The Departments of Health and Human Services, Labor and Treasury have issued final regulations on excepted benefits, lifetime and annual limits and short-term limited-duration health insurance. For the most part, the regulations follow proposed regulations issued earlier this year.
Two of the topics addressed in the proposed regulations—group fixed dollar indemnity coverage and expatriate plans—were not finalized in the new regulations. The final regulations also do not address specified disease policies (like cancer policies or critical illness policies), which is a topic on which the Departments had requested comments.
Under these regulations short-term health insurance policies (which are not minimum essential coverage) must be limited to less than three months and cannot be renewed. These policies have been popular in states that have not expanded Medicaid. Previously, these policies were available for up to a year and could be renewed. The new three-month period is intended to align with the maximum time an individual can be without minimum essential coverage and still avoid a penalty. All application and enrollment materials must prominently include a warning that the policies are not minimum essential coverage.
The new rule also clarifies what travel health insurance policies and supplemental health insurance policies must do to maintain status as excepted benefits. Excepted benefits are benefits that are not subject to a number of the health care reform requirements. These final regulations clarify that to maintain status as an excepted benefits, supplemental coverage must either
- Cover benefits that are not covered by the primary coverage and are not essential health benefits in the state where the coverage (including expatriate coverage) is issued;
- Cover cost-sharing for primary benefits; or
- Provide both supplemental benefits and cover cost-sharing.
Supplemental coverage does not include coverage that becomes secondary under a coordination of benefits provision.
In order for travel insurance to be an excepted benefit, the health benefits cannot be offered on a stand-alone basis and must be incidental to other coverage, such as trip cancellation, baggage loss, etc. Comprehensive medical protection for trips lasting six months or longer is not considered travel insurance and cannot be an excepted benefit.
The final regulations also provide that for plan years beginning on or after January 1, 2017, a plan that is not required to provide essential health benefits (such as a self-funded plan or a large group policy) must define essential health benefits. Self-funded plans and large group policies that are not required to cover essential health benefits are prohibited from having lifetime or annual maximums on essential health benefits. Self-funded plans and large group policies can define essential health benefits to be consistent with any of the 51 base-benchmark plans applicable in a State or the District of Columbia or one of the three Federal Employees Health Benefits Program base-benchmark plans.
All of the new requirements apply on the first day of the first policy year beginning on or after January 1, 2017.