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DEPARTMENT OF THE TREASURY Labor concerning employment-based Education Reconciliation Act of 2010 health coverage laws may call the (PPACA).9 Internal Revenue Service Employee Benefits Security PPACA reorganizes, amends, and Administration (EBSA) Toll-Free adds to the provisions of Part A of title 26 CFR Part 54 Hotline, at 1–866–444–EBSA (3272) or XXVII of the PHS Act relating to group visit the Department of Labor’s website [TD 9837] health plans and health insurance (http://www.dol.gov/ebsa). In addition, issuers in the group and individual RIN 1545–BO41 information from the Department of markets. PPACA added section 715 of Health and Human Services (HHS) on ERISA and section 9815 of the Code to DEPARTMENT OF LABOR private health insurance for consumers incorporate provisions of Part A of title can be found on the Centers for XXVII of the PHS Act (generally, Employee Benefits Security Medicare & Medicaid Services (CMS) sections 2701 through 2728 of the PHS Administration website (www.cms.gov/cciio) and Act) into ERISA and the Code. information on health reform can be 29 CFR Part 2590 found at www.HealthCare.gov. B. President’s Executive Order SUPPLEMENTARY INFORMATION: RIN 1210–AB86 On October 12, 2017, President DEPARTMENT OF HEALTH AND I. Background Trump issued Executive Order 13813 entitled ‘‘Promoting Healthcare Choice HUMAN SERVICES This rule finalizes amendments to the and Competition Across the United definition of ‘‘short-term, limited- States.’’ 10 This Executive Order states 45 CFR Parts 144, 146, and 148 duration insurance’’ for purposes of its in relevant part: ‘‘Within 60 days of the exclusion from the definition of [CMS–9924–F] date of this order, the Secretaries of the ‘‘individual health insurance coverage’’ Treasury, Labor, and Health and Human RIN 0938–AT48 in 26 CFR part 54, 29 CFR part 2590, Services shall consider proposing and 45 CFR part 144. Short-Term, Limited-Duration regulations or revising guidance, Insurance A. General Statutory Background and consistent with law, to expand the Enactment of PPACA availability of [short-term, limited- AGENCY: Internal Revenue Service, duration insurance]. To the extent The Health Insurance Portability and Department of the Treasury; Employee Accountability Act of 1996 (HIPAA) 1 permitted by law and supported by Benefits Security Administration, added title XXVII to the Public Health sound policy, the Secretaries should Department of Labor; Centers for Service Act (PHS Act), part 7 to the consider allowing such insurance to Medicare & Medicaid Services, Employee Retirement Income Security cover longer periods and be renewed by Department of Health and Human Act of 1974 (ERISA), and Chapter 100 to the consumer.’’ Services. the Internal Revenue Code (the Code), C. 2017 Tax Legislation ACTION: Final rule. providing portability and Section 5000A of the Code, added by SUMMARY: This final rule amends the nondiscrimination rules with respect to PPACA, provides that all non-exempt definition of short-term, limited- health coverage. These provisions of the applicable individuals must maintain duration insurance for purposes of its PHS Act, ERISA, and the Code were minimum essential coverage (MEC) or exclusion from the definition of later augmented by other laws, pay the individual shared responsibility individual health insurance coverage. including the Mental Health Parity Act 2 payment.11 This action is being taken to lengthen of 1996, the Paul Wellstone and Pete On December 22, 2017, the Domenici Mental Health Parity and President signed tax reform legislation the maximum duration of short-term, 3 12 limited-duration insurance, which will Addiction Equity Act of 2008, the into law. This legislation includes a Newborns’ and Mothers’ Health provision under which the individual provide more affordable consumer 4 choices for health coverage. Protection Act, the Women’s Health shared responsibility payment under and Cancer Rights Act,5 the Genetic section 5000A of the Code is reduced to DATES: Information Nondiscrimination Act of Effective date: These final regulations 2008,6 the Children’s Health Insurance 9 The Patient Protection and Affordable Care Act, are effective on October 2, 2018. Program Reauthorization Act of 2009,7 Public Law 111–148, was enacted on March 23, Applicability date: Insurance policies Michelle’s Law,8 and the Patient 2010, and the Health Care and Education Reconciliation Act of 2010, Public Law 111–152, sold on or after October 2, 2018 must Protection and Affordable Care Act, as meet the definition of short-term, was enacted on March 30, 2010. These statutes are amended by the Health Care and collectively referred to as PPACA. limited-duration insurance contained in 10 82 FR 48385. this final rule in order to be considered 11 1 Public Law 104–191, 110 Stat. 1936 (August 21, The eligibility standards for exemptions can be such insurance. 1996). found at 45 CFR 155.605. Section 5000A of the FOR FURTHER INFORMATION CONTACT: 2 Public Law 104–204, 110 Stat. 2944 (September Code and Treasury regulations at 26 CFR 1.5000A– 26, 1996). 3 provide exemptions from the requirement to Amber Rivers or Matthew Litton, maintain MEC for the following individuals: (1) 3 Public Law 110–343, 122 Stat. 3881 (October 3, Department of Labor, (202) 693–8335; Members of recognized religious sects; (2) members 2008). of health care sharing ministries; (3) exempt Dara Alderman, Internal Revenue 4 Public Law 104–204, 110 Stat. 2935 (September Service, Department of the Treasury, noncitizens; (4) incarcerated individuals; (5) 26, 1996). individuals with no affordable coverage; (6) (202) 317–5500; David Mlawsky, 5 Public Law 105–277, 112 Stat. 2681–436 individuals with household income below the Centers for Medicare & Medicaid (October 21, 1998). income tax filing threshold; (7) members of Services, Department of Health and 6 Public Law 110–233, 122 Stat. 881 (May 21, federally recognized Indian tribes; (8) individuals Human Services, (410) 786–1565. 2008). who qualify for a hardship exemption certification; 7 Public Law 111–3, 123 Stat. 64 (February 4, and (9) individuals with a short coverage gap of a Customer Service Information: 2009). continuous period of less than 3 months in which Individuals interested in obtaining 8 Public Law 110–381, 122 Stat. 4081 (October 9, the individual is not covered under MEC. information from the Department of 2008). 12 Public Law 115–97, 131 Stat. 2054.

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$0, effective for months beginning after may be elected by the policyholder October 31, 2016, the Departments December 31, 2018. without the issuer’s consent) that is less finalized the June 2016 proposed rule than 12 months after the original without change in a final rule published D. Short-Term, Limited-Duration effective date of the contract.’’ 15 in the Federal Register entitled Insurance Short-term, limited-duration ‘‘Excepted Benefits; Lifetime and Short-term, limited-duration insurance is generally exempt from the Annual Limits; and Short-Term, insurance is a type of health insurance Federal market requirements applicable Limited-Duration Insurance.’’ 19 coverage that was primarily designed to to health insurance sold in the On June 12, 2017, HHS published a fill temporary gaps in coverage that may individual market because it is not request for information in the Federal occur when an individual is considered individual health insurance Register entitled ‘‘Reducing Regulatory transitioning from one plan or coverage coverage. For example, short-term, Burdens Imposed by the Patient to another plan or coverage. Section limited-duration insurance is not Protection and Affordable Care Act & 2791(b)(5) of the PHS Act provides subject to the requirement to provide Improving Healthcare Choices to ‘‘[t]he term ‘individual health insurance essential health benefits and it is not Empower Patients,’’ 20 which solicited coverage’ means health insurance subject to the prohibitions on public comments about potential coverage offered to individuals in the preexisting condition exclusions or changes to existing regulations and individual market, but does not include lifetime and annual dollar limits. It is guidance that could promote consumer short-term limited duration also not subject to requirements choice, enhance affordability of 13 insurance.’’ However, the PHS Act regarding guaranteed availability and coverage for individual consumers, and does not define short-term, limited- guaranteed renewability. affirm the traditional regulatory duration insurance. In 1997, the To address the issue of short-term, authority of the states in regulating the Department of the Treasury, the limited-duration insurance being sold as business of health insurance, among Department of Labor, and the a type of primary coverage, as well as other goals. Several commenters stated Department of Health and Human concerns regarding possible adverse that changes to the October 2016 final Services (together, the Departments), selection impacts on the risk pools for rule may provide an opportunity to issued regulations implementing the PPACA-compliant plans, the achieve these goals. Consistent with portability and renewability Departments published a proposed rule many comments submitted on the June requirements of HIPAA, which included on June 10, 2016 in the Federal Register 2016 proposed rule, commenters stated definitions of individual health entitled ‘‘Expatriate Health Plans, that shortening the permitted length of insurance coverage as well as short- Expatriate Health Plan Issuers, and short-term, limited-duration insurance 14 term, limited-duration insurance. Qualified Expatriates; Excepted policies had deprived individuals of Those regulations defined short-term, Benefits; Lifetime and Annual Limits; affordable coverage options. One limited-duration insurance as ‘‘health and Short-Term, Limited-Duration commenter explained that due to the insurance coverage provided pursuant Insurance.’’ 16 The June 2016 proposed increased costs of PPACA-compliant to a contract with an issuer that has an rule proposed changing the definition of major medical coverage, many expiration date specified in the contract short-term, limited-duration insurance financially-stressed individuals may be (taking into account any extensions that that had been in place for nearly 20 faced with a choice between short-term, years by revising the definition to limited-duration insurance coverage and 13 Sections 733(b)(4) of ERISA and 2791(b)(4) of specify that short-term, limited-duration going without any coverage at all. One the PHS Act provide that group health insurance commenter highlighted the need for coverage means ‘‘in connection with a group health insurance could not provide coverage plan, health insurance coverage offered in for 3 months or longer taking into short-term, limited-duration insurance connection with such plan.’’ Sections 733(a)(1) of account any extensions that may be coverage among individuals who are ERISA and 2791(a)(1) of the PHS Act provide that between jobs. Another commenter a group health plan is generally any plan, fund, or elected by the policyholder with or without the issuer’s consent.17 explained that states have the primary program established or maintained by an employer responsibility to regulate short-term, (or employee organization or both) for the purpose The June 2016 proposed rule also of providing medical care to employees or their proposed to require that the following limited-duration insurance and opined dependents (as defined under the terms of the plan) notice be prominently displayed in the that the October 2016 final rule was directly, or through insurance, reimbursement, or contract and in any application overreaching on the part of the federal otherwise. There is no corresponding provision government. excluding short-term, limited-duration insurance materials provided in connection with In addition to considering these from the definition of group health insurance enrollment in short-term, limited- comments, the Departments also coverage. Thus, any health insurance that is sold in duration insurance, in at least 14 point the group market and purports to be short-term, considered that, while individuals who type: limited-duration insurance must comply with qualify for premium tax credits (PTCs) applicable group health insurance requirements THIS IS NOT QUALIFYING HEALTH under section 36B of the Code are established under Part A of title XXVII of the PHS COVERAGE (‘‘MINIMUM ESSENTIAL Act, part 7 of ERISA, and Chapter 100 of the Code. largely insulated from premium COVERAGE’’) THAT SATISFIES THE 14 The definition of individual health insurance increases for individual health coverage (and its exclusion of short-term, limited- HEALTH COVERAGE REQUIREMENT OF insurance coverage (that is, the THE AFFORDABLE CARE ACT. IF YOU duration insurance) has some limited relevance government, and thus federal taxpayers, with respect to certain provisions that apply to DON’T HAVE MINIMUM ESSENTIAL group health plans and group health insurance COVERAGE, YOU MAY OWE AN largely bear the cost of the increases), issuers over which the Departments of Labor and ADDITIONAL PAYMENT WITH YOUR individuals who are not eligible for the Treasury have jurisdiction. For example, an TAXES.18 PTCs are particularly harmed by individual who loses coverage due to moving out increased premiums in the individual of an HMO service area in the individual market After reviewing public comments and triggers a special enrollment right into a group feedback received from stakeholders, on market due to a lack of other, more health plan. See 26 CFR 54.9801–6(a)(3)(i)(B), 29 affordable alternative coverage options. CFR 2590.701–6(a)(3)(i)(B), and 45 CFR 15 62 FR 16894 at 16928, 16942, 16958 (April 8, Based on CMS data on Exchange- 146.117(a)(3)(i)(B). Also, a group health plan that effectuated enrollment and payment, wraps around individual health insurance coverage 1997); see also 69 FR 78720 (December 30, 2004). is an excepted benefit if certain conditions are 16 81 FR 38019. satisfied. See 26 CFR 54.9831–1(c)(3)(vii), 29 CFR 17 81 FR 38019, 38032. 19 81 FR 75316 (October 31, 2016). 2590.732(c)(3)(vii), and 45 CFR 146.145(b)(3)(vii). 18 Id. at 38032. 20 82 FR 26885.

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average monthly enrollment for affordable choices in the individual the applicability date, the Departments individuals without PTCs declined by market have dwindled. proposed that policies sold on or after 1.3 million, or 20 percent, between 2016 Accordingly, in light of Executive the 60th day following publication of and 2017.21 Some of this decline is Order 13813 directing the Departments the final rule would have to meet the likely a response to increased to consider proposing regulations or definition of short-term, limited- premiums.22 Further, in 2018, about 26 revising guidance to expand the duration insurance in the final rule in percent of enrollees (living in 52 percent availability of short-term, limited- order to be considered short-term, of counties) have access to just one duration insurance, as well as in limited-duration insurance. Further, the issuer in the Exchange.23 Such response to continued feedback from Departments proposed that group health monopoly markets, which are more stakeholders expressing concerns about plans and group health insurance predominant in rural counties, do not the October 2016 final rule, the issuers, to the extent they must provide meaningful choice for Departments published a proposed rule distinguish between short-term, limited- consumers and cause premiums to be on February 21, 2018 entitled ‘‘Short- duration insurance and individual higher than they would be in a Term, Limited-Duration Insurance’’ health insurance coverage, must apply competitive market. Additionally, under which the Departments proposed the definition of short-term, limited- although the October 2016 final rule to amend the definition of short-term, duration insurance in the final rule as was intended to boost enrollment in limited-duration insurance to provide of the 60th day following publication of individual health insurance coverage by (as did the regulations implementing the final rule. reducing the maximum duration of HIPAA) that such insurance may have a coverage in short-term, limited-duration maximum coverage period of less than Request for Comments plans, it did not succeed in that regard. 12 months after the original effective The Departments requested comments Rather, average monthly enrollment in date of the contract, taking into account on all aspects of the proposed rule, individual market plans decreased by 10 any extensions that may be elected by including whether the length of short- percent between 2016 and 2017, while the policyholder without the issuer’s term, limited-duration insurance should premiums increased by 21 percent.24 consent.25 be some other duration. Also, the Therefore, the Departments determined In addition, the Departments Departments requested comments on that the expansion of additional proposed to revise the content of the any regulations or other guidance or coverage options such as short-term, notice that must appear in the contract policy that limits issuers’ flexibility in limited-duration insurance is necessary, and any application materials provided designing short-term, limited-duration as premiums have escalated and in connection with enrollment in short- insurance or poses barriers to entry into term, limited-duration insurance, to be the short-term, limited-duration 21 Centers for Medicare and Medicaid Services, prominently displayed (in at least 14 insurance market. In addition, the ‘‘Trends in Subsidized and Unsubsidized Individual point type), and to read as follows: Departments specifically sought Health Insurance Market Enrollment’’, July 2, THIS COVERAGE IS NOT REQUIRED TO comments on both the conditions under 2018. Available at https://www.cms.gov/CCIIO/ COMPLY WITH FEDERAL REQUIREMENTS which issuers should be able to allow Programs-and-Initiatives/Health-Insurance- FOR HEALTH INSURANCE, PRINCIPALLY short-term, limited-duration insurance Marketplaces/Downloads/2018-07-02-Trends- THOSE CONTAINED IN THE AFFORDABLE Report-2.pdf. to continue for 12 months or longer with CARE ACT. BE SURE TO CHECK YOUR 22 Note, however, that the reduction in the the issuer’s consent and the revised number of unsubsidized enrollees is due to several POLICY CAREFULLY TO MAKE SURE YOU notice. different effects. As implied in the main text, some UNDERSTAND WHAT THE POLICY DOES of the reduction is attributable to unsubsidized AND DOESN’T COVER. IF THIS COVERAGE The Departments requested comments enrollees dropping coverage due to premium EXPIRES OR YOU LOSE ELIGIBILITY FOR on the economic impact analysis increases. Unsubsidized enrollees might also have THIS COVERAGE, YOU MIGHT HAVE TO provided in the proposed rule, and left the Exchange because the labor market has WAIT UNTIL AN OPEN ENROLLMENT welcomed other estimates of the improved, which might have resulted in increased availability of employer-sponsored coverage. In PERIOD TO GET OTHER HEALTH increase in enrollment in short-term, addition, because Exchange enrollees pay a fixed INSURANCE COVERAGE. ALSO, THIS limited-duration insurance under the share of income for premiums with PTC covering COVERAGE IS NOT ‘‘MINIMUM proposal, and on the health status and the remainder, when premiums rise some ESSENTIAL COVERAGE’’. IF YOU DON’T age of individuals who would purchase unsubsidized enrollees become subsidized, even if HAVE MINIMUM ESSENTIAL COVERAGE enrollment does not change at all. Between FOR ANY MONTH IN 2018, YOU MAY these policies. February 2017 and February 2018, effectuated HAVE TO MAKE A PAYMENT WHEN YOU The comment period on the proposed enrollment fell by about 209,000 among the rule ended on April 23, 2018. The unsubsidized but rose by 522,000 for the FILE YOUR TAX RETURN UNLESS YOU subsidized, suggesting some movement from QUALIFY FOR AN EXEMPTION FROM THE Departments received approximately unsubsidized to subsidized status without a change REQUIREMENT THAT YOU HAVE HEALTH 12,000 comments. After careful in enrollment. See ‘‘2017 Effectuated Enrollment COVERAGE FOR THAT MONTH. consideration of these comments, the Snapshot’’, June 12, 2017, available at https:// downloads.cms.gov/files/effectuated-enrollment- Under the proposed rule, the final two Departments are issuing these final snapshot-report-06-12-17.pdf and ‘‘Early 2018 sentences of the notice would only be rules. Effectuated Enrollment Snapshot’’, June 2, 2018, required for policies sold on or after the available at https://www.cms.gov/CCIIO/Programs- II. Overview of the Final Regulations and-Initiatives/Health-Insurance-Marketplaces/ applicability date of the final rule, if Downloads/2018-07-02-Trends-Report-1.pdf. finalized, that have a coverage start date After considering the public 23 Kaiser Family Foundation, ‘‘Insurer before January 1, 2019, because the comments, the Departments are Participation on ACA Marketplaces, 2014–2018,’’ individual shared responsibility finalizing the proposed rule with some November 10, 2017. Available at http:// payment is reduced to $0 for months modifications. Under this final rule, www.kff.org/health-reform/issue-brief/insurer- participation-on-aca-marketplaces/. beginning after December 2018. short-term, limited-duration insurance 24 Centers for Medicare and Medicaid Services, The Departments proposed that the means health coverage provided ‘‘Trends in Subsidized and Unsubsidized rule would be effective 60 days after pursuant to a contract with an issuer Individual Health Insurance Market Enrollment’’, publication of the final rule in the that has an expiration date specified in July 2, 2018. Available at https://www.cms.gov/ the contract that is less than 12 months CCIIO/Programs-and-Initiatives/Health-Insurance- Federal Register, and with respect to Marketplaces/Downloads/2018-07-02-Trends- after the original effective date of the Report-2.pdf. 25 83 FR 7437 (February 21, 2018). contract and, taking into account

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renewals or extensions, has a duration Comments on Authority that the proposed definition is of no longer than 36 months in total. Several commenters questioned the inconsistent with PPACA, because an This final rule also retains the Departments’ legal authority with regard issuer meeting the proposed definition requirement that issuers of short-term, to various aspects of the proposed rule. could avoid all PPACA insurance limited-duration insurance display one One commenter stated that because the reforms, which would deprive of two versions of a notice prominently PHS Act exempts short-term, limited- consumers of PPACA’s protections and in the contract and in any application duration insurance from the definition damage individual market risk pools. materials provided in connection with of ‘‘health insurance coverage,’’ there is Taking all this into consideration, the enrollment in such coverage in at least no delegation of Congressional authority commenter asserted that the proposed 14-point type. However, the language of giving HHS the power to define short- definition is thus arbitrary and the notice in the final rule is revised to term, limited-duration insurance. capricious. read as follows: Several commenters questioned whether The Departments disagree with these This coverage is not required to comply the Departments have legal authority to commenters that questioned our legal with certain federal market requirements for define short-term, limited-duration authority. health insurance, principally those contained insurance as having a maximum The Departments have clear statutory in the Affordable Care Act. Be sure to check contract term of less than 12 months. authority under the PHS Act to interpret your policy carefully to make sure you are One commenter stated that allowing undefined provisions of the PHS Act, aware of any exclusions or limitations 26 such coverage to last nearly as long as ERISA, and the Code. In order to regarding coverage of preexisting conditions determine the scope of individual or health benefits (such as hospitalization, individual health insurance coverage would be arbitrary, capricious, and not health insurance coverage, which is emergency services, maternity care, essential to allow enforcement of the preventive care, prescription drugs, and in accordance with law. Another mental health and substance use disorder commenter stated that the Departments rules that apply to individual health services). Your policy might also have failed to provide any reasonable insurance coverage, the Departments lifetime and/or annual dollar limits on health justification for the change and must give meaning to the term short- 27 benefits. If this coverage expires or you lose expressed concern that short-term, term, limited-duration insurance. eligibility for this coverage, you might have limited-duration insurance will harm Relatedly, Congress provided the to wait until an open enrollment period to get Secretaries of HHS, Labor and the other health insurance coverage. Also, this consumers and the individual market, will increase premiums for individual Treasury with explicit authority to coverage is not ‘‘minimum essential promulgate regulations as may be coverage.’’ If you don’t have minimum market plans, and will increase PTC expenditures. The commenter noted necessary or appropriate to carry out the essential coverage for any month in 2018, 28 you may have to make a payment when you that despite acknowledging these provisions of the PHS Act. Due to the file your tax return unless you qualify for an potential outcomes of the proposed rule, absence of a statutory definition for the exemption from the requirement that you the Departments stated that they are term short-term, limited-duration have health coverage for that month. proposing this action to provide more insurance, and the fact that the only As under the proposed rule, the last affordable consumer choice for health reference to such coverage is as an two sentences of the notice are only coverage. The commenter stated that exclusion from individual health required for policies sold on or after the this does not suffice to explain the insurance coverage, this includes the applicability date of this final rule that decision for a rule change that is authority to issue regulations on short- have a coverage start date before January inconsistent with the Departments’ term, limited-duration insurance to 1, 2019. As explained in more detail earlier position, cannot carry the force define it and set standards that later in this preamble, in response to of law, and is not entitled to deference distinguish it from individual health comments, the notice in the final rule and therefore is arbitrary and insurance coverage. contains additional specificity, capricious, and cannot stand. One The Departments also disagree that including a list of health benefits that commenter stated that none of the three the definition in the proposed rule and might not be covered. However, the preambles supporting the less-than-12- as revised in this final rule is Departments do not have evidence that month duration (the 1997 rules, the inconsistent with PPACA. Both the short-term, limited-duration insurance 2004 rules and the proposed rule that proposed rule and the final rule policies have not historically or are this rule finalizes) provide a ‘‘reasoned establish federal standards for short- unlikely to cover hospitalization and explanation’’ for this choice as the term, limited-duration insurance in a emergency services. Further, this final maximum length of coverage. Another manner that clearly distinguishes such rule provides that the notice may commenter stated that 3 months is a insurance from the individual health contain any additional information as reasonable, ordinary-English meaning of insurance coverage that is subject to required by applicable state law and the word ‘‘short,’’ that the Departments’ PPACA’s individual market that the notice typeface should be in adoption of it in 2016 was well- requirements. Further, there are no sentence case, rather than all capital reasoned, and that neither the facts nor explicit statutory standards governing letters. the statute have changed, only a policy 26 See section 715 of ERISA and section 9815 of Based on comments submitted, the agenda inimical to PPACA is new. the Code, which incorporate provisions of Part A Departments have also revised the Another commenter stated that the of title XXVII of the PHS Act (generally, sections estimates of the impact of short-term, definition in the proposed rule is 2701 through 2728 of the PHS Act) into ERISA and limited-duration coverage on the inconsistent with the statutory text of the Code. See also, section 104 of HIPAA. See also, sections 505 and 734 of ERISA, sections 2761 and individual health insurance market and PHS Act section 2791(b)(5) because the 2792 of the PHS Act, section 1321(a)(1) and (c) of the uninsured as explained further proposed maximum duration for short- PPACA and section 7805 of the Code. below. In addition, a severability clause term, limited-duration insurance 27 As discussed in footnote 14, the definition of has been added to this final rule. coverage is not sufficiently shorter than short-term, limited-duration insurance also has Finally, as was proposed in the individual health insurance coverage to some relevance with respect to certain provisions that apply to group health plans and group health proposed rule, this final rule is effective be consistent with any reasonable insurance issuers over which the Departments of and applicable 60 days after publication reading of the statutory phrase ‘‘short- Labor and the Treasury have jurisdiction. in the Federal Register. term.’’ This commenter also asserted 28 See section 2792 of the PHS Act.

