Internal Revenue Bulletin 2023-33 (PDF rendition): IRS Revenue Rulings

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Bulletin No. 2023–33
August 14, 2023
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
ADMINISTRATIVE
Rev. Proc. 2023-26, page 486.
This revenue procedure describes a program that provides
an opportunity for fast-track processing of certain requests
for letter rulings solely or primarily under the jurisdiction of
the Associate Chief Counsel (Corporate). This new program
replaces the pilot program established by Rev. Proc. 2022-
10, 2022-6 I.R.B. 473.
EMPLOYEE PLANS, EXCISE TAX,
INCOME TAX
REG-120730-21, page 491.
These proposed rules would amend the definition of short-
term, limited-duration insurance for purposes of the exclu-
sion from the definition of “individual health insurance
coverage” in 26 CFR part 54, 29 CFR part 2590, and 45
CFR part 144. These proposed rules would also amend the
requirements for hospital indemnity and other fixed indem-
nity insurance to be treated as an excepted benefit in the
group and individual health insurance markets. In addition,
Treasury and IRS propose rules that would clarify the tax
treatment of amounts received by a taxpayer through certain
employment-based accident or health insurance that gener-
ally are paid without regard to incurred medical expenses in
26 CFR part 1. If finalized, the proposed rule would include
in income and wages benefits from fixed indemnity policies
purchased with employer funds, including by salary reduc-
tion through a section 125 cafeteria plan. Furthermore,
these proposed rules include technical amendments to
clarify that, under longstanding regulations and guidance,
the substantiation requirements for reimbursement of quali-
fied medical care expenses apply to reimbursements under
section 105(b) of the Internal Revenue Code in order for
those reimbursements to be excluded from an individual’s
gross income.
INCOME TAX
Rev. Rul. 2023-14, page 484.
This revenue ruling provides that if a taxpayer stakes cryp-
tocurrency native to a proof-of-stake blockchain and receives
additional units of cryptocurrency as rewards when valida-
tion occurs, the fair market value of the rewards received is
included in the taxpayer’s gross income in the taxable year
in which the taxpayer gains dominion and control over the
rewards. The fair market value is determined as of the date
and time the taxpayer gains dominion and control over the
rewards. The revenue ruling also clarifies that this also is the
case if a taxpayer stakes cryptocurrency through a cryptocur-
rency exchange and the taxpayer receives additional units of
cryptocurrency as rewards as a result of the validation.
Finding Lists begin on page ii.

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and
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Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing offi-
cial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of inter-
nal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rul-
ings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
August 14, 2023 Bulletin No. 2023–33

Part I
26 CFR 1.61-1: Gross income.
(Also § 61)
Rev. Rul. 2023-14
ISSUE
If a taxpayer that uses a cash method of
accounting (cash-method taxpayer) stakes
cryptocurrency native to a proof-of-stake
blockchain and receives additional units
of cryptocurrency as rewards when val-
idation occurs (validation rewards or
rewards), must the taxpayer include the
value of the rewards in the taxpayer’s
gross income and, if so, in which taxable
year?
BACKGROUND
Section 6045(g)(3)(D) of the Internal
Revenue Code
1
generally defines a dig-
ital asset, for purposes of information
reporting by brokers, as any digital repre-
sentation of value which is recorded on a
cryptographically secured distributed led-
ger or any similar technology as specified
by the Secretary.
Digital assets do not exist in physical
form and include, but are not limited to,
property the Department of the Treasury
and the Internal Revenue Service have pre-
viously referred to as convertible virtual
currency and cryptocurrency. See Notice
2014-21, 2014-16 I.R.B. 938, as modified
by Notice 2023-34, 2023-19 I.R.B. 837;
Rev. Rul. 2019-24, 2019-44 I.R.B. 1004.
Notice 2014-21 defines convertible virtual
currency as virtual currency that has an
equivalent value in real currency or acts
as a substitute for real currency. Notice
2014-21 provides that convertible virtual
currency is treated as property and that
general tax principles applicable to prop-
erty transactions apply to convertible vir-
tual currency.
Cryptocurrency is a type of virtual cur-
rency that utilizes cryptography to secure
transactions that are digitally recorded on
a distributed ledger. See Rev. Rul. 2019-
24. References to cryptocurrency in this
revenue ruling are to cryptocurrency that
is convertible virtual currency. Units of
cryptocurrency are generally referred to
as coins or tokens.
Many cryptocurrencies utilize block-
chain technology, a specific type of dis-
tributed ledger technology. Distributed
ledger technology uses independent digi-
tal systems to record, share, and synchro-
nize transactions, the details of which
are recorded simultaneously on multiple
nodes on a network. In this context, a node
generally refers to a device that maintains
a copy of the distributed ledger and runs
copies of the software associated with the
protocol for the distributed ledger at issue.
In general, it is these nodes that main-
tain the integrity of a blockchain by val-
idating transactions and ensuring that
new entries in the ledger, in the form of
blocks of transactions, are legitimate and
not duplicative so that a new block can
be recorded on the blockchain. This can
be done, for example, by rejecting trans-
actions that attempt to move the same
units to two different wallet addresses at
the same time. The creation of new blocks
on a blockchain generally requires the
participation of multiple validators who
are selected and rewarded pursuant to
the blockchain protocol. These validation
rewards typically consist of one or more
newly created units of the cryptocurrency
native to that blockchain.
A consensus mechanism is a set of pro-
tocols by which nodes reach agreement
on updates to the blockchain. One con-
sensus mechanism is commonly referred
to as proof-of-stake. In a proof-of-stake
consensus mechanism, persons who hold
cryptocurrency may participate in the
validation process by staking their hold-
ings, if they hold the requisite number
of units of a particular cryptocurrency.
Persons may also participate in the vali-
dation process by staking their holdings
through a cryptocurrency exchange. In
a proof-of-stake consensus mechanism,
validators may be selected by the proto-
col for the blockchain associated with the
specific cryptocurrency based on a variety
of factors including the number of coins
or tokens staked. These validators confirm
transactions and add blocks to the block-
chain in accordance with the protocol. If
a validator is chosen by the protocol and
validation is successful, the validator will
receive a reward. If a validator is chosen
by the protocol and validation is unsuc-
cessful, the staked units may be subject to
penalty in the form of “slashing,” a pro-
cess by which the staked units, or a por-
tion thereof, are forfeited.
FACTS
Transactions in M, a cryptocurrency,
are validated by a proof-of-stake consen-
sus mechanism. On Date 1, Taxpayer A, a
cash-method taxpayer, owns 300 units of
M. A stakes 200 of the units of M and vali-
dates a new block of transactions on the M
blockchain, receiving 2 units of M as val-
idation rewards. Pursuant to the M proto-
col, during a brief period ending on Date
2, A lacks the ability to sell, exchange, or
otherwise dispose of any interest in the 2
units of M in any manner. The following
day, on Date 3, A has the ability to sell,
exchange, or otherwise dispose of the 2
units of M.
2
L AW
Section 61(a) provides the general rule
that, except as otherwise provided by sub-
title A of the Code, gross income means
all income from whatever source derived.
Specifically, gross income includes, but is
not limited to, compensation for services,
gross income derived from business, and
gains from dealings in property. Under
section 61, “instances of undeniable
accessions to wealth, clearly realized, and
over which the taxpayers have complete
dominion,” require inclusion in gross
income. See Commissioner v. Glenshaw
Glass Co., 348 U.S. 426, 431 (1955).
“Gross income includes income realized
in any form, whether in money, prop-
erty, or services. Income may be realized,
therefore, in the form of services, meals,
1
Unless otherwise specified, all “section” or “§” references are to sections of the Internal Revenue Code (Code) or the Income Tax Regulations (26 CFR part 1).
2
The facts in this revenue ruling do not address any type of “gas” or transaction fees other than the validation rewards described herein.
August 14, 2023 484 Bulletin No. 2023–33

accommodations, stock, or other property,
as well as in cash.” § 1.61-1(a). Unless
otherwise provided by a Code or regu-
latory provision, any receipt of property
constitutes gross income in the amount of
its fair market value at the date and time
at which it is reduced to undisputed pos-
session. See, e.g., section 61(a); Koons
v. United States, 315 F.2d 542 (9th Cir.
1963); Rooney v. Commissioner, 88 T.C.
523, 526-527 (1987); § 1.61-2(d)(1).
Cryptocurrency that is convertible vir-
tual currency is treated as property for
Federal income tax purposes and gen-
eral tax principles applicable to property
transactions apply to transactions involv-
ing cryptocurrency. See Notice 2014-21.
For example, a taxpayer who receives
cryptocurrency as a payment for goods
or services or who mines cryptocurrency
must include the fair market value of the
cryptocurrency in the taxpayer’s gross
income in the taxable year the taxpayer
obtains dominion and control of the cryp-
tocurrency. See id., Q&A 3 and Q&A
8. Amounts received as gains derived
from dealings in property, or as rents or
royalties, also generally must be included
in a cash-method taxpayer’s gross income
in the taxable year the taxpayer obtains
dominion and control of those amounts
through actual or constructive receipt. See
also § 1.451-1(a).
ANALYSIS
The 2 units of M represent A’s reward
for staking units and validating transac-
tions on the M blockchain. On Date 3,
A has an accession to wealth as A gains
dominion and control through A’s ability,
as of this date, to sell, exchange, or other-
wise dispose of the 2 units of M received
as validation rewards. Accordingly, the
fair market value of the 2 units of M, as
of the date and time A gains dominion and
control over the 2 units of M, is included
in A’s gross income for the taxable year
that includes Date 3.
HOLDING
If a cash-method taxpayer stakes
cryptocurrency native to a proof-of-stake
blockchain and receives additional units
of cryptocurrency as rewards when val-
idation occurs, the fair market value
of the validation rewards received is
included in the taxpayer’s gross income
in the taxable year in which the taxpayer
gains dominion and control over the val-
idation rewards. The fair market value
is determined as of the date and time
the taxpayer gains dominion and control
over the validation rewards.
3
The same is
true if a taxpayer stakes cryptocurrency
native to a proof-of-stake blockchain
through a cryptocurrency exchange and
the taxpayer receives additional units of
cryptocurrency as rewards as a result of
the validation.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Alina Lewandowski of the Office
of Associate Chief Counsel (Income Tax
& Accounting). For further information
regarding the revenue ruling, contact
Ms. Lewandowski at (202) 317-7006 (not
a toll-free number).
3
This revenue ruling does not address issues that may arise under any rules not specifically cited, such as section 83.
Bulletin No. 2023–33 485 August 14, 2023

August 14, 2023 486 Bulletin No. 2023–33
Part III
26 CFR 601.201: Rulings and determination letters.
Rev. Proc. 2023-26
SECTION 1. PURPOSE
This revenue procedure describes a
program that provides an opportunity for
fast-track processing of certain requests
for letter rulings solely or primarily under
the jurisdiction of the Associate Chief
Counsel (Corporate). This new program
replaces the pilot program established by
Rev. Proc. 2022-10, 2022-6 I.R.B. 473.
SECTION 2. NOTABLE CHANGES
TO REV. PROC. 2022-10
The new program reflects two notable
changes to the program set forth in Rev.
Proc. 2022-10:
.01 Sections 4.02(2) and 5.08(2) of this
revenue procedure provide that fast-track
processing will not be granted if the letter
ruling includes a closing agreement with
respect to an issue under the jurisdiction of
the Associate Chief Counsel (Corporate) or
another Associate office. If the inclusion of
a closing agreement arises during the fast-
track processing of a letter ruling request,
the fast-track processing will be termi-
nated, and the Internal Revenue Service
(IRS) will continue to process the letter rul-
ing request under the procedures of section
7 of Rev. Proc. 2023-1. Expedited handling
under section 7.02(4) of Rev. Proc. 2023-1
remains available for such requests.
.02 Section 5.03(3) of this revenue
procedure clarifies that while a statement
providing one or more of the taxpayer’s
reasons for requesting fast-track pro-
cessing is required, the taxpayer is not
required to demonstrate a business need
unless the taxpayer is requesting a ruling
in less than 12 weeks. The stated reason(s)
will be used as one factor to be considered
in making the determination of whether
a request for fast-track processing is
granted, and, if so, the length of the spec-
ified period defined in section 4.03 of this
revenue procedure.
SECTION 3. BACKGROUND
.01 Letter Rulings.
(1) In general. The IRS publishes
annually a revenue procedure to explain
how the IRS provides advice to taxpayers
on issues under the jurisdiction of each
Associate office. For example, Rev. Proc.
2023-1, 2023-1 I.R.B. 1, explains the
forms of advice and the manner in which
advice is requested by taxpayers and
provided by the IRS. References in this
revenue procedure to Rev. Proc. 2023-1
include references to successor revenue
procedures as appropriate.
(2) General instructions for request-
ing letter rulings. Section 7 of Rev. Proc.
2023-1 provides general instructions and
procedures for requesting letter rulings
and determination letters.
(a) Expedited handling of letter ruling
requests. The IRS ordinarily processes
requests for letter rulings and determina-
tion letters in order of the date received.
However, section 7.02(4) of Rev. Proc.
2023-1 sets forth the procedures for
requesting expedited handling of letter
ruling requests (expedited handling). That
section requires a request for expedited
handling to be made in writing, prefera-
bly in a separate letter included with the
request for the letter ruling or provided
soon after its filing, and to explain in detail
the need for expedited handling. That sec-
tion also sets forth the circumstances in
which the IRS will grant expedited han-
dling of a letter ruling request. Specifically,
that section provides that a request for
expedited handling is granted only in rare
and unusual cases, out of fairness to other
taxpayers and because the IRS seeks to
process all requests as expeditiously as
possible and to give appropriate deference
to normal business exigencies in all cases.
Nevertheless, the IRS may grant a request
for expedited handling when a factor out-
side a taxpayer’s control creates a real
business need to obtain a letter ruling or
determination letter before a certain date
to avoid serious business consequences.
(b) Processing of letter ruling requests.
Section 8 of Rev. Proc. 2023-1 describes
the processing of letter ruling requests by
the Associate offices. Section 8.05(1) of
Rev. Proc. 2023-1 provides that, if a let-
ter ruling request lacks essential informa-
tion, the branch representative will request
such information, and that, unless an
extension of time is granted, the request
will be closed if the Associate office does
not receive the requested information
within 21 calendar days from the date
of the request. Section 8.05(2) of Rev.
Proc. 2023-1 provides that the IRS will
grant an extension of the 21-day period
if the extension is justified in writing by
the taxpayer and approved by the branch
reviewer. Section 8.05(3) of Rev. Proc.
2023-1 provides procedures for closing a
request if the taxpayer does not submit the
information requested within the specified
time.
(3) Conferences for letter rulings.
Section 10 of Rev. Proc. 2023-1 provides
procedures and rules regarding confer-
ences between the taxpayer or the taxpay-
er’s authorized representative (taxpayer)
and IRS representatives to discuss a let-
ter ruling request. A taxpayer generally is
entitled, as a matter of right, to only one
conference (conference of right). See Rev.
Proc. 2023-1, section 10.02.
.02 Pilot Program. In response to com-
ments requesting faster processing of let-
ter rulings, the Department of the Treasury
(Treasury Department) and the IRS issued
Rev. Proc. 2022-10 on January 14, 2022,
announcing an 18-month pilot program
to provide an opportunity for fast-track
processing of certain requests for letter
rulings solely or primarily under the juris-
diction of the Associate Chief Counsel
(Corporate). The Treasury Department
and the IRS have received favorable infor-
mal comments from practitioners regard-
ing the pilot program. After considering
those comments and the results of the pilot
program, the Treasury Department and the
IRS have determined that it is in the best
interests of sound tax administration to
adopt the program set forth in this revenue
procedure.
SECTION 4. SCOPE
.01 Availability of Fast-Track
Processing. Except as provided in section
4.02 of this revenue procedure, a taxpayer
requesting a letter ruling solely or primar-
ily under the jurisdiction of the Associate
Chief Counsel (Corporate) may request
fast-track processing but may not request
expedited handling of such request under

