Short-Term, Limited-Duration Insurance; Independent, Noncoordinated Excepted Benefits Coverage; Level-Funded Plan Arrangements; and Tax Treatment of Certain Accident and Health Insurance

Federal RegisterJul 12, 2023

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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 54

[REG-120730-21]

RIN 1545-BQ28

DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2590

RIN 1210-AC12

DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 144, 146, and 148

[CMS-9904-P]

RIN 0938-AU67

Short-Term, Limited-Duration Insurance; Independent, Noncoordinated Excepted Benefits Coverage; Level-Funded Plan Arrangements; and Tax Treatment of Certain Accident and Health Insurance

AGENCY:

Internal Revenue Service, Department of the Treasury; Employee Benefits Security Administration, Department of Labor; Centers for Medicare & Medicaid Services, Department of Health and Human Services.

ACTION:

Proposed rules.

SUMMARY:

This document sets forth proposed rules that would amend the definition of short-term, limited-duration insurance, which is excluded from the definition of individual health insurance coverage under the Public Health Service Act. This document also sets forth proposed amendments to the requirements for hospital indemnity or other fixed indemnity insurance to be considered an excepted benefit in the group and individual health insurance markets. This document further sets forth proposed amendments to clarify the tax treatment of certain benefit payments in fixed amounts received under employer-provided accident and health plans. Finally, this document solicits comments regarding coverage only for a specified disease or illness that qualifies as excepted benefits, and comments regarding level-funded plan arrangements.

DATES:

To be assured consideration, comments must be received at one of the addresses provided below by September 11, 2023.

ADDRESSES:

In commenting, please refer to file code CMS-9904-P.

Comments, including mass comment submissions, must be submitted in one of the following three ways (please choose only one of the ways listed):

Electronically.

You may submit electronic comments on this regulation to

https://www.regulations.gov.

Follow the “Submit a comment” instructions.

By regular mail.

You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-9904-P, P.O. Box 8010, Baltimore, MD 21244-8010.

Please allow sufficient time for mailed comments to be received before the close of the comment period.

By express or overnight mail.

You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-9904-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

For information on viewing public comments, see the beginning of the

SUPPLEMENTARY INFORMATION

FOR FURTHER INFORMATION CONTACT:

Elizabeth Schumacher or Rebecca Miller, Employee Benefits Security Administration, Department of Labor at (202) 693-8335; Jason Sandoval, Internal Revenue Service, Department of the Treasury at (202) 317-5500; Cam Clemmons, Centers for Medicare & Medicaid Services, Department of Health and Human Services at (206) 615-2338; Geraldine Doetzer, Centers for Medicare & Medicaid Services, Department of Health and Human Services at (667) 290-8855.

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments:

Comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post comments received before the close of the comment period on the following website as soon as possible after they have been received:

https://www.regulations.gov.

Follow the search instructions on that website to view comments. We will not post on

Regulations.gov

comments that make threats to individuals or institutions or suggest that the individual will take actions to harm the individual. We continue to encourage individuals not to submit duplicative comments. We will post acceptable comments from multiple unique commenters even if the content is identical or nearly identical to other comments.

I. Background

These proposed rules set forth proposed revisions to the definition of “short-term, limited-duration insurance” (STLDI) for purposes of its exclusion from the definition of “individual health insurance coverage” in 26 CFR part 54, 29 CFR part 2590, and 45 CFR part 144. The definition of STLDI is also relevant for purposes of the disclosure and reporting requirements in section 2746 of the Public Health Service Act (the PHS Act), which require health insurance issuers offering individual health insurance coverage or STLDI to disclose to enrollees in such coverage, and to report annually to the Department of Health and Human Services (HHS), any direct or indirect compensation provided by the issuer to an agent or broker associated with enrolling individuals in such coverage.

These proposed rules also set forth proposed amendments to the requirements for hospital indemnity and other fixed indemnity insurance to be treated as an excepted benefit in the group and individual health insurance markets (fixed indemnity excepted benefits coverage).

Further, the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) propose to clarify the tax treatment under 26 CFR part 1 of fixed amounts received by a taxpayer through certain employment-based accident or health insurance that are paid without regard to the amount of medical expenses incurred.

For simplicity and readability, this preamble refers to hospital indemnity or other fixed indemnity insurance that meets all requirements to be considered an excepted benefit under the Federal framework as “fixed indemnity excepted benefits coverage” in order to distinguish it from hospital indemnity or other fixed indemnity insurance that does not meet all such requirements.

Lastly, comments are solicited regarding coverage only for a specified disease or illness that qualifies as excepted benefits (specified disease excepted benefits coverage),

and regarding level-funded plan arrangements to better understand the key features and characteristics of these arrangements and whether additional guidance or rulemaking is needed to clarify plan sponsors' obligations with respect to coverage provided through these arrangements.

For simplicity and readability, this preamble refers to specified disease or illness insurance coverage that meets all requirements to be considered an excepted benefit under the Federal framework as “specified disease excepted benefits coverage” in order to distinguish it from specified disease or illness insurance that does not meet all such requirements.

The Treasury Department, the Department of Labor, and HHS (collectively, the Departments) propose these revisions to define and more clearly distinguish STLDI and fixed indemnity excepted benefits coverage from comprehensive coverage. Comprehensive coverage is subject to the Federal consumer protections and requirements established under chapter 100 of the Internal Revenue Code (Code), part 7 of the Employee Retirement Income Security Act of 1974 (ERISA), and title XXVII of the PHS Act,

such as the prohibition on exclusions for preexisting conditions, the prohibition on health status discrimination, the requirement to cover certain preventive services without cost sharing, and many others. The Departments propose these revisions to promote equitable access to high-quality, affordable, comprehensive coverage by increasing consumers' understanding of their health coverage options and reducing misinformation about STLDI and fixed indemnity excepted benefits coverage, consistent with Executive Orders 14009 and 14070 as described in section I.B of this preamble. Similarly, clarifying the tax treatment of benefit payments in fixed amounts under hospital indemnity or other fixed indemnity coverage purchased on a pre-tax basis when those benefits are paid without regard to the medical expenses incurred is also an important means by which to distinguish that coverage from comprehensive coverage and should serve to promote the purchase of comprehensive coverage in the group market.

While STLDI is generally not subject to the Federal consumer protections and requirements for comprehensive coverage that apply to individual health insurance coverage, the agent and broker compensation disclosure and reporting requirements in section 2746 of the PHS Act apply to health insurance issuers offering individual health insurance coverage or STLDI.

A. General Statutory Background

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) (Pub. L. 104-191, August 21, 1996) added chapter 100 to the Code, part 7 to ERISA, and title XXVII to the PHS Act, which set forth portability and nondiscrimination rules with respect to health coverage. These provisions of the Code, ERISA, and the PHS Act were later augmented by other laws, including the Mental Health Parity Act of 1996 (Pub. L. 104-204, September 26, 1996), the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) (Pub. L. 110-343, October 3, 2008), the Newborns' and Mothers' Health Protection Act (Pub. L. 104-204, September 26, 1996), the Women's Health and Cancer Rights Act (Pub. L. 105-277, October 21, 1998), the Genetic Information Nondiscrimination Act of 2008 (Pub. L. 110-233, May 21, 2008), the Children's Health Insurance Program Reauthorization Act of 2009 (Pub. L. 111-3, February 4, 2009), Michelle's Law (Pub. L. 110-381, October 9, 2008), the Patient Protection and Affordable Care Act (Pub. L. 111-148, March 23, 2010) (as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152, March 30, 2010) (collectively known as the Affordable Care Act (ACA)), and Division BB of the Consolidated Appropriations Act, 2021 (CAA, 2021) (Pub. L. 116-260, December 27, 2020), which includes the No Surprises Act.

The ACA reorganized, amended, and added to the provisions of Part A of title XXVII of the PHS Act relating to group health plans and health insurance issuers in the group and individual markets. The ACA added section 9815 of the Code and section 715 of ERISA to incorporate the provisions of Part A of title XXVII of the PHS Act, as amended or added by the ACA, into the Code and ERISA, making them applicable to group health plans and health insurance issuers providing health insurance coverage in connection with group health plans. The provisions of the PHS Act incorporated into the Code and ERISA, as amended or added by the ACA, are sections 2701 through 2728. In addition to marketwide provisions applicable to group health plans and health insurance issuers in the group and individual markets, the ACA established Health Benefit Exchanges (Exchanges) aimed at promoting access to high-quality, affordable, comprehensive coverage. Section 1401(a) of the ACA added section 36B to the Code, providing a premium tax credit (PTC) for certain individuals with annual household income that is at least 100 percent but not more than 400 percent of the Federal poverty level (FPL) who enroll in, or who have one or more family members enrolled in, an individual market qualified health plan (QHP) through an Exchange, who are not otherwise eligible for minimum essential coverage (MEC). Section 1402 of the ACA provides for, among other things, reductions in cost sharing for essential health benefits for qualified low- and moderate-income enrollees in silver-level QHPs purchased through the individual market Exchanges. This section also provides for reductions in cost sharing for American Indians enrolled in QHPs purchased through the individual market Exchanges at any metal level.

Section 5000A of the Code, added by section 1501(b) of the ACA, provides that individuals must maintain MEC, or make a payment known as the individual shared responsibility payment with their Federal tax return for the year in which they did not maintain MEC, if they are not otherwise exempt.

On December 22, 2017, the Tax Cuts and Jobs Act (Pub. L. 115-97) was enacted, which included a provision under which the individual shared responsibility payment under section 5000A of the Code was reduced to $0, effective for months beginning after December 31, 2018.

Section 5000A of the Code and Treasury regulations at 26 CFR 1.5000A-3 provide exemptions from the requirement to maintain MEC for the following individuals: (1) members of recognized religious sects; (2) members of health care sharing ministries; (3) exempt noncitizens; (4) incarcerated individuals; (5) individuals with no affordable coverage; (6) individuals with household income below the income tax filing threshold; (7) members of federally recognized Indian tribes; (8) individuals who qualify for a hardship exemption certification; and (9) individuals with a short coverage gap of a continuous period of less than 3 months in which the individual is not covered under MEC. The eligibility standards for exemptions can be found at 45 CFR 155.605.

The American Rescue Plan Act of 2021 (ARP) (Pub. L. 117-2) was enacted on March 11, 2021. Among other policies intended to address the health care and economic needs of the country during the coronavirus disease-2019 (COVID-19) pandemic, the ARP increased the PTC amount for individuals with annual household income at or below 400 percent of the FPL and extended PTC eligibility for the first time to individuals with annual household incomes above 400 percent of the FPL. Although the expanded PTC subsidies under the ARP were applicable only for 2021 and 2022, the Inflation Reduction Act of 2022 (IRA) (Pub. L. 117-169, August 16, 2022) extended the subsidies for an additional 3 years, through December 31, 2025.

The No Surprises Act was enacted on December 27, 2020, as title I of Division BB of the CAA, 2021. The No Surprises Act added new provisions in Subchapter B of chapter 100 of the Code, Part 7 of ERISA, and Part D of title XXVII of the PHS Act, applicable to group health plans and health insurance issuers offering group or individual health insurance coverage. These provisions provide protections against surprise medical bills for certain out-of-network services and generally require plans and issuers and providers and

facilities to make certain disclosures regarding balance billing protections to the public and to individual participants, beneficiaries, and enrollees. In addition to the new provisions applicable to group health plans and issuers of group or individual health insurance coverage, the No Surprises Act added a new Part E to title XXVII of the PHS Act, establishing corresponding requirements applicable to health care providers, facilities, and providers of air ambulance services. The CAA, 2021 also amended title XXVII of the PHS Act to, among other things, add section 2746, which requires health insurance issuers offering individual health insurance coverage or STLDI to disclose the direct or indirect compensation provided by the issuer to an agent or broker associated with enrolling individuals in such coverage to the enrollees in such coverage as well as to report it annually to HHS.

The Secretaries of HHS, Labor, and the Treasury have authority to promulgate regulations as may be necessary or appropriate to carry out the parallel Federal consumer protections and requirements for comprehensive coverage established under the Code, ERISA, and the PHS Act (hereinafter referred to as the “Federal consumer protections and requirements for comprehensive coverage”).

Sections 2701 through 2728 of the PHS Act, incorporated into section 715 of ERISA and section 9815 of the Code; section 104 of HIPAA; sections 408(b)(2), 505, 734, and 716-717 of ERISA; sections 2746, 2761, 2792, 2799A-1-2, and 2799B1-B2 of the PHS Act; section 1321(a)(1) and (c) of ACA; sections 7805, 9816-9817, and 9822 of the Code; and sections 2746, 2799A-1-2, and 2799B1-B2 of the PHS Act.

See also

64 FR 70164 (December 15, 1999).

B. Recent Executive Orders

On January 28, 2021, President Biden issued Executive Order 14009, “Strengthening Medicaid and the Affordable Care Act,” which directed the Departments to review policies to ensure their consistency with the Administration's goal of protecting and strengthening the ACA and making high-quality health care accessible and affordable for every American.

Executive Order 14009 also directed Federal agencies to examine policies or practices that may undermine protections for people with preexisting conditions and that may reduce the affordability of coverage or financial assistance for coverage. Executive Order 14009 also revoked the previous Administration's Executive Order 13813, “Promoting Healthcare Choice and Competition Across the United States,” which directed agencies to expand the availability of STLDI.

On April 5, 2022, President Biden issued Executive Order 14070, “Continuing to Strengthen Americans' Access to Affordable, Quality Health Coverage,” which directed the heads of Federal agencies with responsibilities related to Americans' access to health coverage to examine polices or practices that make it easier for all consumers to enroll in and retain coverage, understand their coverage options, and select appropriate coverage; that strengthen benefits and improve access to health care providers; that improve the comprehensiveness of coverage and protect consumers from low-quality coverage; and that help reduce the burden of medical debt on households.

Executive Order 14009 of January 28, 2021, 86 FR 7793.

Executive Order 13813 of October 12, 2017, 82 FR 48385.

Executive Order 14070 of April 5, 2022, 87 FR 20689.

In addition, on January 21, 2021, President Biden issued Executive Order 13995, “Ensuring an Equitable Pandemic Response and Recovery,” which directed the Secretaries of Labor and HHS, and the heads of all other agencies with authorities or responsibilities relating to the COVID-19 pandemic response and recovery, to consider any barriers that have restricted access to preventive measures, treatment, and other health services for populations at high risk for COVID-19 infection, and modify policies to advance equity.

Executive Order 13995 of January 21, 2021, 86 FR 7193.

Consistent with these executive orders, the Departments have reviewed the regulatory provisions related to STLDI and fixed indemnity excepted benefits coverage, and propose amendments to those provisions in these proposed rules. The Departments also solicit comments on specified disease excepted benefit coverage (for example, cancer-only policies) in section III.B.2 of this preamble and on level-funded plan arrangements in section III.C of this preamble.

C. Short-Term, Limited-Duration Insurance (STLDI)

STLDI is a type of health insurance coverage sold by health insurance issuers that is primarily designed to fill temporary gaps in coverage that may occur when an individual is transitioning from one plan or coverage to another, such as transitioning between employment-based coverages. Section 2791(b)(5) of the PHS Act provides “[t]he term `individual health insurance coverage' means health insurance coverage offered to individuals in the individual market, but does not include short-term, limited-duration insurance.”