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the degree to which short-term, limited- Departments instead set a less-than-12- (including renewals and extensions) for duration insurance must vary from month maximum on the length of the a policy, and a consumer notice. This individual health insurance coverage, initial contract term. The Departments final rule establishes such federal leaving it to the Departments to use would have had the authority to do the standards for short-term, limited- their interpretive authority to former (had we chosen to do so), and duration insurance in a way that is distinguish between the two terms. also have the authority to do the latter. necessary and appropriate to distinguish Indeed, when the federal regulations for As explained above, the Departments this coverage from individual health short-term, limited-duration insurance have authority to establish regulatory insurance coverage. As stated above, were first implemented in 1997, short- standards for short-term, limited- Congress provided the HHS, Labor, and term, limited-duration insurance was duration insurance, including setting a Treasury Secretaries with explicit considered to be health insurance limit on the length of the initial contract authority to promulgate regulations as coverage with a period of coverage that term. The Departments have explained may be necessary or appropriate to carry was less than 12 months, as under the in the proposed rule and elsewhere in out the provisions of the PHS Act.29 The proposed rule. That standard was in this final rule that this regulatory action Departments believe that the federal place for nearly two decades without is necessary and appropriate to remove regulatory definition of short-term, objection. As demonstrated by the federal barriers that inhibit consumer limited-duration insurance as set forth definition of short-term, limited- access to additional, more affordable in this final rule, including the notice duration insurance in this final rule, coverage options and support state requirement, is necessary and short-term, limited-duration insurance efforts to develop innovative solutions appropriate to carry out the provisions and individual health insurance in response to market-specific needs. of the PHS Act. As explained above, the coverage are distinguished by the This final rule recognizes the role that Departments must give meaning to the differences in their initial contract short-term, limited-duration insurance undefined statutory term short-term, terms, the maximum duration of a can fulfill, while at the same time limited-duration insurance and the policy itself, and the types of notice distinguishing it from individual health meaning must distinguish it from requirements applicable to each type of insurance coverage by interpreting individual health insurance coverage. coverage. The two types of insurance are ‘‘short-term’’ to mean an initial contract This is because the PHS Act imposes further distinguished with respect to term of less than 12 months and certain requirements on individual whether the coverage is considered implementing the ‘‘limited-duration’’ health insurance coverage, and does not MEC. In the Departments’ view, these requirement by precluding renewals or impose those same requirements on differences are significant and sufficient extensions that extend a policy beyond short-term, limited-duration insurance. to distinguish short-term, limited- a total of 36 months. See below for a Further, the Departments believe it is duration insurance from individual discussion of the rationale for the necessary and appropriate for health insurance coverage, and the interpretation of the ‘‘limited-duration’’ consumers considering the purchase of definition of short-term, limited- requirement to mean no longer than 36 short-term, limited-duration insurance, duration insurance in this final rule is months. States remain free to adopt a and those actually purchasing such consistent with PPACA, is well definition with a shorter maximum insurance, to be aware that such reasoned, is clearly within the initial contract term or shorter coverage is not subject to the federal Departments’ authority, and is therefore maximum duration (including renewals individual market rules under the PHS and extensions) for a policy to meet not arbitrary and capricious. Rather than Act. Therefore, one component of the their specific market needs, including deprive consumers of PPACA federal standards for short-term, the adoption of strategies to mitigate protections, this final rule expands limited-duration insurance in this final adverse selection in the individual access to additional, more affordable rule is inclusion of the notice specified market. in this final rule, to inform applicants coverage options for individuals, One commenter stated that unlike including those who might otherwise be and enrollees that short-term, limited- health insurance products sold in the duration insurance is not individual uninsured, as well as to those who do non-group market, short-term, limited- not qualify for PTCs or who otherwise health insurance coverage and therefore duration insurance is exempt from is not required to meet the federal find individual health insurance federal regulation and is subject only to market requirements that apply to coverage unattractive. Consumers who state regulation and that the extent of individual health insurance coverage. want comprehensive, individual health CMS’s statutory authority is to define Defining short-term, limited-duration insurance coverage as defined by what short-term, limited-duration insurance in such a way that requires a PPACA will continue to be able to insurance is. The commenter stated that short, standard description of how the purchase such coverage on a guaranteed the Departments have no legal authority coverage might vary from individual availability and guaranteed renewability to impose regulatory burdens or health insurance coverage allows for a basis in the individual market. As to the limitations on short-term, limited- clear determination by regulators that comment regarding whether the rule is duration insurance, such as the notice the policy is intended to be short-term, justified, see the discussion in the requirement. limited-duration insurance, facilitates Regulatory Impact Analysis in this final The Departments agree with the compliance by issuers, and promotes rule for updated estimates of the impact commenter that short-term, limited- ease of understanding by consumers. of enrollment in short-term, limited- duration insurance is exempt from the We further clarify that to the extent a duration insurance on consumers and PHS Act’s individual market rules and health insurance policy sold to an the individual market. is generally subject to state regulation. individual in the non-group market As stated above, some commenters However, the Departments also have includes the notice, and satisfies the challenged the legal authority of the limited authority under the PHS Act to other federal standards for short-term, Departments to set a less-than-12 month establish federal regulatory standards limited-duration insurance in this final maximum contract term, including for short-term, limited-duration rule, it constitutes short-term, limited- extensions that may be elected by the insurance, including standards related duration insurance and is not subject to policyholder without the issuer’s to the maximum length of the initial consent. In this final rule, the contract term, the maximum duration 29 See section 2792 of the PHS Act.

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the federal individual market rules market for individual health insurance consumers and the initial contract term under the PHS Act. As described coverage, thereby raising premiums for is less than 12 months). elsewhere in this final rule, states can such coverage. Commenters who The Departments acknowledge that adopt a definition with a shorter supported the proposed rule stated that making short-term, limited-duration maximum initial contract term and/or a it would allow purchasers of short-term, insurance more available, and for longer shorter maximum duration of a policy, limited-duration insurance to obtain the initial contract terms and periods of and can require issuers to provide coverage they want (excluding services duration than is currently permitted, additional information as part of the they do not want) at a more affordable could have an impact on the risk pools consumer notice. price for a longer period of time. These for individual health insurance The proposed rule did not address commenters explained that currently, coverage, and could therefore raise whether any aspect (or standard) in the enrollees have to reapply for short-term, premiums for individual health definition of short-term, limited- limited-duration insurance every 3 insurance coverage (see the discussion duration insurance should be months, have their deductibles reset in the Regulatory Impact Analysis considered independent of other every 3 months, and might lose coverage section). However, as discussed more provisions, and thus severable, if such for conditions that develop during the fully below, we believe the critical need part of the definition were to be initial 3 months. They also noted that for coverage options that are more determined invalid. Although there many individuals may be unable to affordable than individual health were no comments that directly insurance coverage, combined with the addressed severability, from the obtain more comprehensive coverage at the end of the 3-month coverage period general need for more coverage options comments received on the proposed and choice, substantially outweigh the rule, the Departments recognize there is because they may not qualify for a special enrollment period for individual estimated impact on individual health a possibility that some stakeholders may insurance premiums. challenge the 36-month maximum health insurance coverage and might duration standard in court. The have a long time to wait for the next Initial Contract Term for Short-Term, Departments expect to prevail in any individual market open enrollment Limited-Duration Insurance such challenge, as this final rule and period. The proposed rule would have set a each of the federal standards for short- The Departments agree that short- maximum length of short-term, limited- term, limited-duration insurance term, limited-duration insurance plays duration coverage, including any finalized herein are legally sound. If a an important role in providing extensions that may be elected by the court should conclude that the 36- temporary valuable health coverage to month maximum duration standard for policyholder without the issuer’s individuals who would otherwise go consent, of less than 12 months. Given short-term, limited-duration insurance uninsured. Short-term, limited-duration in this final rule is invalid, the that the proposed rule did not include insurance can also provide a more a proposal to permit renewal periods in Departments wish to emphasize our affordable, and potentially desirable, intent that the remaining standards of addition to or longer than the less-than- coverage option for some consumers, 12-month period, we are addressing all the final rule will take effect and be such as those who cannot afford given the maximum effect as permitted comments related to the ‘‘less-than-12- unsubsidized coverage in the individual month’’ aspect of the proposed rule as by law. Thus, we have added a market. This final rule balances the severability clause as a new paragraph comments on the initial contract term. important role that short-term, limited- The Departments discuss and respond (4) to the final rule, which addresses duration insurance plays in the market, two situations—one where the 36- to comments related to renewals and while at the same distinguishing it from extensions beyond the initial contract month provision is invalidated ‘‘as individual health insurance coverage applied,’’ and the other where it is term, including comments on the and requiring issuers of short-term, permissible maximum duration for a invalidated ‘‘facially.’’ The severability limited-duration insurance to inform provision reads as follows: ‘‘If a court policy (including renewals and consumers of how coverage under the holds the 36-month maximum duration extensions of the same insurance policy might differ from coverage under provision set forth in paragraph (1) of contract), later in this preamble. With individual health insurance coverage. this definition or its applicability to any respect to the maximum length of the The rule does this by setting the person or circumstances invalid, the initial contract term for short-term, remaining provisions and their maximum length of the initial contract limited-duration insurance, most applicability to other people or term to less than 12 months, comments suggested not extending the circumstances shall continue in effect.’’ establishing the total maximum maximum duration beyond the current duration for a policy (including less-than-3-month maximum. Others General Comments on the Proposed coverage during the initial contract term suggested periods such as less than 6 or Rule and renewals or extensions under the 8 months. Most commenters who Many commenters generally agreed same insurance contract) of no longer supported extending the maximum that short-term, limited-duration than 36 months, and providing for a initial contract term suggested it should insurance plays an important role in notice to inform consumers of how be 364 days. A few commenters providing temporary health coverage to coverage under the policy might differ suggested more than 1 year. Other individuals who would otherwise go from coverage under individual health commenters stated that any short-term, uninsured. Most commenters also stated insurance coverage. Thus, under this limited-duration policy should end by that such plans are not meant to take the final rule, issuers may offer coverage December 31 of the calendar year in place of comprehensive health under a short-term, limited-duration which the policy period commences, insurance coverage, and allowing them insurance policy for up to a total of 36 while others stated that the maximum to be marketed as a viable alternative to months, without any medical duration should be 1 year or until comprehensive coverage would subject underwriting or experience rating December 31 of the calendar year in uninformed consumers to potentially beyond that completed upon the initial which the policy period commences, severe financial risks, and would siphon sale of the policy (as long as the whichever occurs later. Other off healthier individuals from the applicable notice is provided to commenters stated that the maximum

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length of the coverage should be left to which for the reasons stated above, the term, limited-duration insurance may the states. Departments believe is not desirable. not be suitable coverage for all As explained in the proposed rule, we With respect to the comment that the individuals in all circumstances and proposed to return to the less-than-12- maximum duration should be 1 year or that in some instances it may not month standard in order to expand more until December 31 of the calendar year provide coverage that is as affordable coverage options to in which the policy period commences, comprehensive as individual health consumers who desire and need them, the Departments do not believe that a insurance coverage. However, short- to help individuals avoid paying for policy with an initial contract term of 1 term, limited-duration insurance can be benefits provided in individual health full year would satisfy the ‘‘short-term’’ a viable health insurance option for insurance coverage that they believe are component of short-term, limited- many people in many circumstances. not worth the cost, to reduce the duration insurance, as it would have the Also, no individual is required to enroll number of uninsured individuals, and same initial contract term as individual in short-term, limited-duration to make available more coverage options health insurance coverage. insurance; rather, it is simply an with broader access to providers than The Departments agree that states additional, and likely more affordable, certain individual health insurance remain free to adopt a definition with a option that may be available to them. coverage has. The Departments disagree shorter maximum initial contract term. Individual health insurance coverage is with the commenters who supported a The maximum initial contract term of unaffordable for many consumers, shorter maximum initial contract term. less than 12 months established in this particularly those who do not qualify for To the extent the initial contract term final rule provides a uniform federal PTCs. Of uninsured consumers visiting would be limited to a shorter duration, standard for the initial contract term for the HealthCare.gov website in the past for example, 3 months, this would mean short-term, limited-duration insurance. year, 63 percent of those who did not that every 3 months, absent renewability As explained in the proposed rule and purchase a plan cited high premiums as of the policy, an individual purchasing elsewhere in this final rule, this the primary reason not to purchase.30 short-term, limited-duration insurance standard was selected in order to Furthermore, the availability of short- would be subject to re-underwriting if promote access to health coverage term, limited-duration insurance they did not have a renewal guarantee, choices in addition to individual health provides an additional choice for many and would possibly have his or her insurance coverage, which, as stated consumers that exists side-by-side with premium greatly increased as a result. above, may or may not be the most individual market coverage, with the The issuer could also decline to issue a appropriate or affordable policies for end result that individuals are provided new policy to the consumer based on some individuals. Therefore, this rule with more choices and have the preexisting medical conditions. Also, to sets a federal standard for the maximum opportunity to purchase the type of the extent that the policy has a initial contract term for short-term, coverage that is most desirable and deductible, the individual would not get limited-duration insurance. This federal suitable for the individual and/or her credit for money spent toward the standard defines the ‘‘short-term’’ family. Additionally, many individuals deductible during the previous 3 component of short-term, limited- who have health conditions for which months. In addition, to the extent that duration insurance as less than 12 they desire coverage that might be more the policy excluded preexisting months. The federal maximum duration comprehensive than what is available conditions for a specified period of time for a policy (including renewals and through short-term, limited-duration or imposed a waiting period on specific extensions of the same insurance insurance, can access individual health benefits, the individual might not get contract), discussed further below, insurance coverage on a guaranteed credit for the amount of the time he or implements the ‘‘limited-duration’’ available and guaranteed renewable she had the previous coverage, and thus component of short-term, limited- basis and, if enrollment is pursued the waiting period on preexisting duration insurance. through an Exchange and the individual conditions or on specific benefits would Many commenters that opposed the is otherwise eligible, may qualify for the start over, leaving the consumer without extension of the maximum initial PTC to offset the cost of such coverage coverage for the condition(s) or contract term for short-term, limited- and, in some cases, cost-sharing benefit(s) until the new waiting period duration insurance generally expressed reductions. PTCs and cost-sharing expires. Although these circumstances concerns about the lack of protections reductions generally are not available to would be somewhat mitigated if the for consumers who purchase short-term, purchasers of short-term, limited- maximum initial contract term was limited-duration insurance. Some of duration insurance. However, states somewhat longer than less than 3 these commenters stated that such may be able to provide subsidies to months, for example, less than 9 insurance is not a viable option for purchasers of short-term, limited- months, the Departments believe that people with serious or chronic medical duration insurance with funds provided mitigating these circumstances even conditions because of potential policy under waivers authorized by section further, by establishing a federal exclusions. Commenters also stated that 1332 of PPACA 31 should they choose to maximum initial contract term of less short-term, limited-duration policies do so and should the waiver satisfy all than 12 months, is preferable. The discriminate against those with serious applicable requirements. Departments find all of these to be illnesses and other preexisting Also, states have flexibility to compelling reasons in favor of conditions including mental health and establish a different, shorter maximum permitting a maximum initial contract substance abuse disorders, older initial contract term consistent with term of less than 12 months, rather than consumers, women, transgender state law. In addition, these final rules a shorter maximum initial contract term. patients, persons with gender-identity- require the prominent display of a With respect to the comment that any related health concerns, and victims of notice in the contract and any short-term, limited-duration policy rape and domestic violence. application materials provided in should end by December 31 of the The commenters did not provide connection with enrollment in short- calendar year in which the policy persuasive evidence for concluding that term, limited-duration insurance to alert period commences, this could result in short-term, limited-duration policies many such policies having an initial discriminate against individuals. The 30 CMS Exchanges Trend Report, July 2, 2018. contract term of far less than 12 months, Departments acknowledge that short- 31 42 U.S.C. 18052.

