83 FR 7437 - Short-Term, Limited-Duration Insurance

DEPARTMENT OF THE TREASURY
Internal Revenue Service
DEPARTMENT OF LABOR
Employee Benefits Security Administration
DEPARTMENT OF HEALTH AND HUMAN SERVICES

Federal Register Volume 83, Issue 35 (February 21, 2018)

Page Range		7437-7447
FR Document		2018-03208

This rule contains proposals amending the definition of short- term, limited-duration insurance for purposes of its exclusion from the definition of individual health insurance coverage. This action is being taken to lengthen the maximum period of short-term, limited- duration insurance, which will provide more affordable consumer choice for health coverage.

Federal Register, Volume 83 Issue 35 (Wednesday, February 21, 2018)

[Federal Register Volume 83, Number 35 (Wednesday, February 21, 2018)]
[Proposed Rules]
[Pages 7437-7447]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2018-03208]

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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 54

[REG-133491-17]
RIN 1545-BO41

DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2590

RIN 1210-AB86

DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 144, 146, and 148

[CMS-9924-P]
RIN 0938-AT48

Short-Term, Limited-Duration Insurance

AGENCY: Internal Revenue Service, Department of the Treasury; Employee
Benefits Security Administration, Department of Labor; Centers for
Medicare & Medicaid Services, Department of Health and Human Services.

ACTION: Proposed rule.

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SUMMARY: This rule contains proposals amending the definition of short-
term, limited-duration insurance for purposes of its exclusion from the
definition of individual health insurance coverage. This action is
being taken to lengthen the maximum period of short-term, limited-
duration insurance, which will provide more affordable consumer choice
for health coverage.

DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. EST on April 23,
2018.

ADDRESSES: In commenting, please refer to file code CMS-9924-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one
of the ways listed):
1. Electronically. You may submit electronic comments on this
regulation to https://www.regulations.gov. Follow the ``Submit a
comment'' instructions.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-9924-P, P.O. Box 8010,
Baltimore, MD 21244-8010.

Please allow sufficient time for mailed comments to be received before
the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-9924-P, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
4. By hand or courier. Alternatively, you may deliver (by hand or
courier) your written comments ONLY to the following addresses prior to
the close of the comment period:
a. For delivery in Washington, DC--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, Room 445-G, Hubert
H. Humphrey Building, 200 Independence Avenue SW, Washington, DC 20201.
(Because access to the interior of the Hubert H. Humphrey Building
is not readily available to persons without Federal government
identification, commenters are encouraged to leave their comments in
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing
by stamping in and retaining an extra copy of the comments being
filed.)
b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, 7500 Security
Boulevard, Baltimore, MD 21244-1850.
Comments erroneously mailed to the addresses indicated as
appropriate for hand or courier delivery may be delayed and received
after the comment period.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Amber Rivers or Matthew Litton of the
Department of Labor, at 202-693-8335; Karen Levin, Internal Revenue
Service, Department of the Treasury, at (202) 317-5500; David Mlawsky,
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, at 410-786-1565.
Customer Service Information: Individuals interested in obtaining
information from the Department of Labor concerning employment-based
health coverage laws may call the Employee Benefits Security
Administration (EBSA) Toll-Free Hotline, at 1-866-444-EBSA (3272) or
visit the Department of Labor's website (http://www.dol.gov/ebsa). In
addition, information from the Department of Health and Human Services
(HHS) on private health insurance for consumers can be found on the
Centers for Medicare & Medicaid Services (CMS) website (www.cms.gov/cciio) and information on health reform can be found at
www.HealthCare.gov.

SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following
website as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that website to
view public comments.

I. Background

This proposed rule contains amendments to the definition of
``short-term, limited-duration insurance'' for purposes of its
exclusion from the definition of ``individual health insurance
coverage'' in 26 CFR part 54, 29 CFR part 2590, and 45 CFR part 144.

A. General Statutory Background and Enactment of PPACA

The Health Insurance Portability and Accountability Act of 1996
(HIPAA),\1\ added title XXVII to the Public Health Service Act (PHS
Act), part 7 to the Employee Retirement Income Security Act of 1974
(ERISA), and Chapter 100 to the Internal Revenue Code (the Code),
providing portability and nondiscrimination rules with respect to
health coverage. These provisions of the PHS Act, ERISA, and the Code
were later augmented by other laws, including the Mental Health Parity
Act of 1996,\2\ the Paul Wellstone and Pete Domenici Mental Health
Parity and

[[Page 7438]]

Addiction Equity Act of 2008,\3\ the Newborns' and Mothers' Health
Protection Act,\4\ the Women's Health and Cancer Rights Act,\5\ the
Genetic Information Nondiscrimination Act of 2008,\6\ the Children's
Health Insurance Program Reauthorization Act of 2009,\7\ Michelle's
Law,\8\ and the Patient Protection and Affordable Care Act, as amended
by the Health Care and Education Reconciliation Act of 2010 (PPACA).\9\
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\1\ Public Law 104-191, 110 Stat. 1936 (August 21, 1996).
\2\ Public Law 104-204, 110 Stat. 2944 (September 26, 1996).
\3\ Public Law 110-343, 122 Stat. 3881 (October 3, 2008).
\4\ Public Law 104-204, 110 Stat. 2935 (September 26, 1996).
\5\ Public Law 105-277, 112 Stat. 2681-436 (October 21, 1998).
\6\ Public Law 110-233, 122 Stat. 881 (May 21, 2008).
\7\ Public Law 111-3, 123 Stat. 64 (February 4, 2009).
\8\ Public Law 110-381, 122 Stat. 4081 (October 9, 2008).
\9\ The Patient Protection and Affordable Care Act, Public Law
111-148, was enacted on March 23, 2010, and the Health Care and
Education Reconciliation Act of 2010, Public Law 111-152, was
enacted on March 30, 2010.
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PPACA reorganizes, amends, and adds to the provisions of Part A of
title XXVII of the PHS Act relating to group health plans and health
insurance issuers in the group and individual markets. PPACA added
section 715 of ERISA and section 9815 of the Code to incorporate
provisions of Part A of title XXVII of the PHS Act (generally, sections
2701 through 2728 of the PHS Act) into ERISA and the Code.

B. President's Executive Order

On October 12, 2017, President Trump issued Executive Order 13813
entitled ``Promoting Healthcare Choice and Competition Across the
United States''.\10\ This Executive Order states in relevant part:
``Within 60 days of the date of this order, the Secretaries of the
Treasury, Labor, and Health and Human Services shall consider proposing
regulations or revising guidance, consistent with law, to expand the
availability of [short-term, limited-duration insurance]. To the extent
permitted by law and supported by sound policy, the Secretaries should
consider allowing such insurance to cover longer periods and be renewed
by the consumer.''
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\10\ 82 FR 48385.
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C. 2017 Tax Legislation

Section 5000A of the Code, added by PPACA, provides that all non-
exempt applicable individuals must maintain minimum essential coverage
or pay the individual shared responsibility payment.\11\ On December
22, 2017, the President signed tax reform legislation into law.\12\
This legislation includes a provision under which the individual shared
responsibility payment included in section 5000A of the Code is reduced
to $0, effective for months beginning after December 31, 2018.
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\11\ The eligibility standards for exemptions can be found at 45
CFR 155.605. Section 5000A of the Code and Treasury regulations at
26 CFR 1.5000A-3 provide exemptions from the requirement to maintain
minimum essential coverage for the following individuals: (1)
Members of recognized religious sects; (2) members of health care
sharing ministries; (3) exempt noncitizens; (4) incarcerated
individuals; (5) individuals with no affordable coverage; (6)
individuals with household income below the income tax filing
threshold; (7) members of federally recognized Indian tribes; (8)
individuals who qualify for a hardship exemption certification; and
(9) individuals with a short coverage gap of a continuous period of
less than 3 months in which the individual is not covered under
minimum essential coverage.
\12\ Public Law 115-97, 131 Stat. 2054.
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D. Short-Term, Limited-Duration Insurance

Short-term, limited-duration insurance is a type of health
insurance coverage that was designed to fill temporary gaps in coverage
that may occur when an individual is transitioning from one plan or
coverage to another plan or coverage. Although short-term, limited-
duration insurance is not an excepted benefit,\13\ it is exempt from
the PHS Act's individual-market requirements because it is not
individual health insurance coverage.\14\ Section 2791(b)(5) of the PHS
Act provides ``[t]he term `individual health insurance coverage' means
health insurance coverage offered to individuals in the individual
market, but does not include short-term limited duration insurance.''
\15\
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\13\ Sections 2722 and 2763 of the PHS Act, section 732 of
ERISA, and section 9831 of the Code provide that the respective
requirements of title XXVII of the PHS Act, part 7 of ERISA, and
Chapter 100 of the Code generally do not apply to certain types of
benefits, known as ``excepted benefits.'' Excepted benefits are
described in section 2791(c) of the PHS Act, section 733(c) of
ERISA, and section 9832(c) of the Code. See also 26 CFR 54.9831-
1(c), 29 CFR 2590.732(c), 45 CFR 146.145(b), and 45 CFR 148.220.
\14\ The definition of short-term, limited-duration insurance
has some limited relevance with respect to group health plans and
group health insurance issuers. For example, an individual who loses
coverage due to moving out of an HMO service area in the individual
market triggers a special enrollment right into a group health plan.
See 26 CFR 54.9801-6(a)(3)(i)(B), 29 CFR 2590.701-6(a)(3)(i)(B) and
45 CFR 146.117(a)(3)(i)(B). Also, a group health plan that wraps
around individual health insurance coverage is an excepted benefit
if certain conditions are satisfied. See 26 CFR 54.9831-
1(c)(3)(vii), 29 CFR 2590.732(c)(3)(vii), and 45 CFR
146.145(b)(3)(vii).
\15\ Sections 733(b)(4) of ERISA and 2791(b)(4) of the PHS Act
provide that group health insurance coverage means ``in connection
with a group health plan, health insurance coverage offered in
connection with such plan.'' Sections 733(a)(1) of ERISA and
2791(a)(1) of the PHS Act provide that a group health plan is
generally any plan, fund, or program established or maintained by an
employer (or employee organization or both) for the purpose of
providing medical care to employees or their dependents (as defined
under the terms of the plan) directly, or through insurance,
reimbursement, or otherwise. There is no corresponding provision
excluding short-term, limited-duration insurance from the definition
of group health insurance coverage. Thus, any insurance that is sold
in the group market and purports to be short-term, limited-duration
insurance must comply with Part A of title XXVII of the PHS Act,
part 7 of ERISA, and Chapter 100 of the Code.
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The PHS Act does not define short-term, limited-duration insurance.
Under regulations implementing HIPAA, and that continued to apply
through 2016, short-term, limited-duration insurance was defined as
``health insurance coverage provided pursuant to a contract with an
issuer that has an expiration date specified in the contract (taking
into account any extensions that may be elected by the policyholder
without the issuer's consent) that is less than 12 months after the
original effective date of the contract.'' \16\
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\16\ 62 FR 16894 at 16928, 16942, 16958 (April 8, 1997), 69 FR
78720 (December 30, 2004).
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To address the issue of short-term, limited-duration insurance
being sold as a type of primary coverage, as well as concerns regarding
possible adverse selection impacts on the risk pool for PPACA-compliant
plans, the Department of the Treasury, the Department of Labor, and the
Department of Health and Human Services (together, the Departments)
\17\ published a proposed rule on June 10, 2016 in the Federal Register
entitled ``Expatriate Health Plans, Expatriate Health Plan Issuers, and
Qualified Expatriates; Excepted Benefits; Lifetime and Annual Limits;
and Short-Term, Limited-Duration Insurance.''\18\ The June 2016
proposed rule changed the definition of short-term, limited-duration
insurance that had been in place for nearly 20 years by revising the
definition to specify that short-term, limited-duration insurance could
not provide coverage for 3 months or longer (including any renewal
period(s)).\19\
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\17\ Note, however, that in section headings listing only 2 of
the 3 Departments, the term ``Departments'' generally refers only to
the 2 Departments listed in the heading.
\18\ 81 FR 38019.
\19\ 81 FR 38019, 38032-33.
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The June 2016 proposed rule also included a requirement that the
following notice be prominently displayed in the contract and in any
application materials provided in connection with enrollment in short-
term, limited-duration insurance, in 14 point type:

THIS IS NOT QUALIFYING HEALTH COVERAGE (``MINIMUM ESSENTIAL
COVERAGE'') THAT SATISFIES THE

[[Page 7439]]

HEALTH COVERAGE REQUIREMENT OF THE AFFORDABLE CARE ACT. IF YOU DON'T
HAVE MINIMUM ESSENTIAL COVERAGE, YOU MAY OWE AN ADDITIONAL PAYMENT
WITH YOUR TAXES.\20\

\20\ 82 FR 38032.
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Some stakeholders who submitted comments on the June 2016 proposed
rule supported the rule and the Departments' stated goals. Several
commenters agreed that the proposed rule would limit the number of
consumers relying on short-term, limited-duration insurance as their
primary form of coverage and improve the PPACA's individual market
single risk pools. However, other commenters expressed concerns about
restricting the use of short-term, limited-duration insurance (as
originally defined under the HIPAA regulations) because it provides an
additional, often much more affordable coverage option than an
insurance policy that complies with all of the requirements of the
PPACA. Some commenters explained that individuals who do not qualify
for premium tax credits and need temporary coverage, or who cannot
afford Consolidated Omnibus Budget Reconciliation Act \21\ (COBRA)
continuation coverage, or who missed an opportunity to sign up for
coverage during open enrollment or special enrollment periods, might
need to rely on short-term, limited-duration insurance coverage for 3
months or longer. Commenters highlighted how a person with just a less-
than-3-month policy who develops a health condition might have no
coverage options for the condition after their coverage expires until
the beginning of the plan year that corresponds to the next individual
market open enrollment period. Other commenters also expressed
opposition to the proposed rule citing their belief that States are in
the best position to regulate short-term, limited-duration insurance
and that the proposed rule would limit State flexibility. Finally,
several commenters observed that PPACA-compliant policies are often
network-based but short-term, limited-duration insurance policies
typically are not, thus offering consumers a greater choice of health
care providers. This is particularly true in rural areas, one commenter
stated.
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\21\ Public Law 99-272, 100 Stat. 82 (April 7, 1986).
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After reviewing public comments and feedback received from
stakeholders, on October 31, 2016, the Departments finalized the June
2016 proposed rule without change in a final rule published in the
Federal Register entitled ``Excepted Benefits; Lifetime and Annual
Limits; and Short-Term, Limited-Duration Insurance''.\22\
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\22\ 81 FR 75316.
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On June 12, 2017, HHS published a request for information in the
Federal Register entitled ``Reducing Regulatory Burdens Imposed by the
Patient Protection and Affordable Care Act & Improving Healthcare
Choices to Empower Patients'',\23\ which solicited public comments
about potential changes to existing regulations and guidance that could
promote consumer choice, enhance affordability of coverage for
individual consumers, and affirm the traditional regulatory authority
of the States in regulating the business of health insurance, among
other goals. Several commenters stated that changes to the October 2016
final rule may provide an opportunity to achieve these goals.
Consistent with many comments submitted on the June 2016 proposed rule,
commenters stated that shortening the permitted length of short-term,
limited-duration insurance policies had deprived individuals of
affordable coverage options. One commenter explained that due to the
increased costs of PPACA-compliant major medical coverage, many
financially-stressed individuals may be faced with a choice between
short-term, limited-duration insurance coverage and going without any
coverage at all. One commenter highlighted the need for short-term,
limited-duration insurance coverage among individuals who are in-
between jobs. Another commenter explained that States have the primary
responsibility to regulate short-term, limited-duration insurance and
opined that the October 2016 final rule was overreaching on the part of
the Federal government.
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\23\ 82 FR 26885.
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The Departments are also aware that, while individuals who qualify
for premium tax credits are largely insulated from significant premium
increases (that is, the government, and thus federal taxpayers, largely
bear the cost of the higher premiums), individuals who are not eligible
for subsidies are particularly harmed by increased premiums in the
individual market due to a lack of other, more affordable alternative
coverage options. Based on CMS data on Exchange plan selections and
data compiled from issuer regulatory filings at the State level, for
the first quarters of 2016 and 2017, the number of off-Exchange and
unsubsidized enrollees with individual market coverage fell by nearly 2
million, representing an almost 25 percent decrease.\24\ Further, in
2018, about 26 percent of enrollees (living in 52 percent of counties)
have access to just one insurer in the Exchange.\25\ Short-term,
limited-duration insurance has become increasingly attractive to some
individuals as premiums have escalated for PPACA-compliant plans and
affordable choices in the individual market have dwindled.
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\24\ See Mark Farrah and Associates, ``A Brief Look at the
Turbulent Individual Health Insurance Market,'' July 19, 2017.
Available at: http://www.markfarrah.com/healthcare-business-strategy-print/A-Brief-Look-at-the-Turbulent-Individual-Health-Insurance-Market.aspx. Also, see the Centers for Medicare and
Medicaid Services, ``2017 Effectuated Enrollment Snapshot,'' June
12, 2017. Available at: https://downloads.cms.gov/files/effectuated-enrollment-snapshot-report-06-12-17.pdf.
\25\ See Kaiser Family Foundation. ``Insurer Participation on
ACA Marketplaces, 2014-2018,'' November 10, 2017. http://www.kff.org/health-reform/issue-brief/insurer-participation-on-aca-marketplaces/.
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II. Overview of the Proposed Regulations

In light of Executive Order 13813 directing the Departments to
consider proposing regulations or revising guidance to expand the
availability of short-term, limited-duration insurance, as well as
continued feedback from stakeholders expressing concerns about the
October 2016 final rule, the Departments are proposing to amend the
definition of short-term, limited-duration insurance so that it may
offer a maximum coverage period of less than 12 months after the
original effective date of the contract, consistent with the original
definition in the 1997 HIPAA rule (that is, the proposed rule would
expand the potential maximum coverage period by 9 months). This
proposed definition states that the expiration date specified in the
contract takes into account any extensions that may be elected by the
policyholder without the issuer's consent.
In addition, this proposed rule would revise the required notice
that must appear in the contract and any application materials for
short-term, limited-duration insurance. The Departments are concerned
that short-term, limited-duration insurance policies that provide
coverage lasting almost 12 months may be more difficult for some
individuals to distinguish from PPACA-compliant coverage which is
typically offered on a 12-month basis. Accordingly, under this proposed
rule, one of two versions (as explained below) of the following notice
would be required to be prominently displayed (in at least 14 point
type) in the contract and in any application materials

[[Page 7440]]

provided in connection with enrollment:

THIS COVERAGE IS NOT REQUIRED TO COMPLY WITH FEDERAL
REQUIREMENTS FOR HEALTH INSURANCE, PRINCIPALLY THOSE CONTAINED IN
THE AFFORDABLE CARE ACT. BE SURE TO CHECK YOUR POLICY CAREFULLY TO
MAKE SURE YOU UNDERSTAND WHAT THE POLICY DOES AND DOESN'T COVER. IF
THIS COVERAGE EXPIRES OR YOU LOSE ELIGIBILITY FOR THIS COVERAGE, YOU
MIGHT HAVE TO WAIT UNTIL AN OPEN ENROLLMENT PERIOD TO GET OTHER
HEALTH INSURANCE COVERAGE. ALSO, THIS COVERAGE IS NOT ``MINIMUM
ESSENTIAL COVERAGE''. IF YOU DON'T HAVE MINIMUM ESSENTIAL COVERAGE
FOR ANY MONTH IN 2018, YOU MAY HAVE TO MAKE A PAYMENT WHEN YOU FILE
YOUR TAX RETURN UNLESS YOU QUALIFY FOR AN EXEMPTION FROM THE
REQUIREMENT THAT YOU HAVE HEALTH COVERAGE FOR THAT MONTH.