The PHS Act does not, however, define the phrase “short-term, limited-duration insurance.” Sections 733(b)(4) of ERISA and 2791(b)(4) of the PHS Act provide that group health insurance coverage means “in connection with a group health plan, health insurance coverage offered in connection with such plan.” Sections 733(a)(1) of ERISA and 2791(a)(1) of the PHS Act provide that a group health plan is generally any plan, fund, or program established or maintained by an employer (or employee organization or both) for the purpose of providing medical care to employees or their dependents (as defined under the terms of the plan) directly, or through insurance, reimbursement, or otherwise. There is no corresponding provision excluding STLDI from the definition of group health insurance coverage. Thus, any health insurance that is sold in the group market and purports to be STLDI must comply with applicable Federal group market consumer protections and requirements for comprehensive coverage, unless the coverage satisfies the requirements of one or more types of group market excepted benefits.

The definition of individual health insurance coverage (and its exclusion of STLDI) has some limited relevance with respect to certain provisions that apply to group health plans and group health insurance issuers over which the Departments of Labor and the Treasury also have jurisdiction. For example, an individual who loses coverage due to moving out of a health maintenance organization (HMO) service area in the individual market precipitates a special enrollment right into a group health plan.

See

26 CFR 54.9801-6(a)(3)(i)(B), 29 CFR 2590.701-6(a)(3)(i)(B), and 45 CFR 146.117(a)(3)(i)(B).

Because STLDI is not individual health insurance coverage, it is generally exempt from the applicable Federal individual market consumer protections and requirements for comprehensive coverage. STLDI is not subject to many PHS Act provisions that apply to individual health insurance coverage under the ACA including, for example, the prohibition of preexisting condition exclusions or other discrimination based on health status (section 2704 of the PHS Act), the prohibition on discrimination against individual participants and beneficiaries based on health status (section 2705 of the PHS Act), nondiscrimination in health care (section 2706 of the PHS Act), and the prohibition on lifetime and annual dollar limits on essential health benefits (section 2711 of the PHS Act). In addition, STLDI is not subject to the Federal consumer protections and

requirements added to the PHS Act by other laws that apply to individual health insurance coverage, including MHPAEA (Pub. L. 110-343, October 3, 2008) (section 2726 of the PHS Act), and the No Surprises Act, as added by the CAA, 2021. Thus, individuals who enroll in STLDI are not guaranteed these key consumer protections under Federal law.

This feature of STLDI is especially problematic when it is not readily apparent to consumers deciding whether to purchase STLDI or comprehensive individual health insurance coverage.

Some state laws apply some consumer protections and requirements that parallel those in the ACA to STLDI.

In 1997, the Departments issued interim final rules implementing the portability and renewability requirements of HIPAA (1997 HIPAA interim final rules).

Those interim final rules included definitions of individual health insurance coverage, as well as STLDI. That definition of STLDI, which was finalized in rules issued in 2004 and applied through 2016, defined “short-term, limited-duration insurance” as “health insurance coverage provided pursuant to a contract with an issuer that has an expiration date specified in the contract (taking into account any extensions that may be elected by the policyholder without the issuer's consent) that is less than 12 months after the original effective date of the contract.”

62 FR 16894 (April 8, 1997).

62 FR 16894 at 16928, 16942, 16958 (April 8, 1997);

See also

Executive Order 13813 of October 12, 2017 82 FR 48385. (Directing the Secretaries of the Treasury, Labor and HHS “. . . to consider proposing regulations or revising guidance, consistent with law, to expand the availability of [STLDI]. To the extent permitted by law and supported by sound policy, the Secretaries should consider allowing such insurance to cover longer periods and be renewed by the consumer.”)

In contrast, several other commenters stated that changes to the 2016 final rules may provide an opportunity to achieve the goals outlined in the RFI (for example, to promote consumer choice, enhance affordability, and affirm the traditional authority of the States in regulating the business of insurance). These commenters stated that shortening the permitted length of STLDI policies in the 2016 final rules had deprived individuals of affordable coverage options. One commenter explained that due to the increased costs of comprehensive coverage, many financially stressed individuals could be faced with a choice between purchasing STLDI and going without any coverage at all. One commenter highlighted the need for STLDI for individuals who are between jobs for a relatively long period and for whom enrolling in Consolidated Omnibus Budget Reconciliation Act (COBRA)

continuation coverage is financially infeasible. Another commenter noted that States have the primary responsibility to regulate STLDI and encouraged the Departments to defer to the States' authority with respect to such coverage.

Public Law 99-272, April 7, 1986.

On February 21, 2018, the Departments published proposed rules in the

Federal Register

titled “Short-Term, Limited-Duration Insurance” (2018 proposed rules) in which the Departments proposed changing the definition of STLDI to provide that such insurance may have a maximum coverage period of less than 12 months after the original effective date of the contract, taking into account any extensions that may be elected by the policyholder without the issuer's consent.

Among other things, the Departments solicited comments on whether the maximum length of STLDI should be less than 12 months or some other duration and under what conditions issuers should be able to allow such coverage to continue for 12 months or longer. In addition, the Departments proposed to revise the content of the consumer notice that must appear in the contract and any application materials provided in

connection with enrollment in STLDI. The 2018 proposed rules included two variations of the consumer notice—one for policies that had a coverage start date before January 1, 2019, and the other for policies that had a coverage start date on or after January 1, 2019, which excluded language referencing the individual shared responsibility payment (which was reduced to $0 for months beginning after December 2018).

83 FR 7437 (February 21, 2018).

Public Law 115-97, December 22, 2017.

Some commenters on the 2018 proposed rules acknowledged that STLDI fills an important role by providing temporary coverage, but that such insurance should not take the place of comprehensive coverage. These commenters expressed concern that allowing STLDI to be marketed as a viable alternative to comprehensive coverage would subject uninformed consumers to potentially severe financial risks. Commenters who opposed the proposed changes to the definition also expressed concern that such plans would siphon off healthier individuals from the market for individual health insurance coverage, thereby raising premiums for individual health insurance coverage.

Many of these commenters also expressed concerns about the lack of protections for consumers who purchase STLDI, stating that such policies are not a viable option for people with serious or chronic medical conditions due to potential coverage exclusions and benefit limitations in STLDI policies. These commenters further observed that STLDI policies can discriminate against individuals with serious illnesses or preexisting conditions, including individuals with mental health and substance use disorders, older consumers, women, transgender patients, persons with gender identity-related health concerns, and victims of rape and domestic violence. Many of these commenters also expressed concern about aggressive and deceptive marketing practices utilized by marketers of STLDI.

Other commenters highlighted the important role that STLDI could play in providing temporary coverage to individuals who would otherwise be uninsured. These commenters, who supported the proposed changes to the definition, also noted that such changes would allow purchasers of STLDI to obtain the coverage they want at a more affordable price for a longer period.

With respect to the maximum length of the initial contract term for STLDI, most commenters opposed extending the maximum duration beyond 3 months. Others suggested periods such as less than 6 or 8 months. However, most commenters who supported extending the maximum initial contract term beyond 3 months suggested it should be 364 days. A few commenters suggested more than 1 year. Other commenters stated the maximum length of coverage should be left to the States. Commenters who supported the 2018 proposed rules generally favored permitting renewals of STLDI policies, while those who opposed the 2018 proposed rules generally opposed permitting such renewals.

After reviewing comments and feedback received from interested parties, on August 3, 2018, the Departments published final rules in the

Federal Register

titled “Short-Term, Limited-Duration Insurance” (2018 final rules)

with some modifications from the 2018 proposed rules. Specifically, in the 2018 final rules, the Departments amended the definition of STLDI to provide that STLDI is coverage with an initial term specified in the contract that is less than 12 months after the original effective date of the contract, and taking into account renewals or extensions, has a duration of no longer than 36 months in total.

The 2018 final rules also finalized the provision that issuers of STLDI must display one of two versions of a notice prominently in the contract and in any application materials provided in connection with enrollment in such coverage, in at least 14-point type. Under the 2018 final rules, the notice must read as follows (with the final two sentences omitted for policies sold on or after January 1, 2019):

83 FR 38212 (August 3, 2018).

Id.

This coverage is not required to comply with certain Federal market requirements for health insurance, principally those contained in the Affordable Care Act. Be sure to check your policy carefully to make sure you are aware of any exclusions or limitations regarding coverage of preexisting conditions or health benefits (such as hospitalization, emergency services, maternity care, preventive care, prescription drugs, and mental health and substance use disorder services). Your policy might also have lifetime and/or annual dollar limits on health benefits. If this coverage expires or you lose eligibility for this coverage, you might have to wait until an open enrollment period to get other health insurance coverage. Also, this coverage is not “minimum essential coverage.” If you don't have minimum essential coverage for any month in 2018, you may have to make a payment when you file your tax return unless you qualify for an exemption from the requirement that you have health coverage for that month.

D. Independent, Noncoordinated Excepted Benefits: Hospital Indemnity or Other Fixed Indemnity Insurance and Specified Disease or Illness Coverage

Section 9831 of the Code, section 732 of ERISA, and sections 2722(b)-(c) and 2763 of the PHS Act provide that the respective Federal consumer protections and requirements for comprehensive coverage do not apply to any individual coverage or any group health plan (or group health insurance coverage offered in connection with a group health plan) in relation to its provision of certain types of benefits, known as “excepted benefits.” These excepted benefits are described in section 9832(c) of the Code, section 733(c) of ERISA, and section 2791(c) of the PHS Act.

HIPAA defined certain types of coverage as “excepted benefits” that were exempt from its portability requirements.

The same definitions are applied to describe benefits that are not required to comply with some of the ACA requirements.

There are four statutory categories of excepted benefits: independent, noncoordinated excepted benefits, which are the subject of these proposed rules; benefits that are excepted in all circumstances;

limited excepted benefits;

and supplemental excepted benefits.

The category “independent, noncoordinated excepted benefits” includes coverage for only a

specified disease or illness (such as cancer-only policies) and hospital indemnity or other fixed indemnity insurance. These benefits are excepted under section 9831(c)(2) of the Code, section 732(c)(2) of ERISA, and section 2722(c)(2) of the PHS Act only if all of the following conditions are met: (1) the benefits are provided under a separate policy, certificate, or contract of insurance; (2) there is no coordination between the provision of such benefits and any exclusion of benefits under any group health plan maintained by the same plan sponsor; and (3) the benefits are paid with respect to an event without regard to whether benefits are provided with respect to such event under any group health plan maintained by the same plan sponsor or, with respect to individual coverage, under any health insurance coverage maintained by the same health insurance issuer.

In addition, under the existing regulations, hospital indemnity and other fixed indemnity insurance in the group market must pay a fixed dollar amount per day (or other period) of hospitalization or illness, regardless of the amounts of expenses incurred, to be considered an excepted benefit.

In the individual market, under the existing regulations, hospital indemnity and other fixed indemnity insurance must pay benefits in a fixed dollar amount per period of hospitalization or illness and/or per-service (for example, $100/day or $50/visit), regardless of the amount of expense incurred, to be considered an excepted benefit.

See

sections 9831(b)-(c) and 9832(c) of the Code, sections 732(b)-(c) and 733(c) of ERISA, and sections 2722(b)-(c), 2763 and 2791(c) of the PHS Act.

Section 1551 of the ACA.

See also

section 1563(a) and (b)(12) of the ACA. Excepted benefits are also not subject to the consumer protections and other Federal requirements that apply to comprehensive coverage, including MHPAEA, the Newborns' and Mothers' Health Protection Act, the Women's Health and Cancer Rights Act, the Genetic Information Nondiscrimination Act of 2008, the Children's Health Insurance Program Reauthorization Act of 2009, Michelle's Law, and Division BB of the CAA, 2021.

Under section 9832(c)(1) of the Code, section 733(c)(1) of ERISA, and section 2791(c)(1) of the PHS Act, this category includes, for example, accident and disability income insurance, automobile medical payment insurance, liability insurance and workers compensation, as well as “[o]ther similar insurance coverage, specified in regulations, under which benefits for medical care are secondary or incidental to other insurance benefits.”

Under section 9832(c)(2) of the Code, section 733(c)(2) of ERISA, and section 2791(c)(2) of the PHS Act, this category includes limited scope vision or dental benefits, benefits for long-term care, nursing home care, home health care, or community-based care, or other, similar limited benefits specified by the Departments through regulation.

Under section 9832(c)(4) of the Code, section 733(c)(4) of ERISA, and section 2791(c)(4) of the PHS Act, this category includes Medicare supplemental health insurance (also known as Medigap), TRICARE supplemental programs, or “similar supplemental coverage provided to coverage under a group health plan.”

See also

section 2763(b) of the PHS Act (providing that “[the] requirements of this part [related to the HIPAA individual market reforms] shall not apply to any health insurance coverage in relation to its provision of excepted benefits described in paragraph (2), (3), or (4) of section 2791(c) if the benefits are provided under a separate policy, certificate or contract of insurance.”).

26 CFR 54.9831-1(c)(4), 29 CFR 2590.732(c)(4), and 45 CFR 146.145(b)(4).

45 CFR 148.220(b)(4).

The proposals in these rules related to independent, noncoordinated excepted benefits coverage are focused on the conditions that must be met for hospital indemnity and other fixed indemnity insurance in the group or individual markets to be considered excepted benefits under the Federal regulations. Additionally, in section III.B.2 of this preamble, the Departments solicit comments regarding specified disease excepted benefits coverage in the group and individual markets to inform potential future guidance or rulemaking related to such coverage, but are not proposing changes to the Federal regulations governing such coverage in this rulemaking.

1. Fixed Indemnity Excepted Benefits Coverage

Like other forms of excepted benefits, fixed indemnity excepted benefits coverage does not provide comprehensive coverage. Rather, its primary purpose is to provide income replacement benefits.

Benefits under this type of coverage are paid in a flat (“fixed”) cash amount following the occurrence of a health-related event, such as a period of hospitalization or illness, subject to the terms of the contract. In addition, benefits are typically provided at a pre-determined level regardless of any actual health care costs incurred by a covered individual with respect to the qualifying event. Although a benefit payment may equal all or a portion of the cost of care related to an event, it is not necessarily designed to do so, and the benefit payment is made without regard to the amount of medical expense incurred.

See, e.g.,

62 FR 16903 (April 8, 1997) and 79 FR 15818 (July 8, 2014).

Jost, Timothy (2017). “ACA Round-Up: Market Stabilization, Fixed Indemnity Plans, Cost Sharing Reductions, and Penalty Updates,”

Health Affairs,

available at:

https://www.healthaffairs.org/do/10.1377/forefront.20170208.058674/full.

(“Fixed indemnity coverage is excepted benefit coverage that pays a fixed amount per-service or per-time period of service without regard to the cost of the service or the type of items or services provided.”).

Traditionally, benefits under fixed indemnity excepted benefits coverage are paid directly to a policyholder, rather than to a health care provider or facility, and the policyholder has discretion over how to use such benefits—including using the benefits to cover non-medical expenses that may or may not be related to the event that precipitated the payment of benefits.

Because fixed indemnity excepted benefits coverage is capped at a maximum benefit payment, design features aimed at reducing risk to the plan or issuer that are common in comprehensive coverage (such as medical management techniques, use of a preferred network of providers, or cost-sharing requirements) are unnecessary and are generally absent in this coverage.

AHIP (2019). “Supplemental Health Insurance: Hospital or Other Fixed Indemnity, Accident-Only, Critical Illness,” available at:

https://www.ahip.org/documents/Supplemental-Health-Insurance-Fast-Facts.pdf.

