August 8, 2024 – September 1st will see the implementation of a new federal rule that imposes a four-month limit on the duration of short-term health insurance plans (also referred to as short-term limited duration insurance (STLDI) plans), including renewals, unless stricter state regulations are in place. Healthinsurance.org is urging consumers to take note of this significant change and plan for alternative coverage.
“The purpose of the new rule is to ensure that short-term health plans are used solely to bridge gaps between other health plans,” explained Louise Norris, a health policy analyst for healthinsurance.org. “Given that some consumers are currently using these plans for extended periods, it’s crucial to inform people about the impending changes.”
According to the Congressional Budget Office, approximately 1.5 million people were enrolled annually in short-term limited duration insurance plans as of 2019.
Here are three key considerations for consumers in light of the new limits:
1. Impact on Initial Plan Terms and Renewals: The new federal rule, effective for plans sold or issued on or after September 1, 2024, will limit initial terms to three months and total duration, including renewals, to no more than four months. After a four-month policy expires, consumers will not be able to purchase another short-term policy from the same insurer within 12 months of the effective date of the first policy. Since 2018, federal rules have allowed short-term health plans to have initial terms of up to 364 days and a total duration of up to 36 months with renewals, except in states with stricter restrictions.
“This change will significantly affect many people across the country,” Norris noted. “While these plans were never intended for long-term use, some have relied on them for extended periods. This will no longer be an option.”
2. State-by-State Variation: The new federal rule is more restrictive than current regulations in most states. However, in 17 states and the District of Columbia, short-term health plans are either not allowed, not offered by insurers, or have stricter duration limits than the new federal limits. In Washington, D.C., and 14 of these states, no short-term plans are currently available. Three states—Delaware, Maryland, and Oregon—already limit short-term plans to three months.
“The impact will be most significant in states like Florida, Texas, and Pennsylvania, where consumers need to be aware of the upcoming changes,” Norris said. “Anyone enrolled in or considering a short-term health plan should understand the new rules.”
3. Consumer Options with Advanced Planning: The timeline for the new short-term health plan rule allows consumers to purchase a short-term plan on or after September 1 and potentially keep it through the end of the year. They will then have the opportunity to enroll in an Affordable Care Act (ACA) health plan through the Marketplace for 2025.
Open enrollment for ACA-compliant individual health plans typically starts on November 1 and runs through January 15 in most states. Consumers may be eligible for immediate enrollment in a Marketplace plan if they qualify for a special enrollment period.
“Whether you are enrolled in a short-term health plan before or after the new rule takes effect in September, it’s important to plan for enrolling in major medical coverage during the open enrollment window,” Norris advised. “Without careful timing, you could face a gap in coverage until the next open enrollment period the following year.”