Bulletin No. 2023–33 487 August 14, 2023
section 7.02(4) of Rev. Proc. 2023-1. A
request for fast-track processing generally
will be granted if the letter ruling request
is solely under the jurisdiction of the
Associate Chief Counsel (Corporate), and
the requirements described in section 5 of
this revenue procedure are met. However,
if the letter ruling request is primarily
under the jurisdiction of the Associate
Chief Counsel (Corporate) but also
includes a request for a ruling on an issue
under the jurisdiction of another Associate
office, fast-track processing will be
granted only if the other Associate office
with jurisdiction over the issue agrees to
process the request in accordance with
this revenue procedure. If the letter rul-
ing request is primarily under the juris-
diction of the Associate Chief Counsel
(Corporate) but also involves an issue
under the jurisdiction of another Associate
office, but no ruling with respect to such
issue is requested, fast-track processing
will be granted only if no other Associate
office with jurisdiction over the issue
objects to the request being processed in
accordance with this revenue procedure.
.02 Expedited Handling Available but
Not Fast-Track Processing. Expedited
handling under section 7.02(4) of Rev.
Proc. 2023-1, but not fast-track process-
ing under this revenue procedure, may
be available for a letter ruling request
described in the following circumstances:
(1) A § 301.9100 request within the
meaning of section 5.03 of Rev. Proc.
2023-1 for extension of time for making an
election or for other applications for relief
under §§ 301.9100-1 through 301.9100-3
of the Procedure and Administration
Regulations (26 CFR part 301).
(2) Letter rulings that include a closing
agreement with respect to an issue under
the jurisdiction of the Associate Chief
Counsel (Corporate) or another Associate
office.
.03 Effect of Fast-Track Processing.
If a request for fast-track processing is
granted, the IRS will endeavor to com-
plete processing of the letter ruling request
and, if appropriate, to issue the letter rul-
ing within the time period specified by the
branch representative or branch reviewer
(specified period). The specified period
will be 12 weeks unless a shorter or lon-
ger period is designated by the branch
reviewer pursuant to section 5.06 of this
revenue procedure. The specified period
begins on the following dates:
(1) If the letter ruling request involves
issues solely under the jurisdiction of the
Associate Chief Counsel (Corporate), the
specified period will begin on the date
the letter ruling request is assigned to and
received by the branch representative and
branch reviewer processing the letter rul-
ing request.
(2) If the letter ruling request also
involves issues under the jurisdiction
of an Associate office other than the
Associate Chief Counsel (Corporate), the
specified period will begin on the first date
on which all other Associate offices hav-
ing jurisdiction have informed the branch
representative or branch reviewer of their
agreement to fast-track processing (or, if
applicable, have indicated non-objection
to such processing).
SECTION 5. PROCEDURES FOR
FAST-TRACK PROCESSING
.01 Qualification. The IRS will pro-
vide fast-track processing of a letter ruling
request only if—
(1) the taxpayer satisfies each of the
requirements described in sections 5.02
through 5.04 of this revenue procedure
and agrees to satisfy the requirement
described in section 5.07 of this revenue
procedure; and
(2) after considering the factors listed
in section 5.05(2) of this revenue proce-
dure, the branch reviewer determines that
fast-track processing is feasible.
.02 Pre-submission Conference.
(1) Request by taxpayer. The taxpayer
must request a pre-submission conference
with respect to the letter ruling request, in
accordance with the procedures described
in sections 10.07, 10.08, and 10.09 (as
added by section 6.02(3) of this revenue
procedure) of Rev. Proc. 2023-1. In the
pre-submission conference, the taxpayer
should address both the substantive issues
and the taxpayer’s request for fast-track
processing.
(2) Required information before
pre-submission conference. Before the
pre-submission conference, the taxpayer
must provide the information required
pursuant to section 10.07(3) of Rev. Proc.
2023-1. Such information should include
a clear and concise description of the
transaction and issues to be discussed
during the pre-submission conference.
Additionally, the taxpayer must provide
a statement setting forth the reason(s)
for requesting fast-track processing, the
length of the specified period the taxpayer
requests (if other than 12 weeks), any
matters that could affect the feasibility
of fast-track processing, and any issues
under the jurisdiction of an Associate
office other than the Associate Chief
Counsel (Corporate) relevant to the trans-
action(s) (including whether a ruling will
be requested as to each such issue).
.03 Letter Ruling Request. A letter rul-
ing request as to which fast-track process-
ing is requested must satisfy all applicable
requirements of Rev. Proc. 2023-1 and
any other applicable revenue procedures
and, in addition, must include the items in
sections 5.03(1) through (5) of this reve-
nue procedure.
(1) Required statement. The letter
ruling request must state, at the top of
the first page: “Fast-Track Processing
Is Requested under Revenue Procedure
2023-26.”
(2) Required information. The letter
ruling request must include information
on the taxpayer’s reason(s) for request-
ing fast-track processing, the length of
the specified period the taxpayer requests
(if other than 12 weeks), any information
required by section 5.06 of this revenue
procedure if the specified period is less
than 12 weeks, any matters that could
affect the feasibility of fast-track process-
ing, and any issues under the jurisdic-
tion of an Associate office other than the
Associate Chief Counsel (Corporate) rel-
evant to the transaction(s) (including any
rulings requested on any such issues).
(3) Rationale for fast-track processing.
The taxpayer must submit a statement pro-
viding one or more of the taxpayer’s rea-
sons for requesting fast-track processing.
However, unless the taxpayer is request-
ing a specified period less than 12 weeks,
there is no requirement that the taxpayer
demonstrate a business need for request-
ing fast-track processing.
(4) Agreement regarding additional
information. The letter ruling request
must state that the taxpayer agrees to pro-
vide any additional information requested
by the branch representative or branch
reviewer within the seven business days

August 14, 2023 488 Bulletin No. 2023–33
that begin on the next business day after
the day the request for information is
made (seven-day period). See section 5.07
of this revenue procedure.
(5) Draft letter ruling. The letter ruling
request must include a draft letter ruling
in a form that includes a legend of defined
terms, a description of relevant facts,
representations, requested rulings, and
administrative matters.
.04 Submitting Request for Letter
Ruling.
(1) Suggested submission by encrypted
email attachment. To avoid delay in pro-
cessing of letter ruling requests submitted
by mail or delivered in physical form, it is
strongly recommended that a letter ruling
request for which fast-track processing
is requested be submitted by encrypted
email attachment, in accordance with sec-
tion 7.04(3) of Rev. Proc. 2023-1.
(2) Submission other than by encrypted
email attachment. If a letter ruling
request for which fast-track processing
is requested is submitted other than by
encrypted email attachment, the draft let-
ter ruling required by section 5.03(5) of
this revenue procedure must be submitted
separately by encrypted email attachment
in accordance with section 7.04(3) of Rev.
Proc. 2023-1.
.05 Notification of Receipt and Granting
of Request for Fast-Track Processing.
(1) Notification. No later than seven
business days after the day the letter ruling
request is assigned to and received by the
branch representative and branch reviewer,
the branch representative or branch reviewer
will contact the taxpayer to acknowledge
receipt of the letter ruling request, to pro-
vide contact information for the branch
representative and branch reviewer, and
to notify the taxpayer that the request for
fast-track processing is granted, denied, or
still pending. If the request is granted, the
branch representative or branch reviewer
will inform the taxpayer of the length of the
specified period and the date the specified
period will end. If the request is denied, the
branch representative or branch reviewer
will explain the reasons for the denial. If the
request is under consideration by another
Associate office at that time, the branch
representative or branch reviewer will so
inform the taxpayer.
(2) Factors in determining whether
a request for fast-track processing will
be granted. In making the determination
whether to grant a request for fast-track
processing, and, if so, the length of the
specified period, the branch reviewer will
consider—
(a) All the facts, representations, and
circumstances, including the complex-
ity of the proposed transactions, and the
issues presented;
(b) Whether the letter ruling request
fully, clearly, and concisely describes and
analyzes the relevant facts and issues;
(c) Whether the draft letter ruling sat-
isfies the requirements set forth in section
5.03 of this revenue procedure;
(d) The taxpayer’s reason(s) for
requesting fast-track processing as set
forth in a statement provided under sec-
tion 5.03(3) of this revenue procedure;
(e) Any concerns communicated by
another Associate office; and
(f) Any resource constraints or other
obligations of the Associate Chief Counsel
(Corporate), including responsibilities
with respect to examination matters, lit-
igation matters, guidance projects, assis-
tances provided to other Associate offices,
and other letter ruling requests.
(3) Opportunity for discussion and
reconsideration; tolling. If the branch rep-
resentative or the branch reviewer informs
the taxpayer that the request for fast-track
processing is denied, the taxpayer may
address that determination in writing, dis-
cuss that determination with the branch
reviewer, or both. If the branch reviewer
continues to determine that the request for
fast-track processing should be denied,
there is no right of appeal. See section 10.02
of Rev. Proc. 2023-1. If, after reconsider-
ation, the branch reviewer determines that
the request for fast-track processing should
be granted, the specified period will be
tolled for the period beginning on the date
the taxpayer was informed that the request
for fast-track-processing was denied and
ending on the date the taxpayer is informed
of the determination that such request is
granted. The branch representative or the
branch reviewer will inform the taxpayer
that a favorable or unfavorable determi-
nation has been made as soon as possible
after the determination has been made and,
in the event of a favorable determination,
the period of tolling of the specified period.
.06 Specified Period Shorter or Longer
than 12 Weeks.
(1) Request for specified period shorter
than 12 weeks.
(a) In general. Upon request, the IRS
will agree to a specified period shorter than
12 weeks if the branch reviewer determines
that the taxpayer has a business need to
obtain a letter ruling within that specified
period, and that processing is feasible.
(b) Business need. In a request for a
specified period shorter than 12 weeks,
the taxpayer must demonstrate a need for
such processing by submitting informa-
tion to support the following conclusions,
no later than the date on which the letter
ruling request is submitted:
(i) There is a business exigency outside
the taxpayer’s control.
(ii) There will be adverse consequences
to the taxpayer or other persons if the IRS
does not issue the requested letter ruling
within the specified period.
(iii) The taxpayer submitted the request
as promptly as possible after becoming
aware of the circumstances described
in paragraphs (i) and (ii) of this section
5.06(1)(b).
(c) Insufficient reasons. The following
facts alone do not demonstrate a need for
a specified period shorter than 12 weeks:
(i) The scheduling of a closing date
for a transaction, a meeting of a board of
directors or shareholders of a corporation,
or any other corporate action within the
control of the taxpayer or other parties to
the transaction.
(ii) The possible effect of fluctuation in
the market price of stocks on a transaction.
(2) Specified period longer than 12
weeks.
(a) Taxpayer request. Upon request by
the taxpayer, the branch reviewer may
agree to a specified period longer than 12
weeks.
(b) Branch reviewer determination.
The branch reviewer may decide to des-
ignate a specified period longer than 12
weeks, if he or she determines (based on
the factors described in section 5.05(2)
of this revenue procedure) that fast-track
processing is not feasible within 12 weeks
(or other specified period requested by
the taxpayer) but is feasible during the
longer period. In such a case, the branch
representative or branch reviewer will
inform the taxpayer of the decision and
the reasons therefor and will provide the
taxpayer an opportunity to address the

Bulletin No. 2023–33 489 August 14, 2023
decision. The branch representative or the
branch reviewer will inform the taxpayer
of any subsequent favorable or unfavor-
able determination.
(3) Same procedures apply. The proce-
dures described in this revenue procedure
apply to all requests for fast-track process-
ing, regardless of whether the specified
period is 12 weeks or is shorter or longer
than 12 weeks.
.07 Requested Additional Information
Not Received Within Seven-Day Period.
If the branch representative or branch
reviewer requests additional information,
but all the requested information is not
received within the seven-day period, then,
unless the taxpayer requests an extension
before the end of the seven-day period,
and the branch reviewer grants the exten-
sion, fast-track processing will be termi-
nated. A request for an extension of the
seven-day period may be made orally, in
writing, or both. However, the seven-day
period will not be tolled after an extension
is requested unless agreed to by the branch
reviewer. The branch reviewer will grant
an extension only if the taxpayer provides
good cause therefor. If an extension of
time to submit information is granted, and
the requested information is not provided
within the extended time, fast-track pro-
cessing will also be terminated unless a
further extension is requested and granted.
If fast-track processing is terminated
under this section, the request will be sub-
ject to the procedures described in section
5.08 of this revenue procedure.
.08 Termination or Delay of Fast-Track
Processing.
(1) In general. If the branch reviewer
determines that fast-track processing
within the specified period is no longer
feasible, the branch reviewer may termi-
nate fast-track processing or determine
that fast-track processing will be com-
pleted within a newly designated specified
period.
(2) Rationale for determination. In
determining whether fast-track processing
is no longer feasible within the specified
period, the branch reviewer will consider
any event or situation that affects the IRS’s
ability to provide fast-track processing
within the specified period, including—
(a) Any material change to the pro-
posed transaction(s) since submission of
the letter ruling request;
(b) Any Federal income tax issue not
addressed in the original letter ruling
request and subsequently identified;
(c) The accuracy or completeness of
any additional information submitted;
(d) Any pending legislation, regula-
tions, or other guidance that may affect
the proposed transaction(s);
(e) Any resource constraints or other
obligations of the Associate Chief Counsel
(Corporate), including responsibilities
with respect to examination matters, lit-
igation matters, guidance projects, assis-
tances provided to other Associate offices,
and other letter ruling requests;
(f) The subsequent inclusion of a clos-
ing agreement in the letter ruling request;
and
(g) The scheduling of a conference of
right described in section 10.02 of Rev.
Proc. 2023-1 or a similar conference.
(3) Notification and opportunity for
discussion and reconsideration; tolling.
If the branch representative or the branch
reviewer informs the taxpayer that fast-
track processing has been terminated, the
specified period has been extended, or the
completion of fast-track processing has
otherwise been delayed, the taxpayer may
address that determination in writing, dis-
cuss that determination with the branch
reviewer, or both. If, upon reconsideration,
the branch reviewer continues to deter-
mine that the request for fast-track pro-
cessing should be terminated, the specified
period should be extended, or completion
of fast-track processing will otherwise be
delayed, there is no right of appeal. See
section 10.02 of Rev. Proc. 2023-1. If,
upon reconsideration, the branch reviewer
determines that fast-track processing
should not be terminated, the specified
period should not be extended, or com-
pletion of fast-track processing should not
be otherwise delayed, the specified period
will be tolled for the period beginning on
the date the taxpayer was informed of the
initial unfavorable determination and end-
ing on the date the taxpayer is informed of
the subsequent favorable determination.
The branch representative or the branch
reviewer will inform the taxpayer that a
determination following reconsideration
has been made as soon as possible after
the determination has been made and, in
the event of a favorable determination, the
period of tolling of the specified period.
(4) Continued processing of letter rul-
ing request. If fast-track processing is ter-
minated, the IRS will continue to process
the letter ruling request under the proce-
dures of section 7 (exclusive of section
7.02(4)) of Rev. Proc. 2023-1. However,
if fast track processing is terminated
because a closing agreement that was not
initially part of a letter ruling request is
subsequently included with a letter ruling
request, the IRS will continue to process
the letter ruling request under the proce-
dures of section 7 of Rev. Proc. 2023-1,
and will consider a request for expedited
handling under section 7.02(4) of that rev-
enue procedure.
SECTION 6. MODIFICATIONS TO
REV. PROC. 2023-1
Rev. Proc. 2023-1 is modified as
follows:
.01 Requests for Expedited Handling.
Section 7.02(4) of Rev. Proc. 2023-1 is
modified by adding the following lan-
guage at the end of the first paragraph:
“Expedited handling under this section
7.02(4) is not available as to a request
for a letter ruling solely or primarily
under the jurisdiction of the Associate
Chief Counsel (Corporate) (other than
a § 301.9100 request described in sec-
tion 5.03 of this revenue procedure
for an extension of time for making
an election or other relief, or a request
that includes a closing agreement with
respect to an issue under the jurisdic-
tion of the Associate Chief Counsel
(Corporate) or another Associate
office). For guidance on fast-track pro-
cessing of such a letter ruling request,
see Rev. Proc. 2023-26, 2023-33 I.R.B.
486.”
.02 Additional Information. Section
8.05(1) of Rev. Proc. 2023-1 is modified
by adding the following language at the
end of the first paragraph:
“Special rules and procedures apply to
letter ruling requests under the juris-
diction of the Associate Chief Counsel
(Corporate) for which fast-track pro-
cessing is requested. Under section
5.07 of Rev. Proc. 2023-26, failure to
provide, within seven business days
(plus extensions, if granted), a com-
plete response to any information
request from the branch representative

August 14, 2023 490 Bulletin No. 2023–33
or branch reviewer assigned to the let-
ter ruling request will result in termina-
tion of fast-track processing.”
.03 Conferences for Letter Rulings.
Section 10 of Rev. Proc. 2023-1 is
modified by adding the following new
paragraph at the end:
Pre-submission conferences
under Rev. Proc. 2023-26.
.09 Special rules and procedures apply to letter ruling requests
solely or primarily under the jurisdiction of the Associate Chief
Counsel (Corporate) for which fast-track processing has been
requested. For more information, see section 5.02 of Rev. Proc.
2023-26.
.04 List of Guideline Revenue
Procedures. Section .01 of Appendix
F of Rev. Proc. 2023-1 is modified by
adding the following entry to the subject
matter list of guideline revenue proce-
dures immediately before “Intercompany
transactions; election not to defer gain or
loss”:
Fast-track processing of letter ruling requests solely or pri-
marily under the jurisdiction of the Associate Chief Counsel
(Corporate).
Rev. Proc. 2023-26, 2023-33 I.R.B. 486.
SECTION 7. EFFECT ON OTHER
DOCUMENTS
.01 Rev. Proc. 2022-10. Rev. Proc.
2022-10 is superseded for letter ruling
requests described in section 8 of this rev-
enue procedure.
.02 Rev. Proc. 2023-1. Rev. Proc.
2023-1 is modified as provided in section
6 of this revenue procedure.
SECTION 8. APPLICABILITY DATE
The fast-track ruling program estab-
lished by this revenue procedure applies
to all letter ruling requests described in
section 4.01 of this revenue procedure
postmarked or, if not mailed, received by
the IRS after July 26, 2023.
SECTION 9. PAPERWORK
REDUCTION ACT
The collections of information in
this revenue procedure have been
reviewed and approved by the Office
of Management and Budget (OMB)
in accordance with the Paperwork
Reduction Act (44 U.S.C. 3507) under
control number 1545-1522.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
OMB control number.
The collections of information in this
revenue procedure are in section 5. This
information is required to determine
whether a taxpayer qualifies for fast-track
processing. The collections of information
are required to obtain a benefit. The likely
respondents are corporations seeking pri-
vate letter rulings.
The estimated total annual reporting
and/or recordkeeping burden for Rev.
Proc. 2023-1 is 316,020 hours.
The estimated annual burden per
respondent/recordkeeper for Rev. Proc.
2023-1 varies from 1 to 200 hours,
depending on individual circumstances,
with an estimated average burden of 80
hours. The estimated number of respon-
dents and/or recordkeepers is 3,956.
The estimated total annual reporting
and/or recordkeeping burden for this rev-
enue procedure adds 260 hours to the bur-
den imposed by Rev. Proc. 2023-1.
The estimated annual burden per
respondent/recordkeeper for this revenue
procedure varies from 3 to 10 hours,
depending on individual circumstances,
with an estimate average burden of 8
hours. The estimated number of addi-
tional respondents and/or recordkeep-
ers added to Rev. Proc. 2023-1 by this
revenue procedure is 10, increasing the
estimated number of respondents and/
or recordkeepers to Rev. Proc. 2023-1 to
3,966.
The estimated annual frequency of
response is on occasion.
Books or records relating to a collec-
tion of information must be retained as
long as their contents may become mate-
rial in the administration of any internal
revenue tax law. Generally, tax returns and
tax return information are confidential, as
required by section 6103 of the Internal
Revenue Code.
SECTION 10. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Kelton P. Frye of the Office
of Associate Chief Counsel (Corporate).
For further information, please call Mr.
Frye at (202) 317-5363.

