The Departments of Health and Human Services, Labor, and the Treasury released a final rule on March 28 regarding short-term, limited-duration insurance (STLDI) and fixed indemnity insurance.

The final rule amends the federal definition of STLDI to limit the length of the initial contract period to no more than three months, with a maximum coverage period of no more than four months, including any renewals or extensions. Additionally, the final rule prohibits issuers from “stacking,” or the practice of issuing multiple or consecutive STLDI policies to the same policyholder within a 12-month period.

According to a fact sheet released by the Centers for Medicare & Medicaid Services, “The revised definition of STLDI in these final rules will realign the federal definition of STLDI with its traditional role of serving as temporary coverage, help ensure that consumers can clearly distinguish STLDI from comprehensive coverage, and ultimately reduce the financial and health risks to consumers who would otherwise enroll in this limited coverage as a long-term alternative to comprehensive coverage.”

The maximum term and duration amendments found in the final rule will apply to STLDI coverage periods beginning on or after Sept. 1, 2024. For any policies, certificates, or contracts sold or issued before Sept. 1, coverage may continue to have an initial contract term of less than 12 months, with a maximum duration of up to 36 months, as was allowed previously.