Feds Won’t Enforce Short-Term Health Insurance Limits

The Departments of Labor, Treasury and Health and Human Services announced that they will no longer enforce a 2024 rule limiting short-term health insurance to three months.

The decision leaves the door open for insurers to once again issue these policies for up to three years, as they were permitted under rules implemented during President Trump’s first term. The agencies emphasized that the rule itself remains in place but said they “do not intend to prioritize enforcement actions” against plans that exceed the Biden-era restrictions.

Officials also signaled that they are considering further changes to how these policies are regulated, though no timeline was outlined.

A shifting regulatory landscape

Short-term health plans have been a political football across three administrations.

• In 2016, the Obama administration finalized a rule limiting the plans to three months, calling them temporary stopgaps.
• In 2018, Trump extended the maximum duration to one year and allowed renewals up to three years. Sales surged after that change.
• In 2024, the Biden administration rolled back the expansion, capping the plans at three months with no more than four months of total coverage including renewals.

With the latest move, enforcement of that cap is on hold, giving insurers room to once again sell longer-duration plans.

How the plans work

Short-term policies are typically less expensive than Affordable Care Act-compliant coverage because they are not subject to ACA rules. These plans were originally envisioned as a bridge between jobs or coverage transitions, not as long-term solutions.

For smaller employers that are not subject to the ACA’s mandate to offer affordable health coverage, short-term policies could be an option for workers seeking lower-cost alternatives.

But because short-term coverage is distinct from comprehensive health insurance, employers evaluating whether to steer workers toward these plans should understand the trade-offs:

• Preexisting conditions can be excluded.
• Coverage can be denied based on health history.
• Annual and lifetime benefit caps may apply.
• Preventive care, maternity care and mental health services are often not included.
• No protection under ACA consumer safeguards such as the No Surprises Act or parity requirements for mental health.

Short-term plans can also exclude certain benefits that ACA plans are required to cover.

State restrictions

While federal regulators are stepping back, states still control whether these plans can be sold within their borders.

Fourteen states plus the District of Columbia bar them altogether, including California, New York and New Jersey. Other states allow them but impose strict duration limits or conditions that make them impractical for insurers to offer.

Potential changes ahead

The agencies noted they are considering additional adjustments to the rules governing short-term plans. Possible areas of change could include:

• Redefining the maximum duration,
• Revisiting required consumer disclosures,
• Imposing new standards for renewals, and
• Allowing for stacking of policies.

Any proposed rulemaking would undergo a public comment process before becoming final.

Takeaway for employers

The federal decision creates uncertainty in the market, with enforcement discretion now favoring longer short-term policies but no clear timeline on new rules.

Employers with fewer than 50 employees may see these plans as a possible option for workers, but larger employers remain bound by ACA requirements to provide affordable, minimum-value coverage.

As the agencies move toward potential new regulations, employers should monitor developments closely and weigh the risks and limitations of short-term health plans before considering them as part of a benefits strategy.