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consumers about how coverage under of individual health insurance coverage, expedited or streamlined reapplication the policy might vary from coverage and therefore limits the degree to and for short-term, limited-duration under individual health insurance areas in which states may regulate such insurance that would simplify the coverage. See the discussion below for coverage. This is yet another way in reapplication process and minimize the an explanation of the changes the which the federal regulation of short- burden on consumers may be Departments are making to the required term, limited-duration insurance in this appropriate; whether federal standards notice in this final rule in response to rule is different from individual health are appropriate for such processes; and commenters’ concerns about consumers’ insurance coverage. In fact, several whether any clarifications are needed potential misunderstanding of some of commenters (both in favor of, and regarding the application of the those variations. These changes include opposed to, the proposed rule) said that proposed definition of short-term, a clarification that states have the states should retain the authority to limited-duration insurance to such flexibility to require additional regulate short-term, limited-duration practices. For example, the proposed consumer disclosures. insurance, and that such authority rule preamble noted that an expedited Many commenters who opposed the should not be preempted by the PHS process could involve setting minimum extension of the maximum initial Act. Several commenters requested the federal standards for what must be contract term for short-term, limited- Departments to coordinate with the considered as part of the streamlined duration insurance expressed concern states on the regulation of short-term, reapplication process while allowing about what they viewed as a history of limited-duration insurance. The issuers to consider additional factors in aggressive and deceptive marketing Departments have considered those accordance with contract terms. The practices by individuals who market comments, and we acknowledge and Departments were also interested in short-term, limited-duration insurance. respect states’ authority to regulate the information on any state approaches One commenter stated that over the past business of insurance. The Departments (including any approaches that states 2 years, state regulators have seen an generally agree that states retain the are considering adopting) to minimize increase in complaints about such authority to regulate short-term, limited- the burden of the reapplication process insurance, with consumers saying they duration insurance and further note that for issuers and consumers. were unaware their plan did not provide this final rule does not change or Several commenters questioned the comprehensive coverage or that they otherwise modify the existing PHS Act Departments’ authority to permit the could be refused a new policy at the end 33 preemption standard. As such, states duration of short-term, limited-duration of the contract term. Many commenters may shorten the length of the maximum provided examples of specific issues insurance to extend to 12 months or initial contract term, the 36-month total longer through renewal or extension of states were dealing with, such as issues maximum duration (including renewals with claims handling. In a 10-state such policies. One commenter stated or extensions) discussed further below, that ‘‘limited-duration’’ means these survey conducted by the or both, although they may not lengthen Commonwealth Fund 32 cited to by policies cannot be made guaranteed them. Relatedly, as discussed later in renewable. Several commenters stated some commenters, state regulators noted this preamble, in this final rule, the an increase in complaints about brokers that establishing a guaranteed Departments added language to the renewability requirement for short-term, using deceptive practices to enroll notice to alert consumers to how the people in short-term, limited-duration limited-duration insurance would be coverage they are purchasing might vary contrary to the plain language of the insurance over the phone. Some from individual health insurance commenters also mentioned the low statute since short-term, limited- coverage and also added a clarification duration insurance is excluded from the levels of health literacy, particularly to the regulation text that states may among younger adults, and how this statutory definition of individual health also impose additional requirements insurance coverage. One commenter could exacerbate deceptive marketing with respect to the language in the practices by short-term, limited- stated that short-term, limited-duration consumer notice. States remain free to insurance issuers should be permitted to duration insurance issuers and brokers. regulate short-term, limited-duration Several commenters stated that they did sell a policy with a duration of less than insurance. We also clarify that this final 12 months, with a separate guaranteed not want state laws prohibiting the sale rule does not preempt any state laws of short-term, limited-duration renewability rider, allowing the prohibiting the sale of short-term, customer to buy a new policy without insurance preempted. limited-duration insurance. This final rule establishes federal underwriting. The commenter stated standards for short-term, limited- Renewability of Short-Term, Limited- that the Departments have no statutory duration insurance only with respect to Duration Insurance Coverage authority to prohibit or otherwise regulate such arrangements, and that the the maximum length of the initial The proposed rule provided that in Departments have no authority to contract term, the maximum duration of determining whether an insurance require guaranteed renewability, or a policy (including renewals and contract had a duration of less than 12 prohibit it. One commenter suggested extensions under the same insurance months, extensions that may be elected that issuers be allowed to sell multiple contract), and a consumer notice. States by the policyholder without the issuer’s consecutive policies at the initial point are free to regulate such coverage in consent were taken into account. The of sale and be allowed to sell renewal every other respect. This contrasts with Departments solicited comments on the options with and without preexisting the federal regulation of individual conditions under which issuers should conditions exclusions. One commenter health insurance coverage under the be able to allow short-term, limited- stated that the term ‘‘short-term, PHS Act, which touches many aspects duration insurance to continue 12 limited-duration insurance’’ provides months or longer with the issuer’s 32 authority to define the length of time Dania Palanker, Kevin Lucia, Sabrina Corlette, consent. The Departments also solicited Maanasa Kona, ‘‘Proposed Federal Changes to within which such insurance contracts comments on whether any processes for ‘Short-Term Health Coverage Leave Regulation to must expire, but does not provide States’’, Commonwealth Fund, February 20, 2018. authority to limit how many contracts Available at https://www.commonwealthfund.org/ 33 See section 2724 (formerly section 2723) of the blog/2018/proposed-federal-changes-short-term- PHS Act and 45 CFR 146.143 and 148.210. See also consumers enter into, or to regulate health-coverage-leave-regulation-state. 62 FR 16894 at 16904 and 69 FR 78719 at 78739. renewal guarantees. The commenter

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asserted that renewal guarantees are not guaranteed renewals for short-term, renewals, is less than 3 months, whereas ‘‘health insurance coverage,’’ explaining limited-duration insurance. this final rule allows renewals to the that such guarantees protect against Although some commenters extent the maximum duration of a premiums increasing, but do not questioned whether the Departments policy, including the initial contract provide benefits consisting of items and have authority to impose a guaranteed term and renewals or extensions, is up services paid for as medical care and renewability requirement on short-term, to 36 months. therefore, the Departments cannot limited-duration insurance, this final The Departments have determined regulate these contracts. Since renewal rule does not impose such a that the 36-month limit on coverage, guarantees are not ‘‘health insurance requirement. Rather, it permits, but does including the initial contract term, plus coverage,’’ the commenter asserted, it is not require, issuers to renew or extend renewals or extensions (without limiting reasonable to interpret the statute as not a short-term, limited-duration policy up consecutive periods of separate counting renewal guarantees against the to a maximum total duration of 36 coverage, as explained above) satisfies time limit the Departments set for the months and still have such coverage the ‘‘limited-duration’’ component of contract for medical benefits. Another considered short-term, limited-duration the statutory term ‘‘short-term, limited- commenter stated that, should the final insurance. This rule does so by duration insurance’’ (while the less- rule allow renewals, then changing the establishing a maximum duration of a than-12-months limit on the initial interpretation of this from the current short-term, limited-duration insurance contract term, discussed above, satisfies rule, without support, would violate policy (inclusive of the initial contract the ‘‘short-term’’ component of the federal law. term and renewals or extensions under term). The Departments note that the same insurance contract) of no Congress did not change the existing Other commenters commented on the longer than 36 months. reference to short-term, limited-duration renewal of short-term, limited-duration Under this final rule, the total number insurance as an exclusion from the PHS insurance coverage from a policy of consecutive days of coverage under a Act definition of ‘‘individual health perspective. Most such commenters single (that is, the same) insurance insurance coverage’’ or otherwise who supported the proposed rule stated contract is the relevant metric to address short-term, limited-duration that short-term, limited-duration calculate the duration of the coverage to insurance in PPACA, which indicates insurance should be permitted to be determine if it satisfies the 36-month Congress was not concerned with short- renewable, while those who opposed maximum duration standard. In term, limited-duration insurance the proposed rule and some who agreed contrast, the total number of existing side-by-side, at least under the with lengthening the maximum period consecutive days of coverage under two standard in place prior to the October were opposed to permitting such or more (that is, separate) insurance 2016 rule, with individual health policies to be renewable. One contracts, even if one picks up where insurance coverage. The Departments commenter stated that a federal mandate the last ended, is irrelevant to the 36- believe that a maximum duration of 36 for automatic renewability would limit month maximum duration standard. months for short-term, limited-duration the rights of states and the ability of The number of days of coverage in insurance is consistent with these two state regulators to determine the design, separate contracts is considered insurance markets existing side-by-side, length, and sales practices of short-term, separately and the relevant question is while still giving meaning and effect to limited-duration insurance plans in a whether each individual contract the ‘‘limited-duration’’ component of manner that best protects their satisfies the 36-month maximum short-term, limited-duration insurance. consumers and markets. A few duration standard. Nothing in this final Likewise, the Departments’ commenters addressed the extent to rule precludes the purchase of separate interpretation is consistent with the which, and the circumstances under insurance contracts that run canon of statutory construction that which, individuals should be permitted consecutively, so long as each disfavors rendering one or more to reapply for coverage under an individual contract is separate and can statutory words or phrases redundant. expedited application process. Some of last no longer than 36 months. Here, Congress used two terms: ‘‘short- these commenters opposed such an With respect to the comment that, term’’ and ‘‘limited-duration.’’ The expedited process, while others favored should the final rule allow renewals, Departments have concluded that these permitting it. One commenter suggested then changing the interpretation of this two terms are best interpreted to refer to that short-term, limited-duration from the current rule, without support, periods of time of differing length; if insurance issuers could design a less- would violate federal law, the they both referred to a time period of the than-12-month plan with an option to Departments note that the current rule same length (for example, if the re-write at point of sale. This product (the October 2016 final rule) also allows Departments interpreted both words to would have a different set of renewals.34 Accordingly, with regard to refer to a time period of less than twelve underwriting questions at point of sale permitting renewals, there is no change months), then one of the terms would be for the option. Upon expiration of the of interpretation. The only difference rendered redundant, or nearly so. The initial contract term, the issuer could between the two rules with respect to Departments likewise conclude that the elect to waive preexisting conditions renewals is that the current rule allows term ‘‘limited-duration’’ refers to a and underwriting for the new less-than- renewals to the extent the total duration longer time period than ‘‘short-term,’’ 12-month period. One commenter stated of coverage, including the initial because, while an insurance policy’s that federal standards should regulate contract term and any extensions or duration is (absent cancellation) never short-term, limited-duration insurance shorter than its term, a policy’s term can policies, including standards for 34 The 1997 HIPAA rule similarly addressed be shorter than its duration (if the policy reapplication, while one commenter extensions for short-term, limited-duration is renewed or extended). Thus, the insurance (that is, short-term, limited-duration asserted that states should maintain insurance was defined as health insurance coverage Departments conclude that the term authority to regulate the application and provided pursuant to a contract with an issuer that ‘‘limited-duration’’ refers to a period of reapplication process. Another has an expiration date specified in the contract time that is longer than the time period commenter that supported the proposed (taking into account any extensions elected by the contemplated by the term ‘‘short-term,’’ policyholder without the issuer’s consent) that is rule suggested further expanding the less than 12 months after the original effective date and contemplates renewal of a short- proposed federal standards to permit of the contract). 62 FR 16894 (April 8, 1997). term policy for a time period potentially

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longer than the maximum term length extend coverage for the maximum policy is no longer than 36 months, for which a short-term policy can be duration with respect to a short-term, serves to further distinguish such short- acquired (under this final rule, less than limited-duration insurance policy; term, limited-duration insurance from 12 months). instead whether to provide coverage for individual health insurance coverage, In determining the appropriate limits the maximum period is left to the states which must be guaranteed renewable on the permissible range of renewals or and/or contracting parties. Accordingly, indefinitely, except under certain extensions in giving meaning to the in establishing federal standards for limited circumstances.37 As noted term ‘‘limited-duration,’’ the short-term, limited-duration insurance, earlier in this rule, states have flexibility Departments were informed by the the Departments interpret the term to establish a different, shorter stakeholder comments and other ‘‘limited-duration’’ in a manner maximum duration for a short-term, circumstances under which Congress consistent with the temporary limited-duration policy (including authorized temporary limited coverage continuation coverage maximums renewals or extensions) consistent with options. In particular, the Consolidated available through COBRA and the state law. Omnibus Budget Reconciliation Act of somewhat similar statutory temporary While the Departments did not 1985 (COBRA) requires certain group continuation of coverage provisions specifically propose the 36-month health plans to extend group health under the Federal Employees Health maximum duration period for short- coverage to certain individuals Benefits Program,36 which permit term, limited-duration insurance otherwise losing that coverage.35 continuation of coverage for up to a coverage in the proposed rule, COBRA requires certain group health maximum duration of 36 months. comments were solicited on all aspects plan sponsors to provide a temporary Individuals may choose to purchase of the proposed rule, including whether continuation coverage option for a short-term, limited-duration insurance the length of short-term, limited- minimum of 18, 29, or 36 months, for a variety of different reasons, which duration insurance should be a different depending on the nature of the may align with various COBRA duration than less than 12 months, and qualifying event that triggers the qualifying events or not. Further, the circumstances, if any, under which temporary coverage period. Under whereas COBRA describes the minimum issuers should be allowed to continue COBRA, the maximum period that period that certain group health plan (that is, renew) such coverage for 12 COBRA coverage could extend is for a sponsors must offer COBRA months or longer.38 Comments were period of 36 months (where the continuation coverage, these regulations also solicited on a potential qualifying event is employee enrollment describe the maximum coverage period reapplication process for short-term, in Medicare, divorce or legal separation, during which insurers may renew a limited-duration insurance, including death of an employee, or loss of short-term, limited-duration insurance whether there should be federal dependent child status (that is, ‘‘aging policy. However, the Departments standards for such a process. In out’’ under the plan)). In certain conclude that the 36-month maximum response, the Departments received a circumstances, individuals experiencing coverage period is a reasonable and wide range of comments indicating that a qualifying event such as job loss, appropriate benchmark for interpreting short-term, limited-duration insurance which triggers an initial 18-month the term ‘‘limited-duration.’’ By coverage should be required to be COBRA continuation coverage period, allowing COBRA coverage to last up to guaranteed renewable, should be may experience a second qualifying 36 months in some circumstances, permitted to be renewed or extended for event, making them eligible for a total Congress recognized that 36 months a designated period of time, and also maximum duration of 36 months of qualifies as a temporary period of that it should not be allowed to be COBRA continuation coverage. transition, during which coverage of renewed or extended beyond the initial Similar to COBRA, short-term, limited duration may be useful. The contract term. We also received a limited-duration insurance also serves Departments have strong policy number of suggestions regarding the as temporary coverage for individuals considerations, as described elsewhere adoption of federal standards governing transitioning between other types of herein, for adopting an interpretation of any reapplication processes. After coverage, and accordingly the the term ‘‘limited-duration’’ that consideration of all the comments Departments believe that it is reasonable provides a flexible period of insurance related to the issue of renewability or to look to COBRA in giving meaning to for individuals transitioning between extensions, and for the reasons stated ‘‘limited-duration,’’ as both types of other types of coverage, and COBRA’s above, this final rule permits a short- coverage serve an analogous purpose— 36-month maximum provides precedent term, limited-duration insurance policy that is, to provide temporary health for a 36-month coverage period that is to be renewed or extended so that the coverage for individuals who are not designed to be of limited duration. total duration of coverage under the currently eligible for or enrolled in Therefore, in looking to COBRA as a policy may be up to 36 months. comprehensive medical coverage, and guidepost for determining the maximum Renewal guarantees generally permit are transitioning between types of duration of short-term, limited-duration a policyholder, when purchasing his or coverage. Unlike COBRA, where insurance (that is, the length of coverage her initial insurance contract, to pay an Congress explicitly authorized a sliding under the initial contract term, plus additional amount, in exchange for a scale of maximum duration periods, the renewals or extensions), the guarantee that the policyholder can Departments decline to adopt a sliding Departments believe the 36-month elect to purchase, for periods of time scale approach to the maximum COBRA period, rather than the 18- following expiration of the initial duration period for short-term, limited- month COBRA period, is more contract, another policy or policies at duration coverage. We adopt the appropriate. some future date, at a specific premium approach outlined in this final rule for The Departments also believe that would not reflect any additional simplicity in the absence of explicit, permitting renewal or extension of a underwriting. In 2009, shortly before staggered statutory maximums and short-term, limited-duration insurance enactment of PPACA, one of the because no party is required to renew or policy, but only to the extent the maximum duration of coverage under a 37 Section 2703 of the PHS Act; see also 42 U.S.C. 35 26 U.S.C. 4980B(f), 29 U.S.C. 1161–1168, 42 300gg–42. U.S.C. 300bb–1—300bb–8. 36 5 U.S.C. 8905(a). 38 See, for example, 83 FR 7440.

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nation’s largest health insurance issuers months.41 The Departments are also possibly have his or her premium received regulatory approval from 25 significantly limited in their ability to greatly increased as a result. Also, to the states to offer renewal guarantees as a take an enforcement action under the extent the policy excluded preexisting standalone product, for an annual PHS Act market rules with respect to conditions for a specified period of time premium equal to 20 percent of the cost such transactions involving products or or imposed a waiting period on specific of a guaranteed renewable health instruments that are not health benefits, the individual might not get insurance policy.39 With respect to the insurance coverage.42 As commenters credit for the amount of time he or she comments on renewal guarantees, to the mentioned, we also recognize that the had the previous coverage. The issuer extent a contract for health insurance mechanisms and means by which could also decline to issue a new policy coverage is extended or renewed, coverage may be extended or renewed to the consumer based on preexisting whether due to a renewal guarantee or may vary from state to state. Further, medical conditions. The Departments otherwise, the period of health states can shorten the maximum find all of these to be compelling insurance coverage that is covered by duration for a short-term, limited- reasons in favor of permitting renewals the renewal or extension of the policy duration insurance policy, but cannot and extensions as set forth in the final is counted toward the 36 month extend the maximum duration beyond rule, such that the maximum duration of maximum duration, as to not do so the 36-month federal standard. coverage under a single short-term, would ignore the meaning of the Therefore, as stated above, under this limited-duration insurance policy may statutory phrase ‘‘limited-duration.’’ final rule, the total number of be 36 months (including renewal or However, to the extent a contract does consecutive days of coverage under the other extension periods), as opposed to not provide health insurance coverage 40 same insurance contract is considered less than 12 months. While the and instead consists of a separate when calculating the duration of a Departments anticipate that some transaction or other instrument under policy for purposes of determining if the issuers will choose to provide renewals which the individual can, in advance, insurance satisfies the 36-month without the restrictions described above (such as providing renewals without lock in a premium rate in the future or maximum duration federal standard. In premium increases and without re- the ability to purchase a new, separate contrast, the total number of setting preexisting condition exclusion short-term, limited-duration insurance consecutive days of coverage under waiting periods), we note that short- policy at a specified premium rate at a separate insurance contracts is not term, limited-duration insurance issuers future date without re-underwriting, considered when calculating the duration of coverage for such purpose. are not required to do so under this final such subsequent periods of coverage Rather, in such cases, the number of rule and may determine the terms of the under the new, separate short-term, days of coverage under each contract of renewal in the short-term, limited- limited-duration insurance policies insurance is considered separately, to duration insurance contract, subject to would not count toward the 36-month determine if the duration of the the definition of short-term, limited- maximum. Through these mechanisms, coverage under each contract satisfies duration insurance in this final it may be possible for a consumer to the 36-month maximum duration regulation and any permissible state law maintain coverage under short-term, standard, and coverage under each new variations. Further, in consideration of limited-duration insurance policies for contract commences a new period of Congress’ intent to exempt from the extended periods of time to protect coverage. The Departments generally definition of individual health themselves against financial defer to state law to determine the insurance coverage (and therefore, to vulnerabilities, such as developing a circumstances under which consecutive exempt from the HIPAA and PPACA costly medical condition. The ability to periods of coverage are under the same, individual market requirements) short- purchase such instruments, which are or under separate, insurance contracts. term, limited-duration insurance, the essentially options to buy new policies In addition to having authority to Departments are not imposing a in the future, is at present permitted allow renewals or extensions for a guaranteed renewability requirement on under federal law, and this rule does maximum duration of up to 36 months, short-term, limited-duration insurance. nothing to forbid or permit such the Departments also determined there The Departments appreciate the transactions. Furthermore, the are sound policy reasons to provide the comments and suggestions regarding Departments note that anyone, not just ability for renewals and extensions as simplified or expedited application and policyholders of short-term, limited- set forth in the final rule. Many of these reapplication processes. The insurance, can purchase such reasons are discussed above with Departments decline to adopt or instruments under current federal law respect to the less-than-12-month initial otherwise establish federal standards (which this rule does not alter). contract term maximum finalized in this regarding such procedures at this time. Similarly, the Departments also have rule. As many commenters pointed out, Rather, the Departments defer to the not, and do not in this final rule, to the extent that the maximum duration states to define and regulate such prohibit issuers from offering a new of short-term, limited-duration practices. short-term, limited-duration insurance insurance is limited to a relatively short Notice policy to consumers who have period of time, for example, less than 3 In the proposed rule, the Departments previously purchased this type of months, or even less than 12 months, proposed to revise the notice that must coverage, or otherwise prevent without permitting renewals or appear in the contract and any consumers from stringing together extensions, this would mean that every application materials provided in coverage under separate policies offered 3 months or every 12 months, an connection with enrollment in short- by the same or different issuers, for total individual purchasing short-term, term, limited-duration insurance. The coverage periods that would exceed 36 limited-duration insurance would be Departments noted concerns that short- subject to re-underwriting, and would term, limited-duration insurance 39 Reed Abelson, ‘‘United Health to Insure the policies that provide coverage lasting Right to Insurance,’’ New York Times, December 2, 41 81 FR 75318. 2008, https://www.nytimes.com/2008/12/03/ 42 However, the Departments may have the almost 12 months may be more difficult business/03insure.html. authority to regulate health insurance coverage for some individuals to distinguish from 40 See section 2792(b)(1) of the PHS Act. issued pursuant to such an instrument. coverage available in the individual

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market, which is typically offered on a the notice to provide additional maintaining the last two sentences in 12-month basis. Accordingly, under the disclosures about their short-term, the notice, when provided for policies proposed rule, one of two versions of limited-duration insurance product, with an effective date on or after January the following notice was proposed to be subject to state approval, while another 1, 2019. required to be prominently displayed commenter said that states should be With respect to additional flexibility (in at least 14 point type) in the contract permitted to prescribe their own notice to add language to the notices, the and in any application materials language, with the federal language as a Departments have clarified as part of the provided in connection with default for those states that fail to do so. final regulations that states may require enrollment: The Departments believe it is additional language to be included in important and appropriate for issuers of the notices, as discussed elsewhere in THIS COVERAGE IS NOT REQUIRED TO COMPLY WITH FEDERAL REQUIREMENTS short-term, limited-duration insurance this rule. In addition, there is no FOR HEALTH INSURANCE, PRINCIPALLY to disclose the key potential prohibition on issuers including THOSE CONTAINED IN THE AFFORDABLE characteristics of such insurance to additional language in their notices, as CARE ACT. BE SURE TO CHECK YOUR applicants and policyholders. long as the additional language POLICY CAREFULLY TO MAKE SURE YOU Consumers need as complete and accurately describes the coverage. UNDERSTAND WHAT THE POLICY DOES accurate information as possible in Many commenters suggested specific AND DOESN’T COVER. IF THIS COVERAGE order to make informed coverage changes to the content of the notices. EXPIRES OR YOU LOSE ELIGIBILITY FOR purchasing decisions—whether it be for Some commenters suggested expanding THIS COVERAGE, YOU MIGHT HAVE TO comprehensive, major medical coverage the notice to include details such as WAIT UNTIL AN OPEN ENROLLMENT PERIOD TO GET OTHER HEALTH in the individual market or for short- which benefits are not covered by the INSURANCE COVERAGE. ALSO, THIS term, limited-duration insurance, which plan, whether preexisting conditions are COVERAGE IS NOT ‘‘MINIMUM can consist of a wide variety of coverage covered, which PPACA protections will ESSENTIAL COVERAGE’’. IF YOU DON’T options. Therefore, the final rule retains not be applicable, and more clearly state HAVE MINIMUM ESSENTIAL COVERAGE the notice requirement, with some that loss of short-term, limited-duration FOR ANY MONTH IN 2018, YOU MAY changes to content and style, as insurance will not trigger a special HAVE TO MAKE A PAYMENT WHEN YOU discussed below. enrollment period in the individual FILE YOUR TAX RETURN UNLESS YOU The Departments decline to adopt the market. Several commenters stated that QUALIFY FOR AN EXEMPTION FROM THE suggestion that the notice should not be the notice should not only distinguish REQUIREMENT THAT YOU HAVE HEALTH part of the definition of short-term, short-term, limited-duration insurance COVERAGE FOR THAT MONTH. limited-duration insurance, but instead from available individual market plans, Given that the individual shared should be a separate requirement, once but should also distinguish the former responsibility payment is reduced to $0 a policy satisfies the definition of short- from excepted benefits coverage. Some for months beginning after December term, limited-duration insurance. The commenters suggested making the 2018, the Departments proposed that the Departments do not believe there is a notice available in several languages. final two sentences of the notice must compelling reason to so change the One commenter stated that the notice appear only with respect to policies sold regulatory structure. The Departments should illustrate how certain conditions on or after the proposed applicability also decline to adopt the suggestion that would be covered. Several commenters date of the rule, if finalized, that have one disclosure notice be used, stated that the notice should not be in a coverage start date before January 1, regardless of the year in which the capital letters. A few commenters stated 2019. policy is issued. As previously stated, that the notice should inform consumers The Departments solicited comments the amount of the individual shared that if they choose to purchase short- on this revised notice, and whether its responsibility payment will be $0 for term, limited-duration insurance language or some other language would months beginning January 2019. For following expiration of the policy, they best ensure that it is understandable and short-term, limited-duration policies will be underwritten again, while sufficiently apprises individuals of the covering any months before January another commenter stated that the nature of the coverage. 2019, the Departments believe it is notice should state that, even if the Many commenters generally critical that the disclosure notice inform consumer passes re-underwriting, he supported the approach in the proposed applicants and policyholders that they may not be covered for medical rule that a short-term, limited-duration could be liable for the individual shared conditions that the previous policy insurance policy must include such a responsibility payment, given the covered. A few commenters stated that notice. One commenter stated that the potential financial consequences for not the notice should indicate that notice should not be part of the maintaining MEC during that time. purchasers of short-term, limited- definition of short-term, limited- However, for policies not covering any duration insurance cannot qualify for duration insurance, but should be a such month, not only would such PTCs (although some purchasers of separate requirement that applies once a language be irrelevant, but the qualified health plans sold on the policy satisfies the short-term, limited- Departments believe it could be Exchange can). One commenter stated duration insurance definition. One confusing. The Departments further note that the notice should say that the commenter stated that requiring short- that the language in the two notices is policy ‘‘does not comply,’’ as well as ‘‘is term, limited-duration insurance issuers verbatim with the exception of the final not required to comply,’’ with PPACA to use one of two different notices two sentences (which must not appear requirements. One commenter stated (depending on the year) is burdensome in notices provided with short-term, that the notice should have a CAUTION to issuers and state regulators with limited-duration insurance policies with heading, be in bullet form, be written in respect to filing policies, and suggested a coverage start date on or after January dark-color type, be literacy-tested to a developing one notice that could be 1, 2019). Therefore, the Departments 6th grade reading level, and have the used for all years. A few other believe any burden associated with the MEC language listed first. One commenters also more generally two notices applying to different commenter stated that the notice should supported the use of just one type of periods are outweighed by the benefits appear on the first page of the policy, notice. One commenter stated that of mitigating the potential for consumer rather than be displayed ‘‘prominently.’’ issuers should be permitted to modify confusion that could result from One commenter stated that the

