By Muhammed Gulen, Esq. Vice President & Legal Consultant, Lewis & Ellis, LLC
The U.S. Departments of Health and Human Services (HHS), Labor (DOL), and the Treasury recently finalized regulations that significantly impact short-term, limited-duration insurance (STLDI) and supplemental fixed indemnity health plans. These changes aim to enhance consumer protections and clarify the limitations of these insurance products.
Significant Changes to Insurance Regulations
One of the most significant adjustments is the stringent limitation imposed on STLDI plans. Previously, these plans could be extended to a maximum of 36 months under certain conditions. However, the new regulation caps their duration at just four months, including any renewals. This is intended to discourage the use of STLDI as a substitute for comprehensive health insurance. According to the final rule, “STLDI policies can now have an initial term of no more than three months, with a possibility of extending for one additional month.”
Additionally, there is a new mandatory notice requirement for fixed indemnity plans in the group market, which revises the notice previously required in the individual market. These plans must now clearly inform consumers that the coverage offered is not comprehensive health insurance. This notice must be prominently displayed, stating that it should appear “on the first page of any marketing materials,” ensuring that consumers fully understand what they are purchasing.
Legal Challenges and Compliance Uncertainty
The implementation of these rules has not been without controversy. A recent court decision in Texas has temporarily blocked the enforcement of the notice requirement for group fixed indemnity plans, arguing that the regulatory departments exceeded their statutory authority. This court case, brought by an insurance company and currently under appeal, could significantly influence how these rules are enforced moving forward.
While some insurance associations support the new rules, indicating that they align with the industry’s commitment to consumer transparency, others state that implementation of these rules necessitates that insurers and employers remain vigilant and prepared to adjust their compliance strategies depending on the appeal’s outcome.
Implications for Consumers and the Market
These regulatory changes are designed to protect consumers by ensuring that short-term and supplemental insurance plans are used appropriately. By limiting the duration of STLDI plans and clarifying their temporary nature, the regulations aim to prevent consumers from relying on these plans as their primary health insurance, which often lacks comprehensive coverage and consumer protections.
Furthermore, the clear notices required for fixed indemnity plans are intended to prevent confusion and ensure that consumers do not mistake these plans for comprehensive health insurance. Ensuring transparency is essential for preserving consumer trust and clarity regarding the insurance products they select.
Market Reaction and Future Outlook
The insurance market’s reaction has been one of cautious adaptation. Insurers and employers are updating their policies and preparing for possible changes in compliance requirements, especially as the legal landscape continues to evolve. Some industry leaders agree that these changes are potentially challenging to implement and are creating uncertainty for the long-term health of the insurance market and the protection of consumers.
As we move forward, it will be essential for all stakeholders to stay informed about the developments in this area. Employers and insurers should monitor the progress of the legal challenges and be ready to adapt their practices in response to the final outcomes. It is important for insurers to bracket these types of changes when they file the forms with the state departments to avoid refiling if they are struck down by courts. Consumers, too, should educate themselves about the nature of the insurance coverage they purchase, leveraging the enhanced disclosures now required by law.
Sources:
Groom Law Group. (2024). Analysis of Final Tri-Agency Rules on STLDI and Supplemental Health Benefits.
PPI Benefit Solutions. (2024). Compliance Update: Court Challenges to Fixed Indemnity Notice Requirement.
American Council of Life Insurers. (2024). Press Release on New Health Insurance Disclosure Requirements.
Published in the Spring 2025 issue of Insights Magazine.
PIMA® (Professional Insurance Marketing Association®) is a member-driven trade association focused exclusively on the affinity market.
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