As stated below, the Departments are proposing that the
applicability date for this proposed rule, if finalized, would be 60
days after the publication of the final rule, and that policies sold on
or after that date would have to meet the requirements of the final
rule in order to constitute short-term, limited-duration insurance. As
previously discussed, the individual shared responsibility payment is
reduced to $0 for months beginning after December 2018. Consequently,
the Departments propose that the final two sentences of the notice must
appear only with respect to policies sold on or after the applicability
date of the rule, if finalized, that have a coverage start date before
January 1, 2019. The Departments solicit comments on this revised
notice, and whether its language or some other language would best
ensure that it is understandable and sufficiently apprises individuals
of the nature of the coverage.
The current definition of short-term, limited-duration insurance
applies for policy years beginning on or after January 1, 2017. In the
October 2016 final rule, the Departments recognized that State
regulators may have approved short-term, limited-duration insurance
products for sale in 2017 that met the definition in effect prior to
January 1, 2017.\26\ Accordingly, HHS noted it would not take
enforcement action against an issuer with respect to its sale of a
short-term, limited-duration insurance product before April 1, 2017, on
the ground that the coverage period is 3 months or more, provided that
the coverage ended on or before December 31, 2017, and otherwise
complies with the definition of short-term, limited-duration insurance
in effect under the final rule.\27\ As stated in the October 2016 final
rule, States may also elect not to take enforcement actions against
issuers with respect to such coverage sold before April 1, 2017. The
current definition in the October 2016 final rule, and the non-
enforcement policy as applied to policies sold before April 1, 2017,
and that end on or before December 31, 2017, would continue to apply
unless and until this rule is finalized.
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\26\ 81 FR 75318 through 75319.
\27\ This non-enforcement policy is limited to the requirement
that short-term, limited-duration insurance must be less than 3
months. It does not relieve issuers of short-term, limited-duration
insurance of the notice requirement, which applies for policy years
beginning on or after January 1, 2017.
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Effective Date and Applicability Date

The Departments propose that this rule, if finalized, would be
effective 60 days after publication of the final rule. With respect to
the applicability date, the Departments propose that insurance policies
sold on or after the 60th day following publication of the final rule,
if finalized, would have to meet the definition of short-term, limited-
duration insurance in the final rule in order to be considered such
insurance. The Departments propose that group health plans and group
health insurance issuers, to the extent they must distinguish between
short-term, limited-duration insurance and individual market health
insurance (such as for purposes of determining whether an individual
has moved out of a health maintenance organization (HMO) service area
in the individual market, which would trigger a special enrollment
right into a group health plan or for purposes of offering limited
wraparound coverage (which wraps around individual health insurance or
the Basic Health Plan as an excepted benefit \28\), must apply the
definition of short-term, limited-duration insurance in the final rule
as of the 60th day following publication of the final rule. The current
regulations specify the applicability date for the definition of short-
term, limited-duration insurance at 26 CFR 54.9833-1; 29 CFR 2590.736,
45 CFR 146.125; and 45 CFR 148.102. Therefore, the Departments propose
conforming amendments to those rules as part of this rulemaking. The
Departments also propose a technical update in 26 CFR 54.9833-1; 29 CFR
2590.736; and 45 CFR 146.125 to delete the reference to the
applicability date for amendments to 26 CFR 54.9831-1(c)(5)(i)(C); 29
CFR 2590.732(c)(5)(i)(C); and 45 CFR 146.145(c)(5)(i)(C) (regarding
supplemental coverage excepted benefits).\29\ Given that the
applicability date for the amendments to those sections has passed, it
is no longer necessary to mention the ``future'' applicability
date.\30\ HHS similarly proposes to amend Sec. 148.102 to remove the
reference to the applicability date for amendments to Sec.
148.220(b)(7) (regarding supplemental coverage excepted benefits).\31\
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\28\ See footnote 14.
\29\ The reference in current regulations at 45 CFR 146.125 to
the applicability date of 45 CFR 146.145(c)(5)(i)(C) was a drafting
error. It was intended to be a reference to 45 CFR
146.145(b)(5)(i)(C).
\30\ The applicability date for these amendments (policy years
and plan years beginning on or after January 1, 2017) remains
unchanged.
\31\ The applicability date for these amendments (policy years
beginning on or after January 1, 2017) remains unchanged.
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Request for Comments

The Departments seek comments on all aspects of this proposed rule,
including whether the length of short-term, limited-duration insurance
should be some other duration. The Departments seek comments on any
regulations or other guidance or policy that limits issuers'
flexibility in designing short-term, limited-duration insurance or
poses barriers to entry into the short-term, limited-duration insurance
market.
In addition, the Departments seek comments on the conditions under
which issuers should be able to allow short-term, limited-duration
insurance to continue for 12 months or longer with the issuer's
consent. Among other things, the Departments solicit comments on
whether any processes for expedited or streamlined reapplication for
short-term, limited-duration insurance that would simplify the
reapplication process and minimize the burden on consumers may be
appropriate; whether federal standards are appropriate for such
processes; and whether any clarifications are needed regarding the
application of the definition of short-term, limited-duration insurance
in the proposed rule to such practices. For example, an expedited
process could involve setting minimum federal standards for what must
be considered as part of the streamlined reapplication process while
allowing insurers to consider additional factors in accordance with
contract terms. The Departments are also interested in information on
any State approaches (including any approaches that States are
considering adopting) to minimize the burden of the reapplication
process for issuers and consumers.

[[Page 7441]]

Because short-term, limited-duration insurance can be priced in an
actuarially fair manner (by which the Departments mean that it is
priced so that the premium paid by an individual reflects the risks
associated with insuring the particular individual or individuals
covered by that policy), subject to State law, individuals who are
likely to purchase short-term, limited-duration insurance are likely to
be relatively young or healthy. Allowing such individuals to purchase
policies that are not in compliance with PPACA may impact the
individual market single risk pools. As explained in section III.,
``Economic Impact and Paperwork Burden'' of this proposed rule, the
Departments estimate that in 2019, after the elimination of the
individual shared responsibility payment, between 100,000 and 200,000
individuals previously enrolled in Exchange coverage would purchase
short-term, limited-duration insurance policies instead. This would
cause the average monthly individual market premiums and average
monthly premium tax credits to increase, leading to an increase in
total annual advance payments of the premium tax credit (APTC) \32\ in
the range of $96 million to $168 million. The Departments seek comments
on these estimates, and welcome other estimates of the increase in
enrollment in short-term, limited-duration insurance under this
proposal, and the health status and age of individuals who would
purchase these policies.
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\32\ The Departments are using data on APTC as an approximation
of premium tax credits since this is the data that is available for
2017.
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The Departments also seek comments on the proposed effective and
applicability dates of this rule, if finalized. The Departments seek
comments on whether the proposed fixed applicability date, which would
first impose the new definition of short-term, limited-duration
insurance on group health plans and group health insurance issuers on a
date that may occur in the middle of a plan year, would cause any
special challenges for group health plans and group health insurance
issuers.

III. Economic Impact and Paperwork Burden

A. Summary--Department of Labor and Department of Health and Human
Services

This rule proposes to amend the definition of short-term, limited-
duration insurance coverage so that the coverage (taking into account
extensions elected by the policyholder without the issuer's consent)
has a maximum period of less than 12 months after the original
effective date of the contract. This rule also seeks comments on all
aspects of this proposed rule, including whether the maximum length of
short-term, limited-duration insurance should be some other duration;
under what conditions issuers should be able to allow short-term,
limited-duration insurance to continue for 12 months or longer with the
issuer's consent; and on the proposed revisions to the notice that must
appear in the contract and any application materials.
The Departments have examined the effects of this rule as required
by Executive Order 13563 (76 FR 3821, January 18, 2011, Improving
Regulation and Regulatory Review), Executive Order 12866 (58 FR 51735,
September 30, 1993, Regulatory Planning and Review), the Regulatory
Flexibility Act (September 19, 1980, Pub. L. 96-354), section 1102(b)
of the Social Security Act, section 202 of the Unfunded Mandates Reform
Act of 1995 (March 22, 1995, Pub. L. 104-4), Executive Order 13132 on
Federalism (August 4, 1999), the Congressional Review Act (5 U.S.C.
804(2)) and Executive Order 13771 (January 30, 2017, Reducing
Regulation and Controlling Regulatory Costs).

B. Executive Orders 12866 and 13563--Department of Labor and Department
of Health and Human Services

Executive Order 12866 (58 FR 51735) directs agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 (76 FR 3821, January 21, 2011) is supplemental to and
reaffirms the principles, structures, and definitions governing
regulatory review as established in Executive Order 12866.
Section 3(f) of Executive Order 12866 defines a ``significant
regulatory action'' as an action that is likely to result in a final
rule--(1) having an annual effect on the economy of $100 million or
more in any 1 year, or adversely and materially affecting a sector of
the economy, productivity, competition, jobs, the environment, public
health or safety, or State, local or tribal governments or communities
(also referred to as ``economically significant''); (2) creating a
serious inconsistency or otherwise interfering with an action taken or
planned by another agency; (3) materially altering the budgetary
impacts of entitlement grants, user fees, or loan programs or the
rights and obligations of recipients thereof; or (4) raising novel
legal or policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in the Executive Order.
A full regulatory impact analysis must be prepared for major rules
with economically significant effects (for example, $100 million or
more in any 1 year), and a ``significant'' regulatory action is subject
to review by the Office of Management and Budget (OMB). The Departments
anticipate that this regulatory action is likely to have economic
impacts of $100 million or more in at least 1 year, and therefore meets
the definition of ``significant rule'' under Executive Order 12866.
Therefore, the Departments have provided an assessment of the potential
costs, benefits, and transfers associated with this proposed rule. In
accordance with the provisions of Executive Order 12866, this proposed
rule was reviewed by OMB.
1. Need for Regulatory Action
This rule contains proposed amendments to the definition of short-
term, limited-duration insurance for purposes of the exclusion from the
definition of individual health insurance coverage. This regulatory
action is taken in light of Executive Order 13813 directing the
Departments to consider proposing regulations or revising guidance to
expand the availability of short-term, limited-duration insurance, as
well as continued feedback from stakeholders expressing concerns about
the October 2016 final rule. While individuals who qualify for premium
tax credits are largely insulated from significant premium increases,
individuals who are not eligible for subsidies are harmed by increased
premiums in the individual market due to a lack of other, more
affordable alternative coverage options. The proposed rule would
increase insurance options for individuals unable or unwilling to
purchase PPACA-compliant plans.
2. Summary of Impacts
In accordance with OMB Circular A-4, Table 1 depicts an accounting
statement summarizing the

[[Page 7442]]

Departments' assessment of the benefits, costs, and transfers
associated with this regulatory action.