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statement that short-term, limited- provided in additional languages. States eligibility for this coverage, you might have duration insurance may not comply as primary regulators of short-term, to wait until an open enrollment period to get with PPACA and may require additional limited-duration insurance can impose other health insurance coverage. Also, this payment with your taxes should be additional requirements as may be coverage is not ‘‘minimum essential removed. One commenter noted that in necessary to meet local needs. The coverage.’’ If you don’t have minimum addition to PPACA, short-term, limited- Departments disagree with the comment essential coverage for any month in 2018, duration insurance is also exempt from that the notice have a CAUTION you may have to make a payment when you other specific federal laws and that heading, should be in bullet form, file your tax return unless you qualify for an should be included in the notice as should be written in dark-color type, be exemption from the requirement that you well. One other commenter literacy-tested to a 6th grade reading have health coverage for that month. recommended that the notice include a level, and should have the MEC Importantly, the Departments note link to the applicable state-based language listed first. The Departments that we do not have evidence that erm, Exchange website or HealthCare.gov. believe the form of this notice should be limited-duration insurance has not The Departments agree with some of in straight text, which is the same form historically covered or is unlikely to the commenters who suggested of most documents that individuals are cover hospitalization and emergency providing additional specificity in the accustomed to reading. The services. These benefits are included in notice. Therefore, the notice in the final Departments also believe that a the notice, however, due to an rule has been revised to add language to CAUTION heading might abundance of caution. Several make consumers aware of potential inappropriately bias the reader against commenters stated that, in order to meet exclusions or limitations regarding short-term, limited-duration insurance; the definition of short-term, limited- coverage of preexisting conditions or the Departments instead believe the duration insurance, the issuer should be health benefits (such as hospitalization, notice should assist the consumer in required to provide information through emergency services, maternity care, making an informed choice about the other means in addition to the notice. preventive care, prescription drugs, and type of coverage that is most appropriate One commenter stated that, in addition mental health and substance use for him or her. The Departments to the notice, to satisfy the definition of disorder services). The notice in the disagree with the comment that the short-term, limited-duration insurance, final rule also contains new language MEC language should appear first in the issuers should be required to include a informing consumers that the policy notice. Although that language is plain-language explanation of the might have lifetime and/or annual important, the Departments believe general limits of such insurance in the dollar limits on health benefits. The most consumers would find the application, and that the application Departments did not incorporate the language that appears before the MEC should have a signature line indicating other additional language suggested by language in the final notice to be more that the consumer received and other commenters. The Departments significant when deciding whether understood it. Several commenters believe the language added in this final short-term, limited-duration insurance stated that the notice should require the rule provides important new is the most appropriate type of coverage purchaser to initial several discrete information to consumers, without for their personal needs. lengthening the notice to such an extent In addition, the Departments believe statements about the limitations of the that would make it cumbersome to read, the language in the notice in the policy at the time of application. Several or cause consumers to not read it at all. proposed rule stating that ‘‘This commenters stated that the Summary of The Departments are also cognizant of coverage is not required to comply with Benefits and Coverage (SBC) the burdens and costs on issuers that federal requirements for health requirement, as set forth in section 2715 would be associated with a longer insurance’’ could be interpreted too of the PHS Act, should apply to short- notice. However, states may require broadly, as meaning that the issuer of term, limited-duration insurance. One additional language in the notice, such coverage is not required to comply commenter stated that the term ‘‘short- consistent with their authority to with certain other federal requirements term, limited-duration insurance’’ regulate short-term, limited-duration not related to health insurance market should display prominently in the insurance. The Departments also agree rules that apply generally to issuers as footer on every page of the contract, and with the commenters who suggested well as other entities. Therefore, the in any application, sales, and marketing that the notice not be in all capital Departments revise that clause in the materials, and the outline of coverage letters, as the Departments believe the notice in this final rule to read: ‘‘This should include a ‘‘warning’’ that this is notice will be more readable in sentence coverage is not required to comply with temporary coverage that provides case.43 Therefore, the notice in the final certain federal market requirements for limited benefits. Several commenters rule is in sentence case. health insurance.’’ In this final rule, the stated that the statement in the notice Given the varying demographics of disclosure now reads as follows, with should also appear in marketing different states, the Departments the first, second and third sentences materials. One commenter stated that disagree with the comment that this differing from the proposal: the notice should be read out loud to final rule should require the notice to be any prospective purchaser, particularly This coverage is not required to comply those with limited English proficiency. available in several languages. Although with certain federal market requirements for the Departments believe it is important health insurance, principally those contained One commenter stated that, in addition for the disclosure notice to be useful in the Affordable Care Act. Be sure to check to providing the notice, short-term, and informative to individuals who are your policy carefully to make sure you are limited-duration issuers should be most literate in a language other than aware of any exclusions or limitations required to name their policies in such English, the Departments decline in this regarding coverage of preexisting conditions a way as to distinguish them from rule to require that the notice be or health benefits (such as hospitalization, individual health insurance coverage, emergency services, maternity care, maybe by inserting the word ‘‘Limited’’ preventive care, prescription drugs, and 43 See also, for example, Bryan A. Garner, What’s mental health and substance use disorder as part of the name of the policy. Wrong With Initial-Caps Point Headings, https:// Several commenters stated that the bit.ly/2uNHtNL (over use of capital letters may services). Your policy might also have mean that ‘‘readers will probably skip over what lifetime and/or annual dollar limits on health notice should be accompanied by a list you’re trying to make sink in.’’) benefits. If this coverage expires or you lose of network providers.

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The Departments believe that the pre-higher-education institutions). Some such as a minimum range of benefits to requirements relating to both the higher education institutions may be offered equally in rural and urban content and delivery of the notice as set require their students to either purchase areas, basing premiums on statewide forth in this final rule strike the ‘‘student health insurance coverage,’’ or markets, coverage of preexisting appropriate balance to help each a type of coverage other than short-term, conditions and preventive services and consumer make an informed choice limited-duration insurance. network adequacy standards, federal about the type of coverage that is most regulation and oversight of short-term, Short-Term, Limited-Duration Insurance appropriate for him or her, while not limited-duration insurance policies sold and Minimum Essential Coverage being overly burdensome to issuers of through group trusts and associations, short-term, limited-duration insurance A few commenters asked whether, and requirements for websites or inappropriately biasing the reader under the final rule, short-term, limited- marketing both short-term, limited- against short-term, limited-duration duration insurance would be considered duration insurance and individual insurance. The Departments therefore MEC. One commenter suggested that the health insurance coverage. decline to adopt these suggestions by Departments provide a special For purposes of establishing federal commenters. However, as previously enrollment period to purchase standards for short-term, limited- noted, states may specify additional individual health insurance coverage for duration insurance, the Departments methods and forms of disclosure, as individuals who lose short-term, believe that setting the initial contract well as mandate additional disclosure limited-duration insurance coverage term to less than 12 months, a requirements that issuers of short-term, outside of the individual market open maximum duration for a policy limited-duration insurance must comply enrollment period, similar to how (including renewals or extension under with, consistent with their authority to individuals who lose MEC are currently the same insurance contract) of 36 regulate such coverage. Because short- provided a special enrollment period. months, and a notice requirement, as set term, limited-duration insurance is not Short-term, limited-duration forth in this final rule, are the only individual health insurance coverage insurance is not individual health necessary federal standards for short- under the PHS Act, it is not subject to insurance coverage, nor is it MEC. This term, limited-duration insurance. In the SBC requirements established under rule does not recognize short-term, recognition of the states’ important, section 2715 of the PHS Act. limited-duration insurance as MEC. The traditional role in regulating short-term, Finally, the Departments note that to Departments further note that the limited-duration insurance, the the extent an issuer of short-term, reduction of the individual shared Departments decline to adopt any limited-duration insurance provides a responsibility payment to $0 beginning additional federal standards such as contract or application materials in with coverage months after December those suggested by the commenters. As connection with extension or renewal of 31, 2018, mitigates the need to designate discussed elsewhere in this final rule, a short-term, limited-duration policy, short-term, limited-duration insurance states generally remain free to adopt the notice must be displayed as MEC, given that individuals who do these suggested standards, or other prominently in any such materials, just not have MEC during any such coverage standards, as they see fit. as it must be displayed prominently in months, including individuals who In response to the Departments’ the contract and in any materials have short-term, limited-duration solicitation of comments on any provided in connection with enrollment coverage, will not be subject to the regulations or other guidance or policy in such coverage. individual shared responsibility that limits issuers’ flexibility in payment. Additionally, this rule does designing short-term, limited-duration Short-Term, Limited-Duration Insurance insurance or poses barriers to entry into as Student Health Insurance Coverage not create a special enrollment period to enroll in individual health insurance the short-term, limited-duration Some commenters asked whether coverage for individuals whose short- insurance market, a few commenters short-term, limited-duration insurance term, limited-duration insurance has mentioned section 1557 of PPACA as may be sold as ‘‘student health ended. The disclosure notice puts such a limitation. One commenter insurance coverage’’ within the meaning purchasers of short-term, limited- observed that the lack of standardized of HHS regulations. It may not. duration insurance on notice that no regulation of short-term, limited- ‘‘Student health insurance coverage’’ such special enrollment period is duration insurance across state lines is defined in HHS regulations at 45 CFR available. The Departments causes barriers to entry, and suggested 147.145(a), which provides that acknowledge that the loss of eligibility the Departments encourage state ‘‘student health insurance coverage’’ is for short-term, limited-duration insurance departments to participate in a type of individual health insurance insurance creates a special enrollment an interstate compact to create standard coverage. Thus, ‘‘student health opportunity to enroll in a group health regulations that result in one policy insurance coverage’’ under the plan (as opposed to individual health form filing and approval that is effective definition of ‘‘student health insurance insurance coverage), either insured or in many states. coverage’’ must satisfy the PHS Act self-insured.44 Section 1557 of PPACA prohibits requirements for individual health discrimination on the basis of race, insurance coverage, except for those Other Federal and State Requirements color, national origin, sex, age, or specified in 45 CFR 147.145(b). Several commenters were in favor of disability in certain health programs or Accordingly, short-term, limited- imposing various additional federal activities. This provision is duration insurance cannot be ‘‘student requirements on short-term, limited- administered by the HHS Office for health insurance coverage’’ because it is duration insurance that were not Civil Rights, and it is beyond the scope by definition not individual health included in the proposed rule. These of this rule to address the impact of insurance coverage. However, to the included requiring additional training section 1557 of PPACA on short-term, extent permitted by state law, an issuer for agents and brokers who sell such limited-duration insurance. With may sell short-term, limited-duration insurance, minimum federal standards respect to the comment that state insurance to individual students in insurance departments should institutions of higher education (or to 44 See 26 CFR 54.9801–6, 29 CFR 2590.701–6, 45 participate in an interstate compact to individual students in boarding or other CFR 146.117. create standard regulations that result in

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one policy form filing and approval that Some commenters supported the of less than 12 months for the initial is effective in many states, the proposed effective and applicability contract term, with renewals or Departments did not propose and are date, suggesting that the rule should be extensions permitted for a maximum not adopting such federal standards and effective and applicable as soon as duration of up to 36 months under a generally defer to state insurance possible, while others stated that the policy, and with the notice set forth in departments on that issue. rule should be applicable as of January the final rule, is the appropriate federal Effective Date and Applicability Date 1, 2019. Others stated that it should be standard for the reasons stated earlier, applicable January 1, 2020, to allow and must be applicable as soon as The Departments proposed that this issuers time to plan and prepare new possible. Therefore, this final rule rule, if finalized, would be effective 60 plan designs and regulatory filings and provides that the new definition of days after publication of the final rule to allow states the chance to enact any short-term, limited-duration insurance in the Federal Register. With respect to legislation or promulgate regulations applies to insurance policies sold on or the applicability date, the Departments they felt necessary. One commenter after October 2, 2018. This effective and proposed that insurance policies sold on asserted that if the rule were to become applicability date, which is 60 days after or after the 60th day following effective in 2018, it would disrupt the the date this final rule was published in publication of the final rule, if finalized, markets for 2018 and 2019 without the Federal Register, is the effective and would have to meet the definition of providing a fair opportunity for health applicability date that was proposed in short-term, limited-duration insurance insurance issuers of individual market the proposed rule. The Departments in the final rule in order to be plans to adjust their rates to account for realize that some states may wish to considered such insurance. The the potential impact on the individual retain the less-than-3-month duration Departments also proposed that group market risk pool. This commenter also standard that was set forth in the health plans and group health insurance stated that a delayed effective date October 2016 final rule, or some other issuers, to the extent they must would allow states time to educate the standard that is narrower than the distinguish between short-term, limited- public. Some states and the National federal definition but for whom it might duration insurance and individual Association of Insurance Commissioners be difficult to enact legislation, or health insurance coverage, must apply (NAIC) expressed concerns about the promulgate a regulation before the final the definition of short-term, limited- timing of this rule, noting that some rules goes into effect. Thus, the duration insurance in the final rule as states may want to modify existing laws Departments reiterate that included in of the 60th day following publication of and regulations and asked the states’ ability and authority to define the final rule. The current regulations Departments to give such states time to and regulate short-term, limited- specify the applicability date for the review their rules and seek statutory or duration insurance, is the ability and definition of short-term, limited- regulatory changes. These states asked authority to define and regulate such duration insurance at 26 CFR 54.9833– for flexibility in overseeing short-term, coverage in such a way as to impose a 1, 29 CFR 2590.736, 45 CFR 146.125, limited-duration insurance plans shorter (but not longer) maximum initial and 45 CFR 148.102. Therefore, the according to market-specific needs, contract term and a shorter (but not Departments proposed conforming including the ability to postpone or longer) maximum duration for a policy amendments to those rules as part of otherwise delay the effective date to than those included in this final rule. In this rulemaking. The Departments also proposed a review existing state requirements to addition, issuers of short-term, limited- technical update in 26 CFR 54.9833–1, facilitate a smooth transition and duration insurance must comply with 29 CFR 2590.736, and 45 CFR 146.125 educate the public about this coverage the notice requirement in this final rule, to delete the reference to the option. Another commenter asked for an with respect to policies sold on or after applicability date for amendments to 26 effective date that would allow issuers October 2, 2018, with states having CFR 54.9831–1(c)(5)(i)(C), 29 CFR to begin selling short-term, limited- flexibility to require additional 2590.732(c)(5)(i)(C), and 45 CFR duration insurance, as defined in this disclosures. 146.145(c)(5)(i)(C) (regarding final rule, in 2019, stressing the collapse Group health plans, to the extent they supplemental coverage excepted of its individual market. One must distinguish between short-term, benefits).45 Given that the applicability commenter stated that, given that limited-duration insurance and date for the amendments to those individual health insurance issuers have individual health insurance coverage for sections has passed, the Departments set their 2018 rates assuming that short- purposes of the federal requirements explained that it is no longer necessary term, limited-duration insurance is under the PHS Act, may apply the to mention the ‘‘future’’ applicability limited to less than 3 months, a change definition of short-term, limited- date.46 HHS similarly proposed to in the rule at this point would violate duration insurance contained in the amend 45 CFR 148.102 to remove the serious reliance interests. final rule, as of October 2, 2018. The reference to the applicability date for The Departments understand that an Departments believe this approach amendments to 45 CFR 148.220(b)(7) applicability date of 60 days following might substantially reduce burden for (regarding supplemental coverage publication of this final rule might group health plan sponsors, particularly excepted benefits).47 cause challenges for some states and sponsors of large group health plans that issuers as they move to adopt, enforce, operate in multiple states, as the 45 As explained in the proposed rule, the and comply with the final rule. Departments believe it could be reference in current regulations at 45 CFR 146.125 However, as stated elsewhere in this burdensome for sponsors of such plans to the applicability date of 45 CFR to have to familiarize themselves with 146.145(c)(5)(i)(C) was a drafting error. It was final rule, the Departments believe there intended to be a reference to 45 CFR is a critical need to expand access to the definition of short-term, limited- 146.145(b)(5)(i)(C). health coverage choices in addition to duration insurance that applies in each 46 The applicability date for these amendments individual health insurance coverage, state in which the group health plan (policy years and plan years beginning on or after which, as stated above, may not be the operates. However, to the extent an January 1, 2017) remains unchanged. insurance contract is subject to state law 47 The applicability date for these amendments most appropriate or affordable policies (policy years beginning on or after January 1, 2017) for many individuals. The Departments that requires short-term, limited- remains unchanged. believe that a uniform federal standard duration insurance to have a maximum