Young, Christen Linke and Kathleen Hannick (2020). “Fixed Indemnity Coverage is a Problematic Form of “Junk” Insurance,” U.S.C.-Brookings Schaeffer Initiative for Health Policy, available at:

https://www.brookings.edu/blog/usc-brookings-schaeffer-on-health-policy/2020/08/04/fixed-indemnity-health-coverage-is-a-problematic-form-of-junk-insurance.

(“Consumers are often seeking a product that transfers catastrophic financial risk to the health plan, but fixed indemnity products—almost by definition—do not do this. They set a payment amount associated with a specific service or kind of service [that] is received, and consumers are responsible for any difference between this set payment amount and the actual cost of care.”).

a. Group Market Regulations and Guidance

The Departments' 1997 interim final rules implementing the portability and renewability requirements of HIPAA codified at 26 CFR 54.9831-1(c)(4), 29 CFR 2590.732(c)(4), and 45 CFR 146.145(b)(4) established requirements for hospital indemnity and other fixed indemnity insurance to qualify as an excepted benefit in the group market. These requirements, which were effective until February 27, 2005, provided that coverage for hospital indemnity or other fixed dollar indemnity insurance is excepted only if it meets each of the following conditions: (1) the benefits are provided under a separate policy, certificate or contract of insurance; (2) there is no coordination between the provision of the benefits and an exclusion of benefits under any group health plan maintained by the same plan sponsor; and (3) the benefits are paid with respect to an event without regard to whether benefits are provided with respect to the event under any group health plan maintained by the same plan sponsor.

62 FR 16894 at 16903, 16939 through 16940, 16954, and 16971 (April 8, 1997).

The Departments' group market regulations for fixed indemnity excepted benefits coverage were first amended in the 2004 HIPAA group market final rules. Those amendments added language to further clarify that to be hospital indemnity or other fixed indemnity insurance that is an excepted benefit, the insurance must pay a fixed dollar amount per day (or per other time period) of hospitalization or illness (for example, $100/day) regardless of the amount of expenses incurred.

An illustrative example was also codified as part of these amendments clarifying that a policy providing benefits only for hospital stays at a fixed percentage of hospital expenses up to a maximum amount per day does not qualify as an excepted benefit.

As explained in the 2004 HIPAA group market final rules, the result is the same even if, in practice, the policy pays the maximum for every day of hospitalization.

69 FR 78720 at 78735, 78762, 78780, and 78798-78799 (December 30, 2004).

Id. See also

26 CFR 54.9831-1(c)(4)(iii), 29 CFR 2590.732(c)(4)(iii), and 45 CFR 146.145(b)(4)(iii).

Id.

The Departments later released Frequently Asked Questions (FAQ) on January 24, 2013, to offer additional guidance on the types of hospital indemnity or other fixed indemnity

insurance that meet the criteria for fixed indemnity excepted benefits coverage.

The Departments issued the FAQ in response to reports that policies were being advertised as fixed indemnity coverage but were paying a fixed amount on a per-service basis (for example, per doctor visit or surgical procedure) rather than a fixed amount per period (for example, per day or per week). The FAQ affirmed that, under the 2004 HIPAA group market final rules, to qualify as fixed indemnity excepted benefits coverage, the policy must pay benefits on a per-period basis as opposed to on a per-service basis.

It also affirmed that group health insurance coverage that provides benefits in varying amounts based on the type of procedure or item, such as the type of surgery actually performed or prescription drug provided, does not qualify as fixed indemnity excepted benefits coverage because it does not meet the condition that benefits be provided on a per-period basis, regardless of the amount of expenses incurred.

Frequently Asked Questions about Affordable Care Act Implementation (Part XI) (Jan. 24, 2013), Q7, available at:

https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-xi.pdf

and

https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs11.

Id.

The Departments proposed amendments to the group market regulations for fixed indemnity excepted benefits coverage in the 2016 proposed rules.

As explained in those proposed rules, the Departments were concerned that some individuals may mistake these policies for comprehensive coverage that would be considered MEC.

To avoid this confusion, the Departments proposed to adopt a notice requirement to inform enrollees and potential enrollees that the coverage is a supplement to, rather than a substitute for, comprehensive coverage, and also proposed to codify two illustrative examples to further clarify the condition that benefits be provided on a per-period basis.

The Departments also requested comments on whether the conditions for hospital indemnity or other fixed indemnity insurance to be considered excepted benefits should be more substantively aligned between the group and individual markets.

After consideration of comments, the Departments did not finalize the proposed changes to the group market regulation but noted their intention to address hospital indemnity and other fixed indemnity insurance in future rulemaking.

81 FR 38019 at 38031-38032, 38038, 38042-38043, and 38045-38046 (June 10, 2016).

Id.

at 38031-38032.

Id.

at 38031-38032, 38038, 38042-38043, and 38045-38046.

As described in section I.D.1.b of this preamble, HHS amended the individual market fixed indemnity excepted benefits coverage regulation to provide additional flexibility, subject to several additional requirements that do not apply in the group market. 79 FR 30239 (May 27, 2014).

81 FR 75316 at 75317 (October 31, 2016).

b. Individual Market Regulations and Guidance

HHS also issued an interim final rule in 1997 establishing the regulatory framework for the HIPAA individual market Federal requirements and addressing the requirements for hospital indemnity and other fixed indemnity insurance to qualify as an excepted benefit in the individual market.

The initial HIPAA individual market fixed indemnity excepted benefits coverage regulation, which was effective until July 27, 2014, provided an exemption from the Federal individual market consumer protections and requirements for comprehensive coverage if the hospital indemnity or other fixed indemnity insurance provided benefits under a separate policy, certificate, or contract of insurance and met the noncoordination-of-benefits requirements outlined in the HHS group market excepted benefits regulations.

62 FR 16985 at 16992 and 17004 (April 8, 1997).

Id.;

45 CFR 146.145(b)(4)(ii)(B) and (C).

Following issuance of the Departments' January 24, 2013 FAQ,

State insurance regulators and industry groups representing health insurance issuers expressed concerns that prohibiting hospital indemnity and other fixed indemnity insurance from payment on a per-service basis in order to qualify as an excepted benefit could limit consumer access to an important supplemental coverage option.

Based on this feedback, HHS announced in an FAQ released in January 2014 that it intended to propose amendments to the individual market fixed indemnity excepted benefits coverage regulation to allow hospital indemnity or other fixed indemnity insurance sold in the individual market to be considered an excepted benefit if four conditions were met.

First, such coverage would be sold only to individuals who have other health coverage that is MEC, within the meaning of section 5000A(f) of the Code. Second, no coordination between the provision of benefits and an exclusion of benefits under any other health coverage would be permitted. Third, benefits would be paid in a fixed dollar amount regardless of the amount of expenses incurred and without regard to whether benefits are provided with respect to an event or service under any other health insurance coverage. Finally, a notice would have to be prominently displayed to inform policyholders that the coverage is not MEC and would not satisfy the individual shared responsibility requirements of section 5000A of the Code. HHS explained that if these proposed revisions were implemented, hospital indemnity or other fixed indemnity insurance in the individual market would no longer have to pay benefits solely on a per-period basis to qualify as an excepted benefit.

Frequently Asked Questions about Affordable Care Act Implementation (Part XI) (Jan. 24, 2013), available at:

https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-xi.pdf

and

https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs11.

While the FAQ only addressed fixed indemnity insurance sold in the group market, the same statutory framework and legal analysis also applies to hospital indemnity and fixed indemnity insurance sold in the individual market.

Frequently Asked Questions about Affordable Care Act Implementation (Part XXVIII) and Mental Health Parity Implementation (Jan. 9, 2014), Q11, available at:

https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/aca-part-xviii.pdf

and

https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs18.

In the proposed rule titled “Patient Protection and Affordable Care Act; Exchange and Insurance Market Standards for 2015 and Beyond” (2014 proposed rule), HHS proposed to amend the criteria in 45 CFR 148.220 for fixed indemnity insurance to be treated as an excepted benefit in the individual market.

Consistent with the framework outlined in the January 2014 FAQ, the amendments proposed to eliminate the requirement that individual market fixed indemnity excepted benefits coverage must pay benefits only on a per-period basis (as opposed to a per-service basis) and instead proposed to require, among other things, that it be sold only as secondary to other health coverage that is MEC to qualify as an excepted benefit.

79 FR 15807 at 15818-15820, 15869 (March 21, 2014).

Id.

On July 28, 2014, in the rule titled “Patient Protection and Affordable Care Act; Exchange and Insurance Market Standards for 2015 and Beyond” (2014 final rule), HHS finalized the proposed amendments to 45 CFR 148.220(b)(4) with some modifications. Pursuant to the finalized amendments, hospital indemnity or other fixed indemnity insurance in the individual market may

qualify as fixed indemnity excepted benefits coverage if it is paid on either a per-period or per-service basis subject to several additional requirements that do not apply to fixed indemnity excepted benefits coverage in the group market.

Under 45 CFR 148.220(b)(4)(i), to qualify as excepted benefits coverage, benefits under an individual market hospital indemnity or other fixed indemnity insurance policy may only be provided to individuals who attest in their application that they have other health coverage that is MEC within the meaning of section 5000A(f) of the Code, or that they are treated as having MEC due to their status as a bona fide resident of any possession of the United States pursuant to section 5000A(f)(4)(B) of the Code.

Further, to qualify as an excepted benefit, 45 CFR 148.220(b)(4)(iv) requires specific notice language be prominently displayed in the application materials for individual market hospital indemnity or other fixed indemnity insurance. Finally, consistent with the group market fixed indemnity excepted benefits coverage regulations, 45 CFR 148.220(b)(4)(ii) implements the statutory noncoordination standard and requires that there is no coordination between the provision of benefits under the individual market fixed indemnity excepted benefits insurance policy and an exclusion of benefits under any other health coverage.

79 FR 30239 (May 27, 2014).

As discussed later in this section and in section III.B.1.a of this preamble, the U.S. Court of Appeals for the District of Columbia vacated the requirement at 45 CFR 148.220(b)(4)(i) that an individual attest to having MEC prior to purchasing a fixed indemnity policy in order for the policy to qualify as an excepted benefit.

Central United Life Insurance

Burwell,

827 F.3d 70 (D.C. Cir. 2016).

HHS made these changes in the 2014 final rule for two reasons. First, as stated previously, interested parties, including State insurance regulators and industry groups representing health insurance issuers, communicated to HHS that fixed indemnity plans that paid benefits on a per-service basis were widely available as a complement to comprehensive coverage in the group and individual markets. The National Association of Insurance Commissioners (NAIC) also expressed that State insurance regulators believed fixed indemnity plans that paid benefits on a per-service basis provided consumers an important supplemental coverage option by helping consumers that purchase MEC pay for out-of-pocket costs.

Second, beginning in 2014, most consumers were required to have MEC in order to avoid being subject to an individual shared responsibility payment under section 5000A of the Code. HHS adopted the MEC attestation requirement to prevent fixed indemnity excepted benefits coverage in the individual market from being offered as a substitute for comprehensive coverage while also accommodating the concerns of interested parties who supported allowing fixed indemnity excepted benefits coverage in the individual market to pay benefits on a per-service basis, rather than only on a per-period basis.

However, in its 2016 decision in

Central United Life Insurance Company

Burwell,

the U.S. Court of Appeals for the District of Columbia invalidated the requirement at 45 CFR 148.220(b)(4)(i) that an individual must attest to having MEC prior to purchasing fixed indemnity excepted benefits coverage in the individual market.

The Court did not engage in a severability analysis to determine whether HHS would have intended to leave the remaining provisions of the regulation in place, and left intact the language permitting fixed indemnity excepted benefits coverage in the individual market to be provided on a per-service basis.

National Association of Insurance Commissioners (2013). “Letter to Secretaries of Labor, Treasury, and Health and Human Services,” available at:

https://naic.soutronglobal.net/Portal/Public/en-GB/RecordView/Index/23541.

(“State regulators believe hospital and other fixed indemnity coverage with variable fixed amounts based on service type could provide important options for consumers as supplemental coverage. Consumers who purchase comprehensive coverage that meets the definition of `minimum essential coverage' may still wish to buy fixed indemnity coverage to help meet out-of-pocket medical and other costs.”).

79 FR 30239 at 30255 (May 27, 2014).

827 F.3d 70 (D.C. Cir. July 1, 2016).

2. Specified Disease Excepted Benefits Coverage

Like hospital indemnity or other fixed indemnity insurance, coverage only for a specified disease or illness that meets the requirements under section 9831(c)(2) of the Code, section 732(c)(2) of ERISA, and section 2722(c)(2) of the PHS Act qualifies as a form of independent, noncoordinated excepted benefits coverage.

Specified disease excepted benefits coverage is also not an alternative to comprehensive coverage, but rather provides a cash benefit related to the diagnosis or the receipt of items or services related to the treatment of one or more medical conditions specified in the insurance policy, certificate, or contract of insurance. The Departments are aware of various forms of coverage being marketed to consumers as specified disease or illness coverage under a number of labels, including “specified disease,” “critical illness,” and “dread disease” coverage (or insurance).

Some forms of specified disease excepted benefits coverage pay benefits based on diagnosis or treatment for a single condition (such as diabetes), while others pay benefits related to diagnosis or treatment for a disease category (such as cancer).

See also

section 2763(b) of the PHS Act.

See Healthinsurance.org

(2023). “Glossary: What is a Critical Illness Plan?,” available at:

https://www.healthinsurance.org/glossary/critical-illness-plan. See also

American Council of Life Insurers (2021). “Model 171 Benefits Overview: Presented to the NAIC Accident and Sickness Minimum Standards (B) Subgroup,” available at:

https://content.naic.org/sites/default/files/call_materials/Supplemental%20Benefits%20Overview.pdf.

The Departments codified requirements for coverage only for a specified disease or illness to qualify as an excepted benefit in the group market in the 1997 HIPAA interim final rules.

To qualify as excepted benefits in the group market, specified disease or illness coverage (for example, cancer-only policies) must provide benefits under a separate policy, certificate, or contract of insurance; there must be no coordination between the provision of the benefits and an exclusion of benefits under any group health plan maintained by the same plan sponsor; and benefits must be paid with respect to an event without regard to whether benefits are provided with respect to the event under any group health plan maintained by the same plan sponsor.

66 67

HHS codified similar requirements for specified disease or illness coverage to qualify as an excepted benefit in the individual market in the 1997 interim final rule that established the regulatory framework for the HIPAA individual market.

Unlike fixed indemnity excepted benefits coverage, the Departments have not issued subsequent rulemaking or guidance regarding specified disease excepted benefits coverage.

62 FR 16894 at 16903 (April 8, 1997).

See

26 CFR 54.9831-1(c)(4)(i) and (ii), 29 CFR 2590.732(c)(4)(i) and (ii), and 45 CFR 146.145(b)(4)(i) and (ii).

The Departments' group market regulations for specified disease excepted benefits coverage were later affirmed, without change, in the 2004 HIPAA group market final rules.

See

69 FR 78720 at 78762, 78780, and 78798-78799 (December 30, 2004).

See also

45 CFR 148.220(b)(3).

62 FR 16985 at 16992, 17004 (April 8, 1997).

See also

section 2763(b) of the PHS Act.

