Proposed Regulation Broadly Impacts Insurance Issuers
Effects on issuers of travel insurance and short term medical insurance
The Department of Treasury, Department of Labor, and Department of Health and Human Services recently combined to issue a proposed regulation, which would have a broad impact over issuers of travel insurance and short-term medical insurance.
The proposals provide an opportunity for comments, open through August 9, 2016. The proposed regulation is set to apply to plans made January 1, 2017 and thereafter.
For travel insurance issuers, the proposed regulations define travel insurance and reaffirm it is considered an excepted benefit from the requirements of the Affordable Care Act, title XXVI of the Public Health Service Act, and part 7 of the Employee Retirement Income Security Act of 1974.
Travel insurance is not a major medical policy. Instead, travel insurance is a unique product offering peace of mind to tourists traveling both domestic and abroad. Travel insurance includes coverage for a variety of risks travelers may encounter before and during scheduled trips. These covered risks necessarily include health related issues, but, more importantly, include a wide range of other issues (e.g., travel delays, travel cancellations, property damage) more likely to occur. All of these risks can be devastating, physically and financially, to the unprotected tourist.
The proposed regulation focuses primarily on the medical component of travel insurance, but ignores the other crucial benefits of travel insurance. It seeks to create a federal definition of travel insurance providing another source of regulation, which issuers must consider in addition to state specific definitions governing producer licensing, claims administration and product filing. The added layer of complexity supports the Tourism & Travel Industry Consumer Coalition’s call for a Model Act to comprehensively regulate the travel insurance industry for the benefit of all potential participants by reducing conflicting regulations and their interpretation by different regulators.
The definition also excepts from travel insurance any “major medical plans that provide comprehensive medical protection for travelers with trips lasting 6 months or longer.” Travel insurance is not a major medical plan. However, travel insurance plans offer health coverage, as well as other vital benefits, to many travelers with trips longer than six months. For instance, students coming to the United States to study at educational institutions often rely on travel insurance to provide broad protections during their period of study, which may last longer than six months. The proposed regulation would impact the availability of travel insurance plans to these individuals by considering them “health insurance” subject to the ACA’s requirements. This contradicts the purpose of travel insurance and would potentially leave these individuals without applicable coverage.
Frost Brown Todd, as regulatory counsel for the Tourism & Travel Industry Consumer Coalition, is currently drafting a response to the proposed regulations. If you would like more information on the proposed regulation or are interested in joining the Coalition, please do not hesitate to contact Greg Mitchell or Patrick O’Connor in Frost Brown Todd’s Travel Insurance Services practice.
Short-Term Medical Plans
The proposed regulation redefines short-term medical insurance in a manner which will broadly impact both consumers and issuers.
Currently, these short-term, limited duration medical plans are exempt from the Affordable Care Act (ACA) requirements because they offer coverage for less than twelve (12) months, as defined by existing regulations. Consumers unable to purchase ACA minimum essential coverage due to eligibility or timing concerns (e.g., job loss) may enter the short-term medical insurance and purchase credible health insurance underwritten by major insurance companies. The coverage affordably fills the gap for consumers, provides broad covered services and includes an extensive provider network for consumers who otherwise would likely go without health insurance.
The proposed regulation radically changes the definition of short-term medical insurance requiring that “coverage must be less than three months in duration, including any period for which the policyholder renews or has the option to renew with or without the issuer’s consent.” The proposal will dramatically impact the availability of short-term medical insurance to consumers in need thereby limiting their ability to fill gaps in coverage. It will also create regulatory hurdles for issuers of short-term medical insurance forcing them to re-write policies, reconsider the covered services offered and include multiple disclosures in policies. Therefore, consumers and issuers have reason to be concerned with the broad impact of these proposed regulations.
Frost Brown Todd is in the process of drafting comments to the proposed regulations. If you would like more information on the proposed regulation or would like to join in the comments, please do not hesitate to contact Greg Mitchell in Frost Brown Todd’s Insurance Regulation team.