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initial contract term and/or total Regulation and Controlling Regulatory rule’’ under Executive Order 12866. duration of coverage that is shorter than Costs). Therefore, the Departments have the maximum periods under the provided an assessment of the potential B. Executive Orders 12866 and 13563 definition of short-term, limited costs, benefits, and transfers associated insurance in this final rule, and that Executive Order 12866 (58 FR 51735) with this final rule. In accordance with requires the notice specified in that directs agencies to assess all costs and the provisions of Executive Order definition, a plan or a health insurance benefits of available regulatory 12866, this final rule was reviewed by issuer may, or, if permitted or required alternatives and, if regulation is OMB. by applicable state insurance law, must, necessary, to select regulatory 1. Need for Regulatory Action as applicable, determine whether a approaches that maximize net benefits given insurance contract is individual (including potential economic, This rule contains amendments to the health insurance coverage or is short- environmental, public health and safety definition of short-term, limited- term, limited-duration insurance by effects, distributive impacts, and duration insurance for purposes of the applying that state law to the coverage. equity). Executive Order 13563 (76 FR exclusion from the definition of The Departments received no 3821, January 21, 2011) is supplemental individual health insurance coverage comments on the proposed conforming to and reaffirms the principles, under the PHS Act. This regulatory amendments and technical updates with structures, and definitions governing action is taken in light of Executive respect to the applicability date, and are regulatory review as established in Order 13813 directing the Departments finalizing them in this final rule. Executive Order 12866. to consider proposing regulations or Section 3(f) of Executive Order 12866 revising guidance to expand the III. Economic Impact and Paperwork defines a ‘‘significant regulatory action’’ availability of short-term, limited- Burden as an action that is likely to result in a duration insurance, as well as continued A. Summary rule: (1) Having an annual effect on the feedback from stakeholders expressing economy of $100 million or more in any concerns about the October 2016 final This rule amends the definition of 1 year, or adversely and materially rule. While individuals who qualify for short-term, limited-duration insurance affecting a sector of the economy, PTCs are largely insulated from coverage so that the coverage has a productivity, competition, jobs, the significant premium increases, maximum initial contract term of less environment, public health or safety, or individuals who are not eligible for than 12 months and a maximum state, local or tribal governments or subsidies are harmed by increased duration (including the initial contract communities (also referred to as premiums in the individual market and term and renewals and extensions of the ‘‘economically significant’’); (2) creating the lack of other, more affordable, same insurance contract) of no longer a serious inconsistency or otherwise alternative coverage options. This final than 36 months. The final rule also interfering with an action taken or rule aims to increase insurance options requires a notice be included in the planned by another agency; (3) for individuals unable or unwilling to contract and any application materials materially altering the budgetary purchase available individual market provided in connection with enrollment impacts of entitlement grants, user fees, plans and provide more flexibility to in such coverage. or loan programs or the rights and states to pursue innovative solutions to The Departments have examined the obligations of recipients thereof; or (4) meet their market-specific needs. effects of this rule as required by raising novel legal or policy issues 2. Summary of Impacts Executive Order 13563 (76 FR 3821, arising out of legal mandates, the January 18, 2011, Improving Regulation President’s priorities, or the principles In accordance with OMB Circular and Regulatory Review), Executive set forth in the Executive Order. A–4, Table 1 depicts an accounting Order 12866 (58 FR 51735, September A regulatory impact analysis must be statement summarizing the 30, 1993, Regulatory Planning and prepared for major rules with Departments’ assessment of the benefits, Review), the Regulatory Flexibility Act economically significant effects (for costs, and transfers associated with this (September 19, 1980, Pub. L. 96–354), example, $100 million or more in any 1 regulatory action. The Departments section 1102(b) of the Social Security year), and a ‘‘significant’’ regulatory believe the need for coverage options Act, section 202 of the Unfunded action is subject to review by the Office that are more affordable than individual Mandates Reform Act of 1995 (March of Management and Budget (OMB). The health insurance coverage is critical, 22, 1995, Pub. L. 104–4), Executive Departments anticipate that this combined with the general need for Order 13132 on Federalism (August 4, regulatory action is likely to have more coverage options and choice. 1999), the Congressional Review Act (5 economic impacts of $100 million or Therefore, the Departments believe that U.S.C. 804(2)) and Executive Order more in at least 1 year, and therefore the benefits associated with this rule 13771 (January 30, 2017, Reducing meets the definition of a ‘‘significant 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, poten- tially 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 pre- miums and deductibles for PPACA coverage) from catastrophic health care expenses for consumers purchasing short-term, limited-dura- tion 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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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 re- duced 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 short- term, 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 increasing prior to the issuance of that this rule also offers additional choice to insurance represents a small fraction of rule. In part because under the October persons who would otherwise be the health insurance market. Based on 2016 rule short-term, limited-duration limited to the products offered on their data from the NAIC, in 2016, before the plans may be offered only for periods of local Exchange. By reducing the per- October 2016 final rule became less than three months, fixed month transactions and administrative effective, total premiums earned for administrative costs for issuers, costs on such plans, this rule confers an policies designated short-term, limited- including underwriting, are likely to be economic benefit to its members duration by carriers were approximately high relative to premiums. In addition, because the insurance market passes on $146 million for approximately the transactions costs of obtaining plans some or all of the cost savings as 1,279,500 member months and with are high for consumers, relative to premium savings. This rule also helps approximately 160,600 covered lives at benefits claimed. Allowing plans to be the economic burden of PPACA to be the end of the year. During the same sold for a longer period of time is shared more equitably by shifting some period, total premiums for individual expected to reduce these costs, making of the premium costs to general revenue market (comprehensive major medical) short-term, limited-duration plans more from individual-market customers who coverage were approximately $63.25 attractive for issuers and consumers. are induced to purchase short-term, billion for approximately 175,689,900 Given this and the trend we observed limited-duration plans rather than member months with approximately prior to issuance of the October 2016 Exchange plans. 13.6 million covered lives at the end of rule, the Departments expect more Consumers who purchase short-term, the year.48 One commenter stated, issuers to offer a greater variety of short- limited-duration insurance for longer however, that the actual enrollment in term, limited-duration plans, and more periods than currently permitted will short-term, limited-duration insurance consumers to purchase such plans, as a benefit from increased insurance was close to 500,000 covered lives in result of this rule.51 options at lower premiums, as the average monthly premium for an December 2016, once association based a. Benefits sales were taken into account. Another individual in the fourth quarter of 2016 commenter cited a report 49 stating that This rule will benefit individuals who for a short-term, limited-duration policy enrollment in such coverage may be have been harmed by the increasing was approximately $124 compared to closer to one million. Based on data premiums, deductibles and cost-sharing $393 for an unsubsidized individual from the NAIC, in 2017, total premiums associated with individual market plans market plan—a premium savings of 70 52 earned for policies designated short- and by limited choices. This rule percent. This disparity may be wider empowers consumers to purchase the term, limited-duration by carriers were given that unsubsidized premiums benefits they want and reduce approximately $151 million for significantly increased from 2016 to overinsurance. Short-term, limited- approximately 1,053,082 member 2018. A recent study concluded that the duration insurance is likely to represent months and with approximately 122,483 least expensive short-term, limited- more efficient amounts of coverage covered lives at the end of the year.50 duration insurance policy often costs 20 since it lacks distortionary price While sales of short-term, limited- percent or less of the premium for the controls and regulation that can greatly duration insurance declined after the lowest-cost individual market bronze separate price from value and lead some 53 October 2016 final rule was finalized, plan in the area. While there is a people to overinsure and others to the sales of such coverage were significant difference in the premiums underinsure. for short-term, limited-duration Lengthening the term of short-term, 48 National Association of Insurance limited-duration plans will help reduce 52 Michelle Andrews, ‘‘Sales Of Short-Term Commissioners, ‘‘2016 Accident and Health Policy Insurance Plans Could Surge If Health Law Is Experience Report’’, July 2017. Available at http:// the fraction of the population that is _ uninsured by giving the uninsured a Relaxed’’, NPR, January 31, 2017. Available at www.naic.org/prod serv/AHP-LR-17.pdf. http://www.npr.org/sections/health-shots/2017/01/ 49 Reed Abelson, ‘‘Without Obamacare Mandate, greater variety of plan choices. Similarly 31/512518502/sales-of-short-term-insurance-plans- ‘You Open the Floodgates’ for Skimpy Health could-surge-if-health-law-is-relaxed. Plans’’, the New York Times, November 30, 2017. 51 Other analysts also expect issuers to offer a 53 Karen Pollitz, Michelle Long, Ashley Available at https://www.nytimes.com/2017/11/30/ greater variety of short-term limited-duration plans Semanskee, and Rabah Kamal, ‘‘Understanding health/health-insurance-obamacare-mandate.html. as a result of this rule. See Congressional Budget Short-Term Limited Duration Health Insurance’’, 50 National Association of Insurance Office, ‘‘Federal Subsidies for Health Insurance Kaiser Family Foundation, April 23, 2018. Commissioners, ‘‘2017 Accident and Health Policy Coverage for People Under Age 65: 2018 to 2028,’’ Available at https://www.kff.org/health-reform/ Report’’, July 2018. Available at https://naic.org/ May 23, 2018. Available at http://cbo.gov/ issue-brief/understanding-short-term-limited- prod_serv/AHP-LR-18.pdf. publication/53826. duration-health-insurance/.

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insurance and unsubsidized individual will be reduced relative to premiums as longer than 3 months; it also will market plans, individuals qualifying for issuers will not need to reissue plans provide states with additional flexibility PTCs may not find the difference in every 3 months in order to cover to pursue innovative approaches to premiums as appealing, as the consumers for a year or more. expand access to coverage options in difference in their out-of-pocket In response to the Departments’ addition to individual health insurance premium costs is likely relatively small. request for comments on the benefits of coverage. The final rule increases the A recent study estimated that in 2016 having short-term, limited-duration maximum duration of the initial the consumer portion of the premium, insurance, many commenters stated that contract term, under the federal after the tax credit, for a 40 year old short-term, limited-duration insurance definition, to less than 12 months and non-smoker making $30,000 per year has served a critical role in providing permits such policies to be renewed or ranged from $163 to $206 per month in temporary limited health coverage to extended such that the maximum most of the country.54 However, the individuals who would otherwise go duration of a policy, including the premium cost for a 40 year old non- uninsured. Some commenters also initial contract term specified in the smoker making $30,000, before stated that the proposed changes would contract and renewals and extensions, is accounting for any tax credit, ranged allow potential purchasers of short- no longer than 36 months. from $183 to $719 per month depending term, limited-duration insurance, One commenter asserted that short- on location.55 This rule will provide an especially those who find individual term, limited-duration insurance plans affordable alternative to individuals market plans to be unaffordable, to typically provide coverage for all major who do not qualify for PTCs and have obtain the coverage they want (and benefits such as: Doctor and specialist been harmed by rising premiums in the exclude services they do not want) at a visits, preventive/wellness care, individual market. This final rule will more affordable price for a longer period emergency care, x-rays, lab tests, also benefit individuals who need of time. Other benefits commenters transplants, intensive care, and coverage for longer periods, such as stated would flow from extending the hospitalization. In addition, the those who need more than 3 months to maximum duration for short-term, commenter noted, short-term, limited- find new employment, or who find limited-duration insurance include the duration insurance policies can include available individual market plans to be facts that deductibles will not be reset benefits for mental health disorders, unaffordable. Individuals who purchase every 3 months and that health substance abuse, physical therapy, short-term, limited-duration insurance conditions that develop during this speech therapy, home health care, as opposed to being uninsured will coverage period will continue to be ambulance, and other covered medical potentially experience improved health covered for a longer period of time. expenses. The commenter also claimed outcomes and have greater financial Commenters also stated that increasing that these policies generally provide protection from catastrophic health care the length of coverage would expand coverage for prescription drugs that are expenses. Individuals purchasing short- access to affordable coverage options for administered by a doctor in a setting term, limited-duration policies may those who otherwise would lose covered by the policy and there is obtain broader access to health care coverage and could not pass typically outpatient prescription providers compared to what they would underwriting and would not qualify for coverage for drugs that require a written obtain through individual market plans a special enrollment period because prescription and are necessary to treat a that have narrow provider networks.56 they would not be forced to go without condition covered by the policy. Issuers of short-term, limited-duration coverage until the next open enrollment One commenter stated that a key insurance will benefit from higher period. One commenter cited Bureau of feature of typical short-term, limited- enrollment. They are likely to Labor Statistics data that the average duration insurance is that the plan experience an increase in premium length of unemployment in the United benefits are paid for covered expenses revenues and profits because such States (U.S.) is 24.1 weeks, or about 5.5 incurred from any provider in the U.S. policies can be priced in an actuarially months, as of March 2018; further and there is no referral required if a fair manner (by which the Departments stating that in 20.3 percent of cases the member would like to see a specialist. mean the policies are priced so that the period of unemployment lasts 27 weeks According to the commenter, members premium paid by an individual reflects or more, which means that 6 months is have the added benefit of receiving the risks associated with insuring the often not long enough to secure gainful discounted network rates if they choose particular individual or individuals employment.57 Therefore, limiting the to use an in-network provider. covered by that policy) and issuers have duration of short-term, limited-duration The Departments agree that short- experience pricing in this manner. In insurance policies to 3 months, or even term, limited-duration insurance could addition, the fixed costs of issuing plans 6 months, harms those Americans who be a desirable and affordable option for find themselves unemployed for the many consumers. The Departments are 54 Cynthia Cox, Selena Gonzales, Rabah Kamal, average length of time or longer. therefore finalizing a definition in this Gary Claxton and Larry Levitt, ‘‘Analysis of 2016 The Departments agree with the final rule to remove federal barriers that Premium Changes in the Affordable Care Act’s commenters that increasing the inhibit consumer access to additional, Health Insurance Marketplaces’’, Kaiser Family maximum duration of a short-term, more affordable coverage options while, Foundation, October 26, 2015. Available at https:// www.kff.org/health-reform/fact-sheet/analysis-of- limited-duration insurance policy will at the same time, distinguishing it from 2016-premium-changes-in-the-affordable-care-acts- benefit consumers who have been most individual market health insurance health-insurance-marketplaces/. harmed by PPACA (for example, those coverage. States remain free to regulate 55 Id. who cannot afford or do not want these products as set forth elsewhere in 56 Anna Wilde Mathews, ‘‘Sales of Short-Term individual health insurance coverage) or this final rule. Health Policies Surge: Some consumers opt for limited coverage, saying it is cheaper than who want to purchase such coverage for Some commenters stated that the conventional plans’’, Wall Street Journal, April 10, potential risks of high copayments and 2016. Available at https://www.wsj.com/articles/ 57 The Departments note that the average duration severely limited health coverage sales-of-short-term-health-policies-surge- of unemployment as reported by the Bureau of associated with short-term, limited- 1460328539. The ability of short-term, limited- Labor Statistics is an arithmetic mean based on duration plans to provide broad provider networks observed incomplete spells of unemployment. The duration insurance significantly has been touted by some in the insurance actual average duration of completed spells of outweigh the cost savings from community. unemployment could be longer or shorter. enrollment in such plans. A commenter

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stated that the analysis in the proposed even relatively healthy older will experience an increase in financial rule does not sufficiently explain how individuals to significant premiums, protection and may gain greater access the benefits of expanding short-term, and could also result in individuals to certain health care providers. limited-duration insurance could with preexisting conditions being Moreover, individual market plan possibly outweigh the disruption and denied coverage or charged significantly networks may also be quite restrictive, consumer harm caused by the proposed higher premiums due to their health and short-term, limited-duration plan changes. conditions. networks may very well cover a broader Some commenters stated that some of A few commenters stated that short- array of providers. For most individuals the benefits are mischaracterized; for term, limited-duration insurance plans who switch to short-term, limited- example, people with short-term, should also not be compared with being duration insurance from individual limited-duration insurance don’t have uninsured, rather they should be market plans, lower premiums will broader access to health care providers, compared to individual market plans. provide the biggest benefit. Short-term, when many benefits and health Many commenters stated that the limited-duration insurance may also conditions are entirely excluded from Departments should look at the benefits provide consumers with benefits that short-term, limited-duration plans. to all consumers and not just young and are more tailored to their individual or Commenters suggested that other healthy individuals. familial needs or circumstances. purported benefits of the proposed rule This rule will benefit individuals who Commenters have valid concerns about (such as lower premiums for some have been harmed by the increasing the potential for misleading information healthier people) would be erased by its premiums, deductibles and cost sharing about provider networks, which can harmful impacts (higher premiums in associated with individual market plans also be a concern with individual the individual market as a whole). and limited choices—both in terms of market plans,58 and we generally defer One commenter stated that potential coverage options and in terms of to the states to address such concerns as increases in access to health care and narrowing provider networks. The part of their regulation and oversight of choice are ‘‘illusory’’. The commenter Departments’ judgment is that health insurance. provided an example where an issuer of individuals are in the best position to Many commenters stated that issuers short-term, limited-duration insurance evaluate the tradeoffs between the and brokers will receive higher profits claims not to restrict enrollees to a benefits and costs of various coverage and commissions for these plans, as network, but in reality pays claims up alternatives. This rule empowers issuers have made moves to reduce to a fixed percentage of Medicare consumers to make decisions on the broker commissions for individual reimbursement rates, leaving enrollees benefits they want and reduce the market plans. One commenter responsible for any amounts above that potential for overinsurance and mentioned that according to available threshold. The commenter explained underinsurance while expanding access data from the NAIC, in 2015 the that this essentially is equivalent to to more affordable coverage options. As industry-wide average MLR for ‘‘Short- being enrolled in a PPO plan with an acknowledged previously, short-term, Term Medical’’ was 69.76 percent, with empty network that leaves enrollees limited-duration insurance may not be smaller companies falling below 50 faced with high out-of-pocket expenses the most suitable coverage for everyone. percent MLR for the vast majority of the after receiving care. Individuals who desire comprehensive total market share. The commenter With regard to the claim that short- coverage subject to PPACA rules will stated that health insurance products term, limited-duration insurance can continue to have the option of with an MLR at or below 50 percent offer broader network coverage, a purchasing individual market health raise a red flag because when a majority commenter expressed concerns that the insurance coverage on a guaranteed of the company’s revenue is not spent Departments relied on promotional available and guaranteed renewal basis. on medical services, consumer health material provided by an issuer. Another Also, individuals who receive PTCs becomes a secondary part of its commenter stated that the coverage may generally will not experience an business. have a very limited network of increase in out-of-pocket costs for The Departments acknowledge that providers and may not provide any premiums if they continue to purchase issuers and brokers of short-term, coverage for out-of-network providers, Exchange coverage. However, this final limited-duration insurance will benefit while others stated that the exclusion of rule provides another choice in addition from the changes finalized in this rule services effectively limits the actual to individual health insurance coverage to varying degrees depending on state networks by excluding providers, and for consumers to consider, based on regulations of short-term, limited- this could particularly affect rural areas. their own personal circumstances and duration insurance. Short-term, limited One commenter stated that while needs. In many cases, short-term, duration insurance is not subject to the premiums for short-term, limited- limited-duration insurance will provide federal MLR standards under section duration insurance policies will likely a more desirable option for individuals, 2718 of the PHS Act and this final rule be lower relative to individual market especially those who would otherwise does not establish a federal MLR plans, using premiums as the sole be uninsured, those not eligible for threshold for short-term, limited- measure of a benefit to consumers PTCs, those who have lost their duration insurance. There is also a large provides an incomplete analysis. This employment and are unable to afford variation in the reported MLR for short- commenter noted that short-term, individual market coverage, and those term, limited-duration insurance. limited-duration insurance policies fail with objections to purchasing coverage Average MLR for short-term, limited- to provide comprehensive coverage and of certain services or products that are duration coverage was approximately 67 thus expose consumers who have a mandated to be covered by PPACA. In percent in 2016.59 For the top 10 issuers serious medical condition, such as that regard, the Departments believe it is cancer, to significant out-of-pocket appropriate to compare having short- 58 Chad Terhune, ‘‘Top insurers overstated doctor costs. The commenter also suggested term, limited-duration insurance to both networks, California regulators charge’’, Los that the analysis fails to take into being uninsured as well as having Angeles Times, November 18, 2014. Available at http://www.latimes.com/business/la-fi-obamacare- account that due to underwriting, individual health insurance coverage. network-probe-20141119-story.html. premiums for short-term, limited- Uninsured individuals who purchase 59 National Association of Insurance duration insurance policies can expose short-term, limited-duration insurance Commissioners, ‘‘2016 Accident and Health Policy

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that accounted for almost 94 percent of they are able to enroll in individual have the flexibility to mandate the the national short-term, limited- market plans that will provide coverage disclosure of additional information. duration insurance market their MLRs for such conditions. This will help inform consumers about ranged from 47.46 percent to 219.61 Since short-term, limited-duration the limitations of short-term, limited- percent in 2016.60 MLR may be of insurance is not MEC, any individual duration insurance and their choice of limited utility in evaluating the enrolled in short-term, limited-duration the coverage that best suit their needs. efficiency of insurance coverage and coverage that lasts 3 months or longer in The notice language in the final rule may result in higher medical costs and 2018 will potentially incur a tax liability provides more detail on the potential premiums, less innovation in plan for not having MEC during that year. limitations of short-term, limited- design, less consumer choice, and Starting in 2019, the individual shared duration insurance coverage than what increased market concentration.61 As responsibility payment included in was in the proposed rule to support previously mentioned, the majority of section 5000A of the Code is reduced to informed coverage purchasing decisions short-term, limited-duration insurance $0, as provided under Public Law 115– by consumers, while those who are policies were sold as transitional 97, and thus no tax liability could concerned about potential excessive coverage in 2016, and the duration of accrue in that year and thereafter for not out-of-pocket costs will continue to such policies typically was less than 3 having MEC. However, the tax liability have the option to purchase individual months. Increased administrative costs is not the sole consequence of not market coverage that includes PPACA due to underwriting and the short having MEC. Because short-term, requirements. duration may also explain the lower-end limited-duration insurance does not Many commenters noted that short- reported MLRs for short-term, limited- qualify as MEC, those individuals who term, limited-duration insurance often duration insurance policies in 2016. As lose coverage in these plans may not lacks consumer safeguards, generally the short-term, limited-duration qualify for a special enrollment period excludes coverage for preexisting insurance market grows, the in the individual market and may face conditions, does not provide coverage Departments anticipate that in the long a period of time in which they have no for essential health benefits, often term more issuers will sell such medical coverage, and this will continue applies high deductibles and cost- coverage, increasing competition and to be the case even after 2018. sharing requirements, has lifetime and limiting excessive profits. Purchasing a renewal guarantee, annual dollar caps on reimbursement however, may eliminate the need for a for medical expenses, has no maximum b. Costs and Transfers special enrollment period. limits on out-of-pocket costs, may be Short-term, limited-duration The Departments requested and rescinded, and is generally available insurance policies are unlikely to received many comments on the only for healthy consumers. As a result, include all the requirements applicable potential costs of the proposed changes. consumers who purchase short-term, to individual market plans, such as the Many commenters pointed out the limited-duration insurance can preexisting condition exclusion possible negative impacts and costs experience significant financial prohibition, coverage of essential health associated with the proposed changes, hardship, especially if they require benefits without annual or lifetime especially the effect on consumers’ out- access to health care services not dollar limits, preventive care, maternity of-pocket costs. Many commenters covered by their plan. These and prescription drug coverage, rating stated that consumers considering commenters noted that this is restrictions, and guaranteed purchasing short-term, limited-duration particularly problematic for people who renewability. Therefore, consumers who insurance policies are unlikely to know have chronic or life-threatening switch to such policies from individual the limitations of the policies and the conditions that require costly treatment, market plans will experience loss of non-applicability of the numerous close monitoring and ongoing third-party payments for some services PPACA consumer protections to these medication. and providers and potentially an policies. Many commenters also stated Commenters also stated that the increase in out-of-pocket expenditures that the comprehensiveness of items potential risks of unreasonable related to such excluded services, as and services covered by short-term, copayments and severely limited health well as an exclusion of benefits that in limited-duration insurance coverage can coverage associated with short-term, many cases consumers do not believe be misleading; individuals who are limited-duration insurance significantly are worth their cost (which could be one expected to need expensive services outweigh the cost savings from reason why many consumers, possibly because of preexisting conditions would enrollment in such plans. For example, even those receiving subsidies for likely either have services for those according to one commenter, out-of- Exchange plans, may switch to short- conditions excluded from coverage or be pocket costs for short-term, limited- term, limited-duration policies rather denied coverage altogether. Thus, duration insurance policies may be than remain in individual market consumer expectations for short-term, excessive in many markets: In Phoenix, plans). Depending on state regulation, limited-duration insurance policies may AZ, the out-of-pocket cost-sharing limit issuer plan design, and whether be significantly different from the for a 40-year-old male can be as high as consumers decline to purchase a realities of these policies. Commenters $30,000 for a 3-month period. While separate renewal guarantee product, are concerned that the differences another commenter pointed out that in consumers who purchase short-term, between short-term, limited-duration Georgia, a plan had a 3-month out-of- limited-duration insurance policies and insurance policies and plans offered in pocket limit of $10,000, but did not then develop chronic conditions may individual and group markets may not include the deductible of $10,000, face financial hardship as a result, until be clear to consumers. As a result they resulting in an effective 3-month out-of- may be exposed to excessive out-of- pocket maximum of $20,000. Experience Report’’, July 2017. Available at http:// pocket costs. Some commenters are concerned www.naic.org/prod_serv/AHP-LR-17.pdf. This final rule requires issuers to about the lack of network adequacy 60 Id. provide a notice in application materials requirements for short-term, limited- 61 Scott E. Harrington, ‘‘Medical Loss Ratio Regulation under the Affordable Care Act’’, Inquiry, and the contract to alert consumers to duration insurance. One commenter 2013. Available at https://www.jstor.org/stable/ the potential limitations of short-term, expressed concern that misleading 23480894. limited-duration insurance. States also claims related to provider networks

