Consumer Connection: Understanding Short-Term Limited Duration Plans

Short-term limited duration (STLD) insurance is a type of health insurance coverage traditionally designed to fill the gaps in coverage when an individual is transitioning from one health insurance plan to another.

STLD plans attract a diverse group of individuals, particularly those facing specific life circumstances where traditional health insurance isn't immediately accessible or necessary. Common scenarios when STLD is needed are people between jobs, early retirees, individuals who missed open enrollment or people who find the ACA plans unaffordable. In 2023, the number of Iowans enrolled in STLD plans was 3,802.

Effective September 1, 2024, a new federal law significantly alters the landscape for STLD plans. The key changes under the new law include reducing the coverage duration to no more than 3 months with renewals extending the total coverage period up to only 4 months. Carriers are also prohibited from offering a STLD plan, including permissible renewals, to the same policyholder within a 12-month period.

Notices requirements to consumers purchasing STLD plans must be in 14-point font on the first page of all plans, applications, and marketing and enrollment materials. These requirements assist the consumer in understanding they are not purchasing an ACA compliant major-medical plan.

The federal changes do not impact any plans effective before September 1, 2024, and do not impact the duration of currently active plans. Individuals enrolled in plans before the law took effect, may continue to receive coverage under their plan for the full duration, including renewals, of the plan.

Individuals considering a STLD plan may need to consider other options for health insurance such as the ACA Marketplace. Marketplace plans may offer a subsidy in the form of a tax credit that lowers your monthly premium and, depending on your income, cost-sharing reductions that will lower your deductible and copays. Ninety percent of all Iowans receive significant monthly subsidies and the average monthly premium after the advance premium tax credit is $93. Open enrollment for the ACA Marketplace is November 1, 2024 - January 15, 2025.

Individuals who lose coverage in STLD plans are eligible for a 60-day special enrollment period into group health plans but not into an individual health plan, and the law did not allow for a special enrollment period into individual ACA plans. The September 1, 2024, effective date was set so individuals may receive coverage in STLD plans for up to 4 months until they are able to receive coverage in the individual ACA plans offered on the Marketplace beginning January 1, 2025.

Iowans considering purchasing or renewing a STLD should speak to a licensed insurance agent or contact the Iowa Insurance Division's Consumer Advocate at 515-654-6538.