The IRS released final regulations (T.D. 9837
) to amend the definition of short-term, limited-duration insurance for purposes of its exclusion from individual health insurance coverage under the Affordable Care Act (ACA).
Short-term, limited-duration insurance is generally exempt from the ACA market reforms applicable to health insurance sold in the individual market. For example, they are not required to provide essential health benefits, and they are not prohibited from denying coverage for pre-existing conditions or imposing lifetime or annual dollar limits. As a result, short-term, limited-duration insurance is often less expensive than other health insurance sold on the individual market.
Under these regulations, short-term, limited-duration insurance is defined as health coverage of less than 12 months after the original effective date of the contract with the insurer, with a maximum duration of 36 months in total taking into account renewals or extensions of coverage. The final regulations also provide updated notice requirements to be included in insurance contracts and application materials provided in connection with enrollment in short-term, limited-duration insurance coverage.
The regulations are effective Oct. 2, 2018. Insurance policies sold on or after that date must meet the definition of short-term, limited-duration insurance as defined in the final regulations in order to be considered such insurance.
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