Bulletin No. 2023–33 491 August 14, 2023
Part IV
Notice of Proposed
Rulemaking
REG-120730-21
Short-Term, Limited-
Duration Insurance;
Independent,
Noncoordinated Excepted
Benefits Coverage;
Level-Funded Plan
Arrangements; and Tax
Treatment of Certain
Accident and Health
Insurance
AGENCY: Internal Revenue Service,
Department of the Treasury; Employee
Benefits Security Administration,
Department of Labor; Centers for
Medicare & Medicaid Services,
Department of Health and Human
Services.
ACTION: Proposed rules.
SUMMARY: This document sets forth
proposed rules that would amend the
definition of short-term, limited-duration
insurance, which is excluded from the defi-
nition of individual health insurance cov-
erage under the Public Health Service Act.
This document also sets forth proposed
amendments to the requirements for hos-
pital indemnity or other fixed indemnity
insurance to be considered an excepted
benefit in the group and individual health
insurance markets. This document further
sets forth proposed amendments to clarify
the tax treatment of certain benefit pay-
ments in fixed amounts received under
employer-provided accident and health
plans. Finally, this document solicits
comments regarding coverage only for a
specified disease or illness that qualifies as
excepted benefits, and comments regard-
ing level-funded plan arrangements.
DATES: To be assured consideration,
comments must be received at one of the
addresses provided below by September
11, 2023.
ADDRESSES: In commenting, please
refer to file code CMS-9904-P.
Comments, including mass comment
submissions, must be submitted in one of
the following three ways (please choose
only one of the ways listed):
1. Electronically. You may submit
electronic comments on this regulation to
https://www.regulations.gov. Follow the
“Submit a comment” instructions.
2. By regular mail. You may mail writ-
ten comments to the following address
ONLY:
Centers for Medicare & Medicaid
Services,
Department of Health and Human
Services,
Attention: CMS-9904-P,
P.O. Box 8010,
Baltimore, MD 21244-8010.
Please allow sufficient time for mailed
comments to be received before the close
of the comment period.
3. By express or overnight mail. You
may send written comments to the follow-
ing address ONLY:
Centers for Medicare & Medicaid
Services,
Department of Health and Human
Services,
Attention: CMS-9904-P,
Mail Stop C4-26-05,
7500 Security Boulevard,
Baltimore, MD 21244-1850.
For information on viewing pub-
lic comments, see the beginning of the
“SUPPLEMENTARY INFORMATION”
section.
FOR FURTHER INFORMATION
CONTACT:
Elizabeth Schumacher or Rebecca
Miller, Employee Benefits Security
Administration, Department of Labor
at (202) 693-8335; Jason Sandoval,
Internal Revenue Service, Department
of the Treasury at (202) 317-5500; Cam
Clemmons, Centers for Medicare &
Medicaid Services, Department of Health
and Human Services at (206) 615-2338;
Geraldine Doetzer, Centers for Medicare
& Medicaid Services, Department of
Health and Human Services at (667)
290-8855.
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments:
Comments received before the close of the
comment period are available for viewing
by the public, including any personally
identifiable or confidential business infor-
mation that is included in a comment. We
post comments received before the close
of the comment period on the following
website as soon as possible after they
have been received: https://www.regula-
tions.gov. Follow the search instructions
on that website to view comments. We
will not post on Regulations.gov com-
ments that make threats to individuals or
institutions or suggest that the individual
will take actions to harm the individual.
We continue to encourage individuals not
to submit duplicative comments. We will
post acceptable comments from multiple
unique commenters even if the content
is identical or nearly identical to other
comments.
I. Background
These proposed rules set forth proposed
revisions to the definition of “short-term,
limited-duration insurance” (STLDI) for
purposes of its exclusion from the defini-
tion of “individual health insurance cov-
erage” in 26 CFR part 54, 29 CFR part
2590, and 45 CFR part 144. The definition
of STLDI is also relevant for purposes
of the disclosure and reporting require-
ments in section 2746 of the Public Health
Service Act (the PHS Act), which require
health insurance issuers offering individ-
ual health insurance coverage or STLDI
to disclose to enrollees in such coverage,
and to report annually to the Department
of Health and Human Services (HHS),
any direct or indirect compensation pro-
vided by the issuer to an agent or broker

August 14, 2023 492 Bulletin No. 2023–33
associated with enrolling individuals in
such coverage.
These proposed rules also set forth
proposed amendments to the require-
ments for hospital indemnity and other
fixed indemnity insurance to be treated
as an excepted benefit in the group and
individual health insurance markets (fixed
indemnity excepted benefits coverage).
1

Further, the Department of the Treasury
(Treasury Department) and the Internal
Revenue Service (IRS) propose to clar-
ify the tax treatment under 26 CFR part
1 of fixed amounts received by a tax-
payer through certain employment-based
accident or health insurance that are paid
without regard to the amount of medical
expenses incurred.
Lastly, comments are solicited regard-
ing coverage only for a specified disease
or illness that qualifies as excepted ben-
efits (specified disease excepted benefits
coverage),
2
and regarding level-funded
plan arrangements to better understand
the key features and characteristics of
these arrangements and whether addi-
tional guidance or rulemaking is needed
to clarify plan sponsors’ obligations with
respect to coverage provided through
these arrangements.
The Treasury Department, the
Department of Labor, and HHS (collec-
tively, the Departments) propose these
revisions to define and more clearly dis-
tinguish STLDI and fixed indemnity
excepted benefits coverage from compre-
hensive coverage. Comprehensive cov-
erage is subject to the federal consumer
protections and requirements established
under chapter 100 of the Internal Revenue
Code (Code), part 7 of the Employee
Retirement Income Security Act of 1974
(ERISA), and title XXVII of the PHS Act,
3

such as the prohibition on exclusions for
preexisting conditions, the prohibition on
health status discrimination, the require-
ment to cover certain preventive services
without cost sharing, and many others. The
Departments propose these revisions to
promote equitable access to high-quality,
affordable, comprehensive coverage by
increasing consumers’ understanding of
their health coverage options and reducing
misinformation about STLDI and fixed
indemnity excepted benefits coverage,
consistent with Executive Orders 14009
and 14070 as described in section I.B of
this preamble. Similarly, clarifying the
tax treatment of benefit payments in fixed
amounts under hospital indemnity or other
fixed indemnity coverage purchased on a
pre-tax basis when those benefits are paid
without regard to the medical expenses
incurred is also an important means by
which to distinguish that coverage from
comprehensive coverage and should serve
to promote the purchase of comprehensive
coverage in the group market.
A. General Statutory Background
The Health Insurance Portability and
Accountability Act of 1996 (HIPAA)
(Pub. L. 104-191, August 21, 1996) added
chapter 100 to the Code, part 7 to ERISA,
and title XXVII to the PHS Act, which
set forth portability and nondiscrimina-
tion rules with respect to health coverage.
These provisions of the Code, ERISA,
and the PHS Act were later augmented by
other laws, including the Mental Health
Parity Act of 1996 (Pub. L. 104-204,
September 26, 1996), the Paul Wellstone
and Pete Domenici Mental Health
Parity and Addiction Equity Act of 2008
(MHPAEA) (Pub. L. 110-343, October
3, 2008), the Newborns’ and Mothers’
Health Protection Act (Pub. L. 104-
204, September 26, 1996), the Women’s
Health and Cancer Rights Act (Pub. L.
105-277, October 21, 1998), the Genetic
Information Nondiscrimination Act of
2008 (Pub. L. 110-233, May 21, 2008),
the Children’s Health Insurance Program
Reauthorization Act of 2009 (Pub. L.
111-3, February 4, 2009), Michelle’s Law
(Pub. L. 110-381, October 9, 2008), the
Patient Protection and Affordable Care
Act (Pub. L. 111-148, March 23, 2010) (as
amended by the Health Care and Education
Reconciliation Act of 2010 (Pub. L. 111–
152, March 30, 2010) (collectively known
as the Affordable Care Act (ACA)),
and Division BB of the Consolidated
Appropriations Act, 2021 (CAA, 2021)
(Pub. L. 116-260, December 27, 2020),
which includes the No Surprises Act.
The ACA reorganized, amended, and
added to the provisions of Part A of title
XXVII of the PHS Act relating to group
health plans and health insurance issuers
in the group and individual markets. The
ACA added section 9815 of the Code and
section 715 of ERISA to incorporate the
provisions of Part A of title XXVII of the
PHS Act, as amended or added by the
ACA, into the Code and ERISA, making
them applicable to group health plans and
health insurance issuers providing health
insurance coverage in connection with
group health plans. The provisions of
the PHS Act incorporated into the Code
and ERISA, as amended or added by the
ACA, are sections 2701 through 2728. In
addition to marketwide provisions appli-
cable to group health plans and health
insurance issuers in the group and individ-
ual markets, the ACA established Health
Benefit Exchanges (Exchanges) aimed at
promoting access to high-quality, afford-
able, comprehensive coverage. Section
1401(a) of the ACA added section 36B to
the Code, providing a premium tax credit
(PTC) for certain individuals with annual
household income that is at least 100 per-
cent but not more than 400 percent of the
Federal poverty level (FPL) who enroll in,
or who have one or more family members
enrolled in, an individual market qualified
health plan (QHP) through an Exchange,
who are not otherwise eligible for mini-
mum essential coverage (MEC). Section
1402 of the ACA provides for, among
other things, reductions in cost sharing
for essential health benefits for qualified
low- and moderate-income enrollees in
silver-level QHPs purchased through the
individual market Exchanges. This sec-
tion also provides for reductions in cost
sharing for American Indians enrolled in
1
For simplicity and readability, this preamble refers to hospital indemnity or other fixed indemnity insurance that meets all requirements to be considered an excepted benefit under the federal
framework as “fixed indemnity excepted benefits coverage” in order to distinguish it from hospital indemnity or other fixed indemnity insurance that does not meet all such requirements.
2
For simplicity and readability, this preamble refers to specified disease or illness insurance coverage that meets all requirements to be considered an excepted benefit under the federal frame-
work as “specified disease excepted benefits coverage” in order to distinguish it from specified disease or illness insurance that does not meet all such requirements.
3
While STLDI is generally not subject to the federal consumer protections and requirements for comprehensive coverage that apply to individual health insurance coverage, the agent and
broker compensation disclosure and reporting requirements in section 2746 of the PHS Act apply to health insurance issuers offering individual health insurance coverage or STLDI.

Bulletin No. 2023–33 493 August 14, 2023
QHPs purchased through the individual
market Exchanges at any metal level.
Section 5000A of the Code, added by
section 1501(b) of the ACA, provides that
individuals must maintain MEC, or make
a payment known as the individual shared
responsibility payment with their Federal
tax return for the year in which they did
not maintain MEC, if they are not other-
wise exempt.
4
On December 22, 2017, the
Tax Cuts and Jobs Act (Pub. L. 115-97)
was enacted, which included a provision
under which the individual shared respon-
sibility payment under section 5000A of
the Code was reduced to $0, effective for
months beginning after December 31,
2018.
The American Rescue Plan Act of
2021 (ARP) (Pub. L. 117-2) was enacted
on March 11, 2021. Among other policies
intended to address the health care and
economic needs of the country during the
coronavirus disease-2019 (COVID-19)
pandemic, the ARP increased the PTC
amount for individuals with annual house-
hold income at or below 400 percent of
the FPL and extended PTC eligibility for
the first time to individuals with annual
household incomes above 400 percent of
the FPL. Although the expanded PTC sub-
sidies under the ARP were applicable only
for 2021 and 2022, the Inflation Reduction
Act of 2022 (IRA) (Pub. L. 117-169,
August 16, 2022) extended the subsi-
dies for an additional 3 years, through
December 31, 2025.
The No Surprises Act was enacted on
December 27, 2020, as title I of Division
BB of the CAA, 2021. The No Surprises
Act added new provisions in Subchapter
B of chapter 100 of the Code, Part 7 of
ERISA, and Part D of title XXVII of
the PHS Act, applicable to group health
plans and health insurance issuers offer-
ing group or individual health insurance
coverage. These provisions provide pro-
tections against surprise medical bills
for certain out-of-network services and
generally require plans and issuers and
providers and facilities to make certain
disclosures regarding balance billing pro-
tections to the public and to individual
participants, beneficiaries, and enrollees.
In addition to the new provisions appli-
cable to group health plans and issuers
of group or individual health insurance
coverage, the No Surprises Act added a
new Part E to title XXVII of the PHS Act,
establishing corresponding requirements
applicable to health care providers, facil-
ities, and providers of air ambulance ser-
vices. The CAA, 2021 also amended title
XXVII of the PHS Act to, among other
things, add section 2746, which requires
health insurance issuers offering individ-
ual health insurance coverage or STLDI to
disclose the direct or indirect compensa-
tion provided by the issuer to an agent or
broker associated with enrolling individ-
uals in such coverage to the enrollees in
such coverage as well as to report it annu-
ally to HHS.
The Secretaries of HHS, Labor, and
the Treasury have authority to promulgate
regulations as may be necessary or appro-
priate to carry out the parallel Federal
consumer protections and requirements
for comprehensive coverage established
under the Code, ERISA, and the PHS Act
(hereinafter referred to as the “Federal
consumer protections and requirements
for comprehensive coverage”).
5,6
B. Recent Executive Orders
On January 28, 2021, President
Biden issued Executive Order 14009,
“Strengthening Medicaid and the
Affordable Care Act,” which directed the
Departments to review policies to ensure
their consistency with the Administration’s
goal of protecting and strengthening the
ACA and making high-quality health
care accessible and affordable for every
American.
7
Executive Order 14009 also
directed Federal agencies to examine poli-
cies or practices that may undermine protec-
tions for people with preexisting conditions
and that may reduce the affordability of
coverage or financial assistance for cover-
age. Executive Order 14009 also revoked
the previous Administration’s Executive
Order 13813, “Promoting Healthcare
Choice and Competition Across the United
States,” which directed agencies to expand
the availability of STLDI.
8
On April 5,
2022, President Biden issued Executive
Order 14070, “Continuing to Strengthen
Americans’ Access to Affordable, Quality
Health Coverage,” which directed the
heads of Federal agencies with responsibil-
ities related to Americans’ access to health
coverage to examine polices or practices
that make it easier for all consumers to
enroll in and retain coverage, understand
their coverage options, and select appro-
priate coverage; that strengthen benefits
and improve access to health care provid-
ers; that improve the comprehensiveness
of coverage and protect consumers from
low-quality coverage; and that help reduce
the burden of medical debt on households.
9

In addition, on January 21, 2021,
President Biden issued Executive Order
13995, “Ensuring an Equitable Pandemic
Response and Recovery,” which directed
the Secretaries of Labor and HHS, and the
heads of all other agencies with authorities
or responsibilities relating to the COVID-
19 pandemic response and recovery, to
consider any barriers that have restricted
access to preventive measures, treatment,
and other health services for populations
at high risk for COVID-19 infection, and
modify policies to advance equity.
10

4
Section 5000A of the Code and Treasury regulations at 26 CFR 1.5000A-3 provide exemptions from the requirement to maintain MEC for the following individuals: (1) members of
recognized religious sects; (2) members of health care sharing ministries; (3) exempt noncitizens; (4) incarcerated individuals; (5) individuals with no affordable coverage; (6) individuals
with household income below the income tax filing threshold; (7) members of federally recognized Indian tribes; (8) individuals who qualify for a hardship exemption certification; and (9)
individuals with a short coverage gap of a continuous period of less than 3 months in which the individual is not covered under MEC. The eligibility standards for exemptions can be found
at 45 CFR 155.605.
5
Sections 2701 through 2728 of the PHS Act, incorporated into section 715 of ERISA and section 9815 of the Code; section 104 of HIPAA; sections 408(b)(2), 505, 734, and 716-717 of
ERISA; sections 2746, 2761, 2792, 2799A-1-2, and 2799B1-B2 of the PHS Act; section 1321(a)(1) and (c) of ACA; sections 7805, 9816-9817, and 9822 of the Code; and sections 2746,
2799A-1-2, and 2799B1-B2 of the PHS Act.
6
See also 64 FR 70164 (December 15, 1999).
7
Executive Order 14009 of January 28, 2021, 86 FR 7793.
8
Executive Order 13813 of October 12, 2017, 82 FR 48385.
9
Executive Order 14070 of April 5, 2022, 87 FR 20689.
10
Executive Order 13995 of January 21, 2021, 86 FR 7193.

