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March 28, 2024

CMS issues final rules updating standards for STLDI, defers key changes to fixed indemnity insurance

On March 28, the Departments of Health and Human Services (HHS), Labor, and the Treasury (the Departments), released final rules regarding short-term, limited-duration insurance (STLDI) and independent, non-coordinated excepted benefits coverage. The final rules pull back the Trump-era expansion of STLDI coverage, limiting the length of the initial contract term to no more than three months and the maximum coverage period to no more than four months, considering any renewals or extensions. The rules also finalize new consumer notice requirements for both STLDI and fixed indemnity excepted benefits coverage.

The rules do not finalize proposals regarding the payment standards and non-coordination requirement for fixed indemnity excepted benefits coverage, including those to require hospital indemnity or fixed indemnity plans sold in the individual and group markets to prohibit benefits from being paid on a per-item or per-service basis, although the Departments noted their continued interest in the matter. The rules also do not finalize proposals to clarify that payments from employer-provided fixed indemnity health insurance plans (and other similar plans) are not excluded from a taxpayer's income if the amounts are paid without regard to the amount of incurred medical expenses. A fact sheet noted that Treasury and the IRS are not finalizing the proposals at this time "to provide more time to study the issues and concerns raised by commenters."

Changes go into effect for new STLDI policies sold or issued on or after September 1, 2024. The revised consumer notice standards apply to STLDI with respect to coverage periods beginning on or after September 1, 2024, and to group and individual market fixed indemnity excepted benefits coverage with respect to plan years beginning on or after January 1, 2025.

Additional information is also available in the attached WCEY Alert.

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Final rules updating standards for STLDI

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Contact Information

For additional information concerning this Alert, please contact:

Washington Council Ernst & Young