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could result in consumers purchasing Healthcare.gov in 2017,62 while the provide a notice to alert consumers to plans later finding that the provider average monthly premium for the the potential limitations of the coverage. networks may be non-existent in their second-lowest cost silver plan for a 27- The Departments’ judgment is that specific market, as short-term, limited- year-old increased by 37 percent from individuals are in the best position to duration plans are not subject to the 2017 to 2018.63 Individual market plans evaluate the tradeoffs between lower network adequacy protections, leading will continue to be available to premiums and limitations of short-term, to higher out-of-pocket costs. individual consumers on a guaranteed limited-duration insurance. This rule Many commenters stated that these availability basis and many individuals empowers consumers to make decisions policies could subject patients to will have the opportunity to purchase on the benefits they want and to reduce catastrophic medical bills and medical the type of coverage that is most potential overinsurance and bankruptcy. For example, short-term, desirable and suitable for them and their underinsurance. As discussed below, limited-duration insurance enrollees families’ health care and budget needs, rather than increase the number of suffering acute health emergencies, unless states take actions to restrict the individuals who are uninsured the total debilitating injuries that lead to short-term, limited-duration market. number of individuals purchasing either permanent disabilities, or the onset of Also, individuals who receive PTCs individual market or short-term, chronic conditions could end up facing generally will not experience an limited-duration insurance coverage is increase in out-of-pocket costs for financial hardship until they can enroll expected to increase, perhaps premiums. However, consumer in an individual (or group) market plan significantly. Uninsured individuals expectations for individual market plans that provides the coverage they need. who purchase short-term, limited- Many commenters shared their past have often not been met due to high deductibles,64 and short-term, limited- duration insurance will experience an experience with short-term, limited- increase in financial protection and duration insurance (as well as pre- duration insurance provides an additional choice for individuals to potentially an increase in access to PPACA individual market coverage) and health care. As previously mentioned, provided numerous examples of how consider, based on their own personal individual market plan networks may annual and lifetime dollar limits circumstances. In addition to also be quite restrictive, and short-term, resulted in consumers being left dramatically higher premiums, high out- limited-duration plan networks may responsible for large medical bills and of-pocket costs have harmed many very well cover a broader or superior set high out-of-pocket costs and concluded individual market plan enrollees, with of providers. State regulators have also that short-term, limited-duration deductibles that average nearly $6,000 a taken compliance action against insurance is not really an affordable year for bronze single coverage and misleading claims regarding benefits alternative to available individual more than $12,000 a year for bronze and provider networks, which should market plans. Many commenters stated family coverage in 2018 as well as more act as a disincentive to such practices. that the proposed changes would reduce than $4,000 a year for silver single In response to the concern raised access to maternity care, treatment for coverage and more than $8,000 a year illnesses such as cancer, cystic fibrosis, for silver family coverage in 2018.65 In regarding bankruptcy, the rule makes multiple sclerosis, arthritis, eating addition, out-of-pocket maximums for clear that individuals are free to disorders, visions and hearing loss and individual market plans are only purchase separate products that may mental health and substance use applicable to in-network care and thus provide protection against the disorders. Many commenters shared actual out-of-pocket costs may be much possibility of getting sick in the future personal stories of struggles with higher for individuals who need to and facing higher premiums as a result. illnesses such as cancer and the obtain care out of network. High A few commenters also mentioned the financial and emotional toll of such deductibles may also be a deterrent to potential increase in uncompensated illnesses. These commenters expressed obtaining care for some individuals. In care and the financial burdens that the deep fears that as a result of this rule, some cases, short-term, limited-duration increased use of short-term, limited- they would lose coverage because insurance will provide a more desirable duration insurance could place on issuers would stop offering individual option for individuals and may be the hospitals. Commenters stated that the market plans or because those plans only affordable alternative to being proposed changes could have a would become too expensive. These uninsured. To help consumers make devastating impact on hospital commenters expressed fear of becoming informed coverage decisions, issuers of emergency rooms, since they are bankrupt and losing their lives because short-term, limited-duration insurance required to provide care regardless of of reduced access to the necessary are required under this final rule to coverage status or one’s ability to pay. health care. If more consumers enroll in short-term, Commenters expressed concern that 62 ASPE ‘‘Data Point—Individual Market limited-duration policies that do not Premium Changes: 2013–2017’’, May 23, 2017. this would reverse the health coverage Available at https://aspe.hhs.gov/system/files/pdf/ cover treatments received in emergency gains over the last few years, especially 256751/IndividualMarketPremiumChanges.pdf. departments, it will result in an increase in minority communities and amongst 63 ASPE ‘‘Health Plan Choice and Premiums in in uncompensated care. In addition, the women. One commenter stated that the the 2018 Federal Health Insurance Exchange’’, lack of coverage of essential health October 30, 2017. Available at https://aspe.hhs.gov/ design of short-term, limited-duration pdf-report/health-plan-choice-and-premiums-2018- benefits may also lead to an increased insurance in the proposed rule will federal-health-insurance-exchange. reliance on emergency departments as discourage the pursuit of preventive 64 Robert Pear, ‘‘Many Say High Deductibles Make consumers delay or do not seek primary services, so the public health will suffer. Their Health Law Insurance All but Useless’’, The care, exacerbating existing acute and This rule will benefit individuals who New York Times, November 14, 2015. Available at https://www.nytimes.com/2015/11/15/us/politics/ chronic conditions. One commenter have been harmed by the increasing many-say-high-deductibles-make-their-health-law- stated that this may also lead to premiums, deductibles, and cost-sharing insurance-all-but-useless.html. increased boarding of mental health associated with individual market plans 65 HealthPocket, ‘‘Average Market Premiums patients in emergency departments, and by limited choices. Individual Spike Across Obamacare Plans in 2018’’, October where mental health patients presenting 27, 2017. Available at https:// market premiums increased 105 percent www.healthpocket.com/healthcare-research/ to an emergency department have an from 2013 to 2017, in the 39 states using infostat/2018-obamacare-premiums-deductibles. average stay of 18 hours, compared to an

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average of only four hours for all student health and wellness ERISA—Association Health Plans’’,69 emergency department patients. departments. issued by the Department of Labor, will The Departments acknowledge that if The Departments believe that all increase access to other alternative, less a short-term, limited-duration insurance consumers, including but not limited to expensive options for small businesses policy excludes treatment in hospital students, should have access to and solo entrepreneurs. Moreover, many emergency rooms, there is the additional, more affordable coverage small business employees and solo possibility that there could be increases options. In fact, these policies may entrepreneurs stand to benefit from this in uncompensated care provided by significantly benefit students since rule. States also maintain flexibility hospitals. However, the Departments premiums for the young have risen most under this final rule to pursue have no reason to believe that all short- dramatically as a result of PPACA. innovative strategies to strengthen and term, limited-duration insurance However, since most educational protect their respective risk pools. policies will exclude such coverage. The institutions require students to obtain Some commenters stated that these Departments note that individuals insurance through individual market changes could result in counties with no enrolled in individual market plans also plans or group coverage and often Exchange plans available, otherwise frequently experience unexpected high provide relatively inexpensive options known as bare counties. Many out-of-pocket costs due to balance to students, the Departments believe commenters stated that these changes billing (charges arising when an insured that losses to this insurance pool will be would increase the number of individual receives care from an out-of- limited. As previously stated, the uninsured. network provider, the balance bill being Departments believe that the notice, The Departments acknowledge that the difference between the total charges provided at the time of application and due to the potential increase in risk incurred and what the issuer ultimately in the contract with the language segmentation, in which healthier pays), when obtaining care at emergency specified in this final rule, will help individuals choose products outside the departments and when treating consumers understand what they are individual market may result in an providers are not part of in-network purchasing. Consumers may also be able individual market risk pool with higher hospitals.66 Very few states have laws to obtain additional guidance and medical expenses, it is possible that that protect consumers from this assistance from brokers and agents as fewer issuers may offer plans in the practice; 15 states offer limited balance well as additional plan documents in individual market. However, the impact billing protections, while only six order to understand the products they on issuer participation in the individual provide comprehensive balance billing seek to purchase. The Departments market will vary depending on a protections for consumers.67 In generally defer to the states’ authority number of different factors, such as the addition, for people who would over agents and brokers licensed in their unique demographic and other otherwise have been uninsured and now respective jurisdictions, including characteristics of a state’s population, purchase short-term, limited-duration taking appropriate action in response to regulatory environment and insurance insurance, the final rule will likely unfair or deceptive practices, which markets. Further, as a result of silver result in a decrease in uncompensated should act as a disincentive to such loading 70 and dramatically higher care. The Departments have no evidence practices. premiums as well as pricing power from that this rule will lead to increased Some commenters stated that the markets with limited competition from emergency department boarding times proposed changes would be harmful for other issuers, issuers have begun to turn for mental health patients in emergency solo entrepreneurs and small business a profit in the individual market and departments. employees by raising rates for some issuers are looking to enter the A few commenters stated that short- individuals dependent on the individual market. Further, many term, limited-duration insurance individual market Exchanges, which is enrollees already had access to just one coverage also poses a threat to the where many small business employees issuer for Exchange coverage. In student health insurance market. and solo entrepreneurs purchase health addition, as discussed below, it is Students may buy the cheaper, short- coverage. These commenters asserted expected that the total number of term, limited-duration insurance that in order for employees of small individuals with some type of health erroneously thinking that it is businesses to be able to receive insurance coverage will increase, comprehensive coverage. Commenters affordable coverage, individual market perhaps significantly. believe that losses to this insurance pool risk pools must be robust and well In response to the request for would result in increased premiums for balanced. comments on the value of excluded student health coverage for those The Departments acknowledge that services to individuals who switch from students that choose or need to stay on the changes finalized in this rule may individual market coverage to short- their campus student health insurance lead to a small increase in premiums for term, limited-duration coverage, one plan and this could also place individual market plans and possibly a commenter expressed concern about the considerable stress on the institutions’ reduction in net premiums for Exchange suggestion that consumers would be plans. The CMS Office of the Actuary willing to switch from individual 66 Karen Pollitz, ‘‘Surprise Medical Bills’’, Kaiser (OACT) estimated that the average net market plans that provide more robust Family Foundation, March 17, 2016. Available at premium paid by Exchange enrollees is coverage to short-term, limited-duration https://www.kff.org/private-insurance/issue-brief/ surprise-medical-bills/. expected to decline by 14 percent as a insurance policies that provide less 68 67 Kevin Lucia, Jack Hoadley, and Ashley result of the rule. The Departments generous coverage because consumers Williams, ‘‘Balance Billing by Health Care note, however, that other regulations, do not believe the more generous Providers: Assessing Consumer Protections Across such as this rule and the recently benefits are worth the cost. The States’ ’’, The Commonwealth Fund, June 13, 2017. finalized rule titled ‘‘Definition of commenter stated that the Departments Available at: https://www.commonwealthfund.org/ publications/issue-briefs/2017/jun/balance-billing- ‘‘Employer’’ under Section 3(5) of health-care-providers-assessing-consumer and Berta 69 83 FR 28912. Alicia Bustamante, ‘‘Most States Still Don’t Have 68 The net premium reduction is a result of 70 Silver loading refers to issuers including the Comprehensive Balance Billing Legislation’’, unsubsidized and less-subsidized enrollees exiting entire cost of un-funded cost sharing reduction insideARM, October 3, 2017. Available at: https:// the market, leaving the remaining population (CSR) payments on silver metal tier plans which www.insidearm.com/news/00043325-most-states- receiving more premium tax credit, on average. Net offer CSR plan variants, rather than spread the cost still-dont-have-comprehensive/. premiums for individual enrollees do not fall. over all metal tier plans.

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have not offered any evidence to risk across larger, more diverse could reduce Exchange premiums and support such a suggestion and the populations. One commenter stated that spending—as at least one commenter commenter stated that recent polling the proposals would worsen the pointed out. If the individual market indicates the opposite. The commenter inequality between the low and deteriorates because of people choosing referred to a poll 71 where 84 percent of moderate income populations in the other types of coverage, individual respondents in the individual market individual insurance market. market issuers could experience higher stated that they would prefer to stay This rule makes no changes to the than expected costs of care and suffer with their current plan rather than federal individual market requirements. financial losses, which might prompt enroll in short-term, limited-duration The Departments acknowledge that them to leave the individual market. insurance coverage, when asked if they individuals will be able to continue to Although choices of plans available in would like to enroll in coverage that purchase and renew individual market the individual market have already been was less generous but with a lower plans, instead of switching to short- reduced to plans from a single issuer in premium. The commenter was also term, limited-duration insurance. Of roughly half of all counties, this final concerned that consumers, when faced note, the turbulence of the first several rule may further reduce choices for with cost concerns, new plan choices, years of the Exchanges with persistent individuals remaining in those non-transparent plan information, and a issuer exit resulted in many individuals individual market single risk pools. confusing enrollment process will not being unable to renew their individual However, as a result of silver loading be able to tell whether they are enrolling market plans. Under this final rule, and the tightening of special enrollment in a comprehensive plan or not—and individuals who prefer less expensive periods, some issuers, aware of the consequently will end up with far less coverage, or those that do not qualify for Association Health Plan rule and the coverage than they thought they had. PTCs or otherwise find individual short-term, limited-duration insurance Many commenters stated that the market coverage unattractive, will proposals, have indicated they will negative consequences of short-term, generally have greater flexibility to expand their presence in the individual limited-duration insurance are not purchase short-term, limited-duration market next year. limited to individuals with preexisting insurance and obtain coverage for conditions; even healthy individuals services they want and exclude services Impact on Individual Market Risk Pool may be harmed by choosing cheaper, they determine they do not need. The This final rule allows short-term, skimpier coverage. If individuals are Departments believe that individuals limited-duration insurance policies to unable to receive or pay for care solely reveal their preferences with their be renewed or extended such that the on the basis of having a less actions and consumers who switch to maximum duration of a policy, comprehensive health plan, they may short-term, limited-duration insurance including the initial term specified in put off needed care, and may lose the from individual market plans will do so the contract and renewals or extensions ability to have cost-effective choice over because they do not value the under the same insurance contract, is no their health care decisions. Many individual market coverage at the cost. longer than 36 months. Depending on commenters also stated that enrollees in In addition, allowing people to purchase state rating requirements, issuers of short-term, limited-duration insurance what they view as an efficient amount such coverage may be able to introduce will face financial hardship if they have of coverage leads to less third-party new plans every year at low rates that an accident or become sick and find out payments, and third-party payments can only healthy individuals would be able that these policies do not cover benefits drive up health care spending as to purchase, while imposing large such as prescription drugs or some consumers and producers are renewal rate increases for less healthy surgeries and that the policies can deny insensitive to price when third-party enrollees in existing plans. This could claims that should have been covered or payers are paying the bill. Consumers lead to further worsening of the risk that the enrollees were lead to believe can use their savings from lower pool by keeping healthy individuals out were covered. premiums toward buying health care of the individual market for longer One commenter stated that services when they are active, informed periods of time, increasing premiums individuals who want the services that consumers, looking for the best possible for individual market plans and may are excluded in short-term, limited- deals. cause an increase in the number of duration insurance have the choice to Because short-term, limited-duration individuals who are uninsured. buy individual market plans. If they insurance policies can, subject to state Previous academic research on the pre- cannot afford those policies, however, law, be priced in an actuarially fair PPACA individual market suggests this the commenter stated that they would manner (by which the Departments is unlikely to happen, however, as not be able to get the excluded services mean that is the policies are priced so premium increases generally reflect the in the first instance. that the premium paid by an individual entire pool’s experience with less One commenter suggested that the reflects the risks associated with healthy individuals effectively proposed changes fail to address (and insuring the particular individual or subsidized by healthier individuals will likely exacerbate) the most critical individuals covered by that policy) through market forces.72 This impact needs in the health care and health individuals who purchase such may be further mitigated by the degree insurance markets to put downward coverage are likely to be relatively that individuals purchase separate pressure on the rapidly rising costs of young or relatively healthy. Allowing renewal guarantee products which may health care in the U.S. and to spread such individuals to purchase a policy provide another mechanism for that does not comply with PPACA, but consumers to continue coverage under 71 Kaiser Family Foundation. Poll: ‘‘Survey of the with an initial contract term of less than separate short-term, limited-duration Non-Group Market Finds Most Say the Individual 12-months with renewals or extensions Mandate Was Not a Major Reason They Got Coverage in 2018, And Most Plan to Continue up to maximum duration of 36 months, 72 Michael F. Cannon, ‘‘Short-Term Plans Would Buying Insurance Despite Recent Repeal of the may weaken states’ individual market Increase Coverage, Protect Conscience Rights & Mandate Penalty’’, April 3, 2018. Available at single risk pools. The degree to which Improve ObamaCare Risk Pools’’, Cato Institute, https://www.kff.org/health-reform/press-release/ individuals purchase separate renewal July 2, 2018. Available at https://www.cato.org/ poll-most-non-group-enrollees-plan-to-buy- blog/short-term-plans-reducing-uninsured- insurance-despite-repeal-of-individual-mandate- guarantee products will serve to protecting-conscience-rights-improving- penalty/. strengthen individual market pools and obamacares-risk.

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insurance policies for a longer period of Many commenters stated that the duration insurance and then find the time.73 combination of increased availability of insurance inadequate for a health Further, as detailed elsewhere in this short-term, limited-duration insurance problem that occurs during the term of rule, the Departments are finalizing a and the reduction of the individual this insurance will switch to more notice requirement to inform consumers shared responsibility payment to $0, in adequate coverage in the individual about the limitations of short-term, conjunction with the proposed market. The commenter noted that the limited-duration insurance to help Association Health Plan rule,74 could proposed rule fundamentally conceded individuals make informed coverage exacerbate adverse selection in the that it will adversely affect the purchasing decisions that best suits individual market. One commenter individual market that is a last resort for their needs—whether that is stated that premium and cost-sharing those with serious health issues at the comprehensive individual market subsidies are available only for same time ‘‘the agencies tout the fail coverage or short-term, limited-duration individual market plans sold on safe function of those markets’’. insurance. This notice will also assist Exchanges, providing incentives for Some commenters gave examples consumers of short-term, limited- healthy lower-income individuals to where state policies allowing duration insurance in further remain in such plans and therefore segmentation of the risk pool has led to understanding the products being limiting the deterioration of the higher premiums and problems with offered and can be used to combat individual market risk pool. Individuals issuer participation. These commenters misleading marketing and aggressive eligible for premium subsidies would mentioned continuation of transitional sales tactics that some brokers, agents, generally be shielded from the premium plans in Iowa, Nebraska, North Carolina or issuers may employ as a result of increases as federal premium subsidies and large enrollment numbers in the potentially higher profits and would increase. For unsubsidized Tennessee Farm Bureau as examples. A commissions for short-term, limited- individuals who are healthy, higher commenter noted that in 2016, the duration insurance. premiums for individual market plans average plan liability risk scores for In response to the request for would increase the attractiveness of PPACA-compliant individual market comments on any impacts on PPACA lower-premium short-term, limited- plans in states that allowed the sale of individual market single risk pools, duration insurance. transitional plans were 12.3 percent some commenters who supported the A few commenters stated that these higher than risk scores for PPACA- proposed rule expressed confidence that effects on the individual market risk compliant individual market plans in the rule would not adversely impact the pool could be limited in states that states that prohibited transitional single risk pools. One commenter stated implement additional regulations policies. that the short-term, limited-duration limiting the length and availability of The Departments acknowledge that insurance market has been in existence short-term, limited-duration policies or relatively young, relatively healthy for over three decades and was not requiring that they meet rules governing individuals in the middle-class and accused in the pre-PPACA market of individual market plans. upper middle-class whose income being a destabilizing influence. One commenter stated that if short- disqualifies them from obtaining PTCs According to the commenter, the term, limited-duration issuers are are more likely to purchase short-term, market’s modest size, which they allowed to increase premiums at limited-duration insurance. As people estimated to be between 650,000 and renewal based on an individual’s health choose these plans rather than 850,000 enrollees before the October conditions, individuals with new individual market coverage, this could 2016 final rule became effective, conditions will receive higher rate lead to adverse selection and the represents a niche within the broader increases than enrollees without new worsening of the individual market risk private health insurance market. conditions. The commenter further pool. As discussed below, the Many commenters, however, Departments estimate that the expressed concern that extending the stated that if there are no limits on the proportion of healthier individuals in maximum duration of short-term, allowable rate increases, premiums for the individual market Exchanges will limited-duration coverage would some individuals could exceed those in decrease and by 2028 premiums for weaken the single risk pools and the individual market. In such a case, unsubsidized enrollees in the Exchanges destabilize the individual market by the enrollee may move back to the will increase by 5 percent. The syphoning young, healthy individuals to individual market risk pool, increasing Congressional Budget Office (CBO) the short-term, limited-duration the health care costs of the pool. insurance market, leaving only those Many commenters stated that a key projects only a 2 percent to 3 percent with higher expected health costs and element of any healthy, sustainable impact on premiums in the small group those receiving subsidies in the insurance market is that a broad pool of and individual markets from the individual market. Commenters enrollees share in the spreading of risk. combined Association Health Plan and suggested that the resulting market The effect of the proposed rule would be short-term, limited-duration insurance segmentation and adverse selection to undercut the individual market risk rules, even while projecting more pool as more individuals leave their people will exit the individual market would increase premiums for individual 75 market plans and may decrease the current health plans and purchase short- for these alternatives. Compared to number of plans available as issuers exit term, limited-duration insurance. This CBO, the OACT analysis thereby the individual market, potentially would further destabilize an already represents a more conservative analysis. leading to ‘‘bare counties’’. Commenters difficult market for individual and However, premium and cost-sharing also suggested that this would transform family coverage. subsidies are available only for individual markets into high risk pools One commenter suggested the individual market plans offered on and would create a parallel insurance proposed rule assumed that consumers Exchanges, which makes it likely that market, undercutting the who purchase short-term, limited- healthy lower-income individuals will comprehensive, major medical policies 74 The proposed rule, published in the Federal 75 Congressional Budget Office, ‘‘Federal offered to individuals and families. Register on January 5, 2018 (83 FR 614) was Subsidies for Health Insurance Coverage for People subsequently finalized and published in the Under Age 65: 2018 to 2028,’’ May 23, 2018. 73 Id. Federal Register on July 12, 2018 (83 FR 28912). Available at http://cbo.gov/publication/53826.

