide less 

generous coverage because consumers 

do not believe the more generous 

benefits are worth the cost. The 

commenter stated that the Departments 


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71 Kaiser Family Foundation. Poll: ‘‘Survey of the 

Non-Group Market Finds Most Say the Individual 

Mandate Was Not a Major Reason They Got 

Coverage in 2018, And Most Plan to Continue 

Buying Insurance Despite Recent Repeal of the 

Mandate Penalty’’, April 3, 2018. Available at 

https://www.kff.org/health-reform/press-release/ 

poll-most-non-group-enrollees-plan-to-buyinsurance-despite-repeal-of-individual-mandatepenalty/. 

72Michael F. Cannon, ‘‘Short-Term Plans Would 

Increase Coverage, Protect Conscience Rights & 

Improve ObamaCare Risk Pools’’, Cato Institute, 

July 2, 2018. Available at https://www.cato.org/ 

blog/short-term-plans-reducing-uninsuredprotecting-conscience-rights-improvingobamacares-risk. 

have not offered any evidence to 

support such a suggestion and the 

commenter stated that recent polling 

indicates the opposite. The commenter 

referred to a poll 71 where 84 percent of 

respondents in the individual market 

stated that they would prefer to stay 

with their current plan rather than 

enroll in short-term, limited-duration 

insurance coverage, when asked if they 

would like to enroll in coverage that 

was less generous but with a lower 

premium. The commenter was also 

concerned that consumers, when faced 

with cost concerns, new plan choices, 

non-transparent plan information, and a 

confusing enrollment process will not 

be able to tell whether they are enrolling 

in a comprehensive plan or not—and 

consequently will end up with far less 

coverage than they thought they had. 

Many commenters stated that the 

negative consequences of short-term, 

limited-duration insurance are not 

limited to individuals with preexisting 

conditions; even healthy individuals 

may be harmed by choosing cheaper, 

skimpier coverage. If individuals are 

unable to receive or pay for care solely 

on the basis of having a less 

comprehensive health plan, they may 

put off needed care, and may lose the 

ability to have cost-effective choice over 

their health care decisions. Many 

commenters also stated that enrollees in 

short-term, limited-duration insurance 

will face financial hardship if they have 

an accident or become sick and find out 

that these policies do not cover benefits 

such as prescription drugs or some 

surgeries and that the policies can deny 

claims that should have been covered or 

that the enrollees were lead to believe 

were covered. 

One commenter stated that 

individuals who want the services that 

are excluded in short-term, limitedduration insurance have the choice to 

buy individual market plans. If they 

cannot afford those policies, however, 

the commenter stated that they would 

not be able to get the excluded services 

in the first instance. 

One commenter suggested that the 

proposed changes fail to address (and 

will likely exacerbate) the most critical 

needs in the health care and health 

insurance markets to put downward 

pressure on the rapidly rising costs of 

health care in the U.S. and to spread 

risk across larger, more diverse 

populations. One commenter stated that 

the proposals would worsen the 

inequality between the low and 

moderate income populations in the 

individual insurance market. 

This rule makes no changes to the 

federal individual market requirements. 

The Departments acknowledge that 

individuals will be able to continue to 

purchase and renew individual market 

plans, instead of switching to shortterm, limited-duration insurance. Of 

note, the turbulence of the first several 

years of the Exchanges with persistent 

issuer exit resulted in many individuals 

being unable to renew their individual 

market plans. Under this final rule, 

individuals who prefer less expensive 

coverage, or those that do not qualify for 

PTCs or otherwise find individual 

market coverage unattractive, will 

generally have greater flexibility to 

purchase short-term, limited-duration 

insurance and obtain coverage for 

services they want and exclude services 

they determine they do not need. The 

Departments believe that individuals 

reveal their preferences with their 

actions and consumers who switch to 

short-term, limited-duration insurance 

from individual market plans will do so 

because they do not value the 

individual market coverage at the cost. 

In addition, allowing people to purchase 

what they view as an efficient amount 

of coverage leads to less third-party 

payments, and third-party payments can 

drive up health care spending as 

consumers and producers are 

insensitive to price when third-party 

payers are paying the bill. Consumers 

can use their savings from lower 

premiums toward buying health care 

services when they are active, informed 

consumers, looking for the best possible 

deals. 

Because short-term, limited-duration 

insurance policies can, subject to state 

law, be priced in an actuarially fair 

manner (by which the Departments 

mean that is the policies are priced so 

that the premium paid by an individual 

reflects the risks associated with 

insuring the particular individual or 

individuals covered by that policy) 

individuals who purchase such 

coverage are likely to be relatively 

young or relatively healthy. Allowing 

such individuals to purchase a policy 

that does not comply with PPACA, but 

with an initial contract term of less than 

12-months with renewals or extensions 

up to maximum duration of 36 months, 

may weaken states’ individual market 

single risk pools. The degree to which 

individuals purchase separate renewal 

guarantee products will serve to 

strengthen individual market pools and 

could reduce Exchange premiums and 

spending—as at least one commenter 

pointed out. If the individual market 

deteriorates because of people choosing 

other types of coverage, individual 

market issuers could experience higher 

than expected costs of care and suffer 

financial losses, which might prompt 

them to leave the individual market. 

Although choices of plans available in 

the individual market have already been 

reduced to plans from a single issuer in 

roughly half of all counties, this final 

rule may further reduce choices for 

individuals remaining in those 

individual market single risk pools. 

However, as a result of silver loading 

and the tightening of special enrollment 

periods, some issuers, aware of the 

Association Health Plan rule and the 

short-term, limited-duration insurance 

proposals, have indicated they will 

expand their presence in the individual 

market next year. 

Impact on Individual Market Risk Pool 

This final rule allows short-term, 

limited-duration insurance policies to 

be renewed or extended such that the 

maximum duration of a policy, 

including the initial term specified in 

the contract and renewals or extensions 

under the same insurance contract, is no 

longer than 36 months. Depending on 

state rating requirements, issuers of 

such coverage may be able to introduce 

new plans every year at low rates that 

only healthy individuals would be able 

to purchase, while imposing large 

renewal rate increases for less healthy 

enrollees in existing plans. This could 

lead to further worsening of the risk 

pool by keeping healthy individuals out 

of the individual market for longer 

periods of time, increasing premiums 

for individual market plans and may 

cause an increase in the number of 

individuals who are uninsured. 

Previous academic research on the prePPACA individual market suggests this 

is unlikely to happen, however, as 

premium increases generally reflect the 

entire pool’s experience with less 

healthy individuals effectively 

subsidized by healthier individuals 

through market forces.72 This impact 

may be further mitigated by the degree 

that individuals purchase separate 

renewal guarantee products which may 

provide another mechanism for 

consumers to continue coverage under 

separate short-term, limited-duration 


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73 Id. 

74The proposed rule, published in the Federal 

Register on January 5, 2018 (83 FR 614) was 

subsequently finalized and published in the 

Federal Register on July 12, 2018 (83 FR 28912). 

75Congressional Budget Office, ‘‘Federal 

Subsidies for Health Insurance Coverage for People 

Under Age 65: 2018 to 2028,’’ May 23, 2018. 

Available at http://cbo.gov/publication/53826. 

insurance policies for a longer period of 

time.73

Further, as detailed elsewhere in this 

rule, the Departments are finalizing a 

notice requirement to inform consumers 

about the limitations of short-term, 

limited-duration insurance to help 

individuals make informed coverage 

purchasing decisions that best suits 

their needs—whether that is 

comprehensive individual market 

coverage or short-term, limited-duration 

insurance. This notice will also assist 

consumers of short-term, limitedduration insurance in further 

understanding the products being 

offered and can be used to combat 

misleading marketing and aggressive 

sales tactics that some brokers, agents, 

or issuers may employ as a result of 

potentially higher profits and 

commissions for short-term, limitedduration insurance. 

In response to the request for 

comments on any impacts on PPACA 

individual market single risk pools, 

some commenters who supported the 

proposed rule expressed confidence that 

the rule would not adversely impact the 

single risk pools. One commenter stated 

that the short-term, limited-duration 

insurance market has been in existence 

for over three decades and was not 

accused in the pre-PPACA market of 

being a destabilizing influence. 

