Sarah Borders, CEBS May 2, 2024 3 min read

Federal Government Issues Final Rules on Fixed Indemnity Coverage and Short-Term Limited Duration Insurance

On April 3, 2024, the DOL, HHS and IRS issued final rules imposing new requirements on plan sponsors who offer fixed indemnity excepted benefits and limiting short-term limited duration insurance (STLDI).

Who this applies to:

All employers offering fixed-indemnity policies or short-term limited duration insurance policies to employees

Go Deeper:

Last year, the Biden administration issued a number of executive orders aimed at strengthening the ACA and helping participants understand the difference between certain types of medical coverage. In response, the agencies issued proposed rules on fixed indemnity coverage and STLDI in July 2023. The final rules adopt some of the changes made in the July 2023 proposed rules, but the departments intend to continue to address certain portions of the proposed rules.

In order for fixed indemnity policies to remain ACA-excepted (meaning they don’t have to comply with the ACA’s mandates), the final rules require that they pay benefits based on days of hospitalization or illness and not based on the medical service being provided.

Additionally, employer plan sponsors offering fixed indemnity policies must provide a consumer protection notice which explains the difference between fixed indemnity benefits and major medical coverage. The notice must be provided with all materials discussing the coverage.

The final rules also limit the length of STLDI to a maximum of four months (i.e. an initial three-month period plus a fourth month that can occur within a year of the original STLDI policy). This drastically shortens the 36 months that were allowed under the previous administration. The STLDI notice that is required to be provided to participants has also been updated and must be included in all materials discussing the coverage by the carrier.

Conclusion for Employers

Employers offering fixed indemnity products or STLDI should work with their insurers to comply with these rules and provide the required notices to employees.

Some employees losing STLDI coverage may request to enroll in the group medical mid plan year, which would generally be allowed under a HIPAA special enrollment.

Final Rule: https://www.federalregister.gov/documents/2024/04/03/2024-06551/short-term-limited-duration-insurance-and-independent-noncoordinated-excepted-benefits-coverage

Sarah Borders, CEBS

Principal, Benefits Compliance Solutions. Sarah has spent the last 15 years in the employee benefits industry, has numerous designations and serves on NAHU’s Employer Working Group Subcommittee and is an active board member of Austin AHU. She recently stepped down as Vice President of Benefits Compliance at one of the nation's largest brokerage firms to start her own compliance consulting practice. Her designations include an active license with the Texas Department of Insurance, CEBS (Certified Employee Benefits Specialist), Certified Health Care Reform Professional, HIPAA certification and Health Care Service Associate. She holds an MBA from Texas A&M Corpus Christi and a BA from University of Incarnate Word. Her consulting firm, Benefits Compliance Solutions, partners with employers to identify unknown risks and avoid hundreds of thousands of dollars in fines and lawsuits from failure to comply with their healthplan obligations.