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remain in individual market plans even Impact Estimates updated estimate are the same as those if they place a relatively low value on The economic impact analysis in the used in OACT’s previous health reform 80 this coverage because the individual proposed rule provided that because modelling. The updated estimate subsidized premium is so low, limiting short-term, limited-duration insurance includes the policy to allow the extent of adverse selection. To the can, subject to state law, be priced in an renewability up to 36 months. This extent that individuals purchase actuarially fair manner (by which the policy was estimated to have a separate renewal guarantee products, Departments meant that it is priced so negligible impact. In addition, and continue to use short-term, limited- that the premium paid by an individual consideration was given to some states duration insurance, they very well may reflects the risks associated with taking action to prohibit or limit the sale not return to the individual market risk insuring the particular individual or of short-term, limited-duration pool if they get sick. This will limit the individuals covered by that policy) insurance policies. The original estimate adverse effect on the individual market individuals who are likely to purchase also assumed a 4-year transition to short-term, limited-duration insurance risk pool. In addition, as discussed short-term, limited-duration insurance policies with roughly two-thirds of the below, the total number of individuals are likely to obtain a better value than they receive from individual health impact occurring in 2019, while the new with coverage (including short-term, estimate assumes a 3-year transition limited-duration insurance) is expected insurance coverage. The economic impact analysis of the proposed rule with one-third of the impact occurring to increase. The impact on individual also provided that allowing individuals in 2019. states’ single risk pools will vary greater choice of policies that do not Using these updated assumptions depending on state regulations, the comply with all of the PPACA market yields an estimate that 2019 enrollment current state of the individual market, requirements would impact the in short-term, limited-duration and the unique demographic and other individual market single risk pools. The insurance will increase by 600,000. characteristics of a state’s population Departments 77 estimated that in 2019, Exchange enrollment in 2019 is and insurance markets. between 100,000 and 200,000 expected to decrease by 200,000, while The Departments anticipate that most individuals previously enrolled in enrollment in off-Exchange plans is of the individuals who switch from individual market coverage would expected to decrease by 300,000. The individual market plans to short-term, purchase short-term, limited-duration remaining 100,000 increase in short- limited-duration insurance will be insurance policies instead. The term, limited-duration enrollment is relatively young or relatively healthy Departments estimated that this would largely accounted for by new consumers and have an annual income—about cause the average monthly individual who were previously uninsured. By $48,000 for a single household and market premiums and average monthly 2028, enrollment in individual market $98,000 for a family-of-four—that makes PTCs to increase, leading to an increase plans is projected to decrease by 1.3 them ineligible to receive PTCs. If the in total annual advance payments of the million, while enrollment in short-term, 78 limited-duration insurance will increase individual market single risk pools PTC in the range of $96 million to by 1.4 million. The net result will be an change, the change will result in an $168 million in 2019. Other entities project greater enrollment and have increase in the total number of people increase in gross premiums for the different views on whether or not this with some type of coverage by 0.1 individuals remaining in those risk increases the deficit. The Departments million in 2020 and by 0.2 million by pools. An increase in premiums for also noted that enrollment in short-term, 2028. Premiums for unsubsidized individual market single risk pool limited-duration insurance and the enrollees in the Exchanges are expected coverage is expected to result in an resulting reductions in individual to increase by 1 percent in 2019 and by increase in federal outlays for PTCs. market enrollment and increases in 5 percent in 2028. Individuals who However, individuals who receive PTCs individual market premiums in future choose to purchase short-term, limited- will be largely insulated from these years are uncertain. duration insurance are expected to pay increases in premiums because a OACT performed an analysis of the a premium that is approximately half of consumer’s PTC amount generally financial effects of the proposed rule on the average unsubsidized premium in increases as the price of the relevant April 6, 2018.79 An updated estimate the Exchange. Since individual market benchmark plan increases. As discussed has been performed by OACT where the plan premiums are expected to increase above, OACT’s analysis projects that net baseline was updated to the President’s the study estimates that PTCs will premiums in PPACA-compliant markets Fiscal Year 2019 Mid-Session Review. increase by $0.2 billion in 2019 and by will decline.76 As stated in the April 6th estimate, the a net total of $28.2 billion for fiscal assumptions and methods used in the years 2019–2028. TABLE 2—ESTIMATED EFFECT OF SHORT-TERM, LIMITED-DURATION INSURANCE POLICY CHANGES 2019–2028

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

76 The net premium reduction is a result of 78 The Departments used data on Advance PTC as 80 CMS Office of the Actuary, ‘‘Estimated unsubsidized and less-subsidized enrollees exiting an approximation of PTC since this is the data that Financial Effect of the ‘‘American Health Care Act the market, leaving the remaining population is available for 2017. of 2017’’’ June 13, 2017. Available at https:// receiving more premium tax credit, on average. Net 79 CMS Office of the Actuary, ‘‘Estimated www.cms.gov/Research-Statistics-Data-and- premiums for individual enrollees do not fall. Financial Effects of the Short-Term, Limited- Systems/Research/ActuarialStudies/Downloads/ 77 For purposes of the economic impact analysis Duration Policy Proposed Rule,’’ April 6, 2018. AHCA20170613.pdf. in the proposed rule, the term ‘‘the Departments’’ Available at https://www.cms.gov/Research- was used to refer to HHS and the Department of Statistics-Data-and-Systems/Research/ Labor. ActuarialStudies/Downloads/STLD20180406.pdf.

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

2019– Calendar year 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 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 1 Off-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 in- dividual enrollees do not fall. 3 The 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 projected higher overall enrollment in primarily affect the small-group market regarding these estimates, because short-term, limited-duration coverage, 2 and that the rule on STLDI plans would changes in enrollment and premiums million people in 2023 compared to primarily affect the non-group market.’’ will depend on a variety of economic OACTs estimate of 1.5 million in 2023. Relative to OACT’s estimates, CBO and and regulatory factors and it is difficult Notably, CBO assumed an increase in JCT estimated the impacts of this rule to to predict how consumers and issuers short-term, limited-duration insurance result in more short-term, limited- will react to the changes finalized in policy duration to less than 12 months, duration plan take-up with a larger this rule. In addition, the impact in any but did not analyze the impacts of share of the take-up coming from people given state will vary depending on state allowing extensions up to 36 months, who were not previously insured, lower regulations and the characteristics of which would have presumably premium impacts for PPACA-compliant that state’s markets and risk pools. increased their take-up rates even coverage, and a lower cost to the federal OACT was not the only entity to further. Also, notable is that when government.83 model the impacts of the proposed estimating the combined effects of this CBO and JCT were not the only regulation. CBO, along with the Joint regulation and the recently finalized entities to analyze the quantitative Committee on Taxation (CBO and JCT), Association Health Plan rule, CBO impacts of the proposed rule. The Urban the Urban Institute, and the found that ‘‘premiums are projected to Institute ran a state-level Commonwealth Fund also looked at the be 2 percent to 3 percent higher in those microsimulation model (taking into impact. CBO and JCT estimated the markets [small group and individual account market conditions in each state impacts of the proposed regulation in market] in most years.’’ Despite higher as well as regulatory differences) and their May 2018 report on ‘‘Federal take-up rates, CBO and JCT expect lower also estimated that an extension of Subsidies for Health Insurance Coverage premium increases for coverage that short-term, limited-duration insurance for People Under Age 65: 2018 to complies with all of the PPACA market to less than 12 months would result in 2028’’.81 CBO and JCT found that 2 requirements than OACT. CBO and JCT greater take-up of the plans than OACT million people would be covered by also found that in combination, ‘‘the estimated, as well as savings for the short-term, limited-duration insurance proposed rules [short term limited federal government.84 Specifically the in 2023, and that ‘‘65 percent of the 2 duration insurance and association Urban Institute found that in 2019 ‘‘4.3 million purchasing [short-term, limited- health plans] would reduce the federal million would enroll in expanded short- duration] plans would have been deficit by roughly $1 billion over the term limited-duration plans.’’ 85 ‘‘About insured in the absence of the proposed 2019–2028 period if implemented as 1.7 million of the people buying [short- rules’’. This estimate projected higher proposed.’’ They stated that, ‘‘over the term, limited-duration insurance] uptake of short-term, limited-duration 2019–2028 period, outlays for policies would have been uninsured (in insurance among those that were not marketplace subsidies would increase the traditional sense) under current law, previously insured than OACT on net by $2 billion, and revenues and 2.6 million [short-term, limited- estimated.82 Additionally, CBO would increase by $3 billion. The net increase in marketplace subsidies 83 CBO and JCT did not separately break out the 81 Congressional Budget Office, ‘‘Federal reflects an increase in subsidies budget effects of the AHP rule and the short-term, Subsidies for Health Insurance Coverage for People limited-duration rule. Under Age 65: 2018 to 2028,’’ May 23, 2018. stemming from higher premiums, 84 L.J. Blumberg, M. Buettgens, R. Wang, ‘‘The Available at http://cbo.gov/publication/53826. mostly offset by a reduction in the Potential Impact of Short-Term Limited-Duration 82 CBO noted that, ‘‘of the 2 million additional number of people receiving those Policies on Insurance Coverage, Premiums, and enrollees in STLDI plans, fewer than 500,000 would subsidies.’’ CBO and JCT further stated Federal Spending,’’ Urban Institute, March 2018. purchase products not providing comprehensive Available at: https://www.urban.org/sites/default/ financial protection against high-cost, low- that ‘‘On the basis of information files/publication/96781/2001727_updated_ probability medical events. CBO considers such obtained from stakeholders, CBO and finalized.pdf. people uninsured.’’ JCT project that the rule on AHPs would 85 Id.

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duration] policy holders would estimated that ‘‘the age-specific combined effect of the proposed otherwise have had insurance of some premium for a silver plan increases by changes and the reduction of the type.’’ They further found that ‘‘ACA- 0.9 percent (from $7,308 to $7,377) individual shared responsibility compliant non-group coverage would relative to current law when the payment to $0 would be an increase in decrease by another 2.2 million people. individual mandate is lifted, and by 3.6 claims costs by 11.7 percent to 21.4 About 70 percent of that decrease (1.6 percent (from $7,308 to $7,568) when percent and a decrease in enrollment in million people) comes from fewer the mandate is lifted and behavioral individual and small group plans of people buying PPACA-compliant barriers are removed’’ (implying the 3,800 to 6,100 in Washington, DC. coverage without a tax credit, and about marginal effect of adding short term Notably Washington DC’s individual 30 percent of the decrease (about plans in a scenario with limited market is highly idiosyncratic in terms 600,000 people) comes from fewer behavior barriers was roughly 2.7 of the number of people in it not people buying non-group insurance percent). The Commonwealth Fund did receiving subsidies, so the effects on with a tax credit.’’ As a result of their not provide estimates of cost impacts to that market are unlikely to be estimate of the decrease in the number the federal government. comparable with other states. A study of people receiving tax credits they In response to the Departments’ by Covered California 90 concluded that estimated the policy to result in net request for comments on how many the combined effect of the proposed savings to the federal government of consumers may choose to purchase Association Health Plan rule and the $721 million in 2019. The Urban short-term, limited-duration insurance, short-term, limited-duration rule would Institute grouped the individual rather than being uninsured or increase premiums by 0.3 percent to 1.3 mandate penalty being reduced to $0 purchasing individual market plans, percent in the individual market in and the short-term, limited-duration many commenters submitted or referred California in 2019. proposal to estimate the premium to studies that estimated the impact of Many commenters stated that the effects on individual market single risk the proposed changes. Some of these proposed rule likely underestimates the pools, so it is difficult to know what just studies and findings have been number of people who would enroll in the policy impact of short term changes described above. Another study short-term, limited-duration insurance would have been to premiums in their conducted by the Wakely Consulting and thus underestimates the premium analysis. In sum, relative to OACT’s Group 88 estimated that, as a result of and risk pool impact of the proposed analysis, Urban estimates savings to the the proposed changes and the reduction changes. Commenters suggested that it federal government (rather than costs), of the individual shared responsibility is insufficient to look at prior data on as well as materially higher take-up (4.3 payment to $0, premiums would short-term, limited-duration insurance million in 2019 versus 1.4 million in increase by 0.7 percent to 1.7 percent enrollment to predict what would 2028), including among those that and enrollment would decrease by 2.7 happen as a result of the proposed previously did not have insurance (1.7 percent to 6.4 percent in the individual change in federal rules, since conditions million in 2019 versus 0.2 million in market in 2019. In addition, the study for the short-term, limited-duration 2028). estimated that premiums for individual insurance market are poised to differ While CBO and the Urban Institute market plans would increase 2.2 percent markedly from recent years. appear to have done robust work on the to 6.6 percent and enrollment would Commenters noted that in 2019, the issue, other entities also provided decrease by 8.2 percent to 15 percent in individual shared responsibility estimates of the impact. The 4 to 5 years, when the full impact of the payment will be reduced to $0, Commonwealth Fund concluded that if proposed changes can be felt. A study removing one factor that has likely kept there are no behavioral barriers to by Oliver Wyman,89 focusing on the more people from enrolling in short- enrollment in short-term, limited- District of Columbia’s individual and term, limited-duration insurance. duration plans, and under a baseline of small group markets, estimated that the Commenters also noted that the federal no individual shared responsibility government is actively promoting short- payment, extending the duration of 2018. Available at https:// term, limited-duration insurance and short-term, limited-duration insurance www.commonwealthfund.org/publications/fund- pulling back on its outreach efforts for reports/2018/jun/what-impact-enrollment-and- would result in about 5.2 million people premiums-if-duration-short-term. In a scenario with individual market plans, a reversal of enrolled.86 The Commonwealth Fund behavioral barriers in place, they estimated a prior policy that is likely to increase estimated that the average premium for materially lower number of 0.3 million in take-up. short-term, limited-duration insurance a short-term, limited-duration insurance Examples the Commonwealth Fund cited of enrollment, and that major issuers have behavioral barriers to enrollment include policy will be roughly 80 percent ‘‘increased marketing of plans to increase already expressed interest in offering or cheaper than silver plans and about 70 awareness, streamlining the application process, expanding offerings of short-term, percent cheaper than bronze plans for a lack of concern over facing the mandate penalty.’’ limited-duration plans. 40-year old.87 The Commonwealth Fund Market forces may well come up with ways of One commenter stated that the total addressing these behavioral barriers—such as by marketing the plans aggressively, providing a high enrollment in short-term, limited- 86 Preethi Rao, Sarah A. Nowak, Christine Eibner, quality customer experience in a streamlined duration insurance was actually close to ‘‘What Is the Impact on Enrollment and Premiums application process, and clarifying the applicability 500,000 covered lives in December 2016 if the Duration of Short-Term Health Insurance of the mandate penalty. after accounting for association-based Plans Is Increased?’’, Commonwealth Fund, June 5 88 Michael Cohen, Michelle Anderson, Ross 2018. Available at https:// Winkelman, ‘‘Effects of Short-Term Limited sales. The commenter further noted that www.commonwealthfund.org/publications/fund- Duration Plans on the ACA-Compliant Individual as a result of the reduction of the reports/2018/jun/what-impact-enrollment-and- Market,’’ Wakely Consulting Group, April, 2018. individual shared responsibility premiums-if-duration-short-term. Examples the Available at: http://www.communityplans.net/wp- payment to $0 beginning in 2019, the Commonwealth Fund cited of behavioral barriers to content/uploads/2018/04/Wakely-Short-Term- enrollment include ‘‘increased marketing of plans Limited-Duration-Plans-Report.pdf. cost differential between short-term, to increase awareness, streamlining the application 89 Oliver Wyman, ‘‘Potential Impact of Short- process, lack of concern over facing the mandate Term Limited Duration Plans,’’ April 11, 2018. 90 Covered California, ‘‘Individual Markets penalty.’’ Available at: https://hbx.dc.gov/sites/default/files/ Nationally Face High Premium Increases in Coming 87 Preethi Rao, Sarah A. Nowak, Christine Eibner, dc/sites/hbx/publication/attachments/ Years Absent Federal or State Action, With Wide ‘‘What Is the Impact on Enrollment and Premiums OWReview%20of%20Impact%20of%20Short%20 Variation Among States,’’ March 8, 2018. Available if the Duration of Short-Term Health Insurance Term%20Duration%20Plans%204.11.2018%20 at http://hbex.coveredca.com/data-research/library/ Plans Is Increased?’’, Commonwealth Fund, June 5 %28002%29.pdf. CoveredCA_High_Premium_Increases_3-8-18.pdf.

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limited-duration insurance and such a scenario, high-end enrollment consumers can maintain coverage under individual market plans will increase, estimates would be less likely. their short-term, limited-duration and enrollment in short-term, limited- As discussed earlier in this rule, there insurance policy after the expiration of duration insurance is likely to grow is significant uncertainly regarding all of the initial contract term if it is the most beyond what it was in 2016. The these estimates, because changes in desirable option. As many commenters commenter estimated that each enrollment and premiums will depend pointed out, to the extent that the percentage point increase in premiums on a variety of factors and it is difficult maximum duration of short-term, for individual market plans as a result to predict how consumers and issuers limited-duration insurance is limited to of the policies in the proposed rule will react to the policy changes finalized a relatively short period of time, for would increase federal spending on in this rule. In addition, the impact in example, less than 3 months, or even PTCs by $800 million in 2019. Another any given state will vary depending on less than 12 months, without permitting commenter cited a report stating that state regulations and the characteristics renewals or extensions, this would enrollment in short-term, limited- of that state’s markets and risk pools. In mean that every 3 months or every 12 duration coverage may be closer to one addition, some of these studies estimate months, an individual purchasing short- million. the impacts of the proposed rule and term, limited-duration insurance would some of them present combined effects be subject to re-underwriting, and One commenter expected that the of the Association Health Plan proposed would possibly have his or her premium mostly uninsured or off-Exchange rule or the reduction of the shared greatly increased as a result. Also, to the insured group of consumers who may responsibility payment to $0. The study extent the policy excluded preexisting purchase short-term, limited-duration by Oliver Wyman may not be generally conditions for a specified period of time insurance policies will follow the age applicable to the rest of the country, or imposed a waiting period on specific distribution of those who currently because the District of Columbia is not benefits, the individual would not get purchase short-term, limited-duration representative of other markets insofar credit for the amount of time he or she insurance, which is an average of as it is very small and because a very had the previous coverage. The issuer approximately 41.3 years of age. small percentage of the District’s could also decline to issue a new policy The Departments are unable to verify enrollees receive PTCs. to the consumer based on preexisting the conclusions of the different studies C. Regulatory Alternatives medical conditions. The Departments submitted and referred to by find all of these to be compelling commenters. However, the studies, in The Departments considered not reasons in favor of permitting renewals sum suggest that the rule may changing the federal standards for short- and extensions as set forth in the final significantly reduce the number of term, limited-duration insurance or rule, such that the maximum duration increasing the initial contact term to 6 people without any type of health under a single short-term, limited- or 8 months, as suggested by some insurance and will likely only result in duration insurance policy may be 36 commenters. However, this alternative a small average increase to premiums in months (including renewal or other would not adequately increase choices the individual and group markets. extension periods), as opposed to less for individuals unable or unwilling to than 12 months. As mentioned earlier in Enrollment in short-term, limited- purchase individual market health the preamble, in determining the duration insurance will depend in large insurance coverage. Extending the appropriate limits on the permissible part on how issuers respond to this final maximum initial contract term to less range of renewals or extensions in rule and to external factors such as the than 12 months ensures that deductibles giving meaning to the term ‘‘limited- reduction to $0 of the individual shared are not reset and premiums do not duration,’’ the Departments were responsibility payment starting in 2019. increase every 3 (or 6, or 8) months for informed by other circumstances under If issuers respond by offering a consumers who purchase short-term, which Congress authorized temporary substantially greater range of plan limited-duration insurance and limited coverage options. designs than those currently available in conditions that develop during the In addition to the applicability date the market for short-term, limited- coverage period continue to be covered set forth in the proposed rule, the duration insurance in order to attract for a longer period of time until the Departments also considered an consumers with a wide range of medical consumer can switch to an individual applicability date of January 1, 2020, as needs, then total enrollment is more market plan, if needed suggested by some commenters. The likely to align with high-end estimates. The Departments considered Departments chose the applicability Alternatively, if states impose finalizing the notice language as date of 60 days after the date the rule restrictions on short-term, limited- proposed. The Departments decided to was published in the Federal Register to duration insurance or issuers do not revise the notice language based on ensure that states that want to expand substantially alter existing short-term, commenter feedback to include more access to short-term, limited-duration limited-duration insurance plan details regarding what the policy may or insurance and individuals who wish to designs, then consumers may may not cover. States also have the purchase such coverage can begin to experience only a moderate increase in option to require more information than benefit from the changes as soon as convenience as a result of this final rule what is included in the federal notice. possible. since short-term, limited-duration The Departments considered not Some commenters criticized the insurance is already available and can allowing renewals or extensions of Departments for not adequately, or be purchased as four separate less than short-term, limited-duration insurance failing to, consider other alternatives. 3-month insurance policies 91—and in policies beyond 12 months, as well as Some commenters stated that the not permitting renewals or extensions. Departments failed to explore the 91 Karen Pollitz, Michelle Long, Ashley However, upon review of comments, the options presented in the regulatory Semanskee, and Rabah Kamal, ‘‘Understanding Departments determined that allowing alternatives section and should engage Short-Term Limited Duration Health Insurance’’, renewals or extensions of a policy up to in a more robust discussion of Kaiser Family Foundation, April 23, 2018. Available at https://www.kff.org/health-reform/ a maximum duration of 36 months regulatory alternatives. One commenter issue-brief/understanding-short-term-limited- increases consumer choices, provides stated that the Departments indicated duration-health-insurance/. additional protection, and ensures that that the only alternatives to this