Table 1--Accounting Table
------------------------------------------------------------------------

-------------------------------------------------------------------------
Benefits:
------------------------------------------------------------------------
Qualitative:
Increased access to affordable health insurance for
consumers unable or unwilling to purchase PPACA-compliant plans,
potentially resulting in improved health outcomes for them.
Increased choice at lower cost and increased protection
(for consumers who are currently uninsured) from catastrophic
health care expenses for consumers purchasing short-term, limited-
duration insurance.
Potentially broader access to health care providers
compared to PPACA-compliant plans for some consumers.
------------------------------------------------------------------------
Costs:
------------------------------------------------------------------------
Qualitative:
Reduced access to some services and providers for some
consumers who switch from PPACA-compliant plans.
Increased out-of-pocket costs for some consumers, possibly
leading to financial hardship.
Worsening of States' individual market single risk pools
and potential reduced choice for some other individuals remaining
in those risk pools.
------------------------------------------------------------------------

Low estimate High estimate Discount rate
Transfers (million) (million) Year dollar (percent) Period covered
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year)... $96 $168 2017 7 2019
96 168 2017 3 2019
----------------------------------------------------------------------------------------------------------------
Quantitative:
Transfer from the Federal government to enrollees in individual market plans in the form of
increased APTC payments....................................................................................
Qualitative:
Transfer from enrollees in individual market plans who experience increase in premiums to
individuals who switch to lower premium short-term, limited-duration insurance.............................
Tax liability for consumers who replace PPACA-compliant plans and will thus no longer maintain
minimum essential coverage in 2018.........................................................................
----------------------------------------------------------------------------------------------------------------

Short-term, limited-duration insurance represents a small fraction
of the health insurance market. Based on data from the National
Association of Insurance Commissioners (NAIC), in 2016, before the
October 2016 final rule became effective, total premiums earned for
policies designated short-term, limited-duration by carriers were
approximately $146 million for approximately 1,279,500 member months
and with approximately 160,600 covered lives at the end of the year.
During the same period, total premiums for individual market
(comprehensive major medical) coverage were approximately $63.25
billion for approximately 175,689,900 member months with approximately
13.6 million covered lives at the end of the year.\33\
---------------------------------------------------------------------------

\33\ National Association of Insurance Commissioners, 2016
Accident and Health Policy Experience Report, July 2017, available
at http://www.naic.org/prod_serv/AHP-LR-17.pdf.
---------------------------------------------------------------------------

Some public comments received in response to the June 2016 proposed
rule stated that the majority of the short-term, limited-duration
insurance policies were sold as transitional coverage, particularly for
individuals seeking to cover periods of unemployment or other gaps
between employer-sponsored coverage, and that the policies typically
provided coverage for less than 3 months. Accordingly, this proposed
rule would have no effect on the consumers who purchase such coverage
for less than 3 months and perhaps some issuers of those policies.
While it is not clear how the October 2016 final rule affected the
sales of short-term, limited-duration insurance, the sales of such
coverage were increasing prior to the issuance of that rule. Given the
prior trend and the recent increases in premiums in the individual
market, the Departments anticipate that the rule, if finalized, would
encourage more consumers to purchase short-term, limited-duration
insurance for longer durations, including individuals who were
previously uninsured and some who are currently enrolled in individual
market plans, especially in 2019 and beyond, when the individual shared
responsibility payment included in section 5000A of the Code is reduced
to $0, as provided under Public Law 115-97.
Benefits
Consumers who would be likely to purchase short-term, limited-
duration insurance for longer periods would benefit from increased
insurance options at lower premiums, as the average monthly premium in
the fourth quarter of 2016 for a short-term, limited-duration policy
was approximately $124 compared to $393 for an unsubsidized PPACA-
compliant plan.\34\ This proposed rule would also benefit individuals
who need coverage for longer periods for reasons previously discussed
in the preamble, such as needing more than 3 months to find new
employment, or finding PPACA-compliant plans to be unaffordable.
Individuals who purchase short-term, limited-duration insurance as
opposed to being uninsured would potentially experience improved health
outcomes and have greater protection from catastrophic health care
expenses. Individuals purchasing short-term, limited-duration policies
could obtain broader access to health care providers compared to those
PPACA-compliant plans that have narrow provider networks.\35\ The
Departments seek comments on how many consumers may purchase short-
term, limited-duration insurance, rather than being uninsured or
purchasing PPACA-compliant plans, and the benefits to

[[Page 7443]]

them from having short-term, limited-duration insurance, as well as any
impacts on the PPACA individual market single risk pools.
---------------------------------------------------------------------------

\34\ http://www.npr.org/sections/health-shots/2017/01/31/512518502/sales-of-short-term-insurance-plans-could-surge-if-health-law-is-relaxed.
\35\ The ability of short-term limited-duration plans to provide
broad provider networks has been touted by some in the insurance
community. https://www.wsj.com/articles/sales-of-short-term-health-policies-surge-1460328539.
---------------------------------------------------------------------------

Issuers of short-term, limited-duration insurance would benefit
from higher enrollment. They are likely to experience an increase in
premium revenues and profits because such policies can be priced in an
actuarially fair manner (by which the Departments mean that it is
priced so that the premium paid by an individual reflects the risks
associated with insuring the particular individual or individuals
covered by that policy) and are not required to comply with PPACA
medical loss ratio requirements for group and individual health
insurance coverage.
Costs and Transfers
Short-term, limited-duration insurance policies would be unlikely
to include all the elements of PPACA-compliant plans, such as the
preexisting condition exclusion prohibition, coverage of essential
health benefits without annual or lifetime dollar limits, preventive
care, maternity and prescription drug coverage, rating restrictions,
and guaranteed renewability. Therefore, consumers who switch to such
policies from PPACA-compliant plans would experience loss of access to
some services and providers and an increase in out-of-pocket
expenditures related to such excluded services, benefits that in many
cases consumers do not believe are worth their cost (which could be one
reason why many consumers, even those receiving subsidies for PPACA-
compliant plans, may switch to short-term, limited-duration policies
rather than remain in PPACA-compliant plans). The Departments seek
comments on the value of such excluded services to individuals who
switch coverage. Depending on plan design, consumers who purchase
short-term, limited-duration insurance policies and then develop
chronic conditions could face financial hardship as a result, until
they are able to enroll in PPACA-compliant plans that would provide
coverage for such conditions. Additionally, since short-term, limited-
duration insurance does not qualify as minimum essential coverage, any
individual enrolled in a short-term, limited-duration plan that lasts 3
months or longer in 2018 would potentially incur a tax liability for
not having minimum essential coverage during that year. Starting in
2019, the individual shared responsibility payment included in section
5000A of the Code is reduced to $0, as provided under Public Law 115-
97.
Because short-term, limited-duration insurance policies can be
priced in an actuarially fair manner, subject to State law, individuals
who are likely to purchase such coverage are likely to be relatively
young or healthy. Allowing such individuals to purchase policies that
do not comply with PPACA, but with term lengths that may be similar to
those of PPACA-compliant plans with 12-month terms, could potentially
weaken States' individual market single risk pools. As a result,
individual market issuers could experience higher than expected costs
of care and suffer financial losses, which might prompt them to leave
the individual market. Although choices of plans available in the
individual market have already been reduced to plans from a single
insurer in roughly half of all counties, this proposed rule may further
reduce choices for individuals remaining in those individual market
single risk pools. The Departments seek comments on these and any other
potential costs.
The Departments anticipate that most of the individuals who switch
from individual market plans to short-term, limited-duration insurance
would be relatively young or healthy and would also not be eligible to
receive APTC. If individual market single risk pools change as a
result, it would result in an increase in premiums for the individuals
remaining in those risk pools. An increase in premiums for individual
market single risk pool coverage would result in an increase in Federal
outlays for APTC.
Beginning in 2019, the individual shared responsibility payment
included in section 5000A of the Code is reduced to $0, as provided
under Public Law 115-97. This would compound the effects of the
provisions of this proposed rule (one potential exception being the
impact on APTC payments). In order to estimate the impact on the
individual market and APTC payments, the Departments used enrollment,
premium and APTC data for 2017, observed rate increases for 2018, and
assumed that 2019 rates will increase in line with medical expenditures
and assumed the relative morbidities of the individuals leaving the
individual market single risk pool to those remaining in the risk pool
to be 75 percent. The Congressional Budget Office estimates that 3
million people will drop coverage in 2019 from the individual market
and premiums will increase 10 percent on average, as a result of the
change to the individual shared responsibility payment.\36\ The
Departments seek comments on how many of these individuals may purchase
short-term, limited-duration insurance instead. Based on enrollment
trends prior to the October 2016 final rule, the Departments project
that approximately 100,000 to 200,000 additional individuals would
shift from the individual market to short-term, limited-duration
insurance in 2019. Most of these individuals would be young or healthy
and only about 10 percent of them would have been subsidized by
eligibility for APTC if they maintained their Exchange coverage. While
the reduction in the number of subsidized enrollees would tend to
reduce total APTC payments, increases in premiums would tend to
increase them. The proposed rule's net effect on total APTC payments is
uncertain, but federal outlays for APTC are estimated to increase by
between $96 million ($54,948 million-$54,852 million) and $168 million
($55,020 million-$54,852 million) annually. Table 2 depicts the effects
on average premiums \37\ and APTC payments.
---------------------------------------------------------------------------

\36\ See Congressional Budget Office, Repealing the Individual
Health Insurance Mandate: An Updated Estimate, November 2017,
available at https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/53300-individualmandate.pdf.
\37\ Percent Premium Increase = (Total Enrollment-
(Morbidity(75%) * Number Switching)) / (Total Enrollment-Number
Switching).

Table 2--Estimated Effect on Individual Market Exchanges in 2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated Estimated
number of number of Estimated Estimated
subsidized unsubsidized average average Estimated total Estimated total
enrollees in enrollees in monthly monthly APTC monthly APTC annual APTC
exchanges exchanges premium
--------------------------------------------------------------------------------------------------------------------------------------------------------
No change in policy................................. 8,459,000 4,671,000 $649 $512 $4,331,000,000 $51,972,000,000

[[Page 7444]]

$0 individual shared responsibility payment......... 8,122,000 1,608,000 714 563 4,573,000,000 54,852,000,000
100,000 People switching to short-term, limited- 8,112,000 1,518,000 716 564 4,579,000,000 54,948,000,000
duration insurance.................................
200,000 People switching to short-term, limited- 8,102,000 1,428,000 718 566 4,585,000,000 55,020,000,000
duration insurance.................................
--------------------------------------------------------------------------------------------------------------------------------------------------------

There is significant uncertainly regarding these estimates, because
changes in enrollment and premiums would depend on a variety of
economic factors and it is difficult to predict how consumers and
issuers would react to the proposed policy changes.

C. Regulatory Alternatives

One regulatory alternative would be to set the maximum duration for
short-term, limited-duration insurance to a 6 month or 9 month period.
However, this alternative would not adequately increase choices for
individuals unable or unwilling to purchase PPACA-compliant plans.

D. Paperwork Reduction Act--Department of Health and Human Services

This proposed rule would revise the required notice that must be
prominently displayed in the contract and in any application materials
for short-term, limited-duration insurance. The Departments have
proposed the exact text for this notice requirement and the language
would not need to be customized. The burden associated with these
notices is not subject to the Paperwork Reduction Act of 1995 in
accordance with 5 CFR 1320.3(c)(2) because they do not contain a
``collection of information'' as defined in 44 U.S.C. 3502(3).
Consequently, this document need not be reviewed by the Office of
Management and Budget under the authority of the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501 et seq.).