According to the commenter, the 

market’s modest size, which they 

estimated to be between 650,000 and 

850,000 enrollees before the October 

2016 final rule became effective, 

represents a niche within the broader 

private health insurance market. 

Many commenters, however, 

expressed concern that extending the 

maximum duration of short-term, 

limited-duration coverage would 

weaken the single risk pools and 

destabilize the individual market by 

syphoning young, healthy individuals to 

the short-term, limited-duration 

insurance market, leaving only those 

with higher expected health costs and 

those receiving subsidies in the 

individual market. Commenters 

suggested that the resulting market 

segmentation and adverse selection 

would increase premiums for individual 

market plans and may decrease the 

number of plans available as issuers exit 

the individual market, potentially 

leading to ‘‘bare counties’’. Commenters 

also suggested that this would transform 

individual markets into high risk pools 

and would create a parallel insurance 

market, undercutting the 

comprehensive, major medical policies 

offered to individuals and families. 

Many commenters stated that the 

combination of increased availability of 

short-term, limited-duration insurance 

and the reduction of the individual 

shared responsibility payment to $0, in 

conjunction with the proposed 

Association Health Plan rule,74 could 

exacerbate adverse selection in the 

individual market. One commenter 

stated that premium and cost-sharing 

subsidies are available only for 

individual market plans sold on 

Exchanges, providing incentives for 

healthy lower-income individuals to 

remain in such plans and therefore 

limiting the deterioration of the 

individual market risk pool. Individuals 

eligible for premium subsidies would 

generally be shielded from the premium 

increases as federal premium subsidies 

would increase. For unsubsidized 

individuals who are healthy, higher 

premiums for individual market plans 

would increase the attractiveness of 

lower-premium short-term, limitedduration insurance. 

A few commenters stated that these 

effects on the individual market risk 

pool could be limited in states that 

implement additional regulations 

limiting the length and availability of 

short-term, limited-duration policies or 

requiring that they meet rules governing 

individual market plans. 

One commenter stated that if shortterm, limited-duration issuers are 

allowed to increase premiums at 

renewal based on an individual’s health 

conditions, individuals with new 

conditions will receive higher rate 

increases than enrollees without new 

conditions. The commenter further 

stated that if there are no limits on the 

allowable rate increases, premiums for 

some individuals could exceed those in 

the individual market. In such a case, 

the enrollee may move back to the 

individual market risk pool, increasing 

the health care costs of the pool. 

Many commenters stated that a key 

element of any healthy, sustainable 

insurance market is that a broad pool of 

enrollees share in the spreading of risk. 

The effect of the proposed rule would be 

to undercut the individual market risk 

pool as more individuals leave their 

current health plans and purchase shortterm, limited-duration insurance. This 

would further destabilize an already 

difficult market for individual and 

family coverage. 

One commenter suggested the 

proposed rule assumed that consumers 

who purchase short-term, limitedduration insurance and then find the 

insurance inadequate for a health 

problem that occurs during the term of 

this insurance will switch to more 

adequate coverage in the individual 

market. The commenter noted that the 

proposed rule fundamentally conceded 

that it will adversely affect the 

individual market that is a last resort for 

those with serious health issues at the 

same time ‘‘the agencies tout the fail 

safe function of those markets’’. 

Some commenters gave examples 

where state policies allowing 

segmentation of the risk pool has led to 

higher premiums and problems with 

issuer participation. These commenters 

mentioned continuation of transitional 

plans in Iowa, Nebraska, North Carolina 

and large enrollment numbers in the 

Tennessee Farm Bureau as examples. A 

commenter noted that in 2016, the 

average plan liability risk scores for 

PPACA-compliant individual market 

plans in states that allowed the sale of 

transitional plans were 12.3 percent 

higher than risk scores for PPACAcompliant individual market plans in 

states that prohibited transitional 

policies. 

The Departments acknowledge that 

relatively young, relatively healthy 

individuals in the middle-class and 

upper middle-class whose income 

disqualifies them from obtaining PTCs 

are more likely to purchase short-term, 

limited-duration insurance. As people 

choose these plans rather than 

individual market coverage, this could 

lead to adverse selection and the 

worsening of the individual market risk 

pool. As discussed below, the 

Departments estimate that the 

proportion of healthier individuals in 

the individual market Exchanges will 

decrease and by 2028 premiums for 

unsubsidized enrollees in the Exchanges 

will increase by 5 percent. The 

Congressional Budget Office (CBO) 

projects only a 2 percent to 3 percent 

impact on premiums in the small group 

and individual markets from the 

combined Association Health Plan and 

short-term, limited-duration insurance 

rules, even while projecting more 

people will exit the individual market 

for these alternatives.75 Compared to 

CBO, the OACT analysis thereby 

represents a more conservative analysis. 

However, premium and cost-sharing 

subsidies are available only for 

individual market plans offered on 

Exchanges, which makes it likely that 

healthy lower-income individuals will 


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38236 Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Rules and Regulations 

76The net premium reduction is a result of 

unsubsidized and less-subsidized enrollees exiting 

the market, leaving the remaining population 

receiving more premium tax credit, on average. Net 

premiums for individual enrollees do not fall. 77For purposes of the economic impact analysis 

in the proposed rule, the term ‘‘the Departments’’ 

was used to refer to HHS and the Department of 

Labor. 

78The Departments used data on Advance PTC as 

an approximation of PTC since this is the data that 

is available for 2017. 79CMS Office of the Actuary, ‘‘Estimated 

Financial Effects of the Short-Term, LimitedDuration Policy Proposed Rule,’’ April 6, 2018. 

Available at https://www.cms.gov/ResearchStatistics-Data-and-Systems/Research/ 

ActuarialStudies/Downloads/STLD20180406.pdf. 

80CMS Office of the Actuary, ‘‘Estimated 

Financial Effect of the ‘‘American Health Care Act 

of 2017’’’ June 13, 2017. Available at https://

www.cms.gov/Research-Statistics-Data-andSystems/Research/ActuarialStudies/Downloads/ 

AHCA20170613.pdf. 

remain in individual market plans even 

if they place a relatively low value on 

this coverage because the individual 

subsidized premium is so low, limiting 

the extent of adverse selection. To the 

extent that individuals purchase 

separate renewal guarantee products, 

and continue to use short-term, limitedduration insurance, they very well may 

not return to the individual market risk 

pool if they get sick. This will limit the 

adverse effect on the individual market 

risk pool. In addition, as discussed 

below, the total number of individuals 

with coverage (including short-term, 

limited-duration insurance) is expected 

to increase. The impact on individual 

states’ single risk pools will vary 

depending on state regulations, the 

current state of the individual market, 

and the unique demographic and other 

characteristics of a state’s population 

and insurance markets. 

The Departments anticipate that most 

of the individuals who switch from 

individual market plans to short-term, 

limited-duration insurance will be 

relatively young or relatively healthy 

and have an annual income—about 

$48,000 for a single household and 

$98,000 for a family-of-four—that makes 

them ineligible to receive PTCs. If the 

individual market single risk pools 

change, the change will result in an 

increase in gross premiums for the 

individuals remaining in those risk 

pools. An increase in premiums for 

individual market single risk pool 

coverage is expected to result in an 

increase in federal outlays for PTCs. 

However, individuals who receive PTCs 

will be largely insulated from these 

increases in premiums because a 

consumer’s PTC amount generally 

increases as the price of the relevant 

benchmark plan increases. As discussed 

above, OACT’s analysis projects that net 

premiums in PPACA-compliant markets 

will decline.76

Impact Estimates 

The economic impact analysis in the 

proposed rule provided that because 

short-term, limited-duration insurance 

can, subject to state law, be priced in an 

actuarially fair manner (by which the 

Departments meant that it is priced so 

that the premium paid by an individual 

reflects the risks associated with 

insuring the particular individual or 

individuals covered by that policy) 

individuals who are likely to purchase 

short-term, limited-duration insurance 

are likely to obtain a better value than 

they receive from individual health 

insurance coverage. The economic 

impact analysis of the proposed rule 

also provided that allowing individuals 

greater choice of policies that do not 

comply with all of the PPACA market 

requirements would impact the 

individual market single risk pools. The 

Departments 77 estimated that in 2019, 

between 100,000 and 200,000 

individuals previously enrolled in 

individual market coverage would 

purchase short-term, limited-duration 

insurance policies instead. The 

Departments estimated that this would 

cause the average monthly individual 

market premiums and average monthly 

PTCs to increase, leading to an increase 

in total annual advance payments of the 

PTC78 in the range of $96 million to 

$168 million in 2019. Other entities 

project greater enrollment and have 

different views on whether or not this 

increases the deficit. The Departments 

also noted that enrollment in short-term, 

limited-duration insurance and the 

resulting reductions in individual 

market enrollment and increases in 

individual market premiums in future 

years are uncertain. 