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proposal would be to lengthen the the authority of the Paperwork discount policies) fall below these size duration of short-term, limited-duration Reduction Act of 1995 (44 U.S.C. 3501 thresholds. Based on data from MLR plans to either 6 or 9 months and et seq.). annual report submissions for the 2016 dismissed both options without any MLR reporting year,93 approximately 85 E. Regulatory Flexibility Act explanation. This suggested, the out of over 520 issuers of health commenter stated, that the Departments The Regulatory Flexibility Act (5 insurance coverage nationwide had total did not adequately consider other U.S.C. 601 et seq.) (RFA) imposes premium revenue of $38.5 million or options. The commenter suggested that certain requirements with respect to less, of which 51 issuers offer plans in there are other options that will actually federal rules that are subject to the the individual market. This estimate lead to expanded access and will not notice and comment requirements of may overstate the actual number of destabilize the private health insurance section 553(b) of the Administrative small health insurance companies that market, such as to fund cost-sharing Procedure Act (5 U.S.C. 551 et seq.) and may be affected, since almost 79 percent reductions. Another option suggested by that are likely to have a significant of these small companies belong to a commenter was to take no action economic impact on a substantial larger holding groups, and many if not since, in the commenter’s view, the number of small entities. Unless an all of these small companies are likely proposed action would not expand agency certifies that a final rule is not to have non-health lines of business that access to comprehensive coverage, likely to have a significant economic will result in their revenues exceeding would lead to more discrimination impact on a substantial number of small $38.5 million. Therefore, the against people with preexisting entities, section 604 of the RFA requires Departments certify that this final rule conditions, and would destabilize that the agency prepare a final will not have a significant impact on a private health insurance markets. regulatory flexibility analysis describing substantial number of small entities. The Departments disagree. In addition the impact of the rule on small entities. In addition, section 1102(b) of the to considering maintaining the less than Small entities include small businesses, Social Security Act requires agencies to 3 month (including renewals) standard organizations and governmental prepare a regulatory impact analysis if in the October 2016 final rule, as well jurisdictions. a rule may have a significant economic as the proposed less than 12 month The RFA generally defines a ‘‘small impact on the operations of a substantial standard in the proposed rule, the entity’’ as—(1) a proprietary firm number of small rural hospitals. This Departments also considered maximum meeting the size standards of the Small analysis must conform to the provisions durations of 6 months or 8 months. Business Administration (13 CFR of section 604 of the RFA. This final Recognizing the myriad number of 121.201); (2) a nonprofit organization rule will not have a direct effect on rural potential approaches the Departments that is not dominant in its field; or (3) hospitals, though there might be an could consider to establish federal a small government jurisdiction with a indirect impact. However, as discussed standards for short-term, limited- population of less than 50,000. (States below, there are mitigating factors. duration insurance, the Departments and individuals are not included in the Therefore, the Departments have also solicited comments on all aspects definition of ‘‘small entity’’). The determined that this final rule will not of the proposed rule. In addition, we Departments use as their measure of have a significant impact on the have added a more detailed discussion significant economic impact on a operations of a substantial number of of regulatory alternatives considered for substantial number of small entities a small rural hospitals. this final regulation. The Departments change in costs or revenues of more One commenter disagreed with the have chosen the alternatives that we than 3 to 5 percent. statement in the proposed rule that believe will benefit individuals who This final rule will impact health ‘‘[t]his proposed rule will not affect have been harmed by the increasing insurance issuers, especially those in small rural hospitals.’’ The commenter premiums, deductibles and cost-sharing the individual market. The Departments stated that issuer withdrawal from the associated with individual market plans believe that health insurance issuers individual market caused by the and limited choices. As discussed will be classified under the North proposed changes would especially previously, this rule will also increase American Industry Classification have a catastrophic impact on rural the number of people with some type of System code 524114 (Direct Health and families who already have limited plan coverage by 0.2 million by 2028. Medical Insurance Carriers). According choices, as well as on the rural hospitals to SBA size standards, entities with D. Paperwork Reduction Act— and other providers who ‘‘rely on razor- average annual receipts of $38.5 million thin financial margins to deliver care.’’ Department of Health and Human or less are considered small entities for Services The commenter urged the Departments this North American Industry to prioritize market stabilization and to This final rule revises the required Classification System codes. Some pay special attention to the impacts in notice that must be prominently issuers could possibly be classified in rural communities. displayed in the contract and in any 621491 (Health Maintenance The total number of individuals application materials for short-term, Organization Medical Centers) and, if purchasing either individual market limited-duration insurance. The this is the case, the SBA size standard plans or short-term, limited-duration Departments are providing the exact text is $32.5 million or less.92 The insurance coverage is expected to for this notice requirement and the Departments believe that few, if any, increase, which will limit or reduce the language will not need to be insurance companies selling amount of uncompensated care customized. The burden associated with comprehensive health insurance provided by hospitals. Moreover, people these notices is not subject to the policies (in contrast, for example, to in rural areas have generally been most Paperwork Reduction Act of 1995 in travel insurance policies or dental harmed by the reduction in choice that accordance with 5 CFR 1320.3(c)(2) as resulted from PPACA and likely because they do not contain a 92 U.S. Small Business Administration, ‘‘Table of stand to disproportionately receive ‘‘collection of information’’ as defined Small Business Size Standards Matched to North American Industry Classification System Codes’’, benefit from this rule. The Departments in 44 U.S.C. 3502(3). Consequently, this Effective October 1, 2017. Available at https:// document need not be reviewed by the www.sba.gov/sites/default/files/files/Size_ 93 Available at https://www.cms.gov/CCIIO/ Office of Management and Budget under Standards_Table_2017.pdf. Resources/Data-Resources/mlr.html.

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acknowledge there is a possibility that H. Federalism contained in 29 U.S.C. 1135 and 1191c; due to adverse selection and changes to Executive Order 13132 outlines and Secretary of Labor’s Order 1–2011, the individual market risk pool, fewer fundamental principles of federalism. It 77 FR 1088 (Jan. 9, 2012). issuers may offer individual market requires adherence to specific criteria by The Department of Health and Human plans in certain states, leading to Federal agencies in formulating and Services regulations are adopted reduced choices for consumers implementing policies that have pursuant to the authority contained in remaining in the individual market risk ‘‘substantial direct effects’’ on the states, sections 2701 through 2763, 2791, 2792 pools. However, individuals in rural the relationship between the national and 2794 of the PHS Act (42 U.S.C. areas are more likely to be low-income government and states, or on the 300gg through 300gg–63, 300gg–91, and less likely to receive employer distribution of power and 300gg–92 and 300gg–94), as amended. sponsored coverage compared to those responsibilities among the various List of Subjects living in other areas and a large levels of government. Federal agencies 26 CFR Part 54 percentage of rural individuals (24 promulgating regulations that have percent of the nonelderly population) these federalism implications must Pension excise taxes. 94 consult with state and local officials, are covered by Medicaid. Individuals 29 CFR Part 2590 in rural areas enrolled in individual and describe the extent of their Continuation coverage, Disclosure, market plans are more likely to receive consultation and the nature of the Employee benefit plans, Group health PTC 95 because, generally, incomes in concerns of state and local officials in plans, Health care, Health insurance, these areas are typically lower than the preamble to the final regulation. Federal officials have discussed the Medical child support, Reporting and 400% of the Federal Poverty Line and issues related to short-term, limited- recordkeeping requirements. therefore relatively young or healthy duration insurance with state regulatory 45 CFR Parts 144 and 146 individuals are less likely to leave the officials. This final rule has no individual market risk pool in these federalism implications to the extent Health care, Health insurance, areas, thereby limiting the effects on the that current state law requirements for Reporting and recordkeeping risk pool. State regulations may also short-term, limited-duration insurance requirements. limit the impact on the individual are the same as or more restrictive than 45 CFR Part 148 market risk pools. the Federal standard in this final rule. States may continue to apply such state Administrative practice and F. Impact of Regulations on Small procedure, Health care, Health Business—Department of the Treasury law requirements. States also have the flexibility to require additional insurance, Penalties, Reporting and recordkeeping requirements. Pursuant to section 7805(f) of the consumer disclosures and to establish a Code, the proposed rule that preceded different, shorter initial contact term Douglas W. O’Donnell, this final rule was submitted to the and maximum duration (including Acting Deputy Commissioner for Services and Chief Counsel for Advocacy of the Small renewals and extensions) under state Enforcement, Internal Revenue Service. Business Administration for comment law in response to market-specific needs Approved: July 26, 2018. or concerns. on its impact on small business, and no David J. Kautter, comments were received. I. Congressional Review Act Assistant Secretary of the Treasury (Tax G. Unfunded Mandates Reform Act This final rule is subject to the Policy). Congressional Review Act provisions of Signed this 26th day of July 2018. Section 202 of the Unfunded the Small Business Regulatory Preston Rutledge, Mandates Reform Act of 1995 (UMRA) Enforcement Fairness Act of 1996 (5 Assistant Secretary, Employee Benefits requires that agencies assess anticipated U.S.C. 801 et seq.) and will be Security Administration, Department of costs and benefits and take certain other transmitted to the Congress and to the Labor. actions before issuing a final rule that Comptroller General for review in Dated: July 24, 2018. includes any Federal mandate that may accordance with such provisions. Seema Verma, result in expenditures in any 1 year by J. Reducing Regulation and Controlling Administrator, Centers for Medicare & a state, local, or Tribal governments, in Regulatory Costs Medicaid Services. the aggregate, or by the private sector, of Dated: July 25, 2018. $100 million in 1995 dollars, updated Executive Order 13771, titled Alex M. Azar II, Reducing Regulation and Controlling annually for inflation. In 2018, that Secretary, Department of Health and Human Regulatory Costs, was issued on January threshold is approximately $150 Services. million. This final rule does not include 30, 2017 and requires that the costs associated with significant new DEPARTMENT OF THE TREASURY any Federal mandate that may result in regulations ‘‘shall, to the extent expenditures by state, local, or tribal Internal Revenue Service permitted by law, be offset by the governments, or by the private sector in elimination of existing costs associated For the reasons stated in the excess of that threshold. with at least two prior regulations.’’ preamble, 26 CFR part 54 is amended as This final rule is an Executive Order follows: 94 Julia Foutz, Samantha Artiga, and Rachel 13771 deregulatory action. Garfield, ‘‘The Role of Medicaid in Rural America’’, PART 54—PENSION AND EXCISE TAX Kaiser Family Foundation, April 25, 2017. IV. Statutory Authority Available at: https://www.kff.org/medicaid/issue- ■ Paragraph 1. The authority citation brief/the-role-of-medicaid-in-rural-america/. The Department of the Treasury for part 54 continues to read in part as 95 Analysis of data on Exchange plan selections regulations are adopted pursuant to the follows: (non-canceled plan selections at a point-in-time) for authority contained in sections 7805 the most recent open enrollment period shows that Authority: 26 U.S.C. 7805 * * *. consumers in rural areas are 5 percent more likely and 9833 of the Code. ■ to receive PTC compared to those who live in non- The Department of Labor regulations Par. 2. Section 54.9801–2 is amended rural areas. are adopted pursuant to the authority by revising the definition of ‘‘Short-

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term, limited-duration insurance’’ to or health benefits (such as hospitalization, contract and, taking into account read as follows: emergency services, maternity care, renewals or extensions, has a duration preventive care, prescription drugs, and of no longer than 36 months in total; § 54.9801–2 Definitions. mental health and substance use disorder (2) With respect to policies having a * * * * * services). Your policy might also have coverage start date before January 1, Short-term, limited-duration lifetime and/or annual dollar limits on health benefits. If this coverage expires or you lose 2019, displays prominently in the insurance means health insurance eligibility for this coverage, you might have contract and in any application coverage provided pursuant to a to wait until an open enrollment period to get materials provided in connection with contract with an issuer that: other health insurance coverage. enrollment in such coverage in at least (1) Has an expiration date specified in 14 point type the language in the the contract that is less than 12 months (4) If a court holds the 36-month maximum duration provision set forth following Notice 1, excluding the after the original effective date of the heading ‘‘Notice 1,’’ with any additional contract and, taking into account in paragraph (1) of this definition or its applicability to any person or information required by applicable state renewals or extensions, has a duration law: of no longer than 36 months in total; circumstances invalid, the remaining (2) With respect to policies having a provisions and their applicability to Notice 1: coverage start date before January 1, other people or circumstances shall This coverage is not required to comply 2019, displays prominently in the continue in effect. with certain federal market requirements for contract and in any application * * * * * health insurance, principally those contained materials provided in connection with ■ Par. 3. Section 54.9833–1 is amended in the Affordable Care Act. Be sure to check your policy carefully to make sure you are enrollment in such coverage in at least by revising the section heading and the aware of any exclusions or limitations 14 point type the language in the last sentence to read as follows: regarding coverage of preexisting conditions following Notice 1, excluding the § 54.9833–1 Applicability dates. or health benefits (such as hospitalization, heading ‘‘Notice 1,’’ with any additional emergency services, maternity care, information required by applicable state * * * Notwithstanding the previous preventive care, prescription drugs, and law: sentence, the definition of ‘‘short-term, mental health and substance use disorder limited-duration insurance’’ in services). Your policy might also have Notice 1: § 54.9801–2 applies October 2, 2018. lifetime and/or annual dollar limits on health This coverage is not required to comply benefits. If this coverage expires or you lose with certain federal market requirements for DEPARTMENT OF LABOR eligibility for this coverage, you might have health insurance, principally those contained Employee Benefits Security to wait until an open enrollment period to get in the Affordable Care Act. Be sure to check Administration other health insurance coverage. Also, this your policy carefully to make sure you are coverage is not ‘‘minimum essential aware of any exclusions or limitations 29 CFR Chapter XXV coverage.’’ If you don’t have minimum regarding coverage of preexisting conditions For the reasons stated in the essential coverage for any month in 2018, or health benefits (such as hospitalization, preamble, the Department of Labor you may have to make a payment when you emergency services, maternity care, amends 29 CFR part 2590 as set forth file your tax return unless you qualify for an exemption from the requirement that you preventive care, prescription drugs, and below: mental health and substance use disorder have health coverage for that month. (3) With respect to policies having a services). Your policy might also have PART 2590—RULES AND coverage start date on or after January 1, lifetime and/or annual dollar limits on health REGULATIONS FOR GROUP HEALTH benefits. If this coverage expires or you lose 2019, displays prominently in the PLANS eligibility for this coverage, you might have contract and in any application to wait until an open enrollment period to get ■ materials provided in connection with other health insurance coverage. Also, this 4. The authority citation for part 2590 continues to read as follows: enrollment in such coverage in at least coverage is not ‘‘minimum essential 14 point type the language in the coverage.’’ If you don’t have minimum Authority: 29 U.S.C. 1027, 1059, 1135, following Notice 2, excluding the essential coverage for any month in 2018, 1161–1168, 1169, 1181–1183, 1181 note, you may have to make a payment when you 1185, 1185a, 1185b, 1191, 1191a, 1191b, and heading ‘‘Notice 2,’’ with any additional file your tax return unless you qualify for an 1191c; sec. 101(g), Pub. L. 104–191, 110 Stat. information required by applicable state exemption from the requirement that you 1936; sec. 401(b), Pub. L. 105–200, 112 Stat. law: have health coverage for that month. 645 (42 U.S.C. 651 note); sec. 512(d), Pub. L. Notice 2: (3) With respect to policies having a 110–343, 122 Stat. 3881; sec. 1001, 1201, and 1562(e), Pub. L. 111–148, 124 Stat. 119, as This coverage is not required to comply coverage start date on or after January 1, amended by Pub. L. 111–152, 124 Stat. 1029; with certain federal market requirements for 2019, displays prominently in the Division M, Pub. L. 113–235, 128 Stat. 2130; health insurance, principally those contained contract and in any application Secretary of Labor’s Order 1–2011, 77 FR in the Affordable Care Act. Be sure to check materials provided in connection with 1088 (Jan. 9, 2012). your policy carefully to make sure you are aware of any exclusions or limitations enrollment in such coverage in at least ■ 5. Section 2590.701–2 is amended by regarding coverage of preexisting conditions 14 point type the language in the revising the definition of ‘‘Short-term, following Notice 2, excluding the or health benefits (such as hospitalization, limited-duration insurance’’ to read as emergency services, maternity care, heading ‘‘Notice 2,’’ with any additional follows: preventive care, prescription drugs, and information required by applicable state mental health and substance use disorder law: § 2590.701–2 Definitions. services). Your policy might also have Notice 2: * * * * * lifetime and/or annual dollar limits on health Short-term, limited-duration benefits. If this coverage expires or you lose This coverage is not required to comply eligibility for this coverage, you might have with certain federal market requirements for insurance means health insurance coverage provided pursuant to a to wait until an open enrollment period to get health insurance, principally those contained other health insurance coverage. in the Affordable Care Act. Be sure to check contract with an issuer that: your policy carefully to make sure you are (1) Has an expiration date specified in (4) If a court holds the 36-month aware of any exclusions or limitations the contract that is less than 12 months maximum duration provision set forth regarding coverage of preexisting conditions after the original effective date of the in paragraph (1) of this definition or its

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applicability to any person or following Notice 1, excluding the (4) If a court holds the 36-month circumstances invalid, the remaining heading ‘‘Notice 1,’’ with any additional maximum duration provision set forth provisions and their applicability to information required by applicable state in paragraph (1) of this definition or its other people or circumstances shall law: applicability to any person or continue in effect. Notice 1: circumstances invalid, the remaining * * * * * provisions and their applicability to This coverage is not required to comply other people or circumstances shall ■ 6. Section 2590.736 is amended by with certain federal market requirements for revising the last sentence to read as health insurance, principally those contained continue in effect. follows: in the Affordable Care Act. Be sure to check * * * * * your policy carefully to make sure you are § 2590.736 Applicability dates. aware of any exclusions or limitations PART 146—REQUIREMENTS FOR THE * * * Notwithstanding the previous regarding coverage of preexisting conditions GROUP HEALTH INSURANCE or health benefits (such as hospitalization, MARKET sentence, the definition of ‘‘short-term, emergency services, maternity care, limited-duration insurance’’ in preventive care, prescription drugs, and ■ § 2590.701–2 applies October 2, 2018. mental health and substance use disorder 9. The authority citation for part 146 is revised to read as follows: DEPARTMENT OF HEALTH AND services). Your policy might also have lifetime and/or annual dollar limits on health HUMAN SERVICES Authority: 42 U.S.C. 300gg–1 through benefits. If this coverage expires or you lose 300gg–5, 300gg–11 through 300gg–23, 300gg– For the reasons stated in the eligibility for this coverage, you might have 91, and 300gg–92. preamble, the Department of Health and to wait until an open enrollment period to get ■ 10. Section 146.125 is amended by Human Services amends 45 CFR parts other health insurance coverage. Also, this coverage is not ‘‘minimum essential revising the last sentence to read as 144, 146, and 148 as set forth below: coverage.’’ If you don’t have minimum follows. PART 144—REQUIREMENTS essential coverage for any month in 2018, you may have to make a payment when you § 146.125 Applicability dates. RELATING TO HEALTH INSURANCE file your tax return unless you qualify for an * * * Notwithstanding the previous COVERAGE exemption from the requirement that you have health coverage for that month. sentence, the definition of ‘‘short-term, ■ 7. The authority citation for part 144 limited-duration insurance’’ in continues to read as follows: (3) With respect to policies having a § 144.103 of this subchapter applies coverage start date on or after January 1, October 2, 2018. Authority: 42 U.S.C. 300gg through 300gg– 2019, displays prominently in the 63, 300gg–91, and 300gg–92. contract and in any application PART 148—REQUIREMENTS FOR THE ■ 8. Section 144.103 is amended by materials provided in connection with INDIVIDUAL HEALTH INSURANCE revising the definition of ‘‘Short-term, enrollment in such coverage in at least MARKET limited-duration insurance’’ to read as 14 point type the language in the follows: following Notice 2, excluding the ■ 11. The authority citation for part 148 heading ‘‘Notice 2,’’ with any additional continues to read as follows: § 144.103 Definitions. information required by applicable state * * * * * Authority: 42 U.S.C. 300gg through 300gg– law: 63, 300gg–91, and 300gg–92), as amended. Short-term, limited-duration insurance means health insurance Notice 2: ■ 12. Section 148.102 is amended by coverage provided pursuant to a This coverage is not required to comply revising the section heading and the last contract with an issuer that: with certain federal market requirements for sentence of paragraph (b) to read as (1) Has an expiration date specified in health insurance, principally those contained in the Affordable Care Act. Be sure to check follows: the contract that is less than 12 months your policy carefully to make sure you are § 148.102 Scope and applicability date. after the original effective date of the aware of any exclusions or limitations contract and, taking into account regarding coverage of preexisting conditions * * * * * renewals or extensions, has a duration or health benefits (such as hospitalization, (b) * * * Notwithstanding the of no longer than 36 months in total; emergency services, maternity care, previous sentence, the definition of (2) With respect to policies having a preventive care, prescription drugs, and ‘‘short-term, limited-duration coverage start date before January 1, mental health and substance use disorder insurance’’ in § 144.103 of this 2019, displays prominently in the services). Your policy might also have subchapter is applicable October 2, lifetime and/or annual dollar limits on health contract and in any application benefits. If this coverage expires or you lose 2018. materials provided in connection with eligibility for this coverage, you might have [FR Doc. 2018–16568 Filed 8–1–18; 8:45 am] enrollment in such coverage in at least to wait until an open enrollment period to get BILLING CODE 4150–29–P 4830–01–P 4120–01–P 6325– 14 point type the language in the other health insurance coverage. 64–P

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