In the preamble to the 2016 proposed rules, the Departments solicited comments on whether a policy covering multiple specified diseases or illnesses may be considered to be excepted benefits, but did not propose changes to the rules governing specified disease excepted benefits coverage. The Departments sought comments on

whether such policies should be considered excepted benefits and, if so, whether protections were needed to ensure they were not mistaken for comprehensive coverage, expressing concern that individuals who purchase a specified disease policy covering multiple diseases or illnesses may incorrectly believe they are purchasing comprehensive coverage when, in fact, these polices are not subject to Federal consumer protections and requirements for comprehensive coverage.

The Departments declined to address specified disease excepted benefits coverage in the 2016 final rules, but noted that they might address such coverage in future regulations or guidance.

81 FR 38019, 38032 (June 10, 2016).

81 FR 75316, 75317, footnote 12 (October 31, 2016).

E. Tax Treatment and Substantiation Requirements for Amounts Received From Fixed Indemnity Insurance and Certain Other Arrangements

Hospital indemnity or other fixed indemnity insurance and coverage only for a specified disease or illness are treated as “accident or health insurance” under sections 104, 105, and 106 of the Code whether or not they are excepted benefits. Premiums paid by an employer (including by salary reduction pursuant to section 125 of the Code) for accident or health insurance are excluded from an employee's gross income under section 106 of the Code.

Amounts received from accident or health insurance are excluded from a taxpayer's gross income under section 104(a)(3) of the Code if the premiums are paid for on an after-tax basis. The exclusion from gross income for these amounts under section 104(a)(3) of the Code does not apply to amounts attributable to contributions by an employer that were not includible in the gross income of the employee or amounts paid directly by the employer. This means that the exclusion under section 104(a)(3) of the Code does not apply where the premiums or contributions paid for the accident or health insurance are paid on a pre-tax basis. The taxation of amounts received by an employee from accident or health insurance where the premiums or contributions are paid on a pre-tax basis is determined under section 105 of the Code.

Section 105(a) of the Code provides that amounts received by an employee through accident or health insurance for personal injuries or sickness are included in gross income, except as otherwise provided in section 105. Section 105(b) of the Code excludes from gross income amounts paid by the employer to reimburse an employee's expenses for medical care (as defined in section 213(d) of the Code). Under 26 CFR 1.105-2, the exclusion from gross income in section 105(b) of the Code “applies only to amounts which are paid specifically to reimburse the taxpayer for expenses incurred by him for the prescribed medical care. Thus, section 105(b) does not apply to amounts which the taxpayer would be entitled to receive irrespective of whether or not he incurs expenses for medical care” and “section 105(b) is not applicable to the extent that such amounts exceed the amount of the actual expenses for such medical care.” Further, under longstanding regulations and guidance issued by the Treasury Department and the IRS, amounts for medical expenses within the meaning of section 213(d) of the Code must be substantiated if reimbursed by employment-based accident or health insurance that would not be excluded from a taxpayer's gross income but for the application of section 105(b) of the Code.

See, e.g.,

84 FR 28888, 28917 (June 20, 2019) (describing substantiation requirements for employer-sponsored health reimbursement arrangements);

see also

Q44-55 of IRS Notice 2017-67, 2017-47 IRB 517; Prop. Treas. Reg. § 1.125-6 (72 FR 43938, 43960-43965 (August 6, 2007)); IRS Notice 2002-45, 2002-2 CB 93.

F. Level-Funded Plan Arrangements

The Departments understand that an increasing number of group health plan sponsors are utilizing a type of self-funded arrangement in which the plan sponsor makes set monthly payments to a service provider to cover estimated claims costs, administrative costs, and premiums for stop-loss insurance for claims that surpass a maximum dollar amount beyond which the plan sponsor is no longer responsible for paying claims (attachment point). This funding mechanism or plan type, known as level-funding, is increasingly utilized by small employers in particular. Stop-loss insurance is used by employers or group health plans as part of these plan arrangements to limit their financial responsibility, and the arrangements typically involve both employer and employee contributions. When the total dollar amount of the claims paid during the year is lower than the total amount of contributions attributed to claims costs, the plan or plan sponsor generally will receive a refund or carry the surplus over to the next plan year. When annual claims exceed projected claims, the subsequent year's monthly payments may, and oftentimes do, increase to adjust to the plan's claims experience.

II. Promoting Access to High-Quality, Affordable, and Comprehensive Coverage

The Departments recognize that STLDI can provide temporary health insurance coverage for individuals who are experiencing brief periods without health coverage (for example, due to application of an employer waiting period), and that fixed indemnity excepted benefits coverage can provide consumers with income replacement that can be used to cover out-of-pocket expenses not covered by comprehensive coverage or to defray non-medical expenses (for example, mortgage or rent) in the event of an unexpected or serious health event. Both STLDI and fixed indemnity excepted benefits coverage generally provide limited benefits at lower premiums than comprehensive coverage,

and enrollment is typically available at any time (sometimes subject to medical underwriting) rather than being restricted to open and special enrollment periods. However, given significant changes in the legal landscape and market conditions since the Departments last addressed STLDI and fixed indemnity excepted benefits coverage, and the low value that STLDI and fixed indemnity excepted benefits coverage provide to consumers when used as a substitute for comprehensive coverage, the Departments have determined that it is now necessary and appropriate to propose to amend the existing Federal regulations governing both types of coverage to more clearly distinguish them from comprehensive coverage and increase consumer awareness of coverage options that include the full range of Federal consumer protections.

Although it is typically true that the unsubsidized premium price for comprehensive coverage is greater than STLDI or fixed indemnity excepted benefits coverage, consistent with the greater level of benefits provided under comprehensive coverage,

see

the additional discussion in this section of this preamble regarding the availability of financial subsidies to reduce the premium and out-of-pocket costs for comprehensive coverage purchased on an Exchange for eligible individuals.

Access to Affordable Coverage

In the preamble to the 2018 final rules, the Departments explained the decision to amend the definition of STLDI to expand access to such policies by citing STLDI as an important means to provide more affordable coverage options and more choices for consumers.

The Departments cited a 21 percent increase in individual health

insurance coverage premiums between 2016 and 2017, and a 20 percent decrease in average monthly enrollment for individuals who did not receive PTC, along with a 10 percent overall decrease in monthly enrollment during the same period.

Additionally, the Departments noted that in 2018 about 26 percent of enrollees (living in 52 percent of counties) had access to just one issuer on the Exchange.

83 FR 38212 at 38217 (October 2, 2018).

Id.

at 38214, citing CMS (2018). “Trends in Subsidized and Unsubsidized Individual Health Insurance Market Enrollment,” available at:

https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/2018-07-02-Trends-Report-2.pdf.

Id.,

citing KFF (2017). “Insurer Participation on ACA Marketplaces, 2014-2018,” now available at:

https://www.kff.org/private-insurance/issue-brief/insurer-participation-on-the-aca-marketplaces-2014-2021/.

However, since the publication of the 2018 final rules, comprehensive coverage for individuals has generally become more accessible and affordable. For example, a study examining issuer participation trends from 2014 to 2021 in every county in the United States found that the number of consumers with multiple issuer options for individual health insurance coverage on the Exchanges has grown consistently since 2018. In 2021, 78 percent of enrollees (living in 46 percent of counties) had a choice of three or more health insurance issuers, up from 67 percent of enrollees in 2020 and 58 percent of enrollees in 2019. Only 3 percent of enrollees (residing in 10 percent of counties) resided in single-issuer counties—down from 26 percent of enrollees (residing in 52 percent of counties).

The Centers for Medicare & Medicaid Services (CMS) reported that a record 16.4 million people enrolled in Exchange coverage during the 2023 Open Enrollment Period, including 3.7 million consumers (23 percent of total enrollments) who were new to Exchanges in 2023, and 12.7 million returning customers. Over 1.8 million more consumers signed up for coverage during the 2023 Open Enrollment Period compared to the same period in 2022 (a 13 percent increase), and nearly 4.4 million more consumers signed up compared to the 2021 Open Enrollment Period (a 36 percent increase).

As noted in section I.A of this preamble, enrollment gains during 2023 were influenced by the expansion of PTC subsidies, as first expanded under the ARP and then extended through 2025 under the IRA.

In an analysis prior to the passage of the IRA, the Congressional Budget Office stated that if the ARP subsidies were made permanent, they would attract 4.8 million new people to the Exchanges each year, and that 2.2 million fewer individuals would be without health insurance, on average, over the period from 2023-2032.

McDermott, Daniel and Cynthia Cox (2020). “Insurer Participation on the ACA Marketplaces, 2014-2021,” KFF, available at:

https://www.kff.org/private-insurance/issue-brief/insurer-participation-on-the-aca-marketplaces-2014-2021.

CMS (2023). “Health Insurance Marketplaces, 2023 Open Enrollment Report,” available at:

https://www.cms.gov/files/document/health-insurance-exchanges-2023-open-enrollment-report-final.pdf.

Although unsubsidized premiums for 2023 increased on average between 2.2 percent and 4.7 percent compared to the previous year, after four years of declines, PTC under the IRA largely shielded consumers from these slight increases.

See

Ortaliza, Jared, Justin Lo, Krutika Amin, and Cynthia Cox (2022). “How ACA Marketplace Premiums Are Changing By County in 2023,” KFF, available at:

https://www.kff.org/private-insurance/issue-brief/how-aca-marketplace-premiums-are-changing-by-county-in-2023.

Congressional Budget Office (2022). “Letter from Phillip L. Swagel to Rep. Mike Crapo, “Re: Health Insurance Policies,” available at:

https://www.cbo.gov/system/files?file=2022-07/58313-Crapo_letter.pdf.

Additionally, on October 13, 2022, the IRS and the Treasury Department issued final regulations under section 36B of the Code to provide that affordability of employer-sponsored MEC for family members of an employee is determined based on the employee's share of the cost of covering the employee and those family members, not the cost of covering only the employee (2022 affordability rule).

It was estimated that this rule change, aimed at addressing the issue often called the “family glitch,” will increase the number of individuals with PTC-subsidized Exchange coverage by approximately 1 million per year for the next 10 years.

These anticipated enrollment trends and the availability of the enhanced subsidies allay the accessibility and affordability concerns expressed by the Departments in the preamble to the 2018 final rules regarding the availability of affordable options for comprehensive coverage, and offer further support for the proposals in these proposed rules aimed at helping consumers differentiate between comprehensive coverage and other forms of more limited health coverage.

87 FR 61979 (October 13, 2022).

Id.

at 61999.

Although access to affordable comprehensive coverage has improved in recent years, the Departments recognize that affordability concerns continue to persist among consumers, including among consumers who are enrolled in comprehensive coverage. A 2022 national survey conducted by the Commonwealth Fund found that 29 percent of people with employer coverage and 44 percent of those with coverage purchased in the individual market were underinsured, meaning that their coverage did not provide them with affordable access to health care.

The Departments believe that it is important to ensure consumers have access to a wide range of tools that can support access to affordable health care. However, neither STLDI nor fixed indemnity excepted benefits coverage represents a complete solution to larger issues of affordable access to health care and health coverage. Consumers who enroll in these plans as a substitute for comprehensive coverage or under the misapprehension that STLDI and fixed indemnity excepted benefits are a lower-cost equivalent to comprehensive coverage are at risk of being exposed to significant financial liability in the event of a costly or unexpected health event, often without knowledge of the risk associated with such coverage.

Collins, Sara, Lauren Haynes, and Relebohile Masitha (2022). “The State of U.S. Health Insurance in 2022: Findings from the Commonwealth Fund Biennial Health Insurance Survey,” Commonwealth Fund, available at:

https://www.commonwealthfund.org/publications/issue-briefs/2022/sep/state-us-health-insurance-2022-biennial-survey.

Specifically, this study defined a person as “underinsured” if they were insured all year but one of the following applied: (1) Out-of-pocket costs over the prior 12 months, excluding premiums, were equal to 10 percent or more of household income; (2) Out-of-pocket costs over the prior 12 months, excluding premiums, were equal to 5 percent or more of household income for individuals living under 200 percent of the FPL ($27,180 for an individual or $55,500 for a family of four in 2022); or (3) The deductible constituted 5 percent or more of household income.

B. Risks to Consumers

As noted in the introduction to section II of this preamble, the limitations on benefits and coverage under STLDI or fixed indemnity excepted benefits coverage may allow some issuers to offer such coverage at lower monthly premiums than comprehensive coverage. The Departments are concerned about additional costs to consumers who enroll in STLDI or fixed indemnity excepted benefits coverage and incur medical expenses that are not covered by such coverage. The typical limits on coverage provided by STLDI and fixed indemnity excepted benefits coverage can lead to more and higher uncovered medical bills than consumers enrolled in comprehensive coverage would incur, exposing consumers to greater financial risk.

Healthy consumers who

enroll in STLDI or fixed indemnity excepted benefits coverage as an alternative to comprehensive coverage may not realize their STLDI or fixed indemnity excepted benefits coverage excludes or limits coverage for preexisting conditions (including conditions the consumer did not know about when they enrolled), or conditions contracted after enrollment, such as COVID-19.

Palanker, Dania, JoAnn Volk, and Kevin Lucia (2018). “Short-Term Health Plan Gaps and Limits Leave People at Risk,” Commonwealth Fund, available at:

https://www.commonwealthfund.org/blog/2018/short-term-health-plan-gaps-and-limits-leave-people-risk.

(Describing STLDI marketing

materials that list coverage limits that would fall far short of typical costs to a consumer, including $1,000 a day for hospital room and board coverage, $1,250 a day for the intensive care unit, $50 a day for doctor visits while in the hospital, $100 a day for inpatient substance abuse treatment, and $250 for ambulance transport).

Additionally, a consumer enrolled in STLDI may discover that a newly-diagnosed medical condition is categorized as a preexisting condition, and related medical expenses will not be covered by, or will be only partially covered by, their STLDI policy.

For example, a consumer in Illinois who was diagnosed with Stage IV cancer a month

after

enrolling in STLDI was denied coverage for treatment by the STLDI issuer, both for treatments that led to his successful remission and for a potentially life-saving bone marrow transplant. In his case, the STLDI issuer of his policy determined that his cancer was a preexisting condition because he had disclosed experiencing back pain of undiagnosed cause to the broker who sold him his STLDI policy—leaving him with $800,000 of medical debt and without meaningful health coverage as he continued to fight his illness.

See

Lueck, Sarah (2018). “Key Flaws of Short-Term Health Plans Pose Risks to Consumers,” Center on Budget and Policy Priorities, available at:

https://www.cbpp.org/research/health/key-flaws-of-short-term-health-plans-pose-risks-to-consumers. See also

Hall, Mark and Michael McCue (2022). “Short-Term Health Insurance and the ACA Market,” Commonwealth Fund, available at:

https://www.commonwealthfund.org/blog/2022/short-term-health-insurance-and-aca-market. See also

Partnership to Protect Coverage (2021). “Under-Covered: How `Insurance-Like' Products are Leaving Patients Exposed,” available at:

https://www.nami.org/NAMI/media/NAMI-Media/Public%20Policy/Undercovered_Report_03252021.pdf.

Partnership to Protect Coverage (2021). “Under-Covered: How `Insurance-Like' Products are Leaving Patients Exposed,” available at:

https://www.nami.org/NAMI/media/NAMI-Media/Public%20Policy/Undercovered_Report_03252021.pdf.

The financial risk for consumers that encounter newly diagnosed conditions or a significant medical event while enrolled in STLDI increases with the length of their policy. In fact, researchers found that because the maximum annual limitation on an individual's cost sharing for essential health benefits under section 1302(c)(1) of the ACA does not apply to STLDI, the maximum out-of-pocket health care spending limit for STLDI was on average nearly three times that of comprehensive coverage in 2020.

