What effect will the final rule on short-term/limited-duration insurance have on insurance markets?

The final short-term/limited duration insurance (STLDI) rule represents the second step in the Trump administration’s plan to enhance healthcare choice and competition in America. As with the proposed rule, the final rule is relatively straightforward. Under the final STLDI rule, any plan that meets the following criteria is an STLDI policy:

1. The initial policy term is less than one year in duration.
2. The total policy term including any renewals can be no longer than 36 months.
3. The policy comes with a prescribed consumer warning indicating the limitations of STLDI policies.

By allowing renewals (at the enrollee’s discretion) in addition to extensions (at the issuer’s discretion), the final rule offers new flexibility to allow STLDI contracts to continue past the one-year mark. The final rule affirms the rights of states to add their own restrictions and controls on the market. The rule makes equally clear that the U.S. Department of Health and Human Services (HHS) does not intend to put any limits on states’ efforts to place further restrictions on STLDI.

States have the ability to shorten the initial term of STLDI policies, shorten the overall maximum length of the total STLDI policy terms, and determine whether STLDI policies can be extended, renewed, or neither. Each state’s legislative and regulatory responses to these three STLDI options will help shape their future individual health insurance markets.

To read more analysis regarding the provisions of the final rule and the potential implications to individual insurance markets, read this brief by Erik Huth and Jason Karcher.