E. Regulatory Flexibility Act

The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to Federal rules that are subject to
the notice and comment requirements of section 553(b) of the
Administrative Procedure Act (5 U.S.C. 551 et seq.) and that are likely
to have a significant economic impact on a substantial number of small
entities. Unless an agency certifies that a proposed rule is not likely
to have a significant economic impact on a substantial number of small
entities, section 603 of RFA requires that the agency present an
initial regulatory flexibility analysis at the time of the publication
of the notice of proposed rulemaking describing the impact of the rule
on small entities and seeking public comment on such impact. Small
entities include small businesses, organizations and governmental
jurisdictions.
The RFA generally defines a ``small entity'' as--(1) a proprietary
firm meeting the size standards of the Small Business Administration
(13 CFR 121.201); (2) a nonprofit organization that is not dominant in
its field; or (3) a small government jurisdiction with a population of
less than 50,000. (States and individuals are not included in the
definition of ``small entity''). The Departments use as their measure
of significant economic impact on a substantial number of small
entities a change in revenues of more than 3 to 5 percent.
This proposed rule would impact health insurance issuers,
especially those in the individual market. The Departments believe that
health insurance issuers would be classified under the North American
Industry Classification System code 524114 (Direct Health and Medical
Insurance Carriers). According to SBA size standards, entities with
average annual receipts of $38.5 million or less are considered small
entities for these North American Industry Classification System codes.
Issuers could possibly be classified in 621491 (Health Maintenance
Organization Medical Centers) and, if this is the case, the SBA size
standard is $32.5 million or less.\38\ The Departments believe that
few, if any, insurance companies selling comprehensive health insurance
policies (in contrast, for example, to travel insurance policies or
dental discount policies) fall below these size thresholds. Based on
data from Medical Loss Ratio (MLR) annual report submissions for the
2015 MLR reporting year,\39\ approximately 92 out of over 530 issuers
of health insurance coverage nationwide had total premium revenue of
$38.5 million or less, of which 64 issuers offer plans in the
individual market. This estimate may overstate the actual number of
small health insurance companies that may be affected, since almost 50
percent of these small companies belong to larger holding groups, and
many if not all of these small companies are likely to have non-health
lines of business that would result in their revenues exceeding $38.5
million. Therefore, the Departments certify that this proposed rule
would not have a significant impact on a substantial number of small
entities.
---------------------------------------------------------------------------

\38\ ``Table of Small Business Size Standards Matched to North
American Industry Classification System Codes'', effective October
1, 2017, U.S. Small Business Administration, available at https://www.sba.gov/sites/default/files/files/Size_Standards_Table_2017.pdf.
\39\ Available at https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.
---------------------------------------------------------------------------

In addition, section 1102(b) of the Social Security Act requires
agencies to prepare a regulatory impact analysis if a rule may have a
significant economic impact on the operations of a substantial number
of small rural hospitals. This analysis must conform to the provisions
of section 603 of the RFA. This proposed rule will not affect small
rural hospitals. Therefore, the Departments have determined that this
proposed rule would not have a significant impact on the operations of
a substantial number of small rural hospitals.

F. Special Analysis--Department of the Treasury

Certain IRS regulations, including this one, are exempt from the
requirements of Executive Order 12866, as supplemented and reaffirmed
by Executive Order 13563. Therefore, a regulatory impact assessment is
not required. Pursuant to Executive Order 13789, the Treasury
Department and OMB are currently reviewing the scope and implementation
of the existing

[[Page 7445]]

exemption. Pursuant to section 7805(f) of the Code, this proposed rule
has been submitted to the Chief Counsel for Advocacy of the Small
Business Administration for comment on its impact on small business.

G. Unfunded Mandates Reform Act

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires that agencies assess anticipated costs and benefits and take
certain other actions before issuing a proposed rule that includes any
Federal mandate that may result in expenditures in any 1 year by a
State, local, or Tribal governments, in the aggregate, or by the
private sector, of $100 million in 1995 dollars, updated annually for
inflation. Currently, that threshold is approximately $148 million.
This proposed rule does not include any Federal mandate that may result
in expenditures by State, local, or tribal governments, or the private
sector, that may impose an annual burden that exceeds that threshold.

H. Federalism--Department of Labor and Department of Health and Human
Services

Executive Order 13132 outlines fundamental principles of
federalism. It requires adherence to specific criteria by Federal
agencies in formulating and implementing policies that have
``substantial direct effects'' on the States, the relationship between
the national government and States, or on the distribution of power and
responsibilities among the various levels of government. Federal
agencies promulgating regulations that have these federalism
implications must consult with State and local officials, and describe
the extent of their consultation and the nature of the concerns of
State and local officials in the preamble to the final regulation.
Federal officials have discussed the issue of the term length of
short-term, limited-duration insurance with State regulatory officials.
This proposed rule has no federalism implications to the extent that
current State law requirements for short-term, limited-duration
insurance are the same as or more restrictive than the Federal standard
proposed in this proposed rule. States may continue to apply such State
law requirements.

I. Congressional Review Act

This proposed rule is subject to the Congressional Review Act
provisions of the Small Business Regulatory Enforcement Fairness Act of
1996 (5 U.S.C. 801 et seq.) and will be transmitted to the Congress and
to the Comptroller General for review in accordance with such
provisions.

J. Reducing Regulation and Controlling Regulatory Costs

Executive Order 13771, titled Reducing Regulation and Controlling
Regulatory Costs, was issued on January 30, 2017. This proposed rule,
if finalized as proposed, is expected to be an Executive Order 13771
deregulatory action.

IV. Statutory Authority

The Department of the Treasury regulations are proposed to be
adopted pursuant to the authority contained in sections 7805 and 9833
of the Code.
The Department of Labor regulations are proposed to be adopted
pursuant to the authority contained in 29 U.S.C. 1135 and 1191c; and
Secretary of Labor's Order 1-2011, 77 FR 1088 (Jan. 9, 2012).
The Department of Health and Human Services regulations are
proposed to be adopted pursuant to the authority contained in sections
2701 through 2763, 2791, 2792 and 2794 of the PHS Act (42 U.S.C. 300gg
through 300gg-63, 300gg-91, 300gg-92 and 300gg-94), as amended.

List of Subjects

26 CFR Part 54

Pension excise taxes.

29 CFR Part 2590

Continuation coverage, Disclosure, Employee benefit plans, Group
health plans, Health care, Health insurance, Medical child support,
Reporting and recordkeeping requirements.

45 CFR Parts 144 and 146

Health care, Health insurance, Reporting and recordkeeping
requirements.

45 CFR Part 148

Administrative practice and procedure, Health care, Health
insurance, Penalties, Reporting and recordkeeping requirements.

Kirsten B. Wielobob,
Deputy Commissioner for Services and Enforcement, Internal Revenue
Service.
Signed this 8th day of February 2018.

Preston Rutledge,
Assistant Secretary, Employee Benefits Security Administration,
Department of Labor.
Dated: February 1, 2018.

Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
Dated: February 9, 2018.

Alex M. Azar II,
Secretary, Department of Health and Human Services.

DEPARTMENT OF THE TREASURY

Internal Revenue Service

For the reasons stated in the preamble, 26 CFR part 54 is proposed
to be amended as follows:

PART 54--PENSION AND EXCISE TAX

0
Par. 1. The authority citation for part 54 continues to read in part as
follows:

Authority: 26 U.S.C. 7805 * * *

0
Par. 2. Section 54.9801-2 is amended by revising the definition of
``Short-term, limited-duration insurance'' to read as follows:

Sec. 54.9801-2 Definitions.

* * * * *
Short-term, limited-duration insurance means health insurance
coverage provided pursuant to a contract with an issuer that:
(1) Has an expiration date specified in the contract (taking into
account any extensions that may be elected by the policyholder without
the issuer's consent) that is less than 12 months after the original
effective date of the contract;
(2) With respect to policies having a coverage start date before
January 1, 2019, displays prominently in the contract and in any
application materials provided in connection with enrollment in such
coverage in at least 14 point type the following:

[[Page 7446]]

INSURANCE COVERAGE. ALSO, THIS COVERAGE IS NOT ``MINIMUM ESSENTIAL
COVERAGE''. IF YOU DON'T HAVE MINIMUM ESSENTIAL COVERAGE FOR ANY
MONTH IN 2018, YOU MAY HAVE TO MAKE A PAYMENT WHEN YOU FILE YOUR TAX
RETURN UNLESS YOU QUALIFY FOR AN EXEMPTION FROM THE REQUIREMENT THAT
YOU HAVE HEALTH COVERAGE FOR THAT MONTH.;

and

(3) With respect to policies having a coverage start date on or
after January 1, 2019, displays prominently in the contract and in any
application materials provided in connection with enrollment in such
coverage in at least 14 point type the following:

THIS COVERAGE IS NOT REQUIRED TO COMPLY WITH FEDERAL REQUIREMENTS
FOR HEALTH INSURANCE, PRINCIPALLY THOSE CONTAINED IN THE AFFORDABLE
CARE ACT. BE SURE TO CHECK YOUR POLICY CAREFULLY TO MAKE SURE YOU
UNDERSTAND WHAT THE POLICY DOES AND DOESN'T COVER. IF THIS COVERAGE
EXPIRES OR YOU LOSE ELIGIBILITY FOR THIS COVERAGE, YOU MIGHT HAVE TO
WAIT UNTIL AN OPEN ENROLLMENT PERIOD TO GET OTHER HEALTH INSURANCE
COVERAGE.
* * * * *
0
Par. 3. Section 54.9833-1 is amended by revising the section heading
and the last sentence to read as follows:

Sec. 54.9833-1 Applicability dates.

* * * Notwithstanding the previous sentence, the definition of
``short-term, limited-duration insurance'' in Sec. 54.9801-2 applies
[DATE 60 DAYS AFTER DATE OF PUBLICATION OF THE FINAL RULE IN THE
FEDERAL REGISTER].

DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Chapter XXV

For the reasons stated in the preamble, the Department of Labor
proposes to amend 29 CFR part 2590 as set forth below:

PART 2590--RULES AND REGULATIONS FOR GROUP HEALTH PLANS

0
4. The authority citation for part 2590 continues to read as follows:

Authority: 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169, 1181-
1183, 1181 note, 1185, 1185a, 1185b, 1191, 1191a, 1191b, and 1191c;
sec. 101(g), Pub. L. 104-191, 110 Stat. 1936; sec. 401(b), Pub. L.
105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 512(d), Pub. L.
110-343, 122 Stat. 3881; sec. 1001, 1201, and 1562(e), Pub. L. 111-
148, 124 Stat. 119, as amended by Pub. L. 111-152, 124 Stat. 1029;
Division M, Pub. L. 113-235, 128 Stat. 2130; Secretary of Labor's
Order 1-2011, 77 FR 1088 (Jan. 9, 2012).

0
5. Section 2590.701-2 is amended by revising the definition of ``Short-
term, limited-duration insurance'' to read as follows:

Sec. 2590.701-2 Definitions.