A 2020 report found that over 60 percent of the STLDI policies surveyed had a maximum out-of-pocket limit greater than the $7,900 limit that was permitted for self-only comprehensive coverage in 2019, and 15 percent had limits in excess of $15,000; as is typical for STLDI, these limits apply only to the coverage period, which in some cases was only 6 months, compared to the annual limits required under the ACA.

Consumers enrolled in STLDI who ultimately require medical care are more likely to incur higher out-of-pocket costs than if they had enrolled in comprehensive coverage.

Dieguez, Gabriela and Dane Hansen (2020). “The Impact of Short-term Limited-duration Policy Expansion on Patients and the ACA Individual Market,” Milliman, available at:

https://www.milliman.com/en/insight/the-impact-of-short-term-limited-duration-policy-expansion-on-patients-and-the-aca-individual-market.

Id. See also,

Palanker, Dania, Kevin Lucia, and Emily Curran (2017). “New Executive Order: Expanding Access to Short-Term Health Plans Is Bad for Consumers and the Individual Market,” Commonwealth Fund, available at

https://www.commonwealthfund.org/blog/2017/new-executive-order-expanding-access-short-term-health-plans-bad-consumers-and-individual.

(“When considering the deductible, the best-selling plans have out-of-pocket maximums ranging from $7,000 to $20,000 for just three months of coverage. In comparison, the ACA limits out-of-pocket maximums to $7,150 for the entire [2017 calendar] year.”).

Id.

As noted in section I.D.1 of this preamble, consumers who enroll in fixed indemnity excepted benefits coverage as an alternative to comprehensive coverage bear similar risk and exposure to significant out-of-pocket expenses due to their health care costs exceeding the fixed cash benefit to which they may be entitled, if benefits are even provided for their illness or injury. While issuers of fixed indemnity excepted benefits coverage may emphasize the potential for cash benefits that sound generous outside of the context of the true costs of a significant medical event—such as a product suggesting that a consumer could receive a flat payment in excess of $10,000 following a five-day hospitalization—fixed indemnity excepted benefits coverage is not designed to, and typically does not, provide benefits relative to the full cost of such events. As noted by one expert, hospitalization costs can exceed $10,000 per day, even without accounting for provider services.

A consumer who relied on fixed indemnity excepted benefits coverage and who required hospitalization would be left with tens of thousands of dollars in unpaid medical bills, and without comprehensive coverage designed to cover any long-term follow-up care costs.

Appleby, Julie (2017). “Brokers Tout Mix-And-Match Coverage To Avoid High-Cost ACA Plans,” KFF, available at:

https://kffhealthnews.org/news/brokers-tout-mix-and-match-coverage-to-avoid-high-cost-aca-plans.

Consumers enrolled in STLDI and fixed indemnity excepted benefits coverage may experience financial hardship when their medical bills are unaffordable.

Notably, the protections against balance billing and out-of-network cost sharing for certain out-of-network services established under the No Surprises Act, which are intended to shield consumers from surprise bills that can drive medical debt,

do not apply to STLDI or fixed indemnity excepted benefits coverage.

Because STLDI is typically subject to medical underwriting and not guaranteed renewable, consumers enrolled in STLDI as an alternative to comprehensive coverage may also be unable to renew STLDI at the end of the coverage period, increasing the risk of periods during which they are uninsured. Such consumers may not be able to purchase comprehensive coverage in the individual market until an open enrollment or special enrollment period occurs. Therefore, STLDI serves better as a bridge between different sources of comprehensive coverage than as an alternative to comprehensive coverage. Similarly, as noted in section I.D.1 of this preamble, fixed indemnity excepted benefit coverage serves best as an income replacement policy

that supplements

comprehensive coverage rather than as an alternative to comprehensive coverage.

Unaffordable medical debt increasingly impacts members of disadvantaged and marginalized communities.

See

Lopes, Lunna, Audrey Kearney, Alex Montero, Liz Hamel, and Mollyann Brodie (2022). “Health Care Debt In The U.S.: The Broad Consequences Of Medical And Dental Bills,” KFF, available at:

https://www.kff.org/health-costs/report/kff-health-care-debt-survey. See also

Himmelstein, David, Samuel Dickman, Danny McCormick, David Bor, Adam Gaffney, and Steffie Woolhandler (2022). “Prevalence and Risk Factors for Medical Debt and Subsequent Changes in Social Determinants of Health in the US,”

JAMA Network Open,

Volume 5 Issue 9:e2231898, available at:

https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2796358.

Families USA (2019). “Surprise Medical Bills, Results from a National Survey,” available at

https://familiesusa.org/wp-content/uploads/2019/11/Surprise-Billing-National-Poll-Report-FINAL.pdf.

See

26 CFR 54.9816-2T, 29 CFR 2590.716(b), and 45 CFR 149.20(b).

As an income replacement policy, the policyholder typically has broad discretion in how to use the fixed cash benefits provided, including but not limited to reimbursement for medical expenses not covered by comprehensive coverage

(for example, deductibles, coinsurance, copays) or to defray non-medical costs (for example, mortgage or, rent).

In the preamble to the 2018 final rules, the Departments stated that individuals who purchased STLDI rather than being uninsured would potentially experience improved health outcomes and have greater protection from catastrophic health care expenses.

However, recent experience with the COVID-19 public health emergency (PHE)

has prompted the Departments to reassess the degree of protection generally afforded by coverage that is not subject to the Federal consumer protections and requirements for comprehensive coverage, such as STLDI and fixed indemnity excepted benefits coverage, and to reassess the value of a framework that instead encourages uninsured individuals to purchase comprehensive coverage. Enrollees in STLDI and fixed indemnity excepted benefits coverage with COVID-19 typically face significant limitations on coverage for COVID-19 related treatments, and high out-of-pocket expenses.

For example, neither STLDI nor fixed indemnity excepted benefits coverage was subject to requirements under section 6001 of the Families First Coronavirus Response Act (Pub. L. 116-127, March 18, 2020), as amended by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (Pub. L. 116-136, March 27, 2020), to cover COVID-19 diagnostic testing, without cost sharing, furnished during the COVID-19 PHE;

or the requirement under section 3203 of the CARES Act to cover qualifying coronavirus preventive services, including COVID-19 vaccines, without cost sharing. Instead, both of these important coverage expansions enacted by Congress as part of the nation's response to the COVID-19 PHE only applied to comprehensive coverage. Any coverage of COVID-19 vaccines, diagnostic testing, or treatment by STLDI or fixed indemnity excepted benefits coverage was subject to the discretion of individual plans and issuers of these policies and applicable State law. Notably, the Health Resources and Services Administration's COVID-19 Coverage Assistance Fund, which reimbursed eligible health care providers for providing COVID-19 vaccines to underinsured individuals,

included enrollees in STLDI and excepted benefits coverage within the definition of underinsured.

The CARES Act also amended the definition of “uninsured individual” in Social Security Act section 1902(ss) to include individuals enrolled only in STLDI. Even individuals enrolled in STLDI or fixed indemnity excepted benefits coverage who are generally healthy are at risk of needing health care, and thus at risk of incurring unaffordable medical bills at any time. The COVID-19 PHE has underscored the unpredictability of when the need for medical care will arise, and the importance of encouraging individuals to enroll in comprehensive coverage.

83 FR 38212, 38229 (October 2, 2018).

On January 31, 2020, HHS Secretary Alex M. Azar II declared that as of January 27, 2020, a nationwide public health emergency (PHE) exists as a result of the 2019 novel coronavirus (COVID-19).

See

HHS Office of the Assistant Secretary for Preparedness and Response, Determination of the HHS Secretary that a Public Health Emergency Exists, available at:

https://www.phe.gov/emergency/news/healthactions/phe/Pages/2019-nCoV.aspx.

This declaration was last renewed by HHS Secretary Xavier Becerra on October 13, 2022, following previous renewals on April 21, 2020, July 23, 2020, October 2, 2020, January 7, 2021, April 15, 2021, July 20, 2021, and October 18, 2021, January 14, 2022, April 12, 2022, and July 15, 2022.

See

HHS Office of the Assistant Secretary for Preparedness and Response, Renewal of Determination That A Public Health Emergency Exists, available at:

https://aspr.hhs.gov/legal/PHE/Pages/covid19-13Oct2022.aspx.

On January 30, 2023 and February 9, 2023, the Biden-Harris Administration announced that it intended to end the PHE at the end of the day on May 11, 2023.

See

Executive Office of the President, Office of Management and Budget, Statement of Administration Policy: H.R. 382 and H.J. Res. 7 (Jan. 30, 2023), available at:

https://www.whitehouse.gov/wp-content/uploads/2023/01/SAP-H.R.-382-H.J.-Res.-7.pdf;

Letter to U.S. Governors from HHS Secretary Xavier Becerra on renewing COVID-19 Public Health Emergency (PHE) (Feb. 9, 2023), available at:

https://www.hhs.gov/about/news/2023/02/09/letter-us-governors-hhs-secretary-xavier-becerra-renewing-covid-19-public-health-emergency.html.

The PHE did in fact end at the end of the day on May 11, 2023.

See, e.g.,

Curran, Emily, Kevin Lucia, JoAnn Volk, and Dania Palanker (2020). “In the Age of COVID-19, Short-Term Plans Fall Short for Consumers,” Commonwealth Fund, available at:

https://www.commonwealthfund.org/blog/2020/age-covid-19-short-term-plans-fall-short-consumers.

This study found that STLDI policies provide less financial protection than comprehensive coverage if an enrollee needs treatment for COVID-19. The study found that, among the 12 brochures reviewed for STLDI policies being sold in Georgia, Louisiana, and Ohio, 11 excluded nearly all coverage for prescription drugs, with some providing limited coverage of inpatient drugs. The study further found that STLDI imposed high cost sharing, with deductibles ranging from $10,000 to $12,500 (which did not count toward the enrollees' maximum out-of-pocket costs) and that enrollees may be required to meet separate deductibles for emergency room treatment, forcing some enrollees to face out-of-pocket costs of more than $30,000 over a 6-month period. Additionally, the study found that STLDI did not cover services related to preexisting conditions.

FAQs about Families First Coronavirus Response Act and Coronavirus Aid, Relief, and Economic Security Act Implementation Part 42, Q1 (April 11, 2020), available at:

https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-42.pdf

and

https://www.cms.gov/files/document/FFCRA-Part-42-FAQs.pdf;

Additional Policy and Regulatory Revisions in Response to the COVID-19 Public Health Emergency, 85 FR 71142, 71173 (Nov. 6, 2020); FAQs about Affordable Care Act Implementation Part 51, Families First Coronavirus Response Act and Coronavirus Aid, Relief, and Economic Security Act Implementation (Jan. 10, 2022), available at:

https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-51.pdf

and

https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/FAQs-Part-51.pdf

(FAQs Part 51); and FAQs about Families First Coronavirus Response Act, Coronavirus Aid, Relief, and Economic Security Act and Health Insurance Portability and Accountability Act Implementation (FAQs Part 58), available at:

https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-58

and

https://www.cms.gov/cciio/resources/fact-sheets-and-faqs/downloads/faqs-part-58.pdf.

Note that the COVID-19 PHE ended on May 11, 2023.

Underinsured individuals are defined for this purpose as having a health plan that either does not include COVID-19 vaccine administration as a covered benefit or covers COVID-19 vaccine administration but with cost sharing.

See

Health Resources and Services Administration, “FAQs for The HRSA COVID-19 Coverage Assistance Fund,” available at:

https://www.hrsa.gov/provider-relief/about/covid-19-coverage-assistance/faq.

Health Resources and Services Administration, “FAQs for The HRSA COVID-19 Coverage Assistance Fund,” available at:

https://www.hrsa.gov/provider-relief/about/covid-19-coverage-assistance/faq.

The Departments have also become aware of potentially deceptive or aggressive marketing of STLDI and fixed indemnity excepted benefits coverage to consumers who may be unaware of the limits of these plans or the availability of Federal subsidies that could reduce the costs of premiums and out-of-pocket health care expenditures for comprehensive coverage purchased through an Exchange.

100

The Departments note that these concerns are not limited to individual market consumers considering STLDI or fixed indemnity excepted benefits coverage. Reports that employers are increasingly offering fixed indemnity coverage alongside a plan that offers only a very limited set of primary or preventive care benefits (or in some cases, as the only form of health coverage) have also raised similar concerns about

consumers who obtain this health coverage through their employers.

101

Consumers who are unaware of the coverage limitations of these arrangements, or who are employed by employers who are similarly unaware, can be faced with overwhelming medical costs if they require items and services that are not covered by their group health plan, because the fixed indemnity excepted benefits coverage provides only fixed cash benefits that may be far lower than the costs of medical services, rather than coverage intended to cover the costs of the medical services themselves. For example, a Texas consumer who was enrolled in two forms of health insurance through his employer received a $67,000 hospital bill after he experienced a heart attack. Although he believed his two policies would provide comprehensive coverage, he learned that his coverage was provided through a group health plan that covered only preventive services and prescription drugs and a fixed indemnity excepted benefits coverage policy that provided a cash benefit of less than $200 per day of hospitalization.

102

Additionally, employers may incur penalties if they erroneously treat fixed indemnity policies as excepted benefits when the policies do not meet the requirements for excepted benefits (for example, when they are not offered as independent, noncoordinated benefits) and fail to comply with applicable group market Federal consumer protections and requirements for comprehensive coverage, such as the requirement to provide participants, beneficiaries, and enrollees with a summary of benefits and coverage that meets applicable content requirements or the prohibition on lifetime and annual dollar limits on essential health benefits.

103

In light of research revealing significant disparities in health insurance literacy among certain underserved racial and ethnic groups and people with incomes below the FPL,

104

the Departments are also concerned that underserved populations may be particularly vulnerable to misleading or aggressive sales and marketing tactics that obscure the differences between comprehensive coverage and STLDI or fixed indemnity excepted benefits coverage, exposing these populations to higher levels of health and financial risks. As noted in Executive Order 13995, the COVID-19 pandemic has “exposed and exacerbated severe and pervasive health and social inequities in America,” highlighting the urgency with which such inequities must be addressed. These concerns continue amid the Medicaid unwinding period that began on April 1, 2023 during which State Medicaid programs have 12 months to initiate, and 14 months to complete, a renewal for all individuals enrolled in Medicaid, the Children's Health Insurance Program (CHIP), and, if applicable, the Basic Health Program (BHP).

105

HHS has estimated that 15 million beneficiaries will lose Medicaid, CHIP, or BHP coverage as a result of Medicaid unwinding.

106

The Departments are concerned that the large population of individuals at risk of losing Medicaid and those other forms of coverage, due to a loss of eligibility or as a result of administrative churn, may be susceptible to these marketing and sales tactics, and might therefore mistakenly enroll in STLDI or fixed indemnity excepted benefits coverage in lieu of comprehensive coverage.

100

Palanker, Dania and Kevin Lucia (2021). “Limited Plans with Minimal Coverage Are Being Sold as Primary Coverage, Leaving Consumers at Risk,” Commonwealth Fund, available at:

https://www.commonwealthfund.org/blog/2021/limited-plans-minimal-coverage-are-being-sold-primary-coverage-leaving-consumers-risk.

(Noting that fixed indemnity insurance may be “bundled” with other non-comprehensive insurance products in such a way that “the plans look like comprehensive coverage” while still offering limited benefits).

