ACAP Comments on Regulations Governing Short-Term Limited-Duration Insurance

September 11, 2023

Danny Werfel, Commissioner
Internal Revenue Service
Department of the Treasury

Lisa Gomez, Assistant Secretary
Employee Benefits Security Administration
Department of Labor

Ellen Montz, Deputy Administrator and Director
Center for Consumer Information and Insurance Oversight
Centers for Medicare & Medicaid Services
Department of Health & Human Services

Submitted electronically via:

RE: CMS–9904–P, Short-Term, Limited-Duration Insurance; Independent, Noncoordinated Excepted Benefits Coverage; Level-Funded Plan Arrangements; and Tax Treatment of Certain Accident and Health Insurance

Dear Commissioner Werfel, Assistant Secretary Gomez, and Deputy Administrator and Director Montz:

The Association for Community Affiliated Plans (ACAP) respectfully submits comments in response to the proposed rule, “Short-Term, Limited-Duration Insurance; Independent, Noncoordinated Excepted Benefits Coverage; Level-Funded Plan Arrangements; and Tax Treatment of Certain Accident and Health Insurance” (the “Proposed Rule”).

ACAP is an association of 80 not-for-profit, community-based Safety Net Health Plans (SNHPs). Our member plans provide coverage to more than 25 million individuals enrolled in Medicaid, the Children’s Health Insurance Program (CHIP) and Medicare Special Needs Plans for dually-eligible individuals, including more than 850,000 Marketplace enrollees. Nationally, Safety Net Health Plans serve almost half of all Medicaid managed care enrollees. Of ACAP’s Safety Net Health Plan Members and Partner Plans, 25 offer qualified health plans (QHPs) in the ACA Marketplaces this year.

ACAP has chosen to respond to a subset of proposals in this rule that are particularly relevant to SNHPs. ACAP appreciates the Administration’s desire to strengthen the integrity of the Marketplaces; our comments are designed to ensure market stability for SNHPs and the consumers they serve. ACAP member plan enrollees generally have low-incomes and we emphasize that the comments herein support SNHPs in their efforts to serve these vulnerable communities.

Our comments are summarized in brief below.

Summary of ACAP Comments
Consumer Impact: ACAP supports the Departments’ goal of helping consumers distinguish between STLDI and ACA-compliant plans. As outlined above, consumers can be left with devastating consequences due to misleading marketing of STLDI and non-ACA-compliant plans. Studies have shown the extent to which non-ACA-compliant coverage engage in deceptive marketing schemes, with consumers often being duped into purchasing non-comprehensive coverage. We urge the Departments to continue monitoring these practices and make further refinements if necessary.

Legal Authority: ACAP filed suit against the 2018 rule, which we believe violated both the letter and the spirit of the ACA. We support the Departments’ newly proposed rule, as we believe that it is an appropriate interpretation of the ACA to limit the length of the initial contract period for an STLDI plan to no more than three months and the maximum coverage period to no more than four months. The proposed rule would return STLDI plans to their original role as gap-filler coverage, rather than functioning as an “alternative” to ACA coverage.

Need for Greater Regulation of STLDIs: We support the Departments’ proposals to more clearly distinguish STLDI and fixed indemnity excepted benefits coverage from comprehensive coverage. We specifically believe that greater regulation of non-ACA-compliant coverage is of vital importance right now, as millions of consumers are undergoing the Medicaid redeterminations process as part of the Public Health Emergency continuous coverage requirement “unwinding.”

Proposed Rule Provisions: STLDI

Effective Date: Given the ongoing Medicaid and CHIP continuous enrollment “unwinding”, along with the upcoming ACA Open Enrollment Period, ACAP urges the Departments to finalize and implement the new rule as soon as possible. If the Departments are unable to issue a final rule with an effective date prior to Open Enrollment, we urge the Departments to establish two sets of effective dates—one for full implementation and one governing the new notice requirements, with an effective date prior to open enrollment.

Definitions: Short-Term and Limited-Duration: ACAP strongly supports the Departments’ definitions of short-term and limited-duration and urges the Departments to finalize them as proposed. Additionally, we also support the Departments’ proposal to include any STLDI terms issued by the same issuer to the same policyholder within a 12-month period under the definition of “renewal or extension” for the purposes of defining “limited-duration” to mean a maximum total coverage period that is no longer than 4-months in total. We agree that this practice, known as ‘stacking’, circumvents the rules related to maximum duration and makes it more challenging for consumers to distinguish STLDIs from comprehensive coverage. We urge the Departments to include all issuers that are members of the same controlled group in their definition of an issuer. Finally, we ask the Departments to clarify that renewals and extensions up to 4 months are guaranteed available to the consumer without re-underwriting, rather than at the discretion of the issuer.