THIS COVERAGE IS NOT REQUIRED TO COMPLY WITH FEDERAL REQUIREMENTS
FOR HEALTH INSURANCE, PRINCIPALLY THOSE CONTAINED IN THE AFFORDABLE
CARE ACT. BE SURE TO CHECK YOUR POLICY CAREFULLY TO MAKE SURE YOU
UNDERSTAND WHAT THE POLICY DOES AND DOESN'T COVER. IF THIS COVERAGE
EXPIRES OR YOU LOSE ELIGIBILITY FOR THIS COVERAGE, YOU MIGHT HAVE TO
WAIT UNTIL AN OPEN ENROLLMENT PERIOD TO GET OTHER HEALTH INSURANCE
COVERAGE. ALSO, THIS COVERAGE IS NOT ``MINIMUM ESSENTIAL COVERAGE''.
IF YOU DON'T HAVE MINIMUM ESSENTIAL COVERAGE FOR ANY MONTH IN 2018,
YOU MAY HAVE TO MAKE A PAYMENT WHEN YOU FILE YOUR TAX RETURN UNLESS
YOU QUALIFY FOR AN EXEMPTION FROM THE REQUIREMENT THAT YOU HAVE
HEALTH COVERAGE FOR THAT MONTH.;

and

THIS COVERAGE IS NOT REQUIRED TO COMPLY WITH FEDERAL REQUIREMENTS
FOR HEALTH INSURANCE, PRINCIPALLY THOSE CONTAINED IN THE AFFORDABLE
CARE ACT. BE SURE TO CHECK YOUR POLICY CAREFULLY TO MAKE SURE YOU
UNDERSTAND WHAT THE POLICY DOES AND DOESN'T COVER. IF THIS COVERAGE
EXPIRES OR YOU LOSE ELIGIBILITY FOR THIS COVERAGE, YOU MIGHT HAVE TO
WAIT UNTIL AN OPEN ENROLLMENT PERIOD TO GET OTHER HEALTH INSURANCE
COVERAGE.
* * * * *
0
6. Section 2590.736 is amended by revising the last sentence to read as
follows:

Sec. 2590.736 Applicability dates.

* * * Notwithstanding the previous sentence, the definition of
``short-term, limited-duration insurance'' in Sec. 2590.701-2 applies
[DATE 60 DAYS AFTER DATE OF PUBLICATION OF THE FINAL RULE IN THE
FEDERAL REGISTER].

DEPARTMENT OF HEALTH AND HUMAN SERVICES

For the reasons stated in the preamble, the Department of Health
and Human Services proposes to amend 45 CFR parts 144, 146, and 148 as
set forth below:

PART 144--REQUIREMENTS RELATING TO HEALTH INSURANCE COVERAGE

0
7. The authority citation for part 144 continues to read as follows:

Authority: Secs. 2701 through 2763, 2791, and 2792 of the Public
Health Service Act, 42 U.S.C. 300gg through 300gg-63, 300gg-91, and
300gg-92.

0
8. Section 144.103 is amended by revising the definition of ``Short-
term, limited-duration insurance'' to read as follows:

Sec. 144.103 Definitions.

[[Page 7447]]

ESSENTIAL COVERAGE''. IF YOU DON'T HAVE MINIMUM ESSENTIAL COVERAGE
FOR ANY MONTH IN 2018, YOU MAY HAVE TO MAKE A PAYMENT WHEN YOU FILE
YOUR TAX RETURN UNLESS YOU QUALIFY FOR AN EXEMPTION FROM THE
REQUIREMENT THAT YOU HAVE HEALTH COVERAGE FOR THAT MONTH.;

and

PART 146--REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET

0
9. The authority citation for part 146 is revised to read as follows:

Authority: Secs. 2702 through 2705, 2711 through 2723, 2791,
and 2792 of the Public Health Service Act (42 U.S.C. 300gg-1 through
300gg-5, 300gg-11 through 300gg-23, 300gg-91, and 300gg-92).

0
10. Section 146.125 is amended by revising the last sentence to read as
follows.

Sec. 146.125 Applicability dates.

* * * Notwithstanding the previous sentence, the definition of
``short-term, limited-duration insurance'' in Sec. 144.103 of this
subchapter applies [DATE 60 DAYS AFTER DATE OF PUBLICATION OF THE FINAL
RULE IN THE FEDERAL REGISTER].

PART 148--REQUIREMENTS FOR THE INDIVIDUAL HEALTH INSURANCE MARKET

0
11. The authority citation for part 148 continues to read as follows:

Authority: Secs. 2701 through 2763, 2791, and 2792 of the
Public Health Service Act (42 U.S.C. 300gg through 300gg-63, 300gg-
91, and 300gg-92), as amended.

0
12. Section 148.102 is amended by revising the section heading and the
last sentence of paragraph (b) to read as follows:

Sec. 148.102 Scope and applicability date.

* * * * *
(b) * * * Notwithstanding the previous sentence, the definition of
``short-term, limited-duration insurance'' in Sec. 144.103 of this
subchapter is applicable [DATE 60 DAYS AFTER DATE OF PUBLICATION OF THE
FINAL RULE IN THE FEDERAL REGISTER].

[FR Doc. 2018-03208 Filed 2-20-18; 8:45 am]
BILLING CODE 4150-28-P; 4510-29-P; 6325-64-P

7440 Federal Register / Vol. 83, No. 35 / Wednesday, February 21, 2018 / Proposed Rules

provided in connection with duration insurance in effect under the (regarding supplemental coverage
enrollment: final rule.27 As stated in the October excepted benefits).29 Given that the
THIS COVERAGE IS NOT REQUIRED TO 2016 final rule, States may also elect not applicability date for the amendments to
COMPLY WITH FEDERAL REQUIREMENTS to take enforcement actions against those sections has passed, it is no longer
FOR HEALTH INSURANCE, PRINCIPALLY issuers with respect to such coverage necessary to mention the ‘‘future’’
THOSE CONTAINED IN THE AFFORDABLE sold before April 1, 2017. The current applicability date.30 HHS similarly
CARE ACT. BE SURE TO CHECK YOUR definition in the October 2016 final rule, proposes to amend § 148.102 to remove
POLICY CAREFULLY TO MAKE SURE YOU and the non-enforcement policy as the reference to the applicability date
UNDERSTAND WHAT THE POLICY DOES applied to policies sold before April 1, for amendments to § 148.220(b)(7)
AND DOESN’T COVER. IF THIS COVERAGE 2017, and that end on or before
EXPIRES OR YOU LOSE ELIGIBILITY FOR
(regarding supplemental coverage
THIS COVERAGE, YOU MIGHT HAVE TO December 31, 2017, would continue to excepted benefits).31
WAIT UNTIL AN OPEN ENROLLMENT apply unless and until this rule is
finalized. Request for Comments
PERIOD TO GET OTHER HEALTH
INSURANCE COVERAGE. ALSO, THIS The Departments seek comments on
Effective Date and Applicability Date
COVERAGE IS NOT ‘‘MINIMUM all aspects of this proposed rule,
ESSENTIAL COVERAGE’’. IF YOU DON’T The Departments propose that this including whether the length of short-
HAVE MINIMUM ESSENTIAL COVERAGE rule, if finalized, would be effective 60 term, limited-duration insurance should
FOR ANY MONTH IN 2018, YOU MAY days after publication of the final rule. be some other duration. The
HAVE TO MAKE A PAYMENT WHEN YOU With respect to the applicability date,
FILE YOUR TAX RETURN UNLESS YOU
Departments seek comments on any
the Departments propose that insurance regulations or other guidance or policy
QUALIFY FOR AN EXEMPTION FROM THE
policies sold on or after the 60th day that limits issuers’ flexibility in
REQUIREMENT THAT YOU HAVE HEALTH
COVERAGE FOR THAT MONTH. following publication of the final rule, designing short-term, limited-duration
if finalized, would have to meet the insurance or poses barriers to entry into
As stated below, the Departments are definition of short-term, limited-
proposing that the applicability date for the short-term, limited-duration
duration insurance in the final rule in insurance market.
this proposed rule, if finalized, would order to be considered such insurance.
be 60 days after the publication of the In addition, the Departments seek
The Departments propose that group comments on the conditions under
final rule, and that policies sold on or health plans and group health insurance
after that date would have to meet the which issuers should be able to allow
issuers, to the extent they must short-term, limited-duration insurance
requirements of the final rule in order distinguish between short-term, limited-
to constitute short-term, limited- to continue for 12 months or longer with
duration insurance and individual the issuer’s consent. Among other
duration insurance. As previously market health insurance (such as for
discussed, the individual shared things, the Departments solicit
purposes of determining whether an comments on whether any processes for
responsibility payment is reduced to $0 individual has moved out of a health
for months beginning after December expedited or streamlined reapplication
maintenance organization (HMO) for short-term, limited-duration
2018. Consequently, the Departments service area in the individual market,
propose that the final two sentences of insurance that would simplify the
which would trigger a special reapplication process and minimize the
the notice must appear only with enrollment right into a group health
respect to policies sold on or after the burden on consumers may be
plan or for purposes of offering limited appropriate; whether federal standards
applicability date of the rule, if wraparound coverage (which wraps
finalized, that have a coverage start date are appropriate for such processes; and
around individual health insurance or whether any clarifications are needed
before January 1, 2019. The Departments the Basic Health Plan as an excepted
solicit comments on this revised notice, regarding the application of the
benefit 28), must apply the definition of definition of short-term, limited-
and whether its language or some other short-term, limited-duration insurance
language would best ensure that it is duration insurance in the proposed rule
in the final rule as of the 60th day to such practices. For example, an
understandable and sufficiently following publication of the final rule.
apprises individuals of the nature of the expedited process could involve setting
The current regulations specify the minimum federal standards for what
coverage. applicability date for the definition of
The current definition of short-term, must be considered as part of the
short-term, limited-duration insurance streamlined reapplication process while
limited-duration insurance applies for at 26 CFR 54.9833–1; 29 CFR 2590.736,
policy years beginning on or after allowing insurers to consider additional
45 CFR 146.125; and 45 CFR 148.102. factors in accordance with contract
January 1, 2017. In the October 2016 Therefore, the Departments propose
final rule, the Departments recognized terms. The Departments are also
conforming amendments to those rules interested in information on any State
that State regulators may have approved as part of this rulemaking. The
short-term, limited-duration insurance approaches (including any approaches
Departments also propose a technical that States are considering adopting) to
products for sale in 2017 that met the update in 26 CFR 54.9833–1; 29 CFR
definition in effect prior to January 1, minimize the burden of the
2590.736; and 45 CFR 146.125 to delete reapplication process for issuers and
2017.26 Accordingly, HHS noted it the reference to the applicability date
would not take enforcement action consumers.
for amendments to 26 CFR 54.9831–
against an issuer with respect to its sale 1(c)(5)(i)(C); 29 CFR 2590.732(c)(5)(i)(C); 29 The reference in current regulations at 45 CFR
of a short-term, limited-duration and 45 CFR 146.145(c)(5)(i)(C)
daltland on DSKBBV9HB2PROD with PROPOSALS

146.125 to the applicability date of 45 CFR
insurance product before April 1, 2017, 146.145(c)(5)(i)(C) was a drafting error. It was
on the ground that the coverage period 27 This non-enforcement policy is limited to the intended to be a reference to 45 CFR
is 3 months or more, provided that the requirement that short-term, limited-duration 146.145(b)(5)(i)(C).
coverage ended on or before December insurance must be less than 3 months. It does not 30 The applicability date for these amendments

relieve issuers of short-term, limited-duration (policy years and plan years beginning on or after
31, 2017, and otherwise complies with insurance of the notice requirement, which applies January 1, 2017) remains unchanged.
the definition of short-term, limited- for policy years beginning on or after January 1, 31 The applicability date for these amendments
2017. (policy years beginning on or after January 1, 2017)
26 81 FR 75318 through 75319. 28 See footnote 14. remains unchanged.

