Does Loss of Eligibility for Short-Term, Limited-Duration Health Insurance Trigger HIPAA Special Enrollment Rights?
Question: Some of our employees are considering buying short-term, limited-duration health insurance policies instead of enrolling in our employer-sponsored health care plan. Will these employees have special enrollment rights in our group plan if they lose eligibility for short-term, limited-duration coverage?
Answer: It’s likely that employees who lose eligibility for short-term, limited-duration health insurance will be entitled to special enrollment rights under your company’s group health plan — assuming they’re otherwise eligible to enroll in the plan at that time.
Eligible employees (and their eligible dependents) are entitled to HIPAA special enrollment rights under your company’s plan if they lose eligibility for health insurance coverage (or if they lose eligibility for coverage under another group health plan). “Health insurance coverage” means benefits consisting of medical care under any HMO contract or hospital or medical service policy, certificate or contract offered by a health insurer. This includes group health insurance coverage; individual health insurance coverage; and short-term, limited-duration insurance.
What the regs say
Federal agency regulations require short-term, limited-duration health insurance to have an initial coverage period of less than 12 months and they allow renewals and extensions for up to a total of 36 months. Although short-term, limited-duration policies are individual policies, they’re not subject to individual-market mandates under the Affordable Care Act (ACA). These policies may be a less expensive (though less comprehensive) coverage option than employer-sponsored coverage for some employees, which might explain your employees’ interest.
The preamble to the regulations indicates that loss of eligibility for short-term, limited-duration coverage gives rise to a HIPAA special enrollment right with respect to group health plan coverage (regardless of whether the group health plan coverage is insured or self-insured). This is because the regulations treat short-term, limited-duration insurance as “health insurance coverage,” the loss of which will trigger special enrollment rights — even though it’s not “individual health insurance coverage” subject to the ACA’s insurance mandates.
For purposes of HIPAA’s special enrollment rules, loss of eligibility doesn’t include loss of coverage resulting from the failure to pay timely premiums or voluntarily dropping coverage. Thus, special enrollment rights under your plan wouldn’t be triggered, for example, solely because an employee becomes dissatisfied with the short-term, limited-duration coverage and decides to drop the coverage.