August 14, 2023 494 Bulletin No. 2023–33
Consistent with these executive orders,
the Departments have reviewed the reg-
ulatory provisions related to STLDI and
fixed indemnity excepted benefits cov-
erage, and propose amendments to those
provisions in these proposed rules. The
Departments also solicit comments on
specified disease excepted benefit cover-
age (for example, cancer-only policies)
in section III.B.2 of this preamble and on
level-funded plan arrangements in section
III.C of this preamble.
C. Short-Term, Limited-Duration
Insurance (STLDI)
STLDI is a type of health insurance
coverage sold by health insurance issuers
that is primarily designed to fill temporary
gaps in coverage that may occur when an
individual is transitioning from one plan
or coverage to another, such as transition-
ing between employment-based cover-
ages. Section 2791(b)(5) of the PHS Act
provides “[t]he term ‘individual health
insurance coverage’ means health insur-
ance coverage offered to individuals in the
individual market, but does not include
short-term, limited-duration insurance.”
11

The PHS Act does not, however, define
the phrase “short-term, limited-duration
insurance.” Sections 733(b)(4) of ERISA
and 2791(b)(4) of the PHS Act provide
that group health insurance coverage
means “in connection with a group health
plan, health insurance coverage offered
in connection with such plan.” Sections
733(a)(1) of ERISA and 2791(a)(1) of the
PHS Act provide that a group health plan
is generally any plan, fund, or program
established or maintained by an employer
(or employee organization or both) for
the purpose of providing medical care to
employees or their dependents (as defined
under the terms of the plan) directly, or
through insurance, reimbursement, or
otherwise. There is no corresponding
provision excluding STLDI from the
definition of group health insurance cov-
erage. Thus, any health insurance that is
sold in the group market and purports to
be STLDI must comply with applicable
Federal group market consumer protec-
tions and requirements for comprehensive
coverage, unless the coverage satisfies
the requirements of one or more types of
group market excepted benefits.
Because STLDI is not individual
health insurance coverage, it is generally
exempt from the applicable Federal indi-
vidual market consumer protections and
requirements for comprehensive cover-
age. STLDI is not subject to many PHS
Act provisions that apply to individual
health insurance coverage under the ACA
including, for example, the prohibition of
preexisting condition exclusions or other
discrimination based on health status (sec-
tion 2704 of the PHS Act), the prohibition
on discrimination against individual par-
ticipants and beneficiaries based on health
status (section 2705 of the PHS Act),
nondiscrimination in health care (section
2706 of the PHS Act), and the prohibition
on lifetime and annual dollar limits on
essential health benefits (section 2711 of
the PHS Act). In addition, STLDI is not
subject to the Federal consumer protec-
tions and requirements added to the PHS
Act by other laws that apply to individ-
ual health insurance coverage, including
MHPAEA (Pub. L. 110-343, October
3, 2008) (section 2726 of the PHS Act),
and the No Surprises Act, as added by
the CAA, 2021. Thus, individuals who
enroll in STLDI are not guaranteed these
key consumer protections under Federal
law.
12
This feature of STLDI is especially
problematic when it is not readily appar-
ent to consumers deciding whether to pur-
chase STLDI or comprehensive individual
health insurance coverage.
In 1997, the Departments issued interim
final rules implementing the portability
and renewability requirements of HIPAA
(1997 HIPAA interim final rules).
13
Those
interim final rules included definitions of
individual health insurance coverage, as
well as STLDI. That definition of STLDI,
which was finalized in rules issued in
2004 and applied through 2016, defined
“short-term, limited-duration insurance”
as “health insurance coverage provided
pursuant to a contract with an issuer that
has an expiration date specified in the con-
tract (taking into account any extensions
that may be elected by the policyholder
without the issuer’s consent) that is less
than 12 months after the original effective
date of the contract.”
14

To address the issue of STLDI being
sold as a type of primary coverage, as well
as concerns regarding possible adverse
selection impacts on the individual mar-
ket risk pools that were created under
the ACA,
15
the Departments published
proposed rules on June 10, 2016 in the
Federal Register titled “Expatriate Health
Plans, Expatriate Health Plan Issuers, and
Qualified Expatriates; Excepted Benefits;
Lifetime and Annual Limits; and Short-
Term, Limited-Duration Insurance” (2016
proposed rules). Those rules proposed to
revise the Federal definition of STLDI by
shortening the permitted duration of such
coverage, and adopting a consumer notice
provision.
16
On October 31, 2016, the
Departments finalized the 2016 proposed
rules related to STLDI without change
in final rules published in the Federal
Register titled “Excepted Benefits;
Lifetime and Annual Limits; and Short-
Term, Limited-Duration Insurance” (2016
final rules).
17
The 2016 final rules amended
the definition of STLDI to specify that
the maximum coverage period must be
less than 3 months, taking into account
any extensions that may be elected by the
policyholder with or without the issuer’s
consent.
18
In addition, the 2016 final rules
stated that the following notice must be
11
The definition of individual health insurance coverage (and its exclusion of STLDI) has some limited relevance with respect to certain provisions that apply to group health plans and group
health insurance issuers over which the Departments of Labor and the Treasury also have jurisdiction. For example, an individual who loses coverage due to moving out of a health mainte-
nance organization (HMO) service area in the individual market precipitates a special enrollment right into a group health plan. See 26 CFR 54.9801-6(a)(3)(i)(B), 29 CFR 2590.701-6(a)(3)
(i)(B), and 45 CFR 146.117(a)(3)(i)(B).
12
Some state laws apply some consumer protections and requirements that parallel those in the ACA to STLDI.
13
62 FR 16894 (April 8, 1997).
14
62 FR 16894 at 16928, 16942, 16958 (April 8, 1997); see also 69 FR 78720 (December 30, 2004).
15
See Pub. L. 111-148, section 1312(c)(1) and 45 CFR 156.80.
16
81 FR 38019 (June 10, 2016).
17
81 FR 75316 (October 31, 2016).
18
Id. at 75317 – 75318.

Bulletin No. 2023–33 495 August 14, 2023
prominently displayed in the contract and
in any application materials provided in
connection with enrollment in STLDI, in
at least 14 point type:
“THIS IS NOT QUALIFYING
HEALTH COVERAGE (“MINIMUM
ESSENTIAL COVERAGE”)
THAT SATISFIES THE HEALTH
COVERAGE REQUIREMENT OF THE
AFFORDABLE CARE ACT. IF YOU
DON’T HAVE MINIMUM ESSENTIAL
COVERAGE, YOU MAY OWE AN
ADDITIONAL PAYMENT WITH YOUR
TAXES.”
19
On June 12, 2017, HHS published
a request for information (RFI) in the
Federal Register titled “Reducing
Regulatory Burdens Imposed by the
Patient Protection and Affordable Care
Act & Improving Healthcare Choices
to Empower Patients,”
20
which solic-
ited comments about potential changes
to existing regulations and guidance that
could promote consumer choice, enhance
affordability of coverage for individual
consumers, and affirm the traditional
regulatory authority of the States in reg-
ulating the business of health insurance,
among other goals.
21
In response to this
RFI, HHS received comments that rec-
ommended maintaining the definition of
STLDI adopted in the 2016 final rules,
and comments that recommended expand-
ing the definition to allow for a longer
period of coverage. Commenters in sup-
port of maintaining the definition adopted
in the 2016 final rules expressed concern
that changing the definition could leave
enrollees in STLDI at risk for significant
out-of-pocket costs, and cautioned that
expanding the definition of STLDI could
facilitate its sale to individuals as their
primary form of health coverage, even
though such insurance lacks key con-
sumer protections under Federal law that
apply to individual health insurance cov-
erage. Commenters in favor of maintain-
ing the definition in the 2016 final rules
also suggested that amending the 2016
final rules to include coverage lasting 3
months or more could have the effect of
pulling healthier people out of the individ-
ual market risk pools, thereby increasing
overall premium costs for enrollees in
individual health insurance coverage and
destabilizing the individual market.
In contrast, several other commenters
stated that changes to the 2016 final rules
may provide an opportunity to achieve
the goals outlined in the RFI (for exam-
ple, to promote consumer choice, enhance
affordability, and affirm the traditional
authority of the States in regulating the
business of insurance). These comment-
ers stated that shortening the permitted
length of STLDI policies in the 2016 final
rules had deprived individuals of afford-
able coverage options. One commenter
explained that due to the increased costs
of comprehensive coverage, many finan-
cially stressed individuals could be faced
with a choice between purchasing STLDI
and going without any coverage at all.
One commenter highlighted the need for
STLDI for individuals who are between
jobs for a relatively long period and for
whom enrolling in Consolidated Omnibus
Budget Reconciliation Act (COBRA)
22

continuation coverage is financially infea-
sible. Another commenter noted that
States have the primary responsibility
to regulate STLDI and encouraged the
Departments to defer to the States’ author-
ity with respect to such coverage.
On February 21, 2018, the Departments
published proposed rules in the Federal
Register titled “Short-Term, Limited-
Duration Insurance” (2018 proposed
rules) in which the Departments pro-
posed changing the definition of STLDI
to provide that such insurance may have
a maximum coverage period of less than
12 months after the original effective date
of the contract, taking into account any
extensions that may be elected by the pol-
icyholder without the issuer’s consent.
23

Among other things, the Departments
solicited comments on whether the maxi-
mum length of STLDI should be less than
12 months or some other duration and
under what conditions issuers should be
able to allow such coverage to continue
for 12 months or longer. In addition, the
Departments proposed to revise the con
-
tent of the consumer notice that must
appear in the contract and any application
materials provided in connection with
enrollment in STLDI. The 2018 proposed
rules included two variations of the con-
sumer notice – one for policies that had a
coverage start date before January 1, 2019,
and the other for policies that had a cover-
age start date on or after January 1, 2019,
which excluded language referencing the
individual shared responsibility payment
(which was reduced to $0 for months
beginning after December 2018).
24
Some commenters on the 2018 pro-
posed rules acknowledged that STLDI fills
an important role by providing temporary
coverage, but that such insurance should
not take the place of comprehensive cov-
erage. These commenters expressed con-
cern that allowing STLDI to be marketed
as a viable alternative to comprehensive
coverage would subject uninformed con-
sumers to potentially severe financial
risks. Commenters who opposed the
proposed changes to the definition also
expressed concern that such plans would
siphon off healthier individuals from the
market for individual health insurance
coverage, thereby raising premiums for
individual health insurance coverage.
Many of these commenters also
expressed concerns about the lack of
protections for consumers who purchase
STLDI, stating that such policies are
not a viable option for people with seri-
ous or chronic medical conditions due to
potential coverage exclusions and benefit
limitations in STLDI policies. These com-
menters further observed that STLDI pol-
icies can discriminate against individuals
19
Id.
20
82 FR 26885 (June 12, 2017).
21
See also Executive Order 13813 of October 12, 2017 82 FR 48385. (Directing the Secretaries of the Treasury, Labor and HHS “...to consider proposing regulations or revising guidance,
consistent with law, to expand the availability of [STLDI]. To the extent permitted by law and supported by sound policy, the Secretaries should consider allowing such insurance to cover
longer periods and be renewed by the consumer.”)
22
Pub. L. 99-272, April 7, 1986.
23
83 FR 7437 (February 21, 2018).
24
Pub. L. 115–97, December 22, 2017.

August 14, 2023 496 Bulletin No. 2023–33
with serious illnesses or preexisting con-
ditions, including individuals with mental
health and substance use disorders, older
consumers, women, transgender patients,
persons with gender identity-related health
concerns, and victims of rape and domes-
tic violence. Many of these commenters
also expressed concern about aggressive
and deceptive marketing practices utilized
by marketers of STLDI.
Other commenters highlighted the
important role that STLDI could play in
providing temporary coverage to individ-
uals who would otherwise be uninsured.
These commenters, who supported the
proposed changes to the definition, also
noted that such changes would allow pur-
chasers of STLDI to obtain the coverage
they want at a more affordable price for a
longer period.
With respect to the maximum length of
the initial contract term for STLDI, most
commenters opposed extending the max-
imum duration beyond 3 months. Others
suggested periods such as less than 6 or 8
months. However, most commenters who
supported extending the maximum initial
contract term beyond 3 months suggested
it should be 364 days. A few comment-
ers suggested more than 1 year. Other
commenters stated the maximum length
of coverage should be left to the States.
Commenters who supported the 2018 pro-
posed rules generally favored permitting
renewals of STLDI policies, while those
who opposed the 2018 proposed rules gen-
erally opposed permitting such renewals.
After reviewing comments and feed-
back received from interested parties, on
August 3, 2018, the Departments pub-
lished final rules in the Federal Register
titled “Short-Term, Limited-Duration
Insurance” (2018 final rules)
25
with some
modifications from the 2018 proposed
rules. Specifically, in the 2018 final rules,
the Departments amended the definition
of STLDI to provide that STLDI is cov-
erage with an initial term specified in the
contract that is less than 12 months after
the original effective date of the contract,
and taking into account renewals or exten-
sions, has a duration of no longer than
36 months in total.
26
The 2018 final rules
also finalized the provision that issuers of
STLDI must display one of two versions of
a notice prominently in the contract and in
any application materials provided in con-
nection with enrollment in such coverage,
in at least 14-point type. Under the 2018
final rules, the notice must read as follows
(with the final two sentences omitted for
policies sold on or after January 1, 2019):
“This coverage is not required to com-
ply with certain Federal market require-
ments for health insurance, principally
those contained in the Affordable Care
Act. Be sure to check your policy care-
fully to make sure you are aware of any
exclusions or limitations regarding cov-
erage of preexisting conditions or health
benefits (such as hospitalization, emer-
gency services, maternity care, preven-
tive care, prescription drugs, and mental
health and substance use disorder ser-
vices). Your policy might also have life-
time 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 enroll-
ment period to get other health insur-
ance coverage. Also, this 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 exemp-
tion from the requirement that you have
health coverage for that month.”
D. Independent, Noncoordinated
Excepted Benefits: Hospital Indemnity
or Other Fixed Indemnity Insurance and
Specified Disease or Illness Coverage
Section 9831 of the Code, section 732
of ERISA, and sections 2722(b)-(c) and
2763 of the PHS Act provide that the
respective Federal consumer protections
and requirements for comprehensive
coverage do not apply to any individual
coverage or any group health plan (or
group health insurance coverage offered
in connection with a group health plan)
in relation to its provision of certain types
of benefits, known as “excepted benefits.”
These excepted benefits are described
in section 9832(c) of the Code, section
733(c) of ERISA, and section 2791(c) of
the PHS Act.
HIPAA defined certain types of cov-
erage as “excepted benefits” that were
exempt from its portability require-
ments.
27
The same definitions are applied
to describe benefits that are not required
to comply with some of the ACA require-
ments.
28
There are four statutory catego-
ries of excepted benefits: independent,
noncoordinated excepted benefits, which
are the subject of these proposed rules;
benefits that are excepted in all circum-
stances;
29
limited excepted benefits;
30
and
supplemental excepted benefits.
31
The
category “independent, noncoordinated
excepted benefits” includes coverage for
only a specified disease or illness (such as
cancer-only policies) and hospital indem-
nity or other fixed indemnity insurance.
These benefits are excepted under section
9831(c)(2) of the Code, section 732(c)(2)
of ERISA, and section 2722(c)(2) of the
PHS Act only if all of the following condi-
tions are met: (1) the benefits are provided
under a separate policy, certificate, or
25
83 FR 38212 (August 3, 2018).
26
Id.
27
See sections 9831(b) – (c) and 9832(c) of the Code, sections 732(b) – (c) and 733(c) of ERISA, and sections 2722(b) – (c), 2763 and 2791(c) of the PHS Act.
28
Section 1551 of the ACA. See also section 1563(a) and (b)(12) of the ACA. Excepted benefits are also not subject to the consumer protections and other federal requirements that apply to
comprehensive coverage, including MHPAEA, the Newborns’ and Mothers’ Health Protection Act, the Women’s Health and Cancer Rights Act, the Genetic Information Nondiscrimination
Act of 2008, the Children’s Health Insurance Program Reauthorization Act of 2009, Michelle’s Law, and Division BB of the CAA, 2021
29
Under section 9832(c)(1) of the Code, section 733(c)(1) of ERISA, and section 2791(c)(1) of the PHS Act, this category includes, for example, accident and disability income insurance,
automobile medical payment insurance, liability insurance and workers compensation, as well as “[o]ther similar insurance coverage, specified in regulations, under which benefits for medical
care are secondary or incidental to other insurance benefits.”
30
Under section 9832(c)(2) of the Code, section 733(c)(2) of ERISA, and section 2791(c)(2) of the PHS Act, this category includes limited scope vision or dental benefits, benefits for long-
term care, nursing home care, home health care, or community-based care, or other, similar limited benefits specified by the Departments through regulation.
31
Under section 9832(c)(4) of the Code, section 733(c)(4) of ERISA, and section 2791(c)(4) of the PHS Act, this category includes Medicare supplemental health insurance (also known as
Medigap), TRICARE supplemental programs, or ‘‘similar supplemental coverage provided to coverage under a group health plan.’’