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7442 Federal Register / Vol. 83, No. 35 / Wednesday, February 21, 2018 / Proposed Rules

Departments’ assessment of the benefits, costs, and transfers associated with this
regulatory action.

TABLE 1—ACCOUNTING TABLE
Benefits:

Qualitative:
• Increased access to affordable health insurance for consumers unable or unwilling to purchase PPACA-compliant plans, potentially re-
sulting in improved health outcomes for them.
• Increased choice at lower cost and increased protection (for consumers who are currently uninsured) from catastrophic health care ex-
penses for consumers purchasing short-term, limited-duration insurance.
• Potentially broader access to health care providers compared to PPACA-compliant plans for some consumers.

Costs:

Qualitative:
• Reduced access to some services and providers for some consumers who switch from PPACA-compliant plans.
• Increased out-of-pocket costs for some consumers, possibly leading to financial hardship.
• Worsening of States’ individual market single risk pools and potential reduced choice for some other individuals remaining in those risk
pools.

Low High Discount Period
Transfers estimate estimate Year dollar rate covered
(million) (million) (percent)

Annualized Monetized ($/year) ............................................ $96 $168 2017 7 2019
96 168 2017 3 2019

Quantitative:
• Transfer from the Federal government to enrollees in individual market plans in the form of increased APTC payments.
Qualitative:
• Transfer from enrollees in individual market plans who experience increase in premiums to individuals who switch to lower premium
short-term, limited-duration insurance.
• Tax liability for consumers who replace PPACA-compliant plans and will thus no longer maintain minimum essential coverage in 2018.

Short-term, limited-duration for less than 3 months. Accordingly, this duration policy was approximately $124
insurance represents a small fraction of proposed rule would have no effect on compared to $393 for an unsubsidized
the health insurance market. Based on the consumers who purchase such PPACA-compliant plan.34 This
data from the National Association of coverage for less than 3 months and proposed rule would also benefit
Insurance Commissioners (NAIC), in perhaps some issuers of those policies. individuals who need coverage for
2016, before the October 2016 final rule While it is not clear how the October longer periods for reasons previously
became effective, total premiums earned 2016 final rule affected the sales of discussed in the preamble, such as
for policies designated short-term, short-term, limited-duration insurance, needing more than 3 months to find
limited-duration by carriers were the sales of such coverage were new employment, or finding PPACA-
approximately $146 million for increasing prior to the issuance of that compliant plans to be unaffordable.
approximately 1,279,500 member rule. Given the prior trend and the Individuals who purchase short-term,
months and with approximately 160,600 recent increases in premiums in the limited-duration insurance as opposed
covered lives at the end of the year. individual market, the Departments to being uninsured would potentially
During the same period, total premiums anticipate that the rule, if finalized, experience improved health outcomes
for individual market (comprehensive would encourage more consumers to and have greater protection from
major medical) coverage were purchase short-term, limited-duration catastrophic health care expenses.
approximately $63.25 billion for insurance for longer durations, Individuals purchasing short-term,
approximately 175,689,900 member including individuals who were limited-duration policies could obtain
months with approximately 13.6 million previously uninsured and some who are broader access to health care providers
covered lives at the end of the year.33 currently enrolled in individual market compared to those PPACA-compliant
Some public comments received in plans, especially in 2019 and beyond, plans that have narrow provider
response to the June 2016 proposed rule when the individual shared networks.35 The Departments seek
stated that the majority of the short- responsibility payment included in comments on how many consumers
term, limited-duration insurance section 5000A of the Code is reduced to may purchase short-term, limited-
policies were sold as transitional $0, as provided under Public Law 115– duration insurance, rather than being
coverage, particularly for individuals 97. uninsured or purchasing PPACA-
seeking to cover periods of compliant plans, and the benefits to
daltland on DSKBBV9HB2PROD with PROPOSALS

Benefits
unemployment or other gaps between
Consumers who would be likely to 34 http://www.npr.org/sections/health-shots/2017/
employer-sponsored coverage, and that
purchase short-term, limited-duration 01/31/512518502/sales-of-short-term-insurance-
the policies typically provided coverage
insurance for longer periods would plans-could-surge-if-health-law-is-relaxed.
35 The ability of short-term limited-duration plans
33 National Association of Insurance
benefit from increased insurance
to provide broad provider networks has been touted
Commissioners, 2016 Accident and Health Policy
options at lower premiums, as the by some in the insurance community. https://
Experience Report, July 2017, available at http:// average monthly premium in the fourth www.wsj.com/articles/sales-of-short-term-health-
www.naic.org/prod_serv/AHP-LR-17.pdf. quarter of 2016 for a short-term, limited- policies-surge-1460328539.

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Federal Register / Vol. 83, No. 35 / Wednesday, February 21, 2018 / Proposed Rules 7445

exemption. Pursuant to section 7805(f) Comptroller General for review in insurance, Penalties, Reporting and
of the Code, this proposed rule has been accordance with such provisions. recordkeeping requirements.
submitted to the Chief Counsel for
J. Reducing Regulation and Controlling Kirsten B. Wielobob,
Advocacy of the Small Business
Administration for comment on its Regulatory Costs Deputy Commissioner for Services and
Enforcement, Internal Revenue Service.
impact on small business. Executive Order 13771, titled Signed this 8th day of February 2018.
G. Unfunded Mandates Reform Act Reducing Regulation and Controlling
Preston Rutledge,
Regulatory Costs, was issued on January
Section 202 of the Unfunded Assistant Secretary, Employee Benefits
30, 2017. This proposed rule, if Security Administration, Department of
Mandates Reform Act of 1995 (UMRA)
finalized as proposed, is expected to be Labor.
requires that agencies assess anticipated
an Executive Order 13771 deregulatory Dated: February 1, 2018.
costs and benefits and take certain other
actions before issuing a proposed rule action.
Seema Verma,
that includes any Federal mandate that IV. Statutory Authority Administrator, Centers for Medicare &
may result in expenditures in any 1 year Medicaid Services.
by a State, local, or Tribal governments, The Department of the Treasury Dated: February 9, 2018.
in the aggregate, or by the private sector, regulations are proposed to be adopted
pursuant to the authority contained in Alex M. Azar II,
of $100 million in 1995 dollars, updated
annually for inflation. Currently, that sections 7805 and 9833 of the Code. Secretary, Department of Health and Human
Services.
threshold is approximately $148 The Department of Labor regulations
million. This proposed rule does not are proposed to be adopted pursuant to DEPARTMENT OF THE TREASURY
include any Federal mandate that may the authority contained in 29 U.S.C. Internal Revenue Service
result in expenditures by State, local, or
1135 and 1191c; and Secretary of For the reasons stated in the
tribal governments, or the private sector,
Labor’s Order 1–2011, 77 FR 1088 (Jan. preamble, 26 CFR part 54 is proposed to
that may impose an annual burden that
9, 2012). be amended as follows:
exceeds that threshold.
The Department of Health and Human
H. Federalism—Department of Labor Services regulations are proposed to be PART 54—PENSION AND EXCISE TAX
and Department of Health and Human adopted pursuant to the authority
Services ■ Par. 1. The authority citation for part
contained in sections 2701 through
54 continues to read in part as follows:
Executive Order 13132 outlines 2763, 2791, 2792 and 2794 of the PHS
fundamental principles of federalism. It Act (42 U.S.C. 300gg through 300gg–63, Authority: 26 U.S.C. 7805 * * *
requires adherence to specific criteria by 300gg–91, 300gg–92 and 300gg–94), as ■ Par. 2. Section 54.9801–2 is amended
Federal agencies in formulating and amended. by revising the definition of ‘‘Short-
implementing policies that have term, limited-duration insurance’’ to
‘‘substantial direct effects’’ on the List of Subjects
read as follows:
States, the relationship between the 26 CFR Part 54
national government and States, or on § 54.9801–2 Definitions.
the distribution of power and Pension excise taxes. * * * * *
responsibilities among the various Short-term, limited-duration
levels of government. Federal agencies 29 CFR Part 2590 insurance means health insurance
promulgating regulations that have Continuation coverage, Disclosure, coverage provided pursuant to a
these federalism implications must Employee benefit plans, Group health contract with an issuer that:
consult with State and local officials, plans, Health care, Health insurance, (1) Has an expiration date specified in
and describe the extent of their the contract (taking into account any
Medical child support, Reporting and
consultation and the nature of the extensions that may be elected by the
recordkeeping requirements.
concerns of State and local officials in policyholder without the issuer’s
the preamble to the final regulation. 45 CFR Parts 144 and 146 consent) that is less than 12 months
Federal officials have discussed the after the original effective date of the
issue of the term length of short-term, Health care, Health insurance, contract;
limited-duration insurance with State Reporting and recordkeeping (2) With respect to policies having a
regulatory officials. This proposed rule requirements. coverage start date before January 1,
has no federalism implications to the 2019, displays prominently in the
45 CFR Part 148
extent that current State law contract and in any application
requirements for short-term, limited- Administrative practice and materials provided in connection with
duration insurance are the same as or procedure, Health care, Health enrollment in such coverage in at least
more restrictive than the Federal 14 point type the following:
standard proposed in this proposed THIS COVERAGE IS NOT REQUIRED TO
rule. States may continue to apply such COMPLY WITH FEDERAL REQUIREMENTS
State law requirements. FOR HEALTH INSURANCE, PRINCIPALLY
daltland on DSKBBV9HB2PROD with PROPOSALS

