COMMONWEALTH OF KENTUCKY DEPARTMENT OF

COMMONWEALTH OF KENTUCKY

DEPARTMENT OF INSURANCE

FRANKFORT, KENTUCKY

BULLETIN

2018-02

The following Bulletin is to advise the reader of the current position of the Kentucky Department

of Insurance on the specified issue. The Bulletin is not legally binding on either the Department

or the reader.

TO: All Insurers Authorized to Transact Health Business in Kentucky and all

Kentucky Licensed Health Maintenance Organizations (collectively,

“Health Insurance Issuers”)

FROM: Nancy G. Atkins, Commissioner, Kentucky Department of Insurance

RE: Requirements for Marketing and Sale of Short-Term, Limited Duration Insurance

Policies Sold in Kentucky

DATE: October 18, 2018

* * * * * * * * * * * * * * * * * * * * *

I. INDIVIDUAL STLD HEALTH INSURANCE PURPOSE, SCOPE, AND BACKGROUND

This bulletin advises health insurance issuers intending to write individual short-term,

limited duration health insurance (“STLD insurance”) policies in Kentucky of the current

requirements. In this bulletin, the Kentucky Department of Insurance (“Department”) details

specific state and federal mandates applicable to these products. Additionally, the Department

provides a helpful checklist of relevant provisions to guide regulatory compliance, and best practice

recommendations to ensure consumers are informed of important policy provisions.

STLD insurance is specifically excluded from the definition of individual health insurance

coverage under Section 2791(b)(5) of the Public Health Service Act (“PHS Act”), which was

incorporated into the Patient Protection and Affordable Care Act, as amended by the Health Care

and Education Reconciliation Act of 2010 (“ACA”). As a result, STLD insurance is “generally

exempt from the Federal market requirements applicable to health insurance sold in the individual

market.”

Furthermore, STLD insurance “is not subject to the requirement to provide essential

health benefits and it is not subject to the prohibition on preexisting condition exclusions or lifetime

See, Department of Treasury, et al.; Short-Term, Limited Duration Insurance, 83 Fed. Reg. 38212, 38213 (Aug. 3,

2018)(codified at 26 C.F.R. 54.9801-2, 29 C.F.R. 2590.701-2, and 45 C.F.R. 144.103) (the three regulations are

collectively referred to as “amended federal regulations”). Accessible online at: https://www.gpo.gov/fdsys/pkg/FR-

2018-08-03/pdf/2018-16568.pdf

and annual dollar limits. It is also not subject to requirements regarding guaranteed availability and

guaranteed renewability.”

In short, the mandates of the ACA do not apply to STLD insurance.

STLD insurance is not defined in the above statutes, but instead within regulations

implementing requirements related to the Health Insurance Portability and Accountability Act of

1996 (“HIPAA”). On August 3, 2018, the Department of Treasury, Department of Labor, and

Department of Health and Human Services finalized a regulation amending the definition of STLD

insurance.

The amended definition changes how STLD insurance may be marketed and sold to

Kentuckians.

II. NEW FEDERAL REQUIREMENTS FOR STLD POLICIES

The amended regulations, effective October 2, 2018, establish new requirements for STLD

insurance policies. The new requirements are:

 Short-Term

o All STLD insurance policies are subject to a maximum initial contract term

of less than twelve (12) months.

 Limited Duration

o All STLD insurance policies are subject to a maximum duration for the same

contract (including extensions and renewals, if applicable) of thirty-six (36)

months of consecutive days.

o Individuals may purchase separate STLD insurance contracts for periods

totaling longer than thirty-six (36) months. For example, if on the termination

of the initial contract, a consumer decides to purchase a different policy or a

policy from a different issuer, the prior duration is not factored in on the

subsequent contract’s limit.

 Notice

o Specific notice language, below, is required to ensure consumers are aware

of the limitations of these products and that STLD insurance is not

comprehensive health insurance under the ACA. The notice must be on the

cover page of the contract and any application materials in at least 14-point

font.

o All STLD policies issued before January 1, 2019 must include the following:

This coverage is not required to comply with certain federal market

requirements for health insurance, principally those contained in the

Affordable Care Act. Be sure to check your policy carefully to make

sure you are aware of any exclusions or limitations regarding

coverage of preexisting conditions or health benefits (such as

hospitalization, emergency services, maternity care, preventive care,

prescription drugs, and mental health and substance use disorder

services). Your policy might also have lifetime and/or annual dollar

limits on health benefits. 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

See, Id.

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.

o All STLD policies issued after January 1, 2019 must include the following: