Is short-term health insurance back on the menu? Feds may allow more options

Hard-pressed employers might have something different to offer workers, or departing workers, in 2026: a suggestion that they buy short-term health insurance.

The U.S. Labor Department joined with the U.S. Treasury Department and the U.S Department of Health and Human Services to put out a statement Thursday that blesses use of “short-term, limited-duration insurance” policies that last more than three months.

In 2024, while President Joe Biden was in office, the departments completed regulations that limit the term of short-term health insurance policies to three months

In January, Trump rescinded a Biden executive order that served as a foundation for the 2024 regulations.

In the new statement, the Labor Department, the Treasury Department and HHS did not change the 2024 final federal regulations. But the departments said they will avoid enforcing the three-month duration limit.

“Until future rulemaking is issued and applicable, the departments do not intend to prioritize enforcement actions for violations related to failing to meet the definition of ‘short-term, limited-duration insurance’ in the 2024 final rules,” according to the departments’ statement.

The departments posted the short-term health insurance statement without announcing it in a press release or giving it other publicity.

Sam Melamed, the chief executive officer of NCD Agency, a health benefits marketer, drew attention to the statement in a LinkedIn post Friday.

The new federal regulation non-enforcement policy appears to mean that insurers and others can return to letting short-term health insurance policies stay in effect for up to 36 months.

In theory, employers that are too small to face Affordable Care Act coverage requirements could cope with turmoil in the individual major medical market and the employer plan market by sending workers to short-term health insurance providers.

Short-term health insurance: Short-term health insurance issuers are regulated by the states and are not subject to the ACA requirements that apply to major medical insurance.

Some states ban the sale of short-term health insurance.

In most states where the policies are available, short-term health insurance issuers can use medical underwriting, reject applicants with health problems, charge applicants with health problems higher rates, and put low limits on annual benefits.

But, because the policies, they are exempt from ACA benefits and product design rules, short-term health insurance policies may offer coverage with deductibles that are much lower than the deductibles in the least-expensive individual major medical insurance policies.

Smedsrud’s view: Jeff Smedsrud, the CEO of FlexBenefits.co, a benefits program designer and marketer, said in a LinkedIn post about the non-enforcement statement that he believes that the Trump administration can use a non-enforcement statement to allow for the sale of short-term health insurance policies free from the three-month duration limit.

An insurer can probably use the new non-enforcement statement to write old-rule short-term health insurance policies in Texas, a state that has been friendly to short-term health insurance, but an insurer should be cautious about trying to use the new non-enforcement statement to sell old-rule coverage in a state where officials have been cool toward short-term health insurance, Smedsrud said.