See also

Palanker, Dania, JoAnn Volk, and Maanasa Kona (2019). “Seeing Fraud and Misleading Marketing, States Warn Consumers About Alternative Health Insurance Products,” Commonwealth Fund, available at:

https://www.commonwealthfund.org/blog/2019/seeing-fraud-and-misleading-marketing-states-warn-consumers-about-alternative-health.

101

Young, Christen Linke and Kathleen Hannick (2020). “Fixed Indemnity Coverage is a Problematic Form of “Junk” Insurance,” U.S.C.-Brookings Schaeffer Initiative for Health Policy, available at:

https://www.brookings.edu/blog/usc-brookings-schaeffer-on-health-policy/2020/08/04/fixed-indemnity-health-coverage-is-a-problematic-form-of-junk-insurance.

102

Avila, Jaie (2019). “Show Me Your Bill Helps Wipe Out $70K in Charges After Heart Attack,” News 4 San Antonio, available at

https://news4sanantonio.com/news/trouble-shooters/show-me-your-bill-helps-wipe-out-70k-in-charges-after-heart-attack.

103

See

26 CFR 54.9815-2715(e); 29 CFR 2590.715-2715(e); 45 CFR 147.200(e).

See also

section 2711 of the PHS Act and section 4980D of the Code.

104

Edward, Jean, Amanda Wiggins, Malea Hoepf Young, Mary Kay Rayens (2019). “Significant Disparities Exist in Consumer Health Insurance Literacy: Implications for Health Care Reform,”

Health Literacy Research and Practice,

available at:

https://pubmed.ncbi.nlm.nih.gov/31768496/. See also

Villagra, Victor and Bhumika Bhuva (2019). “Health Insurance Literacy: Disparities by Race, Ethnicity, and Language Preference,”

The American Journal of Managed Care,

available at:

https://www.ajmc.com/view/health-insurance-literacy-disparities-by-race-ethnicity-and-language-preference.

105

As a condition of receiving a temporary Federal Medical Assistance Percentage (FMAP) increase under section 6008 of the Families First Coronavirus Response Act, states were required to maintain enrollment of nearly all Medicaid enrollees during the COVID-19 PHE. This “continuous enrollment condition” was decoupled from the COVID-19 PHE and ended on March 31, 2023 under the Consolidated Appropriations Act, 2023.

See

CMS, Center for Consumer Information and Insurance Oversight, Temporary Special Enrollment Period (SEP) for Consumers Losing Medicaid or the Children's Health Insurance Program (CHIP) Coverage Due to Unwinding of the Medicaid Continuous Enrollment Condition— Frequently Asked Questions (FAQ) (Jan. 27, 2023), available at:

https://www.cms.gov/technical-assistance-resources/temp-sep-unwinding-faq.pdf.

106

HHS, Assistant Secretary for Planning and Evaluation, Office of Health Policy, “Unwinding the Medicaid Continuous Enrollment Provision: Projected Enrollment Effects and Policy Approaches,” August 19, 2022, available at:

https://aspe.hhs.gov/sites/default/files/documents/404a7572048090ec1259d216f3fd617e/aspe-end-mcaid-continuous-coverage_IB.pdf.

C. Impact on Risk Pools

At the time the 2018 final rules were issued, the Departments acknowledged that expanding access to STLDI could have potential negative effects on the risk pools for individual health insurance coverage and on individuals who find themselves insufficiently protected by the typically limited benefits of an STLDI policy. The Departments were of the view that the affordability and access challenges facing consumers at that time necessitated action to increase access to STLDI to provide an alternative option for individuals who were unable or disinclined to purchase comprehensive coverage.

As discussed earlier in this section II, access to affordable comprehensive coverage has significantly improved since the 2018 final rules were published. However, research based on individual market data for plan year 2020 has substantiated concerns about the negative impact that the shift of healthier individuals from comprehensive coverage to STLDI has on individuals remaining in the individual market risk pools.

107

Because healthier individuals are more likely to enroll in STLDI than individuals with known medical needs, the extended contract terms and renewal periods of STLDI under the current Federal regulations result in healthier consumers leaving (or opting out of) the individual market risk pools for extended periods of time. This has resulted in increased premiums for individuals seeking to purchase individual health insurance coverage.

108

For unsubsidized individuals, the costs are borne directly by the consumer, and for subsidized individuals, the costs are borne to a large extent by the Federal Government in the form of increased per capita PTC spending associated with increased individual health insurance coverage premiums. Likewise, the increased reports and anecdotes about fixed indemnity excepted benefits coverage being marketed and sold as an alternative to comprehensive coverage raise concerns about the potential for such practices having a similar impact on the small group and individual market risk pools.

107

See

Dieguez, Gabriela and Dane Hansen (2020). “The Impact of Short-term Limited-duration Policy Expansion on Patients and the ACA Individual Market,” Milliman, available at:

https://www.milliman.com/en/insight/the-impact-of-short-term-limited-duration-policy-expansion-on-patients-and-the-aca-individual-market.

108

Id.

(“Carrier expectations for the impact of [regulatory actions including the expansion of short-term, limited-duration insurance policies and other loosely regulated insurance and the repeal of the federal individual shared responsibility payment being reduced to $0] on premiums in the ACA individual market for 2020 are approximately 4 percent in states that have not restricted the sale or duration of STLD policies . . . Among the states that have limited the impact of loosely regulated insurance through reinstating an individual mandate or by restricting STLD expansion, carriers have assumed an average premium impact in 2020 due to regulatory actions that is about 5 percent lower than other states.”) As noted in section VII.B.2.e of this preamble, this study also found that the few carriers that explicitly included a premium adjustment because of the adoption of the new Federal definition of STLDI in the 2018 final rules

increased premiums by between 0.5 percent and 2 percent in 2020.

Another study looking at States that have adopted policies that restrict STLDI to shorter durations than allowed under the current Federal regulations found that, from 2018 to 2020, States that restricted or prohibited the sale of STLDI saw fewer consumers enroll in such insurance, were able to keep more healthy people in the individual health insurance coverage market, and saw a greater decline in average medical costs for enrollees in individual health insurance coverage.

109

The study reported that, as a result, the risk score—a measurement of the relative medical costs expected for the populations covered by comprehensive coverage in each State, both on- and off-Exchange—decreased by 40 percent more in States with more regulation of STLDI than States with less regulation.

110

As of January 20, 2020, 12 States had enacted legislation prohibiting health status underwriting for STLDI, effectively banning the sale of STLDI in those States.

111

Thirteen States and the District of Columbia prohibited the sale of STLDI policies with initial contract terms longer than 3 months.

112

109

See

Hall, Mark and Michael McCue (2022). “Short-Term Health Insurance and the ACA Market,” Commonwealth Fund, available at:

https://www.commonwealthfund.org/blog/2022/short-term-health-insurance-and-aca-market.

110

Id.

111

National Association of Insurance Commissioners (2023). “Short-Term Limited-Duration Health Plans,” available at:

https://content.naic.org/cipr-topics/short-term-limited-duration-health-plans.

112

Id.

In addition to ensuring that consumers can clearly distinguish STLDI from comprehensive coverage, this new evidence provides an additional basis for the Departments' conclusion that it is important to amend the Federal definition of STLDI.

D. Need for Rulemaking

For the reasons described in this section II, the Departments are of the view that it is necessary to amend the Federal definition of STLDI to ensure that consumers can clearly distinguish STLDI from comprehensive coverage, protect the risk pools and stabilize premiums in the individual market, and promote access to affordable comprehensive coverage.

With respect to individual market fixed indemnity excepted benefits coverage, the combination of the decision in the

Central United

case and the reduction of the individual shared responsibility payment to $0 for months beginning after December 31, 2018, under the Tax Cuts and Jobs Act increased the risk that individuals would purchase fixed indemnity excepted benefits coverage as a substitute for comprehensive coverage. The Departments are of the view that these changes necessitate rulemaking with respect to fixed indemnity excepted benefits coverage. Further, while the Departments did not finalize the proposed amendments to the group market fixed indemnity excepted benefits coverage regulations outlined in the 2016 proposed rules, the Departments noted their intention to address fixed indemnity excepted benefits coverage in future rulemaking.

113

The Departments have continued to monitor the impact of these coverage options and remain concerned about the negative impacts of fixed indemnity excepted benefits coverage on consumers when such products are sold as an alternative to comprehensive coverage. In light of the Departments' ongoing concerns about the numerous negative impacts of STLDI and fixed indemnity excepted benefits coverage being offered as an alternative to comprehensive coverage, as well as the significant changes in market conditions and in the legal landscape since the Departments' last regulatory actions addressing these products, the Departments are proposing changes to the Federal individual and group market regulations governing STLDI and fixed indemnity excepted benefits coverage. For similar reasons, as discussed in more detail in section IV.A of this preamble, the Treasury Department and the IRS propose to clarify the tax treatment of fixed amounts received by a taxpayer through certain employment-based accident or health insurance that are paid without regard to the amount of medical expenses incurred. In addition, the Departments solicit comments on specified disease excepted benefits coverage, as discussed in section III.B.2 of this preamble, and on level-funded plan arrangements, as discussed in section III.C of this preamble.

113

Excepted Benefits; Lifetime and Annual Limits; and Short-Term, Limited-Duration Insurance; Final Rule, 81 FR 75316 at 75317 (October 31, 2016).

III. Overview of the Proposed Rules on Short-Term, Limited-Duration Insurance and Fixed Indemnity Excepted Benefits Coverage; Comment Solicitations Regarding Specified Disease Excepted Benefits Coverage and Level-Funded Plan Arrangements—The Departments of the Treasury, Labor, and Health and Human Services

A. Short-Term, Limited-Duration Insurance

The Departments are proposing the following amendments to the Federal regulations at 26 CFR 54.9801-2, 29 CFR 2590.701-2, and 45 CFR 144.103 defining “short-term, limited-duration insurance” to better distinguish STLDI from individual health insurance coverage. These amendments would apply to new STLDI policies, certificates, or contracts of insurance sold or issued on or after the effective date of the final rules; that is, the date that is 75 days after publication of the final rules.

114

STLDI policies, certificates, or contracts of insurance sold or issued before the effective date of the final rules (including any subsequent renewals or extensions consistent with applicable law) could still have an initial contract term of less than 12 months and maximum duration of up to 36 months (taking into account any renewals or extensions), subject to any limits under applicable State law, but would be required to comply with the revised notice requirement for renewals and extensions.

114

For purposes of this document, the term “effective date of the final rules” refers to the date that is 75 days after the date of publication of the final rules.

1. “Short-Term”

Under the current Federal regulations, contracts for STLDI must specify an expiration date that is less than 12 months after the original effective date of the contract, and, taking into account renewals or extensions, must have a duration of no longer than 36 months in total.

115

The Departments, however, are no longer of the view that permitting the longer duration for STLDI is in the best interests of consumers.

115

See

26 CFR 54.9801-2, 29 CFR 2590.701-2, and 45 CFR 144.103.

See also

83 FR 38212 (August 3, 2018).

Taking into account the potential risk to individuals who enroll in STLDI, the

increased availability of affordable comprehensive coverage options, the potential impact on the individual market risk pools, and consumer challenges in differentiating STLDI from individual health insurance coverage, the Departments propose to reinterpret the phrase “short-term” to refer to a contract term of no more than 3 months. More specifically, the Departments propose to amend the Federal definition for STLDI under 26 CFR 54.9801-2, 29 CFR 2590.701-2, and 45 CFR 144.103 such that the coverage would have an expiration date specified in the policy, certificate, or contract of insurance that is no more than 3 months after the original effective date. As discussed further in section III.A.2 of this preamble, the Departments also propose to amend the Federal definition of STLDI to reinterpret the phrase “limited-duration” to mean that the maximum permitted duration for STLDI is no longer than 4 months in total, taking into account any renewals or extensions. Further, the new proposed Federal definition would provide that a renewal or extension includes the term of a new STLDI policy, certificate, or contract of insurance issued by the same issuer to the same policyholder within a 12-month period beginning on the original effective date of the initial policy, certificate, or contract of insurance.

As described further in section III.A.6 of this preamble, these proposed rules would adopt a bifurcated approach to the applicability date that distinguishes between new STLDI that is sold or issued on or after the effective date of the final rules,

116

and existing STLDI sold or issued before the effective date of the final rules. The proposed new Federal definition and maximum duration framework in these proposed rules would apply for new STLDI policies, certificates, or contracts of insurance sold or issued on or after the effective date of the final rules. Under the framework in these proposed rules, existing policies, certificates, or contracts of insurance sold or issued before the effective date (including any subsequent renewals or extensions consistent with applicable law) could still have an initial contract term of less than 12 months, and a maximum duration of up to 36 months (taking into account any renewals or extensions), subject to any limits under applicable State law. In the preamble to the 2018 final rules, the Departments discussed the importance of ensuring that consumers clearly understand the differences between these types of coverage in order to select the type of coverage that suits their needs. However, particularly in light of recent reports regarding deceptive marketing practices (as discussed in section III.A.3 of this preamble) and the risk of consumer confusion, the Departments are now of the view that interpreting “short-term” in a manner that prevents STLDI from having terms that are similar in length to a 12-month policy year for comprehensive individual health insurance coverage is the most important tool for consumers to distinguish between STLDI and comprehensive coverage.

116

The Departments are of the view that an effective date that is 75 days after the date of publication of the final rule provides sufficient time for interested parties to review, understand, and meet their obligations under the final rule, without unnecessarily delaying the implementation of policies that are proposed to be finalized on the effective date. See sections III.A.6 (STLDI) and III.B.1.g (fixed indemnity excepted benefits coverage) for additional discussion of applicability proposals.

In addition, the Departments expressed in the preamble to the 2018 final rules an expectation that the amended definition of STLDI would result in STLDI being distinguishable from comprehensive coverage because of the differences in their initial contract terms; the maximum duration of a policy itself; the types of notice requirements applicable to each type of coverage; and the classification of comprehensive coverage, but not STLDI, as MEC.

117

However, since the 2018 final rules became effective, and in light of the changes in the legal landscape and market conditions discussed in section II of this preamble, the Departments are now of the view that the current Federal definition of STLDI contributes to confusion between STLDI and comprehensive coverage and that confusion results in consumer harm. The Departments' proposal to reinterpret “short-term” to refer to coverage with a term of no more than 3 months is one change that would help ensure consumers are better able to distinguish between the two types of coverage and therefore make better informed coverage purchasing decisions.

117

83 FR 38215 (August 3, 2018).

The Departments are concerned that the current interpretation and definition is too expansive and contributes to confusion regarding whether a policy is STLDI or comprehensive coverage. The combination of deceptive marketing practices (as discussed in section III.A.3 of this preamble) and the near-identical length of coverage for the initial contract term has proven to be confusing for consumers. As such, STLDI policies that include an initial term just shy of 12 months have not been easily distinguishable by consumers from comprehensive coverage available in the individual market, which generally has a 12-month policy year.

118

In addition, the ability to renew or extend STLDI policies for up to 36 months is also somewhat similar to the structure of comprehensive coverage sold in the individual and group markets and makes STLDI harder to distinguish from comprehensive coverage options. As a result, STLDI is being sold in situations, including as a long-term replacement for comprehensive coverage, that the exception from the definition of individual health insurance coverage was not intended to address.

119

In some instances, individuals may mistakenly purchase STLDI as long-term health insurance coverage.

120

118

45 CFR 144.103 (defining policy year for non-grandfathered health plans offered in the individual health insurance market as a calendar year).