OACT performed an analysis of the 

financial effects of the proposed rule on 

April 6, 2018.79 An updated estimate 

has been performed by OACT where the 

baseline was updated to the President’s 

Fiscal Year 2019 Mid-Session Review. 

As stated in the April 6th estimate, the 

assumptions and methods used in the 

updated estimate are the same as those 

used in OACT’s previous health reform 

modelling.80 The updated estimate 

includes the policy to allow 

renewability up to 36 months. This 

policy was estimated to have a 

negligible impact. In addition, 

consideration was given to some states 

taking action to prohibit or limit the sale 

of short-term, limited-duration 

insurance policies. The original estimate 

also assumed a 4-year transition to 

short-term, limited-duration insurance 

policies with roughly two-thirds of the 

impact occurring in 2019, while the new 

estimate assumes a 3-year transition 

with one-third of the impact occurring 

in 2019. 

Using these updated assumptions 

yields an estimate that 2019 enrollment 

in short-term, limited-duration 

insurance will increase by 600,000. 

Exchange enrollment in 2019 is 

expected to decrease by 200,000, while 

enrollment in off-Exchange plans is 

expected to decrease by 300,000. The 

remaining 100,000 increase in shortterm, limited-duration enrollment is 

largely accounted for by new consumers 

who were previously uninsured. By 

2028, enrollment in individual market 

plans is projected to decrease by 1.3 

million, while enrollment in short-term, 

limited-duration insurance will increase 

by 1.4 million. The net result will be an 

increase in the total number of people 

with some type of coverage by 0.1 

million in 2020 and by 0.2 million by 

2028. Premiums for unsubsidized 

enrollees in the Exchanges are expected 

to increase by 1 percent in 2019 and by 

5 percent in 2028. Individuals who 

choose to purchase short-term, limitedduration insurance are expected to pay 

a premium that is approximately half of 

the average unsubsidized premium in 

the Exchange. Since individual market 

plan premiums are expected to increase 

the study estimates that PTCs will 

increase by $0.2 billion in 2019 and by 

a net total of $28.2 billion for fiscal 

years 2019–2028. 

TABLE 2—ESTIMATED EFFECT OF SHORT-TERM, LIMITED-DURATION INSURANCE POLICY CHANGES 2019–2028 

Calendar year 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2019– 

28 

Enrollment Impact: 

Exchange ................................................................... ¥0.2 ¥0.4 ¥0.6 ¥0.6 ¥0.6 ¥0.6 ¥0.6 ¥0.6 ¥0.6 ¥0.6 ............

Off-Exchange 1 ........................................................... ¥0.3 ¥0.7 ¥0.8 ¥0.8 ¥0.8 ¥0.8 ¥0.7 ¥0.7 ¥0.7 ¥0.7 ............


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81Congressional Budget Office, ‘‘Federal 

Subsidies for Health Insurance Coverage for People 

Under Age 65: 2018 to 2028,’’ May 23, 2018. 

Available at http://cbo.gov/publication/53826. 

82CBO noted that, ‘‘of the 2 million additional 

enrollees in STLDI plans, fewer than 500,000 would 

purchase products not providing comprehensive 

financial protection against high-cost, lowprobability medical events. CBO considers such 

people uninsured.’’ 

83CBO and JCT did not separately break out the 

budget effects of the AHP rule and the short-term, 

limited-duration rule. 

84L.J. Blumberg, M. Buettgens, R. Wang, ‘‘The 

Potential Impact of Short-Term Limited-Duration 

Policies on Insurance Coverage, Premiums, and 

Federal Spending,’’ Urban Institute, March 2018. 

Available at: https://www.urban.org/sites/default/ 

files/publication/96781/2001727_updated_

finalized.pdf. 

85 Id. 

TABLE 2—ESTIMATED EFFECT OF SHORT-TERM, LIMITED-DURATION INSURANCE POLICY CHANGES 2019–2028— 

Continued 

Calendar year 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2019– 

28 

Short-term, limited-duration ....................................... 0.6 1.3 1.6 1.6 1.5 1.5 1.5 1.5 1.5 1.4 ............

Total .................................................................... 0.0 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 

Premium Impact: 

Marketplace.

Gross Premium .......................................................... 1% 3% 5% 5% 5% 5% 5% 5% 5% 5% ............

Net Premium 2 ............................................................ ¥6% ¥11% ¥14% ¥14% ¥14% ¥14% ¥14% ¥14% ¥14% ¥14% ............

Short-term, limited-duration.

Gross Premium 3 ........................................................ ¥41% ¥45% ¥49% ¥49% ¥49% ¥49% ¥49% ¥49% ¥49% ¥49% ............

Fiscal year 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2019– 

28 

Federal Impact [$ Billions]: 

Premium Tax Credits ................................................. $0.2 $1.2 $2.5 $3.0 $3.1 $3.3 $3.4 $3.6 $3.8 $4.0 $28.2 

1Off-Exchange coverage includes enrollment in plans that we assume would meet the definition of insurance coverage. Most of these individuals are assumed to 

be enrolled in individual market plans. 2 Net premium is the actual premium paid by the consumer after accounting for any subsidies such as premium tax credits. The net premium reduction is a result of 

unsubsidized and less-subsidized enrollees exiting the market, leaving the remaining population receiving more premium tax credit, on average. Net premiums for individual enrollees do not fall. 3The change in gross premium for those choosing a short-term, limited-duration policy is measured relative to the average gross premium in the Exchange. 

Note: Impact on Exchange enrollment in 2018 is expected to be minimal. 

There is significant uncertainty 

regarding these estimates, because 

changes in enrollment and premiums 

will depend on a variety of economic 

and regulatory factors and it is difficult 

to predict how consumers and issuers 

will react to the changes finalized in 

this rule. In addition, the impact in any 

given state will vary depending on state 

regulations and the characteristics of 

that state’s markets and risk pools. 

OACT was not the only entity to 

model the impacts of the proposed 

regulation. CBO, along with the Joint 

Committee on Taxation (CBO and JCT), 

the Urban Institute, and the 

Commonwealth Fund also looked at the 

impact. CBO and JCT estimated the 

impacts of the proposed regulation in 

their May 2018 report on ‘‘Federal 

Subsidies for Health Insurance Coverage 

for People Under Age 65: 2018 to 

2028’’.81 CBO and JCT found that 2 

million people would be covered by 

short-term, limited-duration insurance 

in 2023, and that ‘‘65 percent of the 2 

million purchasing [short-term, limitedduration] plans would have been 

insured in the absence of the proposed 

rules’’. This estimate projected higher 

uptake of short-term, limited-duration 

insurance among those that were not 

previously insured than OACT 

estimated.82 Additionally, CBO 

projected higher overall enrollment in 

short-term, limited-duration coverage, 2 

million people in 2023 compared to 

OACTs estimate of 1.5 million in 2023. 

Notably, CBO assumed an increase in 

short-term, limited-duration insurance 

policy duration to less than 12 months, 

but did not analyze the impacts of 

allowing extensions up to 36 months, 

which would have presumably 

increased their take-up rates even 

further. Also, notable is that when 

estimating the combined effects of this 

regulation and the recently finalized 

Association Health Plan rule, CBO 

found that ‘‘premiums are projected to 

be 2 percent to 3 percent higher in those 

markets [small group and individual 

market] in most years.’’ Despite higher 

take-up rates, CBO and JCT expect lower 

premium increases for coverage that 

complies with all of the PPACA market 

requirements than OACT. CBO and JCT 

also found that in combination, ‘‘the 

proposed rules [short term limited 

duration insurance and association 

health plans] would reduce the federal 

deficit by roughly $1 billion over the 

2019–2028 period if implemented as 

proposed.’’ They stated that, ‘‘over the 

2019–2028 period, outlays for 

marketplace subsidies would increase 

on net by $2 billion, and revenues 

would increase by $3 billion. The net 

increase in marketplace subsidies 

reflects an increase in subsidies 

stemming from higher premiums, 

mostly offset by a reduction in the 

number of people receiving those 

subsidies.’’ CBO and JCT further stated 

that ‘‘On the basis of information 

obtained from stakeholders, CBO and 

JCT project that the rule on AHPs would 

primarily affect the small-group market 

and that the rule on STLDI plans would 

primarily affect the non-group market.’’ 