THOSE CONTAINED IN THE AFFORDABLE
I. Congressional Review Act CARE ACT. BE SURE TO CHECK YOUR
This proposed rule is subject to the POLICY CAREFULLY TO MAKE SURE YOU
UNDERSTAND WHAT THE POLICY DOES
Congressional Review Act provisions of AND DOESN’T COVER. IF THIS COVERAGE
the Small Business Regulatory EXPIRES OR YOU LOSE ELIGIBILITY FOR
Enforcement Fairness Act of 1996 (5 THIS COVERAGE, YOU MIGHT HAVE TO
U.S.C. 801 et seq.) and will be WAIT UNTIL AN OPEN ENROLLMENT
transmitted to the Congress and to the PERIOD TO GET OTHER HEALTH

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7446 Federal Register / Vol. 83, No. 35 / Wednesday, February 21, 2018 / Proposed Rules

INSURANCE COVERAGE. ALSO, THIS Secretary of Labor’s Order 1–2011, 77 FR ■ 6. Section 2590.736 is amended by
COVERAGE IS NOT ‘‘MINIMUM 1088 (Jan. 9, 2012). revising the last sentence to read as
ESSENTIAL COVERAGE’’. IF YOU DON’T follows:
■ 5. Section 2590.701–2 is amended by
HAVE MINIMUM ESSENTIAL COVERAGE
FOR ANY MONTH IN 2018, YOU MAY revising the definition of ‘‘Short-term,
§ 2590.736 Applicability dates.
HAVE TO MAKE A PAYMENT WHEN YOU limited-duration insurance’’ to read as
follows: * * * Notwithstanding the previous
FILE YOUR TAX RETURN UNLESS YOU
QUALIFY FOR AN EXEMPTION FROM THE
sentence, the definition of ‘‘short-term,
REQUIREMENT THAT YOU HAVE HEALTH
§ 2590.701–2 Definitions. limited-duration insurance’’ in
COVERAGE FOR THAT MONTH.; * * * * * § 2590.701–2 applies [DATE 60 DAYS
Short-term, limited-duration AFTER DATE OF PUBLICATION OF
and insurance means health insurance THE FINAL RULE IN THE FEDERAL
(3) With respect to policies having a coverage provided pursuant to a REGISTER].
coverage start date on or after January 1, contract with an issuer that:
2019, displays prominently in the (1) Has an expiration date specified in DEPARTMENT OF HEALTH AND
contract and in any application the contract (taking into account any HUMAN SERVICES
materials provided in connection with extensions that may be elected by the For the reasons stated in the
enrollment in such coverage in at least policyholder without the issuer’s preamble, the Department of Health and
14 point type the following: consent) that is less than 12 months Human Services proposes to amend 45
THIS COVERAGE IS NOT REQUIRED TO after the original effective date of the CFR parts 144, 146, and 148 as set forth
COMPLY WITH FEDERAL REQUIREMENTS contract; below:
FOR HEALTH INSURANCE, PRINCIPALLY (2) With respect to policies having a
THOSE CONTAINED IN THE AFFORDABLE coverage start date before January 1, PART 144—REQUIREMENTS
CARE ACT. BE SURE TO CHECK YOUR 2019, displays prominently in the RELATING TO HEALTH INSURANCE
POLICY CAREFULLY TO MAKE SURE YOU contract and in any application COVERAGE
UNDERSTAND WHAT THE POLICY DOES materials provided in connection with
AND DOESN’T COVER. IF THIS COVERAGE ■ 7. The authority citation for part 144
enrollment in such coverage in at least continues to read as follows:
EXPIRES OR YOU LOSE ELIGIBILITY FOR
14 point type the following:
THIS COVERAGE, YOU MIGHT HAVE TO Authority: Secs. 2701 through 2763, 2791,
WAIT UNTIL AN OPEN ENROLLMENT THIS COVERAGE IS NOT REQUIRED TO and 2792 of the Public Health Service Act,
PERIOD TO GET OTHER HEALTH COMPLY WITH FEDERAL REQUIREMENTS 42 U.S.C. 300gg through 300gg–63, 300gg–91,
INSURANCE COVERAGE. FOR HEALTH INSURANCE, PRINCIPALLY and 300gg–92.
THOSE CONTAINED IN THE AFFORDABLE
* * * * * ■ 8. Section 144.103 is amended by
CARE ACT. BE SURE TO CHECK YOUR
■ Par. 3. Section 54.9833–1 is amended POLICY CAREFULLY TO MAKE SURE YOU revising the definition of ‘‘Short-term,
by revising the section heading and the UNDERSTAND WHAT THE POLICY DOES limited-duration insurance’’ to read as
last sentence to read as follows: AND DOESN’T COVER. IF THIS COVERAGE follows:
EXPIRES OR YOU LOSE ELIGIBILITY FOR
§ 54.9833–1 Applicability dates. THIS COVERAGE, YOU MIGHT HAVE TO § 144.103 Definitions.
* * * Notwithstanding the previous WAIT UNTIL AN OPEN ENROLLMENT * * * * *
sentence, the definition of ‘‘short-term, PERIOD TO GET OTHER HEALTH
INSURANCE COVERAGE. ALSO, THIS Short-term, limited-duration
limited-duration insurance’’ in
COVERAGE IS NOT ‘‘MINIMUM insurance means health insurance
§ 54.9801–2 applies [DATE 60 DAYS
ESSENTIAL COVERAGE’’. IF YOU DON’T coverage provided pursuant to a
AFTER DATE OF PUBLICATION OF
HAVE MINIMUM ESSENTIAL COVERAGE contract with an issuer that:
THE FINAL RULE IN THE FEDERAL FOR ANY MONTH IN 2018, YOU MAY (1) Has an expiration date specified in
REGISTER]. HAVE TO MAKE A PAYMENT WHEN YOU the contract (taking into account any
DEPARTMENT OF LABOR FILE YOUR TAX RETURN UNLESS YOU extensions that may be elected by the
QUALIFY FOR AN EXEMPTION FROM THE policyholder without the issuer’s
Employee Benefits Security REQUIREMENT THAT YOU HAVE HEALTH
consent) that is less than 12 months
Administration COVERAGE FOR THAT MONTH.;
after the original effective date of the
29 CFR Chapter XXV and contract;
(3) With respect to policies having a (2) With respect to policies having a
For the reasons stated in the
coverage start date on or after January 1, coverage start date before January 1,
preamble, the Department of Labor
2019, displays prominently in the 2019, displays prominently in the
proposes to amend 29 CFR part 2590 as
contract and in any application contract and in any application
set forth below:
materials provided in connection with materials provided in connection with
PART 2590—RULES AND enrollment in such coverage in at least enrollment in such coverage in at least
REGULATIONS FOR GROUP HEALTH 14 point type the following: 14 point type the following:
PLANS THIS COVERAGE IS NOT REQUIRED TO THIS COVERAGE IS NOT REQUIRED TO
COMPLY WITH FEDERAL REQUIREMENTS COMPLY WITH FEDERAL REQUIREMENTS
■ 4. The authority citation for part 2590 FOR HEALTH INSURANCE, PRINCIPALLY FOR HEALTH INSURANCE, PRINCIPALLY
continues to read as follows: THOSE CONTAINED IN THE AFFORDABLE THOSE CONTAINED IN THE AFFORDABLE
Authority: 29 U.S.C. 1027, 1059, 1135, CARE ACT. BE SURE TO CHECK YOUR CARE ACT. BE SURE TO CHECK YOUR
POLICY CAREFULLY TO MAKE SURE YOU
daltland on DSKBBV9HB2PROD with PROPOSALS

1161–1168, 1169, 1181–1183, 1181 note, POLICY CAREFULLY TO MAKE SURE YOU
1185, 1185a, 1185b, 1191, 1191a, 1191b, and UNDERSTAND WHAT THE POLICY DOES UNDERSTAND WHAT THE POLICY DOES
1191c; sec. 101(g), Pub. L. 104–191, 110 Stat. AND DOESN’T COVER. IF THIS COVERAGE AND DOESN’T COVER. IF THIS COVERAGE
1936; sec. 401(b), Pub. L. 105–200, 112 Stat. EXPIRES OR YOU LOSE ELIGIBILITY FOR EXPIRES OR YOU LOSE ELIGIBILITY FOR
645 (42 U.S.C. 651 note); sec. 512(d), Pub. L. THIS COVERAGE, YOU MIGHT HAVE TO THIS COVERAGE, YOU MIGHT HAVE TO
110–343, 122 Stat. 3881; sec. 1001, 1201, and WAIT UNTIL AN OPEN ENROLLMENT WAIT UNTIL AN OPEN ENROLLMENT
1562(e), Pub. L. 111–148, 124 Stat. 119, as PERIOD TO GET OTHER HEALTH PERIOD TO GET OTHER HEALTH
amended by Pub. L. 111–152, 124 Stat. 1029; INSURANCE COVERAGE. INSURANCE COVERAGE. ALSO, THIS
Division M, Pub. L. 113–235, 128 Stat. 2130; * * * * * COVERAGE IS NOT ‘‘MINIMUM

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Document Created: 2018-02-21 01:48:32
Document Modified: 2018-02-21 01:48:32

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Proposed Rules
Action		Proposed rule.
Dates		To be assured consideration, comments must be received at one of
Contact		Amber Rivers or Matthew Litton of the Department of Labor, at 202-693-8335; Karen Levin, Internal Revenue Service, Department of the Treasury, at (202) 317-5500; David Mlawsky, Centers for Medicare & Medicaid Services, Department of Health and Human Services, at 410-786-1565.
FR Citation		83 FR 7437
RIN Number		1545-BO41, 1210-AB86 and 0938-AT48
CFR Citation		26 CFR 54 29 CFR 2590 45 CFR 144 45 CFR 146 45 CFR 148
CFR Associated		Pension Excise Taxes; Continuation Coverage; Disclosure; Employee Benefit Plans; Group Health Plans; Health Care; Health Insurance; Medical Child Support; Reporting and Recordkeeping Requirements; Administrative Practice and Procedure and Penalties

83 FR 7437 - Short-Term, Limited-Duration Insurance

DEPARTMENT OF THE TREASURYInternal Revenue ServiceDEPARTMENT OF LABOREmployee Benefits Security AdministrationDEPARTMENT OF HEALTH AND HUMAN SERVICES

Federal Register Volume 83, Issue 35 (February 21, 2018)

DEPARTMENT OF THE TREASURY
Internal Revenue Service
DEPARTMENT OF LABOR
Employee Benefits Security Administration
DEPARTMENT OF HEALTH AND HUMAN SERVICES