·
3 minute read
In March 2024, the Department of Health and Human Services (HHS) issued new regulations on short-term limited-duration insurance (STLDI) that will significantly impact how the health insurance industry meets the needs of the 235,000+ customers on STLDI plans (Source: National Association of Insurance Commissioners). So how are carriers and their distribution partners preparing for the changes?
Understanding the STLDI Changes
STLDI coverage was intended to fill temporary gaps in coverage due to job changes, the short-term gaps caused by insurance waiting periods, or the aging out of parents’ insurance plans. They are exempt from ACA regulations on pre-existing conditions’ exclusions and minimum essential coverage. Since STLDI plans have fewer regulations, they can be less expensive and appealing to many who don’t want to pay ACA prices.
The Biden administration was concerned that STLDI plans were being used to circumvent the ACA. The policies of the Trump administration enabled STDLI plans to last for a year and be renewed for up to 3 years. However, many STLDI purchasers used the plans as a long-term solution, unaware of the less comprehensive nature of STLDI plans, and then faced surprise bills with high out-of-pocket costs. This encouraged the Biden administration to pursue a more restricted use case in line with the original intent of STLDI.
Another regulatory concern was that STLDI plans encouraged healthy individuals to forgo ACA plans for lower-price plans, ultimately driving up premiums of ACA plans. With the new regulations, an STLDI plan is limited to a contract term of 3 months with a single one-month renewal, a significant reduction from the previous regulation of an initial 12-month contract term with renewals that allowed up to 36 months.
The final rule also restricts an agent from selling an individual a second STLDI policy from the same carrier. The current administration believes this will reduce the risk of consumers accidentally enrolling in STLDI plans long-term without understanding the gaps in coverage relative to an ACA plan. Consumers can still “stack” a second STLDI policy from a different carrier at the end of their first STLDI policy.
The Impact for Agents
Agents and other parties involved in insurance distribution understand that the demand for short-term plans will not disappear with the new regulations. Agents will have several options to meet this market need:
- Continue to sell STLDI plans and switch customers to new STLDI plans under different carriers every 4 months instead of every 3 years
- Upsell customers to a more expensive ACA plan during open enrollment or when they have a life-qualifying event
- Sell 1-3 STLDI plans to a customer until they are eligible for ACA open enrollment
- Sell a more basic ACA plan, complemented with ancillary products that meet each customer’s needs
All these options result in significantly more time, data collection, and enrollment paperwork for the agent. It also means the agent may be generating multiple commissions from multiple carriers, creating more commission management complexity. Many agents already complain about having to spend at least half a day reconciling every commission statement and then more time following up with carriers to correct errors.
The Impact for Carriers
Innovative carriers understand that their success depends on agent success and downline optimization. Proactive carriers share data, consumer insights, and product information to help agents meet these regulations and be easier to do business with. Research shows that 76% of agents have shared they prioritize the products of carriers that are easier to work with.
Carriers can help by developing ACA plans and ancillary products that meet this new market gap. This will assist agents in matching current STLDI customers to a plan that meets their needs and can lead to policy persistence.
Carriers must also recognize the resulting complexity in commissions. Agents want to get paid accurately and timely, already a challenge for most carriers but even more so under the new regulations. Carriers who prioritize accurate commission management will win agent loyalty resulting in and agent retention and distribution growth.
Regulations
Regulations and associated data requirements are constantly changing. Legacy systems often force carriers and health plans to implement workaround solutions to access the data they need for compliance. Manual data processing across multiple systems can result in more errors that impact overall data quality for the carrier and downlines. Regulation workarounds can also make it more difficult for agencies and downlines to access accurate data to serve customers in an efficient and compliant way.
Carriers that collaborate with agents to use data-driven insights also help agents increase their book of business, which drives agency growth and loyalty. More transparent, accurate data can facilitate commission management accuracy and carrier loyalty.
Using Technology to Meet New Regulations
The new STLDI regulations could significantly decrease one market while increasing opportunities in others. The carriers best poised to take advantage of these opportunities will collaborate with downlines to share data, optimize policy offerings based on consumer insights, and streamline commission management to meet agent needs. See how e123 can help.