Relative to OACT’s estimates, CBO and 

JCT estimated the impacts of this rule to 

result in more short-term, limitedduration plan take-up with a larger 

share of the take-up coming from people 

who were not previously insured, lower 

premium impacts for PPACA-compliant 

coverage, and a lower cost to the federal 

government.83

CBO and JCT were not the only 

entities to analyze the quantitative 

impacts of the proposed rule. The Urban 

Institute ran a state-level 

microsimulation model (taking into 

account market conditions in each state 

as well as regulatory differences) and 

also estimated that an extension of 

short-term, limited-duration insurance 

to less than 12 months would result in 

greater take-up of the plans than OACT 

estimated, as well as savings for the 

federal government.84 Specifically the 

Urban Institute found that in 2019 ‘‘4.3 

million would enroll in expanded shortterm limited-duration plans.’’ 85 ‘‘About 

1.7 million of the people buying [shortterm, limited-duration insurance] 

policies would have been uninsured (in 

the traditional sense) under current law, 

and 2.6 million [short-term, limitedVerDate Sep<11>2014 19:47 Aug 02, 2018 Jkt 244001 PO 00000 Frm 00027 Fmt 4701 Sfmt 4700 E:\FR\FM\03AUR2.SGM 03AUR2

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38238 Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Rules and Regulations 

86Preethi Rao, Sarah A. Nowak, Christine Eibner, 

‘‘What Is the Impact on Enrollment and Premiums 

if the Duration of Short-Term Health Insurance 

Plans Is Increased?’’, Commonwealth Fund, June 5 

2018. Available at https://

www.commonwealthfund.org/publications/fundreports/2018/jun/what-impact-enrollment-andpremiums-if-duration-short-term. Examples the 

Commonwealth Fund cited of behavioral barriers to 

enrollment include ‘‘increased marketing of plans 

to increase awareness, streamlining the application 

process, lack of concern over facing the mandate 

penalty.’’ 

87Preethi Rao, Sarah A. Nowak, Christine Eibner, 

‘‘What Is the Impact on Enrollment and Premiums 

if the Duration of Short-Term Health Insurance 

Plans Is Increased?’’, Commonwealth Fund, June 5 

2018. Available at https://

www.commonwealthfund.org/publications/fundreports/2018/jun/what-impact-enrollment-andpremiums-if-duration-short-term. In a scenario with 

behavioral barriers in place, they estimated a 

materially lower number of 0.3 million in take-up. 

Examples the Commonwealth Fund cited of 

behavioral barriers to enrollment include 

‘‘increased marketing of plans to increase 

awareness, streamlining the application process, 

lack of concern over facing the mandate penalty.’’ 

Market forces may well come up with ways of 

addressing these behavioral barriers—such as by 

marketing the plans aggressively, providing a high 

quality customer experience in a streamlined 

application process, and clarifying the applicability 

of the mandate penalty. 

88Michael Cohen, Michelle Anderson, Ross 

Winkelman, ‘‘Effects of Short-Term Limited 

Duration Plans on the ACA-Compliant Individual 

Market,’’ Wakely Consulting Group, April, 2018. 

Available at: http://www.communityplans.net/wpcontent/uploads/2018/04/Wakely-Short-TermLimited-Duration-Plans-Report.pdf. 

89Oliver Wyman, ‘‘Potential Impact of ShortTerm Limited Duration Plans,’’ April 11, 2018. 

Available at: https://hbx.dc.gov/sites/default/files/ 

dc/sites/hbx/publication/attachments/ 

OWReview%20of%20Impact%20of%20Short%20

Term%20Duration%20Plans%204.11.2018%20

%28002%29.pdf. 

90Covered California, ‘‘Individual Markets 

Nationally Face High Premium Increases in Coming 

Years Absent Federal or State Action, With Wide 

Variation Among States,’’ March 8, 2018. Available 

at http://hbex.coveredca.com/data-research/library/ 

CoveredCA_High_Premium_Increases_3-8-18.pdf. 

duration] policy holders would 

otherwise have had insurance of some 

type.’’ They further found that ‘‘ACAcompliant non-group coverage would 

decrease by another 2.2 million people. 

About 70 percent of that decrease (1.6 

million people) comes from fewer 

people buying PPACA-compliant 

coverage without a tax credit, and about 

30 percent of the decrease (about 

600,000 people) comes from fewer 

people buying non-group insurance 

with a tax credit.’’ As a result of their 

estimate of the decrease in the number 

of people receiving tax credits they 

estimated the policy to result in net 

savings to the federal government of 

$721 million in 2019. The Urban 

Institute grouped the individual 

mandate penalty being reduced to $0 

and the short-term, limited-duration 

proposal to estimate the premium 

effects on individual market single risk 

pools, so it is difficult to know what just 

the policy impact of short term changes 

would have been to premiums in their 

analysis. In sum, relative to OACT’s 

analysis, Urban estimates savings to the 

federal government (rather than costs), 

as well as materially higher take-up (4.3 

million in 2019 versus 1.4 million in 

2028), including among those that 

previously did not have insurance (1.7 

million in 2019 versus 0.2 million in 

2028). 

While CBO and the Urban Institute 

appear to have done robust work on the 

issue, other entities also provided 

estimates of the impact. The 

Commonwealth Fund concluded that if 

there are no behavioral barriers to 

enrollment in short-term, limitedduration plans, and under a baseline of 

no individual shared responsibility 

payment, extending the duration of 

short-term, limited-duration insurance 

would result in about 5.2 million people 

enrolled.86 The Commonwealth Fund 

estimated that the average premium for 

a short-term, limited-duration insurance 

policy will be roughly 80 percent 

cheaper than silver plans and about 70 

percent cheaper than bronze plans for a 

40-year old.87 The Commonwealth Fund 

estimated that ‘‘the age-specific 

premium for a silver plan increases by 

0.9 percent (from $7,308 to $7,377) 

relative to current law when the 

individual mandate is lifted, and by 3.6 

percent (from $7,308 to $7,568) when 

the mandate is lifted and behavioral 

barriers are removed’’ (implying the 

marginal effect of adding short term 

plans in a scenario with limited 

behavior barriers was roughly 2.7 

percent). The Commonwealth Fund did 

not provide estimates of cost impacts to 

the federal government. 

In response to the Departments’ 

request for comments on how many 

consumers may choose to purchase 

short-term, limited-duration insurance, 

rather than being uninsured or 

purchasing individual market plans, 

many commenters submitted or referred 

to studies that estimated the impact of 

the proposed changes. Some of these 

studies and findings have been 

described above. Another study 

conducted by the Wakely Consulting 

Group 88 estimated that, as a result of 

the proposed changes and the reduction 

of the individual shared responsibility 

payment to $0, premiums would 

increase by 0.7 percent to 1.7 percent 

and enrollment would decrease by 2.7 

percent to 6.4 percent in the individual 

market in 2019. In addition, the study 

estimated that premiums for individual 

market plans would increase 2.2 percent 

to 6.6 percent and enrollment would 

decrease by 8.2 percent to 15 percent in 

4 to 5 years, when the full impact of the 

proposed changes can be felt. A study 

by Oliver Wyman,89 focusing on the 

District of Columbia’s individual and 

small group markets, estimated that the 

combined effect of the proposed 

changes and the reduction of the 

individual shared responsibility 

payment to $0 would be an increase in 

claims costs by 11.7 percent to 21.4 

percent and a decrease in enrollment in 

individual and small group plans of 

3,800 to 6,100 in Washington, DC. 

Notably Washington DC’s individual 

market is highly idiosyncratic in terms 

of the number of people in it not 

receiving subsidies, so the effects on 

that market are unlikely to be 

comparable with other states. A study 

by Covered California 90 concluded that 

the combined effect of the proposed 

Association Health Plan rule and the 

short-term, limited-duration rule would 

increase premiums by 0.3 percent to 1.3 

percent in the individual market in 

California in 2019. 

Many commenters stated that the 

proposed rule likely underestimates the 

number of people who would enroll in 

short-term, limited-duration insurance 

and thus underestimates the premium 

and risk pool impact of the proposed 

changes. Commenters suggested that it 

is insufficient to look at prior data on 

short-term, limited-duration insurance 

enrollment to predict what would 

happen as a result of the proposed 

change in federal rules, since conditions 

for the short-term, limited-duration 

insurance market are poised to differ 

markedly from recent years. 

Commenters noted that in 2019, the 

individual shared responsibility 

payment will be reduced to $0, 

removing one factor that has likely kept 

more people from enrolling in shortterm, limited-duration insurance. 

Commenters also noted that the federal 

government is actively promoting shortterm, limited-duration insurance and 

pulling back on its outreach efforts for 

individual market plans, a reversal of 

prior policy that is likely to increase 

short-term, limited-duration insurance 

enrollment, and that major issuers have 

already expressed interest in offering or 

expanding offerings of short-term, 

limited-duration plans. 

One commenter stated that the total 

enrollment in short-term, limitedduration insurance was actually close to 

500,000 covered lives in December 2016 

after accounting for association-based 

sales. The commenter further noted that 

as a result of the reduction of the 

individual shared responsibility 

payment to $0 beginning in 2019, the 

cost differential between short-term, 


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Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Rules and Regulations 38239 

91 Karen Pollitz, Michelle Long, Ashley 

Semanskee, and Rabah Kamal, ‘‘Understanding 

Short-Term Limited Duration Health Insurance’’, 

Kaiser Family Foundation, April 23, 2018. 

Available at https://www.kff.org/health-reform/ 

issue-brief/understanding-short-term-limitedduration-health-insurance/. 

limited-duration insurance and 

individual market plans will increase, 

and enrollment in short-term, limitedduration insurance is likely to grow 

beyond what it was in 2016. The 

commenter estimated that each 

percentage point increase in premiums 

for individual market plans as a result 

of the policies in the proposed rule 

would increase federal spending on 

PTCs by $800 million in 2019. Another 

commenter cited a report stating that 

enrollment in short-term, limitedduration coverage may be closer to one 

million. 

One commenter expected that the 

mostly uninsured or off-Exchange 

insured group of consumers who may 

purchase short-term, limited-duration 

insurance policies will follow the age 

distribution of those who currently 

purchase short-term, limited-duration 

insurance, which is an average of 

approximately 41.3 years of age. 

The Departments are unable to verify 

the conclusions of the different studies 

submitted and referred to by 

commenters. However, the studies, in 

sum suggest that the rule may 

significantly reduce the number of 

people without any type of health 

insurance and will likely only result in 

a small average increase to premiums in 

the individual and group markets. 

Enrollment in short-term, limitedduration insurance will depend in large 

part on how issuers respond to this final 

rule and to external factors such as the 

reduction to $0 of the individual shared 

responsibility payment starting in 2019. 

If issuers respond by offering a 

substantially greater range of plan 

designs than those currently available in 

the market for short-term, limitedduration insurance in order to attract 

consumers with a wide range of medical 

needs, then total enrollment is more 

likely to align with high-end estimates. 

Alternatively, if states impose 

restrictions on short-term, limitedduration insurance or issuers do not 

substantially alter existing short-term, 

limited-duration insurance plan 

designs, then consumers may 

experience only a moderate increase in 

convenience as a result of this final rule 

since short-term, limited-duration 

insurance is already available and can 

be purchased as four separate less than 

3-month insurance policies 91—and in 

such a scenario, high-end enrollment 

estimates would be less likely. 

As discussed earlier in this rule, there 

is significant uncertainly regarding all of 

these estimates, because changes in 

enrollment and premiums will depend 

on a variety of factors and it is difficult 

to predict how consumers and issuers 

will react to the policy changes finalized 

in this rule. In addition, the impact in 

any given state will vary depending on 

state regulations and the characteristics 

of that state’s markets and risk pools. In 

addition, some of these studies estimate 

the impacts of the proposed rule and 

some of them present combined effects 

of the Association Health Plan proposed 

rule or the reduction of the shared 

responsibility payment to $0. The study 

by Oliver Wyman may not be generally 

applicable to the rest of the country, 

because the District of Columbia is not 

representative of other markets insofar 

as it is very small and because a very 

small percentage of the District’s 

enrollees receive PTCs. 

C. Regulatory Alternatives 

The Departments considered not 

changing the federal standards for shortterm, limited-duration insurance or 

increasing the initial contact term to 6 

or 8 months, as suggested by some 

commenters. However, this alternative 

would not adequately increase choices 

for individuals unable or unwilling to 

purchase individual market health 

insurance coverage. Extending the 

maximum initial contract term to less 

than 12 months ensures that deductibles 

are not reset and premiums do not 

increase every 3 (or 6, or 8) months for 

consumers who purchase short-term, 

limited-duration insurance and 

conditions that develop during the 

coverage period continue to be covered 

for a longer period of time until the 

consumer can switch to an individual 

market plan, if needed 

The Departments considered 

finalizing the notice language as 

proposed. The Departments decided to 

revise the notice language based on 

commenter feedback to include more 

details regarding what the policy may or 

may not cover. States also have the 

option to require more information than 

what is included in the federal notice. 

The Departments considered not 

allowing renewals or extensions of 

short-term, limited-duration insurance 

policies beyond 12 months, as well as 

not permitting renewals or extensions. 

However, upon review of comments, the 

Departments determined that allowing 

renewals or extensions of a policy up to 

a maximum duration of 36 months 

increases consumer choices, provides 

additional protection, and ensures that 

consumers can maintain coverage under 

their short-term, limited-duration 

insurance policy after the expiration of 

the initial contract term if it is the most 

desirable option. As many commenters 

pointed out, to the extent that the 

maximum duration of short-term, 

limited-duration insurance is limited to 

a relatively short period of time, for 

example, less than 3 months, or even 

less than 12 months, without permitting 

renewals or extensions, this would 

mean that every 3 months or every 12 

months, an individual purchasing shortterm, limited-duration insurance would 

be subject to re-underwriting, and 

would possibly have his or her premium 

greatly increased as a result. Also, to the 

extent the policy excluded preexisting 

conditions for a specified period of time 

or imposed a waiting period on specific 

benefits, the individual would not get 

credit for the amount of time he or she 

had the previous coverage. The issuer 

could also decline to issue a new policy 

to the consumer based on preexisting 

medical conditions. The Departments 

find all of these to be compelling 

reasons in favor of permitting renewals 

and extensions as set forth in the final 

rule, such that the maximum duration 

under a single short-term, limitedduration insurance policy may be 36 

months (including renewal or other 

extension periods), as opposed to less 

than 12 months. As mentioned earlier in 

the preamble, in determining the 

appropriate limits on the permissible 

range of renewals or extensions in 

giving meaning to the term ‘‘limitedduration,’’ the Departments were 

informed by other circumstances under 

which Congress authorized temporary 

limited coverage options. 

In addition to the applicability date 

set forth in the proposed rule, the 

Departments also considered an 

applicability date of January 1, 2020, as 

suggested by some commenters. The 

Departments chose the applicability 

date of 60 days after the date the rule 

was published in the Federal Register to 

ensure that states that want to expand 

access to short-term, limited-duration 

insurance and individuals who wish to 

purchase such coverage can begin to 

benefit from the changes as soon as 

possible. 

Some commenters criticized the 

Departments for not adequately, or 

failing to, consider other alternatives. 

Some commenters stated that the 

Departments failed to explore the 

options presented in the regulatory 

alternatives section and should engage 

in a more robust discussion of 

regulatory alternatives. One commenter 

stated that the Departments indicated 

that the only alternatives to this 


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38240 Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Rules and Regulations 

92U.S. Small Business Administration, ‘‘Table of 

Small Business Size Standards Matched to North 

American Industry Classification System Codes’’, 

Effective October 1, 2017. Available at https://

www.sba.gov/sites/default/files/files/Size_

Standards_Table_2017.pdf. 