Sales and Marketing Practices: ACAP urges the Departments to prohibit the sale of STLDI plans during the annual ACA open-enrollment period. We also urge the Departments to require that all STLDI policy terms have an end date of December 31st of any given calendar year, regardless of the initial contract date. Finally, we urge the Departments to explicitly prohibit both the Federal Exchange and State Based Exchanges from linking to or otherwise advertising STLDIs, and to similarly prohibit agents, brokers, and web-brokers from side-by-side advertising of STLDI plans with ACA plans.

Notice Requirements: ACAP supports the Departments’ proposal to amend the current notice to consumers in order to further clarify the differences between STLDI and comprehensive coverage and supports that the new notice requirements would apply not just to new policies, but also to existing STLDI policies that are sending renewal or extension notices. However, we urge the Departments to finalize the alternative notice, in table format with simpler language and layout. In addition, we to introduce the following for the Departments’ consideration as they finalize new notice language:

  • We urge the Departments to add language to the notice warning consumers about the possibility of recissions;
  • We urge the Departments to consider additional requirements—separate from the initial notice on the first page, which should be kept clear and concise—for policy enrollment and renewal documents that outline exactly which ACA essential health benefits are not covered under the policy;
  • We support the Departments proposal to include information about how to purchase comprehensive coverage on or a State Based Exchange in notice requirements and further urge that such information also be included on websites that advertise or offer the opportunity to enroll in STLDI plans, as well as required for all issuers, agents, brokers, or others involved in providing notice to consumers;
  • We do not believe the proposed notice requirements would cause undue burden and urge the Administration to finalize that all marketing and advertising materials contain the new notice requirements as proposed —to include ensuring full disclosure on the same page of any website displaying an STLDI plan option;
  • ACAP supports the Departments’ proposal to add a statement to the notice requirements describing the maximum permitted length of STLDI renewability under Federal rules. We also urge the Departments to require language making it clear to consumers if the policy is not guaranteed renewable. We do, however, urge the Departments to require that if the issuer states a policy is renewable, that it must be guaranteed renewable and not at the consent of the issuer, and;
  • We urge the Departments to require similar notice, consent, and documentation requirements as set out in the 2024 Notice of Benefit and Payment Parameters (NBPP) for agents, brokers, and web-brokers selling STLDI and other non-ACA-compliant coverage, to ensure that consumers are aware that what they are purchasing is not comprehensive coverage.

STLDI Sold Through Associations: ACAP supports the Departments’ efforts to clarify and remind issuers that coverage provided to or through associations —other than bona fide employment associations—is not defined as group coverage. We also support the clarification that there is no provision excluding STLDI from the Federal definition of group health insurance coverage and therefore any health insurance sold through a group trust or association in connection with a group health plan that purports to be STLDI would be group health insurance that must comply with the Federal consumer protections and requirements for comprehensive coverage in the group market. We urge the Departments to consider enforcement mechanisms to ensure that STLDI issuers are not selling STLDI products in states where it is unapproved and require additional data reporting on all STLDI products sold through an association.

Data Collection: ACAP urges the Departments to require comprehensive data reporting by all STLDI issuers. Increased data collection should include requirements on the number of policies sold, duration of policies sold, number of covered lives, number of member months, claims incurred, claims denied, MLR, and commissions paid to agents and brokers. Impact Assessment: A new analysis of the proposed rule by Wakely Consulting Group looks at the impact on the ACA-compliant market if 10-40 percent of the current STLDI market were to migrate to ACA-compliant coverage. The analysis shows that a reasonable expectation would be to see 300,000 to 600,000 enrollees move into the ACA-compliant individual market, with premium reductions varying from .5 percent to 2.6 percent, depending on current state-specific regulations of STLDI.

Proposed Rule Provisions: Fixed Indemnity: ACAP supports the Departments’ proposed changes to fixed indemnity excepted benefits coverage. We also suggest that marketing these products as “insurance” rather than income replacement is misleading, and we ask the Departments to consider further limiting the use of the term “insurance” to describe these products.

Applicability Date: Given the ongoing unwinding of Medicaid and CHIP continuous coverage requirements, ACAP urges the Departments to accelerate the applicability date for new coverage as early as possible—specifically, the changes should apply to new coverage on the effective date of the final rules.

Notice Requirements: ACAP specifically requests the Departments adopt the required use of the alternative language for the fixed indemnity notices for both group and individual market coverage. We urge the Administration to finalize that all marketing, application, enrollment and reenrollment materials contain the new notice requirement (in the alternative form) and request clarification in the final rule that the notice appear on websites and electronically sent materials that contain marketing, application and enrollment information.

Request for Information: Level-Funded Plan Arrangements: ACAP encourages the Departments to gather more information on level funded plan arrangements and determine options to mitigate undesirable effects on the ACA-compliant market, as we support policies that facilitate a sustainable, stable risk pool for the small group and individual health insurance markets.

ACAP’s comments are expanded in this document, with additional background.