Bulletin No. 2023–33 497 August 14, 2023
contract of insurance; (2) there is no coor-
dination between the provision of such
benefits and any exclusion of benefits
under any group health plan maintained
by the same plan sponsor; and (3) the
benefits are paid with respect to an event
without regard to whether benefits are pro-
vided with respect to such event under any
group health plan maintained by the same
plan sponsor or, with respect to individ-
ual coverage, under any health insurance
coverage maintained by the same health
insurance issuer.
32
In addition, under the
existing regulations, hospital indemnity
and other fixed indemnity insurance in
the group market must pay a fixed dol-
lar amount per day (or other period) of
hospitalization or illness, regardless of
the amounts of expenses incurred, to be
considered an excepted benefit.
33
In the
individual market, under the existing regu-
lations, hospital indemnity and other fixed
indemnity insurance must pay benefits in
a fixed dollar amount per period of hospi-
talization or illness and/or per-service (for
example, $100/day or $50/visit), regard-
less of the amount of expense incurred, to
be considered an excepted benefit.
34

The proposals in these rules related to
independent, noncoordinated excepted
benefits coverage are focused on the
conditions that must be met for hospital
indemnity and other fixed indemnity insur-
ance in the group or individual markets
to be considered excepted benefits under
the Federal regulations. Additionally,
in section III.B.2 of this preamble, the
Departments solicit comments regarding
specified disease excepted benefits cov-
erage in the group and individual markets
to inform potential future guidance or
rulemaking related to such coverage, but
are not proposing changes to the Federal
regulations governing such coverage in
this rulemaking.
1. Fixed Indemnity Excepted Benefits
Coverage
Like other forms of excepted benefits,
fixed indemnity excepted benefits cov-
erage does not provide comprehensive
coverage. Rather, its primary purpose
is to provide income replacement bene-
fits.
35
Benefits under this type of coverage
are paid in a flat (“fixed”) cash amount
following the occurrence of a health-re-
lated event, such as a period of hospital-
ization or illness, subject to the terms of
the contract. In addition, benefits are typ-
ically provided at a pre-determined level
regardless of any actual health care costs
incurred by a covered individual with
respect to the qualifying event. Although a
benefit payment may equal all or a portion
of the cost of care related to an event, it is
not necessarily designed to do so, and the
benefit payment is made without regard to
the amount of medical expense incurred.
36
Traditionally, benefits under fixed
indemnity excepted benefits coverage
are paid directly to a policyholder, rather
than to a health care provider or facility,
and the policyholder has discretion over
how to use such benefits – including
using the benefits to cover non-medical
expenses that may or may not be related
to the event that precipitated the payment
of benefits.
37
Because fixed indemnity
excepted benefits coverage is capped at
a maximum benefit payment, design fea-
tures aimed at reducing risk to the plan or
issuer that are common in comprehensive
coverage (such as medical management
techniques, use of a preferred network of
providers, or cost-sharing requirements)
are unnecessary and are generally absent
in this coverage.
38

a. Group Market Regulations and
Guidance
The Departments’ 1997 interim final
rules implementing the portability and
renewability requirements of HIPAA cod-
ified at 26 CFR 54.9831-1(c)(4), 29 CFR
2590.732(c)(4), and 45 CFR 146.145(b)
(4) established requirements for hospi-
tal indemnity and other fixed indemnity
insurance to qualify as an excepted benefit
in the group market. These requirements,
which were effective until February 27,
2005, provided that coverage for hospital
indemnity or other fixed dollar indemnity
insurance is excepted only if it meets each
of the following conditions: (1) the ben-
efits are provided under a separate pol-
icy, certificate or contract of insurance;
(2) there is no coordination between the
provision of the benefits and an exclusion
of benefits under any group health plan
maintained by the same plan sponsor; and
(3) the benefits are paid with respect to
an event without regard to whether bene-
fits are provided with respect to the event
under any group health plan maintained
by the same plan sponsor.
39

The Departments’ group market regu-
lations for fixed indemnity excepted ben-
efits coverage were first amended in the
2004 HIPAA group market final rules.
Those amendments added language to
further clarify that to be hospital indem-
nity or other fixed indemnity insurance
that is an excepted benefit, the insurance
must pay a fixed dollar amount per day
(or per other time period) of hospitaliza-
tion or illness (for example, $100/day)
regardless of the amount of expenses
32
See also section 2763(b) of the PHS Act (providing that “[the] requirements of this part [related to the HIPAA individual market reforms] shall not apply to any health insurance coverage in
relation to its provision of excepted benefits described in paragraph (2), (3), or (4) of section 2791(c) if the benefits are provided under a separate policy, certificate or contract of insurance.”).
33
26 CFR 54.9831-1(c)(4), 29 CFR 2590.732(c)(4), and 45 CFR 146.145(b)(4).
34
45 CFR 148.220(b)(4).
35
See, e.g., 62 FR 16903 (April 8, 1997) and 79 FR 15818 (July 8, 2014).
36
Jost, Timothy (2017). “ACA Round-Up: Market Stabilization, Fixed Indemnity Plans, Cost Sharing Reductions, and Penalty Updates,” Health Affairs, available at: https://www.healthaf-
fairs.org/do/10.1377/forefront.20170208.058674/full. (“Fixed indemnity coverage is excepted benefit coverage that pays a fixed amount per-service or per-time period of service without
regard to the cost of the service or the type of items or services provided.”).
37
AHIP (2019). “Supplemental Health Insurance: Hospital or Other Fixed Indemnity, Accident-Only, Critical Illness,” available at: https://www.ahip.org/documents/Supplemental-Health-
Insurance-Fast-Facts.pdf.
38
Young, Christen Linke and Kathleen Hannick (2020). “Fixed Indemnity Coverage is a Problematic Form of “Junk” Insurance,” USC-Brookings Schaeffer Initiative for Health Policy, avail-
able at: https://www.brookings.edu/blog/usc-brookings-schaeffer-on-health-policy/2020/08/04/fixed-indemnity-health-coverage-is-a-problematic-form-of-junk-insurance. (“Consumers are
often seeking a product that transfers catastrophic financial risk to the health plan, but fixed indemnity products – almost by definition – do not do this. They set a payment amount associated
with a specific service or kind of service [that] is received, and consumers are responsible for any difference between this set payment amount and the actual cost of care.”).
39
62 FR 16894 at 16903, 16939 through 16940, 16954, and 16971 (April 8, 1997).

August 14, 2023 498 Bulletin No. 2023–33
incurred.
40
An illustrative example was
also codified as part of these amendments
clarifying that a policy providing benefits
only for hospital stays at a fixed percent-
age of hospital expenses up to a maxi-
mum amount per day does not qualify as
an excepted benefit.
41
As explained in the
2004 HIPAA group market final rules, the
result is the same even if, in practice, the
policy pays the maximum for every day of
hospitalization.
42
The Departments later released an
FAQ on January 24, 2013, to offer addi-
tional guidance on the types of hospi-
tal indemnity or other fixed indemnity
insurance that meet the criteria for fixed
indemnity excepted benefits coverage.
43

The Departments issued the FAQ in
response to reports that policies were
being advertised as fixed indemnity cov-
erage but were paying a fixed amount on
a per-service basis (for example, per doc-
tor visit or surgical procedure) rather than
a fixed amount per period (for example,
per day or per week). The FAQ affirmed
that, under the 2004 HIPAA group market
final rules, to qualify as fixed indemnity
excepted benefits coverage, the policy
must pay benefits on a per-period basis
as opposed to on a per-service basis.
44
It
also affirmed that group health insurance
coverage that provides benefits in vary-
ing amounts based on the type of proce-
dure or item, such as the type of surgery
actually performed or prescription drug
provided, does not qualify as fixed indem-
nity excepted benefits coverage because it
does not meet the condition that benefits
be provided on a per-period basis, regard-
less of the amount of expenses incurred.
45

The Departments proposed amend-
ments to the group market regulations
for fixed indemnity excepted benefits
coverage in the 2016 proposed rules.
46

As explained in those proposed rules, the
Departments were concerned that some
individuals may mistake these policies for
comprehensive coverage that would be
considered MEC.
47
To avoid this confu-
sion, the Departments proposed to adopt a
notice requirement to inform enrollees and
potential enrollees that the coverage is a
supplement to, rather than a substitute for,
comprehensive coverage, and also pro-
posed to codify two illustrative examples
to further clarify the condition that benefits
be provided on a per-period basis.
48
The
Departments also requested comments on
whether the conditions for hospital indem-
nity or other fixed indemnity insurance to
be considered excepted benefits should be
more substantively aligned between the
group and individual markets.
49
After con-
sideration of comments, the Departments
did not finalize the proposed changes to
the group market regulation but noted
their intention to address hospital indem-
nity and other fixed indemnity insurance
in future rulemaking.
50
b. Individual Market Regulations and
Guidance
HHS also issued an interim final rule
in 1997 establishing the regulatory frame-
work for the HIPAA individual market
Federal requirements and addressing the
requirements for hospital indemnity and
other fixed indemnity insurance to qualify
as an excepted benefit in the individual
market.
51
The initial HIPAA individual
market fixed indemnity excepted benefits
coverage regulation, which was effective
until July 27, 2014, provided an exemp-
tion from the Federal individual market
consumer protections and requirements
for comprehensive coverage if the hospital
indemnity or other fixed indemnity insur-
ance provided benefits under a separate
policy, certificate, or contract of insurance
and met the noncoordination-of-benefits
requirements outlined in the HHS group
market excepted benefits regulations.
52
Following issuance of the Departments’
January 24, 2013 FAQ,
53
State insurance
regulators and industry groups represent-
ing health insurance issuers expressed
concerns that prohibiting hospital indem-
nity and other fixed indemnity insurance
from payment on a per-service basis in
order to qualify as an excepted benefit
could limit consumer access to an import-
ant supplemental coverage option.
54

Based on this feedback, HHS announced
in an FAQ released in January 2014 that
it intended to propose amendments to
the individual market fixed indemnity
excepted benefits coverage regulation to
allow hospital indemnity or other fixed
indemnity insurance sold in the individ-
ual market to be considered an excepted
benefit if four conditions were met.
55

First, such coverage would be sold only
to individuals who have other health
40
69 FR 78720 at 78735, 78762, 78780, and 78798 – 78799 (December 30, 2004).
41
Id. See also 26 CFR 54.9831-1(c)(4)(iii), 29 CFR 2590.732(c)(4)(iii), and 45 CFR 146.145(b)(4)(iii).
42
Id.
43
Frequently Asked Questions about Affordable Care Act Implementation (Part XI) (Jan. 24, 2013), Q7, available at: https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/
resource-center/faqs/aca-part-xi.pdf and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs11.
44
Id.
45
Id.
46
81 FR 38019 at 38031-38032, 38038, 38042-38043, and 38045-38046 (June 10, 2016).
47
Id. at 38031- 38032.
48
Id. at 38031- 38032, 38038, 38042- 38043, and 38045- 38046.
49
As described in section I.D.1.b of this preamble, HHS amended the individual market fixed indemnity excepted benefits coverage regulation to provide additional flexibility, subject to
several additional requirements that do not apply in the group market. 79 FR 30239 (May 27, 2014).
50
81 FR 75316 at 75317 (October 31, 2016).
51
62 FR 16985 at 16992 and 17004 (April 8, 1997).
52
Id.; 45 CFR 146.145(b)(4)(ii)(B) and (b)(4)(ii)(C).
53
Frequently Asked Questions about Affordable Care Act Implementation (Part XI) (Jan. 24, 2013), available at: https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/
resource-center/faqs/aca-part-xi.pdf and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs11.
54
While the FAQ only addressed fixed indemnity insurance sold in the group market, the same statutory framework and legal analysis also applies to hospital indemnity and fixed indemnity
insurance sold in the individual market.
55
Frequently Asked Questions about Affordable Care Act Implementation (Part XXVIII) and Mental Health Parity Implementation (Jan. 9, 2014), Q11, available at: https://www.dol.gov/sites/
dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/aca-part-xviii.pdf and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs18.

Bulletin No. 2023–33 499 August 14, 2023
coverage that is MEC, within the meaning
of section 5000A(f) of the Code. Second,
no coordination between the provision
of benefits and an exclusion of benefits
under any other health coverage would be
permitted. Third, benefits would be paid
in a fixed dollar amount regardless of the
amount of expenses incurred and without
regard to whether benefits are provided
with respect to an event or service under
any other health insurance coverage.
Finally, a notice would have to be prom-
inently displayed to inform policyholders
that the coverage is not MEC and would
not satisfy the individual shared respon-
sibility requirements of section 5000A of
the Code. HHS explained that if these pro-
posed revisions were implemented, hos-
pital indemnity or other fixed indemnity
insurance in the individual market would
no longer have to pay benefits solely on a
per-period basis to qualify as an excepted
benefit.
In the proposed rule, titled “Patient
Protection and Affordable Care Act;
Exchange and Insurance Market Standards
for 2015 and Beyond” (2014 proposed
rule), HHS proposed to amend the crite-
ria in 45 CFR 148.220 for fixed indemnity
insurance to be treated as an excepted ben-
efit in the individual market.
56
Consistent
with the framework outlined in the January
2014 FAQ, the amendments proposed
to eliminate the requirement that indi-
vidual market fixed indemnity excepted
benefits coverage must pay benefits only
on a per-period basis (as opposed to a
per-service basis) and instead proposed to
require, among other things, that it be sold
only as secondary to other health cover-
age that is MEC to qualify as an excepted
benefit.
57
On July 28, 2014, in the rule titled
“Patient Protection and Affordable Care
Act; Exchange and Insurance Market
Standards for 2015 and Beyond; Final
Rule” (2014 final rule), HHS finalized
the proposed amendments to 45 CFR
148.220(b)(4) with some modifications.
Pursuant to the finalized amendments,
hospital indemnity or other fixed indem-
nity insurance in the individual market
may qualify as fixed indemnity excepted
benefits coverage if it is paid on either a
per-period or per-service basis subject to
several additional requirements that do not
apply to fixed indemnity excepted bene-
fits coverage in the group market.
58
Under
45 CFR 148.220(b)(4)(i), to qualify as
excepted benefits coverage, benefits under
an individual market hospital indemnity
or other fixed indemnity insurance pol-
icy may only be provided to individuals
who attest in their application that they
have other health coverage that is MEC
within the meaning of section 5000A(f) of
the Code, or that they are treated as hav-
ing MEC due to their status as a bona fide
resident of any possession of the United
States pursuant to section 5000A(f)(4)
(B) of the Code.
59
Further, to qualify as an
excepted benefit, 45 CFR 148.220(b)(4)
(iv) requires specific notice language be
prominently displayed in the application
materials for individual market hospital
indemnity or other fixed indemnity insur-
ance. Finally, consistent with the group
market fixed indemnity excepted benefits
coverage regulations, 45 CFR 148.220(b)
(4)(ii) implements the statutory noncoor-
dination standard and requires that there is
no coordination between the provision of
benefits under the individual market fixed
indemnity excepted benefits insurance
policy and an exclusion of benefits under
any other health coverage.
HHS made these changes in the 2014
final rule for two reasons. First, as stated
previously, interested parties, including
State insurance regulators and industry
groups representing health insurance
issuers, communicated to HHS that fixed
indemnity plans that paid benefits on a
per-service basis were widely available
as a complement to comprehensive cov-
erage in the group and individual markets.
The National Association of Insurance
Commissioners (NAIC) also expressed
that State insurance regulators believed
fixed indemnity plans that paid benefits
on a per-service basis provided consum-
ers an important supplemental coverage
option by helping consumers that pur-
chase MEC pay for out-of-pocket costs.
60

Second, beginning in 2014, most consum-
ers were required to have MEC in order
to avoid being subject to an individual
shared responsibility payment under sec-
tion 5000A of the Code. HHS adopted
the MEC attestation requirement to pre-
vent fixed indemnity excepted benefits
coverage in the individual market from
being offered as a substitute for compre-
hensive coverage while also accommo-
dating the concerns of interested parties
who supported allowing fixed indemnity
excepted benefits coverage in the individ-
ual market to pay benefits on a per-service
basis, rather than only on a per-period
basis.
61
However, in its 2016 decision in
Central United Life Insurance Company
v. Burwell, the U.S. Court of Appeals for
the District of Columbia invalidated the
requirement at 45 CFR 148.220(b)(4)(i)
that an individual must attest to having
MEC prior to purchasing fixed indemnity
excepted benefits coverage in the individ-
ual market.
62
The Court did not engage in a
severability analysis to determine whether
HHS would have intended to leave the
remaining provisions of the regulation in
place, and left intact the language per-
mitting fixed indemnity excepted benefits
coverage in the individual market to be
provided on a per-service basis.
56
79 FR 15807 at 15818-15820, 15869 (March 21, 2014).
57
Id.
58
79 FR 30239 (May 27, 2014).
59
As discussed later in this section and in section III.B.1.a of this preamble, the U.S. Court of Appeals for the District of Columbia vacated the requirement at 45 CFR 148.220(b)(4)(i) that
an individual attest to having MEC prior to purchasing a fixed indemnity policy in order for the policy to qualify as an excepted benefit. Central United Life Insurance v. Burwell, 827 F.3d
70 (D.C. Cir. 2016).
60
National Association of Insurance Commissioners (2013). “Letter to Secretaries of Labor, Treasury, and Health and Human Services,” available at: https://naic.soutronglobal.net/Portal/
Public/en-GB/RecordView/Index/23541. (“State regulators believe hospital and other fixed indemnity coverage with variable fixed amounts based on service type could provide important
options for consumers as supplemental coverage. Consumers who purchase comprehensive coverage that meets the definition of ‘minimum essential coverage’ may still wish to buy fixed
indemnity coverage to help meet out-of-pocket medical and other costs.”).
61
79 FR 30239 at 30255 (May 27, 2014).
62
827 F.3d 70 (D.C. Cir. July 1, 2016).

August 14, 2023 500 Bulletin No. 2023–33
2. Specified Disease Excepted Benefits
Coverage
Like hospital indemnity or other fixed
indemnity insurance, coverage only for a
specified disease or illness that meets the
requirements under section 9831(c)(2) of
the Code, section 732(c)(2) of ERISA,
and section 2722(c)(2) of the PHS Act
qualifies as a form of independent, non-
coordinated excepted benefits coverage.
63

Specified disease excepted benefits cov-
erage is also not an alternative to com-
prehensive coverage, but rather provides
a cash benefit related to the diagnosis or
the receipt of items or services related to
the treatment of one or more medical con-
ditions specified in the insurance policy,
certificate, or contract of insurance. The
Departments are aware of various forms
of coverage being marketed to consum-
ers as specified disease or illness cover-
age under a number of labels, including
“specified disease,” “critical illness,” and
“dread disease” coverage (or insurance).
64

Some forms of specified disease excepted
benefits coverage pay benefits based on
diagnosis or treatment for a single condi-
tion (such as diabetes), while others pay
benefits related to diagnosis or treatment
for a disease category (such as cancer).
The Departments codified require-
ments for coverage only for a specified
disease or illness to qualify as an excepted
benefit in the group market in the 1997
HIPAA interim final rules.
65
To qualify
as excepted benefits in the group mar-
ket, specified disease or illness coverage
(for example, cancer-only policies) must
provide benefits under a separate policy,
certificate, or contract of insurance; there
must be no coordination between the pro-
vision of the benefits and an exclusion
of benefits under any group health plan
maintained by the same plan sponsor; and
benefits must be paid with respect to an
event without regard to whether benefits
are provided with respect to the event
under any group health plan maintained
by the same plan sponsor.
66,67
HHS codi-
fied similar requirements for specified dis-
ease or illness coverage to qualify as an
excepted benefit in the individual market
in the 1997 interim final rule that estab-
lished the regulatory framework for the
HIPAA individual market.
68
Unlike fixed
indemnity excepted benefits coverage, the
Departments have not issued subsequent
rulemaking or guidance regarding speci-
fied disease excepted benefits coverage.
In the preamble to the 2016 proposed
rules, the Departments solicited com-
ments on whether a policy covering mul-
tiple specified diseases or illnesses may
be considered to be excepted benefits, but
did not propose changes to the rules gov-
erning specified disease excepted benefits
coverage. The Departments sought com-
ments on whether such policies should be
considered excepted benefits and, if so,
whether protections were needed to ensure
they were not mistaken for comprehensive
coverage, expressing concern that individ-
uals who purchase a specified disease pol-
icy covering multiple diseases or illnesses
may incorrectly believe they are pur-
chasing comprehensive coverage when,
in fact, these polices are not subject to
Federal consumer protections and require-
ments for comprehensive coverage.
69
The
Departments declined to address specified
disease excepted benefits coverage in the
2016 final rules, but noted that they might
address such coverage in future regula-
tions or guidance.
70

E. Tax Treatment and Substantiation
Requirements for Amounts Received from
Fixed Indemnity Insurance and Certain
Other Arrangements
Hospital indemnity or other fixed
indemnity insurance and coverage only
for a specified disease or illness are treated
as “accident or health insurance” under
sections 104, 105, and 106 of the Code
whether or not they are excepted benefits.
Premiums paid by an employer (including
by salary reduction pursuant to section
125 of the Code) for accident or health
insurance are excluded from an employ-
ee’s gross income under section 106 of the
Code.
Amounts received from accident or
health insurance are excluded from a tax-
payer’s gross income under section 104(a)
(3) of the Code if the premiums are paid for
on an after-tax basis. The exclusion from
gross income for these amounts under sec-
tion 104(a)(3) of the Code does not apply
to amounts attributable to contributions by
an employer that were not includible in the
gross income of the employee or amounts
paid directly by the employer. This means
that the exclusion under section 104(a)
(3) of the Code does not apply where the
premiums or contributions paid for the
accident or health insurance are paid on
a pre-tax basis. The taxation of amounts
received by an employee from accident or
health insurance where the premiums or
contributions are paid on a pre-tax basis is
determined under section 105 of the Code.
Section 105(a) of the Code provides
that amounts received by an employee
through accident or health insurance for
personal injuries or sickness are included
in gross income, except as otherwise pro-
vided in section 105. Section 105(b) of the
Code excludes from gross income amounts
paid by the employer to reimburse an
employee’s expenses for medical care (as
defined in section 213(d) of the Code).
Under 26 CFR 1.105-2, the exclusion
from gross income in section 105(b) of
the Code “applies only to amounts which
are paid specifically to reimburse the tax-
payer for expenses incurred by him for
the prescribed medical care. Thus, section
105(b) does not apply to amounts which
the taxpayer would be entitled to receive
63
See also section 2763(b) of the PHS Act.
64
See Healthinsurance.org (2023). “Glossary: What is a Critical Illness Plan?,” available at: https://www.healthinsurance.org/glossary/critical-illness-plan. See also American Council of Life
Insurers (2021). “Model 171 Benefits Overview: Presented to the NAIC Accident and Sickness Minimum Standards (B) Subgroup,” available at: https://content.naic.org/sites/default/files/
call_materials/Supplemental%20Benefits%20Overview.pdf.
65
62 FR 16894 at 16903 (April 8, 1997).
66
See 26 CFR 54.9831-1(c)(4)(i) and (ii), 29 CFR 2590.732(c)(4)(i) and (ii), and 45 CFR 146.145(b)(4)(i) and (ii).
67
The Departments’ group market regulations for specified disease excepted benefits coverage were later affirmed, without change, in the 2004 HIPAA group market final rules. See 69 FR
78720 at 78762, 78780, and 78798— 78799 (December 30, 2004). See also 45 CFR 148.220(b)(3).
68
62 FR 16985 at 16992, 17004 (April 8, 1997). See also section 2763(b) of the PHS Act.
69
81 FR 38019, 38032 (June 10, 2016).
70
81 FR 75316, 75317, footnote 12 (October 31, 2016).

Bulletin No. 2023–33 501 August 14, 2023
irrespective of whether or not he incurs
expenses for medical care” and “section
105(b) is not applicable to the extent that
such amounts exceed the amount of the
actual expenses for such medical care.”
Further, under longstanding regulations
and guidance issued by the Treasury
Department and the IRS, amounts for
medical expenses within the meaning
of section 213(d) of the Code must be
substantiated if reimbursed by employ-
ment-based accident or health insurance
that would not be excluded from a taxpay-
er’s gross income but for the application
of section 105(b) of the Code.
71
F. Level-Funded Plan Arrangements
The Departments understand that an
increasing number of group health plan
sponsors are utilizing a type of self-funded
arrangement in which the plan sponsor
makes set monthly payments to a service
provider to cover estimated claims costs,
administrative costs, and premiums for
stop-loss insurance for claims that surpass
a maximum dollar amount beyond which
the plan sponsor is no longer responsible
for paying claims (attachment point). This
funding mechanism or plan type, known
as level-funding, is increasingly utilized
by small employers in particular. Stop-loss
insurance is used by employers or group
health plans as part of these plan arrange-
ments to limit their financial responsibil-
ity, and the arrangements typically involve
both employer and employee contribu-
tions. When the total dollar amount of the
claims paid during the year is lower than
the total amount of contributions attributed
to claims costs, the plan or plan sponsor
generally will receive a refund or carry the
surplus over to the next plan year. When
annual claims exceed projected claims,
the subsequent year’s monthly payments
may, and oftentimes do, increase to adjust
to the plan’s claims experience.
II. Promoting Access to High-Quality,
Affordable, and Comprehensive
Coverage
The Departments recognize that
STLDI can provide temporary health
insurance coverage for individuals who
are experiencing brief periods with-
out health coverage (for example, due
to application of an employer waiting
period), and that fixed indemnity excepted
benefits coverage can provide consum-
ers with income replacement that can be
used to cover out-of-pocket expenses not
covered by comprehensive coverage or to
defray non-medical expenses (for exam-
ple, mortgage or rent) in the event of an
unexpected or serious health event. Both
STLDI and fixed indemnity excepted ben-
efits coverage generally provide limited
benefits at lower premiums than com-
prehensive coverage,
72
and enrollment is
typically available at any time (sometimes
subject to medical underwriting) rather
than being restricted to open and special
enrollment periods. However, given sig-
nificant changes in the legal landscape and
market conditions since the Departments
last addressed STLDI and fixed indem-
nity excepted benefits coverage, and the
low value that STLDI and fixed indem-
nity excepted benefits coverage provide to
consumers when used as a substitute for
comprehensive coverage, the Departments
have determined that it is now necessary
and appropriate to propose to amend the
existing Federal regulations governing
both types of coverage to more clearly dis-
tinguish them from comprehensive cov-
erage and increase consumer awareness
of coverage options that include the full
range of Federal consumer protections.
A. Access to Affordable Coverage
In the preamble to the 2018 final rules,
the Departments explained the decision to
amend the definition of STLDI to expand
access to such policies by citing STLDI
as an important means to provide more
affordable coverage options and more
choices for consumers.
73
The Departments
cited a 21 percent increase in individ-
ual health insurance coverage premiums
between 2016 and 2017, and a 20 percent
decrease in average monthly enrollment
for individuals who did not receive PTC,
along with a 10 percent overall decrease
in monthly enrollment during the same
period.
74
Additionally, the Departments
noted that in 2018 about 26 percent of
enrollees (living in 52 percent of coun-
ties) had access to just one issuer on the
Exchange.
75
However, since the publication of the
2018 final rules, comprehensive cover-
age for individuals has generally become
more accessible and affordable. For exam-
ple, a study examining issuer participation
trends from 2014 to 2021 in every county
in the United States found that the number
of consumers with multiple issuer options
for individual health insurance coverage
on the Exchanges has grown consistently
since 2018. In 2021, 78 percent of enroll-
ees (living in 46 percent of counties) had
a choice of three or more health insurance
issuers, up from 67 percent of enrollees in
2020 and 58 percent of enrollees in 2019.
Only 3 percent of enrollees (residing in
10 percent of counties) resided in sin-
gle-issuer counties – down from 26 per-
cent of enrollees (residing in 52 percent
of counties).
76
The Centers for Medicare
& Medicaid Services (CMS) reported
that a record 16.4 million people enrolled
in Exchange coverage during the 2023
Open Enrollment Period, including 3.7
million consumers (23 percent of total
enrollments) who were new to Exchanges
in 2023, and 12.7 million returning cus-
tomers. Over 1.8 million more consum-
ers signed up for coverage during the
2023 Open Enrollment Period compared
71
See, e.g., 84 FR 28888, 28917 (June 20, 2019) (describing substantiation requirements for employer-sponsored health reimbursement arrangements); see also Q44-55 of IRS Notice 2017-
67, 2017-47 IRB 517; Prop. Treas. Reg. § 1.125-6; IRS Notice 2002-45, 2002-2 CB 93.
72
Although it is typically true that the unsubsidized premium price for comprehensive coverage is greater than STLDI or fixed indemnity excepted benefits coverage, consistent with the
greater level of benefits provided under comprehensive coverage, see the additional discussion in this section of this preamble regarding the availability of financial subsidies to reduce the
premium and out-of-pocket costs for comprehensive coverage purchased on an Exchange for eligible individuals.
73
83 FR 38212, at 38217 (October 2, 2018).
74
Id. at 38214, citing CMS (2018). “Trends in Subsidized and Unsubsidized Individual Health Insurance Market Enrollment,” available at: https://www.cms.gov/CCIIO/Programs-and-
Initiatives/Health-Insurance-Marketplaces/Downloads/2018-07-02-Trends-Report-2.pdf.
75
Id., citing KFF (2017). “Insurer Participation on ACA Marketplaces, 2014-2018,” now available at: https://www.kff.org/private-insurance/issue-brief/insurer-participation-on-the-aca-
marketplaces-2014-2021/.
76
McDermott, Daniel and Cynthia Cox (2020). “Insurer Participation on the ACA Marketplaces, 2014-2021,” KFF, available at: https://www.kff.org/private-insurance/issue-brief/
insurer-participation-on-the-aca-marketplaces-2014-2021.