93Available at https://www.cms.gov/CCIIO/ 

Resources/Data-Resources/mlr.html. 

proposal would be to lengthen the 

duration of short-term, limited-duration 

plans to either 6 or 9 months and 

dismissed both options without any 

explanation. This suggested, the 

commenter stated, that the Departments 

did not adequately consider other 

options. The commenter suggested that 

there are other options that will actually 

lead to expanded access and will not 

destabilize the private health insurance 

market, such as to fund cost-sharing 

reductions. Another option suggested by 

a commenter was to take no action 

since, in the commenter’s view, the 

proposed action would not expand 

access to comprehensive coverage, 

would lead to more discrimination 

against people with preexisting 

conditions, and would destabilize 

private health insurance markets. 

The Departments disagree. In addition 

to considering maintaining the less than 

3 month (including renewals) standard 

in the October 2016 final rule, as well 

as the proposed less than 12 month 

standard in the proposed rule, the 

Departments also considered maximum 

durations of 6 months or 8 months. 

Recognizing the myriad number of 

potential approaches the Departments 

could consider to establish federal 

standards for short-term, limitedduration insurance, the Departments 

also solicited comments on all aspects 

of the proposed rule. In addition, we 

have added a more detailed discussion 

of regulatory alternatives considered for 

this final regulation. The Departments 

have chosen the alternatives that we 

believe will benefit individuals who 

have been harmed by the increasing 

premiums, deductibles and cost-sharing 

associated with individual market plans 

and limited choices. As discussed 

previously, this rule will also increase 

the number of people with some type of 

coverage by 0.2 million by 2028. 

D. Paperwork Reduction Act— 

Department of Health and Human 

Services 

This final rule revises the required 

notice that must be prominently 

displayed in the contract and in any 

application materials for short-term, 

limited-duration insurance. The 

Departments are providing the exact text 

for this notice requirement and the 

language will not need to be 

customized. The burden associated with 

these notices is not subject to the 

Paperwork Reduction Act of 1995 in 

accordance with 5 CFR 1320.3(c)(2) 

because they do not contain a 

‘‘collection of information’’ as defined 

in 44 U.S.C. 3502(3). Consequently, this 

document need not be reviewed by the 

Office of Management and Budget under 

the authority of the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3501 

et seq.). 

E. Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) (RFA) imposes 

certain requirements with respect to 

federal rules that are subject to the 

notice and comment requirements of 

section 553(b) of the Administrative 

Procedure Act (5 U.S.C. 551 et seq.) and 

that are likely to have a significant 

economic impact on a substantial 

number of small entities. Unless an 

agency certifies that a final rule is not 

likely to have a significant economic 

impact on a substantial number of small 

entities, section 604 of the RFA requires 

that the agency prepare a final 

regulatory flexibility analysis describing 

the impact of the rule on small entities. 

Small entities include small businesses, 

organizations and governmental 

jurisdictions. 

The RFA generally defines a ‘‘small 

entity’’ as—(1) a proprietary firm 

meeting the size standards of the Small 

Business Administration (13 CFR 

121.201); (2) a nonprofit organization 

that is not dominant in its field; or (3) 

a small government jurisdiction with a 

population of less than 50,000. (States 

and individuals are not included in the 

definition of ‘‘small entity’’). The 

Departments use as their measure of 

significant economic impact on a 

substantial number of small entities a 

change in costs or revenues of more 

than 3 to 5 percent. 

This final rule will impact health 

insurance issuers, especially those in 

the individual market. The Departments 

believe that health insurance issuers 

will be classified under the North 

American Industry Classification 

System code 524114 (Direct Health and 

Medical Insurance Carriers). According 

to SBA size standards, entities with 

average annual receipts of $38.5 million 

or less are considered small entities for 

this North American Industry 

Classification System codes. Some 

issuers could possibly be classified in 

621491 (Health Maintenance 

Organization Medical Centers) and, if 

this is the case, the SBA size standard 

is $32.5 million or less.92 The 

Departments believe that few, if any, 

insurance companies selling 

comprehensive health insurance 

policies (in contrast, for example, to 

travel insurance policies or dental 

discount policies) fall below these size 

thresholds. Based on data from MLR 

annual report submissions for the 2016 

MLR reporting year,93 approximately 85 

out of over 520 issuers of health 

insurance coverage nationwide had total 

premium revenue of $38.5 million or 

less, of which 51 issuers offer plans in 

the individual market. This estimate 

may overstate the actual number of 

small health insurance companies that 

may be affected, since almost 79 percent 

of these small companies belong to 

larger holding groups, and many if not 

all of these small companies are likely 

to have non-health lines of business that 

will result in their revenues exceeding 

$38.5 million. Therefore, the 

Departments certify that this final rule 

will not have a significant impact on a 

substantial number of small entities. 

In addition, section 1102(b) of the 

Social Security Act requires agencies to 

prepare a regulatory impact analysis if 

a rule may have a significant economic 

impact on the operations of a substantial 

number of small rural hospitals. This 

analysis must conform to the provisions 

of section 604 of the RFA. This final 

rule will not have a direct effect on rural 

hospitals, though there might be an 

indirect impact. However, as discussed 

below, there are mitigating factors. 

Therefore, the Departments have 

determined that this final rule will not 

have a significant impact on the 

operations of a substantial number of 

small rural hospitals. 

One commenter disagreed with the 

statement in the proposed rule that 

‘‘[t]his proposed rule will not affect 

small rural hospitals.’’ The commenter 

stated that issuer withdrawal from the 

individual market caused by the 

proposed changes would especially 

have a catastrophic impact on rural 

families who already have limited plan 

choices, as well as on the rural hospitals 

and other providers who ‘‘rely on razorthin financial margins to deliver care.’’ 

The commenter urged the Departments 

to prioritize market stabilization and to 

pay special attention to the impacts in 

rural communities. 

The total number of individuals 

purchasing either individual market 

plans or short-term, limited-duration 

insurance coverage is expected to 

increase, which will limit or reduce the 

amount of uncompensated care 

provided by hospitals. Moreover, people 

in rural areas have generally been most 

harmed by the reduction in choice that 

as resulted from PPACA and likely 

stand to disproportionately receive 

benefit from this rule. The Departments 


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Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Rules and Regulations 38241 

94 Julia Foutz, Samantha Artiga, and Rachel 

Garfield, ‘‘The Role of Medicaid in Rural America’’, 

Kaiser Family Foundation, April 25, 2017. 

Available at: https://www.kff.org/medicaid/issuebrief/the-role-of-medicaid-in-rural-america/. 

95Analysis of data on Exchange plan selections 

(non-canceled plan selections at a point-in-time) for 

the most recent open enrollment period shows that 

consumers in rural areas are 5 percent more likely 

to receive PTC compared to those who live in nonrural areas. 

acknowledge there is a possibility that 

due to adverse selection and changes to 

the individual market risk pool, fewer 

issuers may offer individual market 

plans in certain states, leading to 

reduced choices for consumers 

remaining in the individual market risk 

pools. However, individuals in rural 

areas are more likely to be low-income 

and less likely to receive employer 

sponsored coverage compared to those 

living in other areas and a large 

percentage of rural individuals (24 

percent of the nonelderly population) 

are covered by Medicaid.94 Individuals 

in rural areas enrolled in individual 

market plans are more likely to receive 

PTC95 because, generally, incomes in 

these areas are typically lower than 

400% of the Federal Poverty Line and 

therefore relatively young or healthy 

individuals are less likely to leave the 

individual market risk pool in these 

areas, thereby limiting the effects on the 

risk pool. State regulations may also 

limit the impact on the individual 

market risk pools. 

F. Impact of Regulations on Small 

Business—Department of the Treasury 

Pursuant to section 7805(f) of the 

Code, the proposed rule that preceded 

this final rule was submitted to the 

Chief Counsel for Advocacy of the Small 

Business Administration for comment 

on its impact on small business, and no 

comments were received. 

G. Unfunded Mandates Reform Act 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

requires that agencies assess anticipated 

costs and benefits and take certain other 

actions before issuing a final rule that 

includes any Federal mandate that may 

result in expenditures in any 1 year by 

a state, local, or Tribal governments, in 

the aggregate, or by the private sector, of 

$100 million in 1995 dollars, updated 

annually for inflation. In 2018, that 

threshold is approximately $150 

million. This final rule does not include 

any Federal mandate that may result in 

expenditures by state, local, or tribal 

governments, or by the private sector in 

excess of that threshold. 