119

See, e.g.,

Palanker, Dania, and Volk JoAnn (2021). “Misleading Marketing of Non-ACA Plans Continued During COVID-19 Special Enrollment Period,” Center on Health Insurance Reforms, available at:

https://georgetown.app.box.com/s/mn7kgnhibn4kapb46tqmv6i7putry9gt. See also

Fernandez, Bernadette, Vanessa Forsberg, and Annie Mach (2018). “Background Information on Health Coverage Options Addressed in Executive Order 13813,” Congressional Research Service, available at:

https://crsreports.congress.gov/product/pdf/R/R45216. See also

Corlette, Sabrina, Kevin Lucia, Dania Palanker, and Olivia Hoppe (2019). “The Marketing of Short-Term Health Plans: An Assessment of Industry Practices and State Regulatory Responses,” Urban Institute, available at:

https://www.urban.org/research/publication/marketing-short-term-health-plans-assessment-industry-practices-and-state-regulatory-responses.

120

Government Accountability Office (2022). “Private Health Insurance: Limited Data Hinders Understanding Short-Term Plans Role and Value During the COVID-19 Pandemic,” available at:

https://www.gao.gov/assets/730/720774.pdf.

In determining the appropriate length of STLDI for the proposed amended Federal definition, and giving meaning to “short-term,” the Departments reflected on instances when individuals may experience a temporary gap in coverage. For example, a college student enrolled in student health insurance coverage that does not provide coverage during the summer when they are not enrolled in classes, or a teacher who changes jobs and has to wait until the fall to enroll in new coverage, would experience a temporary gap in coverage of roughly 3 months and would benefit from access to STLDI during that period. Individuals transitioning between other types of jobs may also experience a temporary break in coverage, even if their break in employment is negligible. In particular, section 2708 of the PHS Act and its implementing regulations permit a group health plan or health insurance issuer offering group health insurance coverage to apply a waiting

period (as defined in section 9801(b)(4) of the Code, section 701(b)(4) of ERISA, and 2704(b)(4) of the PHS Act) of up to 90 days.

121

In addition, the implementing regulations allow for a reasonable and bona fide employment-based orientation period not to exceed 1 month. These provisions can result in a delay of approximately 3 to 4 months before coverage of an individual, who is otherwise eligible to enroll under the terms of a group health plan, can become effective.

121

26 CFR 54.9815-2708, 29 CFR 2590.715-2708, and 45 CFR 147.116.

Therefore, the Departments propose to amend the Federal definition of “short-term, limited-duration insurance” in 26 CFR 54.9801-2, 29 CFR 2590.701-2, and 45 CFR 144.103 to reflect a new interpretation of the phrase “short-term” to mean a policy, certificate, or contract of insurance with an issuer that has an expiration date specified in the policy, certificate, or contract of insurance that is no more than 3 months after the original effective date of the policy, certificate, or contract of insurance. This approach is consistent with the group market rules regarding the 90-day waiting period limitation provision under the ACA and with STLDI's role of serving as temporary coverage for individuals transitioning between other types of comprehensive coverage. It also is similar to the less-than-3-month maximum term in the Federal definition of STLDI adopted in the 2016 final rules and already enacted in a number of States,

122

and aligns with the goal of Executive Order 14009 to support protections for people with preexisting conditions, as there are no Federal prohibitions or restrictions on preexisting condition limitations with respect to STLDI.

122

Pollitz, Karen, Michelle Long, Ashley Semanskee, and Rabah Kamal (2018). “Understanding Short-Term Limited Duration Health Insurance,” KFF, available at:

https://www.kff.org/health-reform/issue-brief/understanding-short-term-limited-duration-health-insurance/.

It is reasonable to look to the group market waiting period rules to guide the proposed amendments to the Federal definition of STLDI in giving meaning to “short-term,” because a waiting period is the type of coverage gap that STLDI was initially intended to cover.

123

For longer gaps in coverage, the guaranteed availability protections established under the ACA, COBRA continuation coverage for individuals who were enrolled in employer-based coverage, and the special enrollment period requirements for group health plan and individual health insurance coverage provide individuals various opportunities to enroll in comprehensive coverage through or outside of an Exchange.

123

81 FR 38020 at 38032 (June 10, 2016) (the intent of the initial regulation defining STLDI was to refer to coverage that filled temporary coverage gaps when an individual was transitioning from one plan or coverage to another).

The Departments request comments on the proposed interpretation of the phrase “short-term.” The Departments also request comments on whether the interpretation of “short-term” in the proposed definition of STLDI should instead be no more than 4 months or some other length, and why.

2. “Limited-Duration”

Under the definition adopted in the 2018 final rules, the Departments interpreted the phrase “limited-duration” to preclude renewals or extensions of STLDI that extended a policy beyond a total of up to 36 months, with the total number of consecutive days of coverage under a single (that is, the same) insurance contract being the relevant metric to calculate the permissible duration of coverage. The Departments now propose an update to the Federal definition of “short-term, limited-duration insurance” under 26 CFR 54.9801-2, 29 CFR 2590.701-2, and 45 CFR 144.103 that would adopt a different interpretation of the phrase “limited-duration.” The Departments propose to reinterpret “limited-duration” to refer to a maximum coverage period that is no longer than 4 months in total, taking into account any renewals or extensions. This approach would allow STLDI to be extended, when consistent with applicable State law, to avoid a temporary gap in coverage if, for example, an employer implemented a bona fide employment-based orientation period of up to 1 month under the 90-day waiting period limitation provision under the ACA. An STLDI policy would meet the Federal definition of “limited-duration” so long as the coverage was not renewed or extended beyond a total of 4 months from the original effective date of the policy, certificate, or contract of insurance, regardless of whether the coverage has an initial term of 1, 2, or 3 months. For example, an STLDI policy could have an initial term of 3 months and a renewal term of 1 month, or an initial term of 2 months and a renewal term of 2 months, consistent with the proposed amended Federal definition of STLDI.

For this purpose, the Departments propose that a renewal or extension would include the term of a new STLDI policy, certificate, or contract of insurance issued by the same issuer to the same policyholder within the 12-month period beginning on the original effective date of the initial policy, certificate, or contract of insurance. In this context, the phrase “same issuer” would refer to the entity licensed to sell the policy, consistent with the definition of health insurance issuer in 26 CFR 54.9801-2, 29 CFR 2590.701-2, and 45 CFR 144.103. Under this proposal, the relevant metric to calculate whether the duration of coverage satisfies the new Federal “limited-duration” standard is the total number of days of coverage (either consecutive or non-consecutive) that a policyholder is enrolled in an STLDI policy with the same issuer. That calculation would apply regardless of whether the coverage is a renewal or extension under the same policy, certificate, or contract of insurance, or if it involves the issuance of a new STLDI policy, certificate, or contract of insurance to the same policyholder within the 12-month period beginning on the original effective date of the initial policy, certificate, or contract of insurance.

In the 2018 final rules, the Departments took the position that the maximum length of COBRA continuation coverage serves as an appropriate benchmark for interpreting the term “limited-duration” with respect to STLDI. The 2018 final rules likened the limited-duration maximum to the maximum duration that employers are required to provide COBRA continuation coverage to qualified beneficiaries (18, 29, or 36 months depending on the nature of the qualifying event that precipitates the temporary coverage period).

124

However, unlike STLDI, COBRA requires, and employees expect, that the elected COBRA continuation coverage provides the same benefits as the employee's employment-based coverage, and that the qualified beneficiaries may elect either the same coverage they had the day before the qualifying event occurred or coverage options provided to similarly situated current employees/participants.

125

Additionally, Federal consumer protections and requirements for comprehensive coverage generally apply to COBRA continuation coverage. In contrast, STLDI is primarily designed to fill shorter gaps in coverage, such as when an individual is between enrollment in employment-based coverage, and it is generally not required to comply with Federal consumer protections and requirements for comprehensive coverage,

126

or provide robust, comprehensive benefits.

124

For example, when a qualified employee loses coverage due to the termination of an employee's employment for any reason other than gross misconduct, or a reduction in the number of hours of employment, the group health plan must provide the qualified employee and their covered dependents an opportunity to elect COBRA continuation coverage for up to 18 months. A spouse or dependent child of a covered employee would have the opportunity to elect COBRA continuation coverage for up to 18 months if they lost coverage due to the termination of the covered employee's employment for any reason other than gross misconduct, a reduction in the hours worked by the covered employee, divorce or legal separation of the spouse from the covered employee, or death of the covered employee. In addition, if a child loses coverage because of a loss of dependent child status, the child would have the opportunity to elect up to 36 months of COBRA continuation coverage. The group health plan is required to provide up to 29 months of COBRA continuation coverage only if one of the qualified beneficiaries is disabled and meets certain requirements. A maximum COBRA period of 36 months is only available to a spouse and dependents in limited circumstances such as the occurrence of a second qualifying event (for instance, the death of the covered employee, the divorce or legal separation of a covered employee

and spouse, or a loss of dependent child status under the plan).

125

26 CFR 54.4980B-5.

126

As noted above, health insurance issuers offering STLDI are subject to the new agent and broker compensation disclosure and reporting requirements in section 2746 of the PHS Act.

In response to the 2016 and 2018 proposed rules, the Departments received comments requesting that the Departments not only limit renewals of the same policy, certificate, or contract of insurance, but also prohibit issuers from offering STLDI to consumers who have previously purchased STLDI from the same or different issuer, to prevent consumers from stringing together multiple consecutive policies, a practice commonly referred to as stacking.

127

The Departments share the commenters' concern that stacking STLDI in effect lengthens the duration of coverage without offering the benefits and consumer protections of comprehensive coverage. As those commenters pointed out, this practice effectively circumvents the rules related to maximum duration and makes it more challenging for consumers to distinguish STLDI from comprehensive coverage, concerns that interested parties have reiterated in 2021 and 2022.

128

If an issuer strings together multiple STLDI policies (whether of a 12-month or 4-month maximum) the coverage could be stacked to look very similar to the annual renewals that are common for comprehensive coverage but without the benefits the consumer would receive from comprehensive coverage. For example, when stacking new policies, an issuer could increase premiums and cost sharing and reset the deductible every 4 months. In contrast, if enrolled in comprehensive health insurance coverage, a consumer is guaranteed a stable level of coverage and cost sharing throughout the 12-month plan year, and the coverage is subject to Federal consumer protections and requirements that prohibit practices common to STLDI, including medical underwriting and coverage rescissions. Consumers that have already purchased STLDI policies from the same issuer may not be aware of, and may be less likely, to explore other coverage options that provide more comprehensive coverage at a better price. As a result, some consumers may enroll in STLDI mistaking it for comprehensive coverage or not understanding the limitations of the coverage.

127

The Departments declined to prohibit stacking in the 2016 final rules because the requirement that individuals obtain MEC in order to avoid making an individual shared responsibility payment was an adequate deterrent to discourage consumers from purchasing multiple successive STLDI policies.

See

81 FR 75318. In the Department's view, reconsideration of such a prohibition is now warranted because the individual shared responsibility payment was reduced to $0 by the Tax Cuts and Jobs Act.

128

Partnership to Protect Coverage (2021). “Under-Covered: How `Insurance-Like' Products are Leaving Patients Exposed,” available at:

https://www.nami.org/NAMI/media/NAMI-Media/Public%20Policy/Undercovered_Report_03252021.pdf.

(“STLDI plans should not be renewable or allowed to continue for more than three months because of the significant financial risk posed to consumers by their combination of extraordinary deductibles and limited catastrophic financial protection.”).

See also

Letter from 29 organizations to Sec. Xavier Becerra (January 31, 2022), available at:

https://www.lung.org/getmedia/8a510945-cd82-41fe-968e-d83faf2292eb/013122-Letter-to-HHS-Re-Regulation-of-STLDI-policy-preferences-FINAL.pdf.

(“Allowing short-term plans to be renewed or to be sold such that nominally separate policies run consecutively . . . known as “stacking”—contributes to consumer confusion, increased premiums, and financial risk for consumers.”).

In response to these concerns and continued reports about the impact of the existing Federal definition of STLDI discussed in section III.A.I of this preamble, under the Departments' authority to interpret the phrase “limited-duration,” the Departments propose to add new language that provides that, for purposes of applying the new Federal definition, a renewal or extension includes the term of a new STLDI policy, certificate, or contract of insurance issued by the same issuer to the same policyholder within the 12-month period beginning on the original effective date of the initial policy, certificate, or contract of insurance.

129

As explained elsewhere in this preamble section, under this proposal, the relevant metric to calculate and evaluate if the duration of coverage (taking into account any renewals or extensions) satisfies the proposed permitted maximum duration of no more than 4 months is the total number of days (either consecutive or non-consecutive) of coverage that a policyholder is enrolled in an STLDI policy with the same issuer within the 12-month period beginning on the original effective date of the initial policy, certificate, or contract of insurance, regardless of whether the coverage issued to the policyholder is under the same or a new policy, certificate, or contract of insurance. This calculation, however, would not include an STLDI policy, contract, or certificate of insurance sold to the same policyholder by a

different

issuer. This distinction would effectively limit stacking of policies sold by the same issuer, would be easier for issuers to track and comply with, and would allow consumers the flexibility to purchase subsequent STLDI policies from other issuers within a 12-month period. The Departments are of the view that subsequent sales to the same policyholder by the same issuer should be treated comparably to renewals for purposes of calculating and applying the maximum-duration standard. To do otherwise would undermine the maximum-duration requirements by allowing issuers to stack policies, and would contravene the initial purpose of STLDI policies to fill temporary gaps in comprehensive coverage.

129

In response to the 2018 proposed rules, the Departments received comments regarding renewal guarantees. As explained in the preamble to the 2018 final rules, renewal guarantees generally permit a policyholder, when purchasing his or her initial insurance contract, to pay an additional amount in exchange for a guarantee that the policyholder can elect to purchase, for periods of time following expiration of the initial contract, another policy or policies at some future date, at a specific premium that would not require any additional underwriting.

See

83 FR 38219-38220 (Aug. 3, 2018). These proposed rules would not directly regulate renewal guarantees. However, the Departments acknowledge that the proposed revisions to the Federal definition—including the proposal to count the term of a new STLDI contract issued by the same issuer to the policyholder within the same 12-month period beginning on the original effective date of the initial policy, contract, or certificate of insurance toward the total maximum duration of STLDI—would limit the guarantees that such instruments may be able to provide.

The Departments solicit comments on the proposed revisions to the Federal definition of “short-term, limited-duration insurance,” including the new proposed interpretation of the phrase “limited-duration,” and whether there are circumstances under which issuers should be allowed to renew or extend STLDI for periods of time beyond what would be permitted in these proposed rules. The Departments also solicit comments on whether there are

additional ways to differentiate STLDI from comprehensive coverage options, including information on State approaches or limits on the sale of STLDI by a different issuer, and how the subsequent issuer would determine whether or not an applicant had previous STLDI with another issuer. The Departments also solicit comments on whether to broaden the limits on stacking to include issuers that are members of the same controlled group.

3. Sales and Marketing Practices

The Departments are concerned by reports of aggressive and deceptive sales and marketing practices related to STLDI. According to these reports, STLDI is often marketed as a substitute for comprehensive coverage,

130

despite being exempt from most of the Federal individual market consumer protections and requirements for comprehensive coverage. For example, some websites selling STLDI utilized logos of well-known issuers even when not affiliated with such issuers, and claimed to provide comprehensive health insurance or be providers of government-sponsored health insurance policies. Misleading marketing includes tactics such as designing websites to suggest the product for sale is comprehensive coverage and using the websites to gather personal information for call centers or brokers that later push consumers to make quick decisions about purchasing STLDI without disclosing that the insurance is not comprehensive coverage.