August 14, 2023 502 Bulletin No. 2023–33
to the same period in 2022 (a 13 percent
increase), and nearly 4.4 million more
consumers signed up compared to the
2021 Open Enrollment Period (a 36 per-
cent increase).
77
As noted in section I.A
of this preamble, enrollment gains during
2023 were influenced by the expansion
of PTC subsidies, as first expanded under
the ARP and then extended through 2025
under the IRA.
78
In an analysis prior to
the passage of the IRA, the Congressional
Budget Office stated that if the ARP sub-
sidies were made permanent, they would
attract 4.8 million new people to the
Exchanges each year, and that 2.2 million
fewer individuals would be without health
insurance, on average, over the period
from 2023-2032.
79

Additionally, on October 13, 2022, the
IRS and the Treasury Department issued
final regulations under section 36B of
the Code to provide that affordability of
employer-sponsored MEC for family
members of an employee is determined
based on the employee’s share of the cost
of covering the employee and those fam-
ily members, not the cost of covering only
the employee (2022 affordability rule).
80

It was estimated that this rule change,
aimed at addressing the issue often called
the “family glitch,” will increase the num-
ber of individuals with PTC-subsidized
Exchange coverage by approximately 1
million per year for the next 10 years.
81

These anticipated enrollment trends and
the availability of the enhanced subsidies
allay the accessibility and affordability
concerns expressed by the Departments
in the preamble to the 2018 final rules
regarding the availability of affordable
options for comprehensive coverage, and
offer further support for the proposals
in these proposed rules aimed at helping
consumers differentiate between compre-
hensive coverage and other forms of more
limited health coverage.
Although access to affordable compre-
hensive coverage has improved in recent
years, the Departments recognize that
affordability concerns continue to per-
sist among consumers, including among
consumers who are enrolled in compre-
hensive coverage. A 2022 national sur-
vey conducted by the Commonwealth
Fund found that 29 percent of people with
employer coverage and 44 percent of those
with coverage purchased in the individual
market were underinsured, meaning that
their coverage did not provide them with
affordable access to health care.
82
The
Departments believe that it is important to
ensure consumers have access to a wide
range of tools that can support access to
affordable health care. However, neither
STLDI nor fixed indemnity excepted
benefits coverage represents a complete
solution to larger issues of affordable
access to health care and health coverage.
Consumers who enroll in these plans as a
substitute for comprehensive coverage or
under the misapprehension that STLDI
and fixed indemnity excepted benefits are
a lower-cost equivalent to comprehensive
coverage are at risk of being exposed to
significant financial liability in the event
of a costly or unexpected health event,
often without knowledge of the risk asso-
ciated with such coverage.
B. Risks to Consumers
As noted in the introduction to sec-
tion II of this preamble, the limitations
on benefits and coverage under STLDI
or fixed indemnity excepted benefits cov-
erage may allow some issuers to offer
such coverage at lower monthly premi-
ums than comprehensive coverage. The
Departments are concerned about addi-
tional costs to consumers who enroll in
STLDI or fixed indemnity excepted ben-
efits coverage and incur medical expenses
that are not covered by such coverage.
The typical limits on coverage provided
by STLDI and fixed indemnity excepted
benefits coverage can lead to more and
higher uncovered medical bills than con-
sumers enrolled in comprehensive cover-
age would incur, exposing consumers to
greater financial risk.
83
Healthy consumers
who enroll in STLDI or fixed indemnity
excepted benefits coverage as an alterna-
tive to comprehensive coverage may not
realize their STLDI or fixed indemnity
excepted benefits coverage excludes or
limits coverage for preexisting conditions
(including conditions the consumer did
not know about when they enrolled), or
conditions contracted after enrollment,
such as COVID-19.
Additionally, a consumer enrolled in
STLDI may discover that a newly-diag-
nosed medical condition is categorized
as a preexisting condition, and related
medical expenses will not be covered
by, or will be only partially covered by,
their STLDI policy.
84
For example, a con-
sumer in Illinois who was diagnosed with
77
CMS (2023). “Health Insurance Marketplaces, 2023 Open Enrollment Report,” available at: https://www.cms.gov/files/document/health-insurance-exchanges-2023-open-enrollment-re-
port-final.pdf.
78
Although unsubsidized premiums for 2023 increased on average between 2.2 percent and 4.7 percent compared to the previous year, after four years of declines, PTC under the IRA largely
shielded consumers from these slight increases. See Ortaliza, Jared, Justin Lo, Krutika Amin, and Cynthia Cox (2022). “How ACA Marketplace Premiums Are Changing By County in 2023,”
KFF, available at: https://www.kff.org/private-insurance/issue-brief/how-aca-marketplace-premiums-are-changing-by-county-in-2023.
79
Congressional Budget Office (2022). “Letter from Phillip L. Swagel to Rep. Mike Crapo, “Re: Health Insurance Policies,” available at: https://www.cbo.gov/system/files?file=2022-
07/58313-Crapo_letter.pdf.
80
87 FR 61979 (October 13, 2022).
81
Id. at 61999.
82
Collins, Sara, Lauren Haynes, and Relebohile Masitha (2022). “The State of U.S. Health Insurance in 2022: Findings from the Commonwealth Fund Biennial Health Insurance Survey,”
Commonwealth Fund, available at: https://www.commonwealthfund.org/publications/issue-briefs/2022/sep/state-us-health-insurance-2022-biennial-survey. Specifically, this study defined a
person as “underinsured” if they were insured all year but one of the following applied: 1) Out-of-pocket costs over the prior 12 months, excluding premiums, were equal to 10 percent or more
of household income; 2) Out-of-pocket costs over the prior 12 months, excluding premiums, were equal to 5 percent or more of household income for individuals living under 200 percent of
the FPL ($27,180 for an individual or $55,500 for a family of four in 2022); or 3) The deductible constituted 5 percent or more of household income.
83
Palanker, Dania, JoAnn Volk, and Kevin Lucia (2018). “Short-Term Health Plan Gaps and Limits Leave People at Risk,” Commonwealth Fund, available at: https://www.commonwealth-
fund.org/blog/2018/short-term-health-plan-gaps-and-limits-leave-people-risk. (Describing STLDI marketing materials that list coverage limits that would fall far short of typical costs to a
consumer, including $1,000 a day for hospital room and board coverage, $1,250 a day for the intensive care unit, $50 a day for doctor visits while in the hospital, $100 a day for inpatient
substance abuse treatment, and $250 for ambulance transport).
84
See Lueck, Sarah (2018). “Key Flaws of Short-Term Health Plans Pose Risks to Consumers,” Center on Budget and Policy Priorities, available at: https://www.cbpp.org/research/health/
key-flaws-of-short-term-health-plans-pose-risks-to-consumers. See also Hall, Mark and Michael McCue (2022). “Short-Term Health Insurance and the ACA Market,” Commonwealth
Fund, available at: https://www.commonwealthfund.org/blog/2022/short-term-health-insurance-and-aca-market. See also Partnership to Protect Coverage (2021). “Under-Covered: How
‘Insurance-Like’ Products are Leaving Patients Exposed,” available at: https://www.nami.org/NAMI/media/NAMI-Media/Public%20Policy/Undercovered_Report_03252021.pdf.

Bulletin No. 2023–33 503 August 14, 2023
Stage IV cancer a month after enrolling in
STLDI was denied coverage for treatment
by the STLDI issuer, both for treatments
that led to his successful remission and
for a potentially life-saving bone marrow
transplant. In his case, the STLDI issuer
of his policy determined that his cancer
was a preexisting condition because he
had disclosed experiencing back pain of
undiagnosed cause to the broker who sold
him his STLDI policy – leaving him with
$800,000 of medical debt and without
meaningful health coverage as he contin-
ued to fight his illness.
85

The financial risk for consumers that
encounter newly diagnosed conditions or
a significant medical event while enrolled
in STLDI increases with the length of
their policy. In fact, researchers found that
because the maximum annual limitation
on an individual’s cost sharing for essen-
tial health benefits under section 1302(c)
(1) of the ACA does not apply to STLDI,
the maximum out-of-pocket health care
spending limit for STLDI was on average
nearly three times that of comprehensive
coverage in 2020.
86
A 2020 report found
that over 60 percent of the STLDI policies
surveyed had a maximum out-of-pocket
limit greater than the $7,900 limit that
was permitted for self-only comprehen-
sive coverage in 2019, and 15 percent
had limits in excess of $15,000; as is typ-
ical for STLDI, these limits apply only
to the coverage period, which in some
cases was only 6 months, compared to the
annual limits required under the ACA.
87

Consumers enrolled in STLDI who
ultimately require medical care are more
likely to incur higher out-of-pocket costs
than if they had enrolled in comprehen-
sive coverage.
88

As noted in section I.D.1 of this pre-
amble, consumers who enroll in fixed
indemnity excepted benefits coverage
as an alternative to comprehensive cov-
erage bear similar risk and exposure to
significant out-of-pocket expenses due
to their health care costs exceeding the
fixed cash benefit to which they may be
entitled, if benefits are even provided for
their illness or injury. While issuers of
fixed indemnity excepted benefits cover-
age may emphasize the potential for cash
benefits that sound generous outside of
the context of the true costs of a signif-
icant medical event – such as a product
suggesting that a consumer could receive
a flat payment in excess of $10,000 fol-
lowing a five-day hospitalization – fixed
indemnity excepted benefits coverage is
not designed to, and typically does not,
provide benefits relative to the full cost of
such events. As noted by one expert, hos-
pitalization costs can exceed $10,000 per
day, even without accounting for provider
services.
89
A consumer who relied on fixed
indemnity excepted benefits coverage and
who required hospitalization would be left
with tens of thousands of dollars in unpaid
medical bills, and without comprehensive
coverage designed to cover any long-term
follow-up care costs.
Consumers enrolled in STLDI and
fixed indemnity excepted benefits cov-
erage may experience financial hardship
when their medical bills are unafford-
able.
90
Notably, the protections against
balance billing and out-of-network cost
sharing for certain out-of-network ser-
vices established under the No Surprises
Act, which are intended to shield consum-
ers from surprise bills that can drive med-
ical debt,
91
do not apply to STLDI or fixed
indemnity excepted benefits coverage.
92

Because STLDI is typically subject to
medical underwriting and not guaranteed
renewable, consumers enrolled in STLDI
as an alternative to comprehensive cover-
age may also be unable to renew STLDI
at the end of the coverage period, increas-
ing the risk of periods during which they
are uninsured. Such consumers may not
be able to purchase comprehensive cover-
age in the individual market until an open
enrollment or special enrollment period
occurs. Therefore, STLDI serves better as
a bridge between dif
ferent sources of com-
prehensive coverage than as an alternative
to comprehensive coverage. Similarly, as
noted in section I.D.1 of this preamble,
fixed indemnity excepted benefit cover-
age serves best as an income replacement
policy
93
that supplements comprehensive
coverage rather than as an alternative to
comprehensive coverage.
In the preamble to the 2018 final rules,
the Departments stated that individu-
als who purchased STLDI rather than
being uninsured would potentially expe-
rience improved health outcomes and
have greater protection from catastrophic
health care expenses.
94
However, recent
experience with the COVID-19 public
85
Partnership to Protect Coverage (2021). “Under-Covered: How ‘Insurance-Like’ Products are Leaving Patients Exposed,” available at: https://www.nami.org/NAMI/media/NAMI-Media/
Public%20Policy/Undercovered_Report_03252021.pdf.
86
Dieguez, Gabriela and Dane Hansen (2020). “The Impact of Short-term Limited-duration Policy Expansion on Patients and the ACA Individual Market,” Milliman, available at: https://
www.milliman.com/en/insight/the-impact-of-short-term-limited-duration-policy-expansion-on-patients-and-the-aca-individual-market.
87
Id. See also, Palanker, Dania, Kevin Lucia, and Emily Curran (2017). “New Executive Order: Expanding Access to Short-Term Health Plans Is Bad for Consumers and the Individual
Market,” Commonwealth Fund, available at https://www.commonwealthfund.org/blog/2017/new-executive-order-expanding-access-short-term-health-plans-bad-consumers-and-individual.
(“When considering the deductible, the best-selling plans have out-of-pocket maximums ranging from $7,000 to $20,000 for just three months of coverage. In comparison, the ACA limits
out-of-pocket maximums to $7,150 for the entire [2017 calendar] year.”).
88
Id.
89
Appleby, Julie (2017). “Brokers Tout Mix-And-Match Coverage To Avoid High-Cost ACA Plans,” KFF, available at: https://kffhealthnews.org/news/brokers-tout-mix-and-match-
coverage-to-avoid-high-cost-aca-plans.
90
Unaffordable medical debt increasingly impacts members of disadvantaged and marginalized communities. See Lopes, Lunna, Audrey Kearney, Alex Montero, Liz Hamel, and Mollyann
Brodie (2022). “Health Care Debt In The U.S.: The Broad Consequences Of Medical And Dental Bills,” KFF, available at: https://www.kff.org/health-costs/report/kff-health-care-debt-sur-
vey. See also Himmelstein, David, Samuel Dickman, Danny McCormick, David Bor, Adam Gaffney, and Steffie Woolhandler (2022). “Prevalence and Risk Factors for Medical Debt and
Subsequent Changes in Social Determinants of Health in the US,” JAMA Network Open, Volume 5 Issue 9:e2231898, available at: https://jamanetwork.com/journals/jamanetworkopen/
fullarticle/2796358.
91
Families USA (2019). “Surprise Medical Bills, Results from a National Survey,” available at https://familiesusa.org/wp-content/uploads/2019/11/Surprise-Billing-National-Poll-Report-
FINAL.pdf.
92
See 26 CFR 54.9816-2T, 29 CFR 2590.716(b), and 45 CFR 149.20(b).
93
As an income replacement policy, the policyholder typically has broad discretion in how to use the fixed cash benefits provided, including but not limited to reimbursement for medical
expenses not covered by comprehensive coverage (for example, deductibles, coinsurance, copays) or to defray non-medical costs (for example, mortgage or, rent).
94
83 FR 38212, 38229 (October 2, 2018).

August 14, 2023 504 Bulletin No. 2023–33
health emergency (PHE)
95
has prompted
the Departments to reassess the degree of
protection generally afforded by coverage
that is not subject to the Federal consumer
protections and requirements for com-
prehensive coverage, such as STLDI and
fixed indemnity excepted benefits cover-
age, and to reassess the value of a frame-
work that instead encourages uninsured
individuals to purchase comprehensive
coverage. Enrollees in STLDI and fixed
indemnity excepted benefits coverage
with COVID-19 typically face significant
limitations on coverage for COVID-19
related treatments, and high out-of-pocket
expenses.
96
For example, neither STLDI
nor fixed indemnity excepted benefits
coverage was subject to requirements
under section 6001 of the Families First
Coronavirus Response Act (Pub. L. 116-
127, March 18, 2020), as amended by the
Coronavirus Aid, Relief, and Economic
Security Act (CARES Act) (Pub. L. 116-
136, March 27, 2020), to cover COVID-
19 diagnostic testing, without cost sharing,
furnished during the COVID-19 PHE;
97

or the requirement under section 3203
of the CARES Act to cover qualifying
coronavirus preventive services, includ-
ing COVID-19 vaccines, without cost
sharing. Instead, both of these important
coverage expansions enacted by Congress
as part of the nation’s response to the
COVID-19 PHE only applied to com-
prehensive coverage. Any coverage of
COVID-19 vaccines, diagnostic testing,
or treatm
ent by STLDI or fixed indemnity
excepted benefits coverage was subject
to the discretion of individual plans and
issuers of these policies and applicable
State law. Notably, the Health Resources
and Services Administration’s COVID-19
Coverage Assistance Fund, which reim-
bursed eligible health care providers for
providing COVID-19 vaccines to under-
insured individuals,
98
included enrollees
in STLDI and excepted benefits coverage
within the definition of underinsured.
99