H. Federalism 

Executive Order 13132 outlines 

fundamental principles of federalism. It 

requires adherence to specific criteria by 

Federal agencies in formulating and 

implementing policies that have 

‘‘substantial direct effects’’ on the states, 

the relationship between the national 

government and states, or on the 

distribution of power and 

responsibilities among the various 

levels of government. Federal agencies 

promulgating regulations that have 

these federalism implications must 

consult with state and local officials, 

and describe the extent of their 

consultation and the nature of the 

concerns of state and local officials in 

the preamble to the final regulation. 

Federal officials have discussed the 

issues related to short-term, limitedduration insurance with state regulatory 

officials. This final rule has no 

federalism implications to the extent 

that current state law requirements for 

short-term, limited-duration insurance 

are the same as or more restrictive than 

the Federal standard in this final rule. 

States may continue to apply such state 

law requirements. States also have the 

flexibility to require additional 

consumer disclosures and to establish a 

different, shorter initial contact term 

and maximum duration (including 

renewals and extensions) under state 

law in response to market-specific needs 

or concerns. 

I. Congressional Review Act 

This final rule is subject to the 

Congressional Review Act provisions of 

the Small Business Regulatory 

Enforcement Fairness Act of 1996 (5 

U.S.C. 801 et seq.) and will be 

transmitted to the Congress and to the 

Comptroller General for review in 

accordance with such provisions. 

J. Reducing Regulation and Controlling 

Regulatory Costs 

Executive Order 13771, titled 

Reducing Regulation and Controlling 

Regulatory Costs, was issued on January 

30, 2017 and requires that the costs 

associated with significant new 

regulations ‘‘shall, to the extent 

permitted by law, be offset by the 

elimination of existing costs associated 

with at least two prior regulations.’’ 

This final rule is an Executive Order 

13771 deregulatory action. 

IV. Statutory Authority 

The Department of the Treasury 

regulations are adopted pursuant to the 

authority contained in sections 7805 

and 9833 of the Code. 

The Department of Labor regulations 

are adopted pursuant to the authority 

contained in 29 U.S.C. 1135 and 1191c; 

and Secretary of Labor’s Order 1–2011, 

77 FR 1088 (Jan. 9, 2012). 

The Department of Health and Human 

Services regulations are adopted 

pursuant to the authority contained in 

sections 2701 through 2763, 2791, 2792 

and 2794 of the PHS Act (42 U.S.C. 

300gg through 300gg–63, 300gg–91, 

300gg–92 and 300gg–94), as amended. 

List of Subjects 

26 CFR Part 54 

Pension excise taxes. 

29 CFR Part 2590 

Continuation coverage, Disclosure, 

Employee benefit plans, Group health 

plans, Health care, Health insurance, 

Medical child support, Reporting and 

recordkeeping requirements. 

45 CFR Parts 144 and 146 

Health care, Health insurance, 

Reporting and recordkeeping 

requirements. 

45 CFR Part 148 

Administrative practice and 

procedure, Health care, Health 

insurance, Penalties, Reporting and 

recordkeeping requirements. 

Douglas W. O’Donnell, 

Acting Deputy Commissioner for Services and 

Enforcement, Internal Revenue Service. 

Approved: July 26, 2018. 

David J. Kautter, 

Assistant Secretary of the Treasury (Tax 

Policy). 

Signed this 26th day of July 2018. 

Preston Rutledge, 

Assistant Secretary, Employee Benefits 

Security Administration, Department of 

Labor. 

Dated: July 24, 2018. 

Seema Verma, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Dated: July 25, 2018. 

Alex M. Azar II, 

Secretary, Department of Health and Human 

Services. 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

For the reasons stated in the 

preamble, 26 CFR part 54 is amended as 

follows: 

PART 54—PENSION AND EXCISE TAX 

■ Paragraph 1. The authority citation 

for part 54 continues to read in part as 

follows: 

Authority: 26 U.S.C. 7805 * * *. 

■ Par. 2. Section 54.9801–2 is amended 

by revising the definition of ‘‘ShortVerDate Sep<11>2014 19:47 Aug 02, 2018 Jkt 244001 PO 00000 Frm 00031 Fmt 4701 Sfmt 4700 E:\FR\FM\03AUR2.SGM 03AUR2

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38242 Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Rules and Regulations 

term, limited-duration insurance’’ to 

read as follows: 

§ 54.9801–2 Definitions. 

* * * * * 

Short-term, limited-duration 

insurance means health insurance 

coverage provided pursuant to a 

contract with an issuer that: 

(1) Has an expiration date specified in 

the contract that is less than 12 months 

after the original effective date of the 

contract and, taking into account 

renewals or extensions, has a duration 

of no longer than 36 months in total; 

(2) With respect to policies having a 

coverage start date before January 1, 

2019, displays prominently in the 

contract and in any application 

materials provided in connection with 

enrollment in such coverage in at least 

14 point type the language in the 

following Notice 1, excluding the 

heading ‘‘Notice 1,’’ with any additional 

information required by applicable state 

law: 

Notice 1: 

This coverage is not required to comply 

with certain federal market requirements for 

health insurance, principally those contained 

in the Affordable Care Act. Be sure to check 

your policy carefully to make sure you are 

aware of any exclusions or limitations 

regarding coverage of preexisting conditions 

or health benefits (such as hospitalization, 

emergency services, maternity care, 

preventive care, prescription drugs, and 

mental health and substance use disorder 

services). Your policy might also have 

lifetime and/or annual dollar limits on health 

benefits. If this coverage expires or you lose 

eligibility for this coverage, you might have 

to wait until an open enrollment period to get 

other health insurance coverage. Also, this 

coverage is not ‘‘minimum essential 

coverage.’’ If you don’t have minimum 

essential coverage for any month in 2018, 

you may have to make a payment when you 

file your tax return unless you qualify for an 

exemption from the requirement that you 

have health coverage for that month. 

(3) With respect to policies having a 

coverage start date on or after January 1, 

2019, displays prominently in the 

contract and in any application 

materials provided in connection with 

enrollment in such coverage in at least 

14 point type the language in the 

following Notice 2, excluding the 

heading ‘‘Notice 2,’’ with any additional 

information required by applicable state 

law: 

Notice 2: 

This coverage is not required to comply 

with certain federal market requirements for 

health insurance, principally those contained 

in the Affordable Care Act. Be sure to check 

your policy carefully to make sure you are 

aware of any exclusions or limitations 

regarding coverage of preexisting conditions 

or health benefits (such as hospitalization, 

emergency services, maternity care, 

preventive care, prescription drugs, and 

mental health and substance use disorder 

services). Your policy might also have 

lifetime and/or annual dollar limits on health 

benefits. If this coverage expires or you lose 

eligibility for this coverage, you might have 

to wait until an open enrollment period to get 

other health insurance coverage. 

(4) If a court holds the 36-month 

maximum duration provision set forth 

in paragraph (1) of this definition or its 

applicability to any person or 

circumstances invalid, the remaining 

provisions and their applicability to 

other people or circumstances shall 

continue in effect. 

* * * * * 

■ Par. 3. Section 54.9833–1 is amended 

by revising the section heading and the 

last sentence to read as follows: 

§ 54.9833–1 Applicability dates. 

* * * Notwithstanding the previous 

sentence, the definition of ‘‘short-term, 

limited-duration insurance’’ in 

§ 54.9801–2 applies October 2, 2018. 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Chapter XXV 

For the reasons stated in the 

preamble, the Department of Labor 

amends 29 CFR part 2590 as set forth 

below: 

PART 2590—RULES AND 

REGULATIONS FOR GROUP HEALTH 

PLANS 

■ 4. The authority citation for part 2590 

continues to read as follows: 

Authority: 29 U.S.C. 1027, 1059, 1135, 

1161–1168, 1169, 1181–1183, 1181 note, 

1185, 1185a, 1185b, 1191, 1191a, 1191b, and 

1191c; sec. 101(g), Pub. L. 104–191, 110 Stat. 

1936; sec. 401(b), Pub. L. 105–200, 112 Stat. 

645 (42 U.S.C. 651 note); sec. 512(d), Pub. L. 