131

130

Federal Trade Commission (2018). “FTC Halts Purveyors of Sham Health Insurance Plans,” available at:

https://www.ftc.gov/news-events/news/press-releases/2018/11/ftc-halts-purveyors-sham-health-insurance-plans.

131

Palanker, Dania, JoAnn Volk, and Maanasa Kona (2019). “Seeing Fraud and Misleading Marketing, States Warn Consumers About Alternative Health Insurance Products,” Commonwealth Fund, available at:

https://www.commonwealthfund.org/blog/2019/seeing-fraud-and-misleading-marketing-states-warn-consumers-about-alternative-health. See also,

Federal Trade Commission (2022). “FTC Action Against Benefytt Results in $100 Million in Refunds for Consumers Tricked into Sham Health Plans and Charged Exorbitant Junk Fees,” available at:

https://www.ftc.gov/news-events/news/press-releases/2022/08/ftc-action-against-benefytt-results-100-million-refunds-consumers-tricked-sham-health-plans-charged.

As another example, consumers shopping for health insurance online are often directed to websites selling STLDI or other plans that are not comprehensive coverage, using terms like “Obamacare plans” and “ACA enroll.” websites use those terms in an effort to associate STLDI with the Federal consumer protections and requirements for comprehensive coverage.

132

A report from the Government Accountability Office (GAO) uncovered brokers engaging in deceptive marketing practices that misrepresented or omitted information about products or claimed that preexisting conditions were covered when plan documents reflected that they were not.

133

The GAO study also found that brokers have a financial incentive to enroll their clients in STLDI because brokers receive higher commissions for selling that coverage than for selling comprehensive coverage.

134

For example, the financial incentive could be up to 10 times higher commissions when compared to individual market QHPs purchased through an Exchange.

135

State regulators have also received complaints alleging that brokers engaged in deceptive practices to enroll consumers in STLDI over the phone. These practices prevent consumers from making an informed choice about their coverage.

136

132

https://www.urban.org/research/publication/marketing-short-term-health-plans-assessment-industry-practices-and-state-regulatory-responses.

133

Government Accountability Office (2020). “Private Health Coverage: Results of Covert Testing for Selected Offerings,” available at:

https://www.gao.gov/products/gao-20-634r.

134

Ibid.

135

Keith, Katie (2020). “New Congressional Investigation of Short-Term Plans,”

Health Affairs,

available at:

https://www.healthaffairs.org/do/10.1377/forefront.20200626.227261/full/.

136

Palanker, Dania, JoAnn Volk, and Maanasa Kona (2019). “Seeing Fraud and Misleading Marketing, States Warn Consumers About Alternative Health Insurance Products,” Commonwealth Fund, available at:

https://www.commonwealthfund.org/blog/2019/seeing-fraud-and-misleading-marketing-states-warn-consumers-about-alternative-health.

In addition, the Departments have received feedback that the low levels of health insurance literacy, particularly among younger adults and underserved populations, exacerbate the harm caused by deceptive marketing practices of STLDI by issuers and agents and brokers.

137

Consumers have complained they were unaware that the issuer could decide not to renew or issue a new policy, certificate, or contract of insurance to the same consumer at the end of the contract term.

138

Some consumers unwittingly purchase STLDI with fewer protections and less robust benefits than comprehensive coverage because they do not understand the difference between these two types of coverage.

139

137

Government Accountability Office (2020). “Private Health Coverage: Results of Covert Testing for Selected Offerings,” available at:

https://www.gao.gov/products/gao-20-634r.

138

Id.

139

Id.

In the Departments' view, this risk of misleading consumers could be further minimized if STLDI was not marketed or sold to consumers during certain periods when a consumer is eligible to enroll in comprehensive coverage, such as the individual market open enrollment period. Allowing STLDI to be marketed or sold during open enrollment can confuse consumers by causing them to perceive STLDI as a substitute for comprehensive coverage, rather than an option to fill temporary gaps in coverage. Inadvertent enrollment in STLDI may subject uninformed consumers to potentially severe financial risks, and cause them not to enroll in comprehensive coverage when eligible to do so. In addition, some healthier individuals may also inadvertently enroll in STLDI instead of comprehensive coverage, and in so doing, either leave or not enter an individual market risk pool. As discussed in section II.C of this preamble, this affects the risk pools for individual health insurance coverage, leading to increased premiums.

The Departments solicit comments on additional ways to help consumers distinguish between STLDI and comprehensive coverage. In particular, the Departments are interested in feedback on ways to prevent or otherwise mitigate the potential for direct competition between STLDI and comprehensive coverage during the open enrollment period for individual market coverage. For example, some States have prohibited the sale of STLDI during open enrollment.

140

The Departments are particularly interested in comments related to experience in States that have prohibited enrollment in STLDI during specific periods of time, including whether prohibiting enrollment has increased enrollment in comprehensive coverage, reduced deceptive marketing practices, or resulted in any premium changes for comprehensive coverage. In addition, the Departments request comments on what additional steps the Departments can take to help consumers better

understand and distinguish between comprehensive coverage and other forms of health insurance coverage, as well as what steps can be taken to further support State efforts to protect consumers from misleading and deceptive marketing and sales practices.

140

Washington and Maine prohibit the sale of STLDI during open enrollment. In addition, Hawaii prohibits the sale of STLDI to individuals who were eligible to purchase an Exchange plan during open enrollment in the previous calendar year.

See

U.S. House of Representatives Committee on Energy and Commerce (2020). “Shortchanged: How the Trump Administration's Expansion of Junk Short-Term Health Insurance Plans Is Putting Americans at Risk,” available at:

https://democrats-energycommerce.house.gov/newsroom/press-releases/ec-investigation-finds-millions-of-americans-enrolled-in-junk-health.

4. Notice

Under the 2018 final rules, to satisfy the definition of STLDI, issuers must display prominently in the contract and in any application materials provided in connection with enrollment in STLDI a specific notice in at least 14-point type.

141

The 2018 final rules finalized two notices. The first notice (Notice 1) was for policies with a coverage start date before January 1, 2019, and includes language related to the individual shared responsibility payment under section 5000A of the Code. The second notice (Notice 2), which is for policies with a coverage start date on or after January 1, 2019, omits the language related to the individual shared responsibility payment because, effective for months beginning after December 31, 2018, the individual shared responsibility payment was reduced to $0.

142

The Departments propose a non-substantive technical amendment to remove Notice 1, because the period during which Notice 1 was applicable has ended; thus, that provision no longer has any effect.

141

26 CFR 54.9801-2, 29 CFR 2590.701-2, and 45 CFR 144.103.

See

section I.C of this preamble for further discussion of this requirement.

142

See

Public Law 115-97, December 22, 2017.

The Departments continue to be of the view that the notice is important to help consumers distinguish between comprehensive coverage and STLDI. Therefore, the Departments propose to amend the notice to further clarify the differences between STLDI and comprehensive coverage, and identify options for consumers to obtain comprehensive coverage in concise, understandable language that would be meaningful to them. The proposed amendments to the notice would apply to all STLDI policies sold or issued on or after the effective date of the final rules. The proposed amendments to the notice would only apply to existing policies in connection with notices required to be provided upon renewal or extension of existing STLDI coverage on or after the effective date of the final rules.

After consulting with plain-language experts regarding improvements to the current required notice, the Departments propose the following revisions to both the content and formatting of the notice to inform consumers considering purchasing STLDI about the differences between STLDI and comprehensive coverage, support informed coverage purchasing decisions, and promote readability. The Departments propose that issuers must prominently display the notice (in either paper or electronic form) in at least 14-point font, on the first page of the policy, certificate, or contract of insurance, including for renewals or extensions. The Departments further propose that issuers must prominently display the notice in any marketing and application materials provided in connection with enrollment in such coverage, including on websites that advertise or enroll individuals in STLDI, and in any enrollment materials that are provided at or before the time an individual has the opportunity to enroll. In addition, if an individual is required to reenroll for purposes of renewal or extension of STLDI, the notice must be prominently displayed in the reenrollment materials (in either paper or electronic form) that are provided to the individual at or before the time the individual is given the opportunity to reenroll in coverage, as well as on any websites used to facilitate reenrollment in STLDI.

The notice would not affect any separate notice requirements under applicable State law, except to the extent that a State notice requirement would prevent application of any Federal notice requirement. The text of the proposed STLDI notice is as follows:

BILLING CODE 4120-01-, 4150-29-, 4830-01-P

EP12JY23.013

BILLING CODE 4120-01-, 4150-29-, 4830-01-C

These proposals to revise and enhance the required notice aim to increase consumer understanding of STLDI and combat potential misinformation related to such coverage for all consumers, including historically underserved communities. As noted in section II.B of this preamble, individuals belonging to historically underserved communities often experience more health care challenges, and greater obstacles accessing and using health care services compared to the general population. Underserved communities experience worse health outcomes, higher rates of chronic conditions, lower access to health care, and have more frequent experiences of discrimination in health care settings.

143

The COVID-19 PHE amplified these longstanding inequities, resulting in disparate rates of COVID-19 infection, hospitalization, and death.

144

In addition, research has uncovered significant disparities in health insurance literacy rates nationwide, particularly among those who identify as female, members of underserved racial and ethnic groups, individuals with income below the FPL, and Spanish-speaking enrollees.

145

Because low health insurance literacy increases the likelihood of consumers not fully understanding the differences between comprehensive coverage and STLDI, as well as the potential health and financial risks of STLDI coverage,

146

and in light of Executive Order 13985 which requires the Administration to promote access to equity for underserved communities,

147

the Departments are concerned that members of underserved communities may be particularly vulnerable to misinformation or misleading or aggressive sales tactics. In light of these concerns, it is important for the notice to provide clear and easily readable information alerting consumers to the differences between STLDI coverage and comprehensive coverage. The Departments are of the view that the notice must also provide resources where consumers can access additional information about STLDI coverage and other health coverage options so consumers can make informed choices after considering a range of available health coverage options.

143

See

CMS Office of Minority Health (2022). “The Path Forward: Improving Data to Advance Health Equity Solutions,” available at:

https://www.cms.gov/files/document/path-forwardhe-data-paper.pdf.

144

Moore, Jazmyn, Carolina Luna-Pinto, Heidi Cox, Sima Razi, Michael St. Louis, Jessica Ricaldi, and Leandris Liburd (2021). “Promoting Health Equity During the COVID-19 Pandemic, United States,” Bulletin of the World Health Organization, available at:

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8795842.

145

See,

Edward, Jean, Amanda Wiggins, Malea Hoepf Young, Mary Kay Rayens (2019). “Significant Disparities Exist in Consumer Health Insurance Literacy: Implications for Health Care Reform,”

Health Literacy Research and Practice,

available at:

https://pubmed.ncbi.nlm.nih.gov/31768496/. See also

Villagra, Victor and Bhumika Bhuva (2019). “Health Insurance Literacy: Disparities by Race, Ethnicity, and Language Preference,”

The American Journal of Managed Care,

available at:

https://www.ajmc.com/view/health-insurance-literacy-disparities-by-race-ethnicity-and-language-preference.

146

Edward, Jean, Robin Thompson, and Amanda Wiggins (2022). “Health Insurance Literacy Levels of Information Intermediaries: How Prepared are They to Address the Growing Health Insurance Access Needs of Consumers?,”

Health Literacy Research and Practice,

6(1), available at:

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8919673/.

147

See,

Executive Order 13985 of January 20, 2021, 86 FR 7009.

The Departments propose to add language to the notice to help consumers identify where and how they might be able to enroll in comprehensive coverage. The Departments propose to add a website link and telephone number for

HealthCare.gov

to the notice as reliable resources for consumers to get information on the different types of available health coverage options. The Departments are also considering that the notice be tailored to specify a telephone number and a link to the State Exchange's website if the STLDI is filed in a State that does not use

HealthCare.gov.

148

The Departments seek comments on this approach, including the proposed requirement to provide the notice in the marketing, application, and enrollment (or reenrollment) materials, including the extension of the notice requirement to websites that advertise or offer the opportunity to enroll (or reenroll) in STLDI and on the associated administrative burden for issuers, agents, brokers, or others who will be involved in providing the notice to consumers.

148

Currently, 33 states use

HealthCare.gov. See, https://www.healthcare.gov/marketplace-in-your-state/.

If, under any future final rules, the notice must be customized to specify the website and telephone number for

HealthCare.gov

or the State Exchange's website and telephone number, as applicable, the Departments would state that STLDI sold through associations

149

include a link to the website of the Exchange that operates in the State in which the individual to whom the STLDI is sold or marketed resides, regardless of the State in which the association has filed the insurance product. The Departments are considering this approach for coverage sold through associations because association coverage is sold across numerous States, and consumers interested in other coverage options would enroll through the Exchange of the State in which the consumer resides.

149

See

discussion in section III.A.5 of this preamble regarding coverage sold through associations.

The proposed revised notice would also remind consumers that if they are eligible to enroll in employment-based coverage they should contact their employer or family member's employer about the health coverage offered by the employer. In addition, the Departments propose to add language to the notice that directs consumers to contact the State department of insurance for questions and complaints about the STLDI. The Departments seek comments on whether this part of the notice should also be tailored to include the name and phone number of the State department of insurance of the State in which the product is filed. If the State-specific information must be included, for products that are filed in multiple States, the Departments propose that the notice include the name and the phone number of the State department of insurance of the State of residence of the individual to whom the STLDI is sold or marketed, unless the product is not filed in that State. If the product is not filed in the State of residence of the individual to whom the STLDI is sold or marketed, the notice would include the name and the phone number of the State department of insurance of the State in which the product is filed.

The current regulations already state that the applicable notice must be displayed prominently in the contract and in any application materials provided in connection with enrollment in such coverage in at least 14-point type. However, based on information that consumers are not receiving adequate information prior to enrollment in an STLDI policy,

150

the Departments are concerned that the current standard is too subjective and may be contributing to consumers not understanding the limits of STLDI and being unable to distinguish it from comprehensive coverage.

151

Ensuring that issuers, agents, brokers or others who will be involved in providing the notice to consumers also prominently display the notice on the first page of marketing materials would increase consumer awareness, limit the impact of any deceptive marketing practices, and support informed decision making and purchasing decisions by consumers. The Departments therefore propose that the notice be prominently displayed, in at least 14-point font, on the first page of any marketing materials used in connection with enrollment (or reenrollment) in STLDI. The Departments propose to consider the notice to be prominently displayed if it would be reasonably noticeable to a typical consumer within the context of the page on which it is displayed. For example, the notice would be prominently displayed if it uses a font color that contrasts with the background of the document, is not obscured by any other written or graphic content on the page, and when displayed on a website, is viewable without clicking on an additional link. For this purpose, the Departments would consider marketing materials to include any documents or website pages that advertise the benefits or opportunity to enroll (or reenroll) in STLDI coverage. The Departments seek comments on the benefits and burdens of applying the notice requirements to marketing materials, including websites used in connection with advertising or enrollment (or reenrollment) in STLDI coverage, and on the proposed definition of what would be considered marketing materials.

150

See,

Corlette, Sabrina, Kevin Lucia, Dania Palanker, and Olivia Hoppe (2019). “The Marketing of Short-Term Health Plans: An Assessment of Industry Practices and State Regulatory Respon

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