110–343, 122 Stat. 3881; sec. 1001, 1201, and 

1562(e), Pub. L. 111–148, 124 Stat. 119, as 

amended by Pub. L. 111–152, 124 Stat. 1029; 

Division M, Pub. L. 113–235, 128 Stat. 2130; 

Secretary of Labor’s Order 1–2011, 77 FR 

1088 (Jan. 9, 2012). 

■ 5. Section 2590.701–2 is amended by 

revising the definition of ‘‘Short-term, 

limited-duration insurance’’ to read as 

follows: 

§ 2590.701–2 Definitions. 

* * * * * 

Short-term, limited-duration 

insurance means health insurance 

coverage provided pursuant to a 

contract with an issuer that: 

(1) Has an expiration date specified in 

the contract that is less than 12 months 

after the original effective date of the 

contract and, taking into account 

renewals or extensions, has a duration 

of no longer than 36 months in total; 

(2) With respect to policies having a 

coverage start date before January 1, 

2019, displays prominently in the 

contract and in any application 

materials provided in connection with 

enrollment in such coverage in at least 

14 point type the language in the 

following Notice 1, excluding the 

heading ‘‘Notice 1,’’ with any additional 

information required by applicable state 

law: 

Notice 1: 

This coverage is not required to comply 

with certain federal market requirements for 

health insurance, principally those contained 

in the Affordable Care Act. Be sure to check 

your policy carefully to make sure you are 

aware of any exclusions or limitations 

regarding coverage of preexisting conditions 

or health benefits (such as hospitalization, 

emergency services, maternity care, 

preventive care, prescription drugs, and 

mental health and substance use disorder 

services). Your policy might also have 

lifetime and/or annual dollar limits on health 

benefits. If this coverage expires or you lose 

eligibility for this coverage, you might have 

to wait until an open enrollment period to get 

other health insurance coverage. Also, this 

coverage is not ‘‘minimum essential 

coverage.’’ If you don’t have minimum 

essential coverage for any month in 2018, 

you may have to make a payment when you 

file your tax return unless you qualify for an 

exemption from the requirement that you 

have health coverage for that month. 

(3) With respect to policies having a 

coverage start date on or after January 1, 

2019, displays prominently in the 

contract and in any application 

materials provided in connection with 

enrollment in such coverage in at least 

14 point type the language in the 

following Notice 2, excluding the 

heading ‘‘Notice 2,’’ with any additional 

information required by applicable state 

law: 

Notice 2: 

This coverage is not required to comply 

with certain federal market requirements for 

health insurance, principally those contained 

in the Affordable Care Act. Be sure to check 

your policy carefully to make sure you are 

aware of any exclusions or limitations 

regarding coverage of preexisting conditions 

or health benefits (such as hospitalization, 

emergency services, maternity care, 

preventive care, prescription drugs, and 

mental health and substance use disorder 

services). Your policy might also have 

lifetime and/or annual dollar limits on health 

benefits. If this coverage expires or you lose 

eligibility for this coverage, you might have 

to wait until an open enrollment period to get 

other health insurance coverage. 

(4) If a court holds the 36-month 

maximum duration provision set forth 

in paragraph (1) of this definition or its 


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Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Rules and Regulations 38243 

applicability to any person or 

circumstances invalid, the remaining 

provisions and their applicability to 

other people or circumstances shall 

continue in effect. 

* * * * * 

■ 6. Section 2590.736 is amended by 

revising the last sentence to read as 

follows: 

§ 2590.736 Applicability dates. 

* * * Notwithstanding the previous 

sentence, the definition of ‘‘short-term, 

limited-duration insurance’’ in 

§ 2590.701–2 applies October 2, 2018. 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

For the reasons stated in the 

preamble, the Department of Health and 

Human Services amends 45 CFR parts 

144, 146, and 148 as set forth below: 

PART 144—REQUIREMENTS 

RELATING TO HEALTH INSURANCE 

COVERAGE 

■ 7. The authority citation for part 144 

continues to read as follows: 

Authority: 42 U.S.C. 300gg through 300gg– 

63, 300gg–91, and 300gg–92. 

■ 8. Section 144.103 is amended by 

revising the definition of ‘‘Short-term, 

limited-duration insurance’’ to read as 

follows: 

§ 144.103 Definitions. 

* * * * * 

Short-term, limited-duration 

insurance means health insurance 

coverage provided pursuant to a 

contract with an issuer that: 

(1) Has an expiration date specified in 

the contract that is less than 12 months 

after the original effective date of the 

contract and, taking into account 

renewals or extensions, has a duration 

of no longer than 36 months in total; 

(2) With respect to policies having a 

coverage start date before January 1, 

2019, displays prominently in the 

contract and in any application 

materials provided in connection with 

enrollment in such coverage in at least 

14 point type the language in the 

following Notice 1, excluding the 

heading ‘‘Notice 1,’’ with any additional 

information required by applicable state 

law: 

Notice 1: 

This coverage is not required to comply 

with certain federal market requirements for 

health insurance, principally those contained 

in the Affordable Care Act. Be sure to check 

your policy carefully to make sure you are 

aware of any exclusions or limitations 

regarding coverage of preexisting conditions 

or health benefits (such as hospitalization, 

emergency services, maternity care, 

preventive care, prescription drugs, and 

mental health and substance use disorder 

services). Your policy might also have 

lifetime and/or annual dollar limits on health 

benefits. If this coverage expires or you lose 

eligibility for this coverage, you might have 

to wait until an open enrollment period to get 

other health insurance coverage. Also, this 

coverage is not ‘‘minimum essential 

coverage.’’ If you don’t have minimum 

essential coverage for any month in 2018, 

you may have to make a payment when you 

file your tax return unless you qualify for an 

exemption from the requirement that you 

have health coverage for that month. 

(3) With respect to policies having a 

coverage start date on or after January 1, 

2019, displays prominently in the 

contract and in any application 

materials provided in connection with 

enrollment in such coverage in at least 

14 point type the language in the 

following Notice 2, excluding the 

heading ‘‘Notice 2,’’ with any additional 

information required by applicable state 

law: 

Notice 2: 

This coverage is not required to comply 

with certain federal market requirements for 

health insurance, principally those contained 

in the Affordable Care Act. Be sure to check 

your policy carefully to make sure you are 

aware of any exclusions or limitations 

regarding coverage of preexisting conditions 

or health benefits (such as hospitalization, 

emergency services, maternity care, 

preventive care, prescription drugs, and 

mental health and substance use disorder 

services). Your policy might also have 

lifetime and/or annual dollar limits on health 

benefits. If this coverage expires or you lose 

eligibility for this coverage, you might have 

to wait until an open enrollment period to get 

other health insurance coverage. 

(4) If a court holds the 36-month 

maximum duration provision set forth 

in paragraph (1) of this definition or its 

applicability to any person or 

circumstances invalid, the remaining 

provisions and their applicability to 

other people or circumstances shall 

continue in effect. 

* * * * * 

PART 146—REQUIREMENTS FOR THE 

GROUP HEALTH INSURANCE 

MARKET 

■ 9. The authority citation for part 146 

is revised to read as follows: 

Authority: 42 U.S.C. 300gg–1 through 

300gg–5, 300gg–11 through 300gg–23, 300gg– 

91, and 300gg–92. 

■ 10. Section 146.125 is amended by 

revising the last sentence to read as 

follows. 

§ 146.125 Applicability dates. 

* * * Notwithstanding the previous 

sentence, the definition of ‘‘short-term, 

limited-duration insurance’’ in 

§ 144.103 of this subchapter applies 

October 2, 2018. 

PART 148—REQUIREMENTS FOR THE 

INDIVIDUAL HEALTH INSURANCE 

MARKET 

■ 11. The authority citation for part 148 

continues to read as follows: 

Authority: 42 U.S.C. 300gg through 300gg– 

63, 300gg–91, and 300gg–92), as amended. 

■ 12. Section 148.102 is amended by 

revising the section heading and the last 

sentence of paragraph (b) to read as 

follows: 

§ 148.102 Scope and applicability date. 

* * * * * 

(b) * * * Notwithstanding the 

previous sentence, the definition of 

‘‘short-term, limited-duration 

insurance’’ in § 144.103 of this 

subchapter is applicable October 2, 

2018. 

[FR Doc. 2018–16568 Filed 8–1–18; 8:45 am] 

BILLING CODE 4150–29–P 4830–01–P 4120–01–P 6325– 

64–P 


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