The CARES Act also amended the defi-
nition of “uninsured individual” in Social
Security Act section 1902(ss) to include
individuals enrolled only in STLDI. Even
individuals enrolled in STLDI or fixed
indemnity excepted benefits coverage
who are generally healthy are at risk of
needing health care, and thus at risk of
incurring unaffordable medical bills at
any time. The COVID-19 PHE has under-
scored the unpredictability of when the
need for medical care will arise, and the
importance of encouraging individuals to
enroll in comprehensive coverage.
The Departments have also become
aware of potentially deceptive or aggres-
sive marketing of STLDI and fixed
indemnity excepted benefits coverage to
consumers who may be unaware of the
limits of these plans or the availability
of Federal subsidies that could reduce
the costs of premiums and out-of-pocket
health care expenditures for compre-
hensive coverage purchased through an
Exchange.
100
The Departments note that
these concerns are not limited to individ-
ual market consumers considering STLDI
or fixed indemnity excepted benefits cov-
erage. Reports that employers are increas-
ingly offering fixed indemnity coverage
alongside a plan that offers only a very
limited set of primary or preventive care
benefits (or in some cases, as the only
form of health coverage) have also raised
similar concerns about consumers who
obtain this health coverage through their
95
On January 31, 2020, HHS Secretary Alex M. Azar II declared that as of January 27, 2020, a nationwide public health emergency (PHE) exists as a result of the 2019 novel coronavirus
(COVID-19). See HHS Office of the Assistant Secretary for Preparedness and Response, Determination of the HHS Secretary that a Public Health Emergency Exists, available at: https://
www.phe.gov/emergency/news/healthactions/phe/Pages/2019-nCoV.aspx. This declaration was last renewed by HHS Secretary Xavier Becerra on October 13, 2022, following previous
renewals on April 21, 2020, July 23, 2020, October 2, 2020, January 7, 2021, April 15, 2021, July 20, 2021, and October 18, 2021, January 14, 2022, April 12, 2022, and July 15, 2022. See
HHS Office of the Assistant Secretary for Preparedness and Response, Renewal of Determination That A Public Health Emergency Exists, available at: https://aspr.hhs.gov/legal/PHE/Pages/
covid19-13Oct2022.aspx. On January 30, 2023 and February 9, 2023, the Biden-Harris Administration announced that it intended to end the PHE at the end of the day on May 11, 2023. See
Executive Office of the President, Office of Management and Budget, Statement of Administration Policy: H.R. 382 and H.J. Res. 7 (Jan. 30, 2023), available at: https://www.whitehouse.gov/
wp-content/uploads/2023/01/SAP-H.R.-382-H.J.-Res.-7.pdf; Letter to U.S. Governors from HHS Secretary Xavier Becerra on renewing COVID-19 Public Health Emergency (PHE) (Feb.
9, 2023), available at: https://www.hhs.gov/about/news/2023/02/09/letter-us-governors-hhs-secretary-xavier-becerra-renewing-covid-19-public-health-emergency.html. The PHE did in fact
end at the end of the day on May 11, 2023.
96
See, e.g., Curran, Emily, Kevin Lucia, JoAnn Volk, and Dania Palanker (2020). “In the Age of COVID-19, Short-Term Plans Fall Short for Consumers,” Commonwealth Fund, available
at: https://www.commonwealthfund.org/blog/2020/age-covid-19-short-term-plans-fall-short-consumers. This study found that STLDI policies provide less financial protection than compre-
hensive coverage if an enrollee needs treatment for COVID-19. The study found that, among the 12 brochures reviewed for STLDI policies being sold in Georgia, Louisiana, and Ohio, 11
excluded nearly all coverage for prescription drugs, with some providing limited coverage of inpatient drugs. The study further found that STLDI imposed high cost sharing, with deductibles
ranging from $10,000 to $12,500 (which did not count toward the enrollees’ maximum out-of-pocket costs) and that enrollees may be required to meet separate deductibles for emergency
room treatment, forcing some enrollees to face out-of-pocket costs of more than $30,000 over a 6-month period. Additionally, the study found that STLDI did not cover services related to
preexisting conditions.
97
FAQs about Families First Coronavirus Response Act and Coronavirus Aid, Relief, and Economic Security Act Implementation Part 42, Q1 (April 11, 2020), available at: https://www.
dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-42.pdf and https://www.cms.gov/files/document/FFCRA-Part-42-FAQs.pdf; Additional Policy and
Regulatory Revisions in Response to the COVID–19 Public Health Emergency, 85 FR 71142, 71173 (Nov. 6, 2020); FAQs about Affordable Care Act Implementation Part 51, Families
First Coronavirus Response Act and Coronavirus Aid, Relief, and Economic Security Act Implementation (Jan. 10, 2022), available at: https://www.dol.gov/sites/dolgov/files/ebsa/about-
ebsa/our-activities/resource-center/faqs/aca-part-51.pdf and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/FAQs-Part-51.pdf (FAQs Part 51); and FAQs about
Families First Coronavirus Response Act, Coronavirus Aid, Relief, and Economic Security Act and Health Insurance Portability and Accountability Act Implementation (FAQs Part 58),
available at: https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-58 and https://www.cms.gov/cciio/resources/fact-sheets-and-faqs/downloads/faqs-
part-58.pdf. Note that the COVID-19 PHE ended on May 11, 2023.
98
Underinsured individuals are defined for this purpose as having a health plan that either does not include COVID-19 vaccine administration as a covered benefit or covers COVID-19 vaccine
administration but with cost sharing. See Health Resources and Services Administration, “FAQs for The HRSA COVID-19 Coverage Assistance Fund,” available at: https://www.hrsa.gov/
provider-relief/about/covid-19-coverage-assistance/faq.
99
Health Resources and Services Administration, “FAQs for The HRSA COVID-19 Coverage Assistance Fund,” available at: https://www.hrsa.gov/provider-relief/about/
covid-19-coverage-assistance/faq.
100
Palanker, Dania and Kevin Lucia (2021). “Limited Plans with Minimal Coverage Are Being Sold as Primary Coverage, Leaving Consumers at Risk,” Commonwealth Fund, available at:
https://www.commonwealthfund.org/blog/2021/limited-plans-minimal-coverage-are-being-sold-primary-coverage-leaving-consumers-risk. (Noting (noting that fixed indemnity insurance
may be “bundled” with other non-comprehensive insurance products in such a way that “the plans look like comprehensive coverage” while still offering limited benefits). See also); Palanker,
Dania, JoAnn Volk, and Maanasa Kona (2019). “Seeing Fraud and Misleading Marketing, States Warn Consumers About Alternative Health Insurance Products,” Commonwealth Fund,
available at: https://www.commonwealthfund.org/blog/2019/seeing-fraud-and-misleading-marketing-states-warn-consumers-about-alternative-health.

Bulletin No. 2023–33 505 August 14, 2023
employers.
101
Consumers who are unaware
of the coverage limitations of these
arrangements, or who are employed by
employers who are similarly unaware,
can be faced with overwhelming medical
costs if they require items and services
that are not covered by their group health
plan, because the fixed indemnity excepted
benefits coverage provides only fixed cash
benefits that may be far lower than the costs
of medical services, rather than coverage
intended to cover the costs of the medical
services themselves. For example, a Texas
consumer who was enrolled in two forms
of health insurance through his employer
received a $67,000 hospital bill after he
experienced a heart attack. Although he
believed his two policies would provide
comprehensive coverage, he learned that
his coverage was provided through a group
health plan that covered only preventive
services and prescription drugs and a fixed
indemnity excepted benefits coverage
policy that provided a cash benefit of less
than $200 per day of hospitalization.
102

Additionally, employers may incur penal-
ties if they erroneously treat fixed indem-
nity policies as excepted benefits when the
policies do not meet the requirements for
excepted benefits (for example, when they
are not offered as independent, noncoor-
dinated benefits) and fail to comply with
applicable group market Federal consumer
protections and requirements for compre-
hensive coverage, such as the requirement
to provide participants, beneficiaries, and
enrollees with a summary of benefits and
coverage that meets applicable content
requirements or the prohibition on lifetime
and annual dollar limits on essential health
benefits.
103
In light of research revealing
significant disparities in health insurance
literacy among certain underserved racial
and ethnic groups and people with incomes
below the FPL,
104
the Departments are also
concerned that underserved populations
may be particularly vulnerable to mislead-
ing or aggressive sales and marketing tac-
tics that obscure the differences between
comprehensive coverage and STLDI or
fixed indemnity excepted benefits cover-
age, exposing these populations to higher
levels of health and financial risks. As noted
in Executive Order 13995, the COVID-19
pandemic has “exposed and exacerbated
severe and pervasive health and social
inequities in America,” highlighting the
urgency with which such inequities must
be addressed. These concerns continue
amid the Medicaid unwinding period
that began on April 1, 2023 during which
State Medicaid programs have 12 months
to initiate, and 14 months to complete, a
renewal for all individuals enrolled in
Medicaid, the Children’s Health Insurance
Program (CHIP), and, if applicable, the
Basic Health Program (BHP).
105
HHS has
estimated that 15 million beneficiaries will
lose Medicaid, CHIP, or BHP coverage
as a result of Medicaid unwinding.
106
The
Departments are concerned that the large
population of individuals at risk of losing
Medicaid and those other forms of cover-
age, due to a loss of eligibility or as a result
of administrative churn, may be suscep-
tible to these marketing and sales tactics,
and might therefore mistakenly enroll in
STLDI or fixed indemnity excepted ben-
efits coverage in lieu of comprehensive
coverage.
C. Impact on Risk Pools
At the time the 2018 final rules were
issued, the Departments acknowledged
that expanding access to STLDI could
have potential negative effects on the
risk pools for individual health insur-
ance coverage and on individuals who
find themselves insufficiently protected
by the typically limited benefits of an
STLDI policy. The Departments were
of the view that the affordability and
access challenges facing consumers at
that time necessitated action to increase
access to STLDI to provide an alternative
option for individuals who were unable
or disinclined to purchase comprehensive
coverage.
As discussed earlier in this section
II, access to affordable comprehensive
coverage has significantly improved
since the 2018 final rules were pub-
lished. However, research based on
individual market data for plan year
2020 has substantiated concerns about
the negative impact that the shift of
healthier individuals from comprehen-
sive coverage to STLDI has on indi-
viduals remaining in the individual
market risk pools.
107
Because healthier
individuals are more likely to enroll in
STLDI than individuals with known
medical needs, the extended contract
terms and renewal periods of STLDI
under the current Federal regulations
result in healthier consumers leaving
(or opting out of) the individual market
risk pools for extended periods of time.
This has resulted in increased premi-
ums for individuals seeking to purchase
101
Young, Christen Linke and Kathleen Hannick (2020). “Fixed Indemnity Coverage is a Problematic Form of “Junk” Insurance,” USC-Brookings Schaeffer Initiative for Health Policy,
available at: https://www.brookings.edu/blog/usc-brookings-schaeffer-on-health-policy/2020/08/04/fixed-indemnity-health-coverage-is-a-problematic-form-of-junk-insurance.
102
Avila, Jaie (2019). “Show Me Your Bill Helps Wipe Out $70K in Charges After Heart Attack,” News 4 San Antonio, available at https://news4sanantonio.com/news/trouble-shooters/
show-me-your-bill-helps-wipe-out-70k-in-charges-after-heart-attack.
103
See 26 CFR 54.9815-2715(e); 29 CFR 2590.715-2715(e); 45 CFR 147.200(e). See also section 2711 of the PHS Act and section 4980D of the Code.
104
Edward, Jean, Amanda Wiggins, Malea Hoepf Young, Mary Kay Rayens (2019). “Significant Disparities Exist in Consumer Health Insurance Literacy: Implications for
Health Care Reform,” Health Literacy Research and Practice, available at: https://pubmed.ncbi.nlm.nih.gov/31768496/. See also Villagra, Victor and Bhumika Bhuva (2019).
“Health Insurance Literacy: Disparities by Race, Ethnicity, and Language Preference,” The American Journal of Managed Care, available at: https://www.ajmc.com/view/
health-insurance-literacy-disparities-by-race-ethnicity-and-language-preference.
105
As a condition of receiving a temporary Federal Medical Assistance Percentage (FMAP) increase under section 6008 of the Families First Coronavirus Response Act, states were required
to maintain enrollment of nearly all Medicaid enrollees during the COVID-19 PHE. This “continuous enrollment condition” was decoupled from the COVID-19 PHE and ended on March
31, 2023 under the Consolidated Appropriations Act, 2023. See CMS, Center for Consumer Information and Insurance Oversight, Temporary Special Enrollment Period (SEP) for Consumers
Losing Medicaid or the Children’s Health Insurance Program (CHIP) Coverage Due to Unwinding of the Medicaid Continuous Enrollment Condition– Frequently Asked Questions (FAQ)
(Jan. 27, 2023), available at: https://www.cms.gov/technical-assistance-resources/temp-sep-unwinding-faq.pdf.
106
HHS, Assistant Secretary for Planning and Evaluation, Office of Health Policy, “Unwinding the Medicaid Continuous Enrollment Provision: Projected Enrollment Effects and Policy
Approaches,” August 19, 2022, available at: https://aspe.hhs.gov/sites/default/files/documents/404a7572048090ec1259d216f3fd617e/aspe-end-mcaid-continuous-coverage_IB.pdf.
107
See Dieguez, Gabriela and Dane Hansen (2020). “The Impact of Short-term Limited-duration Policy Expansion on Patients and the ACA Individual Market,” Milliman, available at: https://
www.milliman.com/en/insight/the-impact-of-short-term-limited-duration-policy-expansion-on-patients-and-the-aca-individual-market.

August 14, 2023 506 Bulletin No. 2023–33
individual health insurance coverage.
108

For unsubsidized individuals, the costs
are borne directly by the consumer, and
for subsidized individuals, the costs are
borne to a large extent by the Federal
Government in the form of increased
per capita PTC spending associated
with increased individual health insur-
ance coverage premiums. Likewise, the
increased reports and anecdotes about
fixed indemnity excepted benefits cov-
erage being marketed and sold as an
alternative to comprehensive coverage
raise concerns about the potential for
such practices having a similar impact
on the small group and individual mar-
ket risk pools.
Another study looking at States that
have adopted policies that restrict STLDI
to shorter durations than allowed under
the current Federal regulations found that,
from 2018 to 2020, States that restricted
or prohibited the sale of STLDI saw fewer
consumers enroll in such insurance, were
able to keep more healthy people in the
individual health insurance coverage mar-
ket, and saw a greater decline in average
medical costs for enrollees in individual
health insurance coverage.
109
The study
reported that, as a result, the risk score
– a measurement of the relative medical
costs expected for the populations covered
by comprehensive coverage in each State,
both on- and off-Exchange – decreased by
40 percent more in States with more reg-
ulation of STLDI than States with less
regulation.
110
As of January 20, 2020, 12
States had enacted legislation prohibit-
ing health status underwriting for STLDI,
effectively banning the sale of STLDI in
those States.
111
Thirteen States and the
District of Columbia prohibited the sale of
STLDI policies with initial contract terms
longer than 3 months.
112

In addition to ensuring that consum-
ers can clearly distinguish STLDI from
comprehensive coverage, this new evi-
dence provides an additional basis for the
Departments’ conclusion that it is import-
ant to amend the Federal definition of
STLDI.
D. Need for Rulemaking
For the reasons described in this sec-
tion II, the Departments are of the view
that it is necessary to amend the Federal
definition of STLDI to ensure that con-
sumers can clearly distinguish STLDI
from comprehensive coverage, protect the
risk pools and stabilize premiums in the
individual market, and promote access to
affordable comprehensive coverage.
With respect to individual market fixed
indemnity excepted benefits coverage, the
combination of the decision in the Central
United case and the reduction of the indi-
vidual shared responsibility payment to
$0 for months beginning after December
31, 2018 under the Tax Cuts and Jobs Act
increased the risk that individuals would
purchase fixed indemnity excepted bene-
fits coverage as a substitute for compre-
hensive coverage. The Departments are
of the view that these changes necessitate
rulemaking with respect to fixed indem-
nity excepted benefits coverage. Further,
while the Departments did not finalize
the proposed amendments to the group
market
fixed indemnity excepted bene-
fits coverage regulations outlined in the
2016 proposed rules, the Departments
noted their intention to address fixed
indemnity excepted benefits coverage in
future rulemaking.
113
The Departments
have continued to monitor the impact of
these coverage options and remain con-
cerned about the negative impacts of fixed
indemnity excepted benefits coverage on
consumers when such products are sold
as an alternative to comprehensive cover-
age. In light of the Departments’ ongoing
concerns about the numerous negative
impacts of STLDI and fixed indemnity
excepted benefits coverage being offered
as an alternative to comprehensive cover-
age, as well as the significant changes in
market conditions and in the legal land-
scape since the Departments’ last regu-
latory actions addressing these products,
the Departments
are proposing changes to
the Federal individual and group market
regulations governing STLDI and fixed
indemnity excepted benefits coverage.
For similar reasons, as discussed in more
detail in section IV.A of this preamble, the
Treasury Department and the IRS pro-
pose to clarify the tax treatment of fixed
amounts received by a taxpayer through
certain employment-based accident or
health insurance that are paid without
regard to the amount of medical expenses
incurred. In addition, the Departments
solicit comments on specified disease
excepted benefits coverage, as discussed
in section III.B.2 of this preamble, and on
level-funded plan arrangements, as dis-
cussed in section III.C of this preamble.
III. Overview of the Proposed Rules
on Short-Term, Limited-Duration
Insurance and Fixed Indemnity
Excepted Benefits Coverage; Comment
Solicitations Regarding Specified
Disease Excepted Benefits Coverage
and Level-Funded Plan Arrangements
– The Departments of the Treasury,
Labor, and Health and Human
Services
A. Short-Term, Limited-Duration
Insurance
The Departments are proposing the
following amendments to the Federal reg-
ulations at 26 CFR 54.9801-2, 29 CFR
2590.701-2, and 45 CFR 144.103 defining
“short-term, limited-duration insurance”
108
Id. (“Carrier expectations for the impact of [regulatory actions including the expansion of short-term, limited-duration insurance policies and other loosely regulated insurance and the
repeal of the federal individual shared responsibility payment being reduced to $0] on premiums in the ACA individual market for 2020 are approximately 4 percent in states that have not
restricted the sale or duration of STLD policies ... Among the states that have limited the impact of loosely regulated insurance through reinstating an individual mandate or by restricting
STLD expansion, carriers have assumed an average premium impact in 2020 due to regulatory actions that is about 5 percent lower than other states.”) As noted in section VII.B.2.e of this
preamble, this study also found that the few carriers that explicitly included a premium adjustment because of the adoption of the new federal definition of STLDI in the 2018 final rules
increased premiums by between 0.5 percent and 2 percent in 2020.
109
See Hall, Mark and Michael McCue (2022). “Short-Term Health Insurance and the ACA Market,” Commonwealth Fund, available at: https://www.commonwealthfund.org/blog/2022/
short-term-health-insurance-and-aca-market.
110
Id.
111
National Association of Insurance Commissioners (2023). “Short-Term Limited-Duration Health Plans,” available at: https://content.naic.org/cipr-topics/
short-term-limited-duration-health-plans.
112
Id.
113
Excepted Benefits; Lifetime and Annual Limits; and Short-Term, Limited-Duration Insurance; Final Rule, 81 FR 75316 at 75317 (October 31, 2016).

Bulletin No. 2023–33 507 August 14, 2023
to better distinguish STLDI from indi-
vidual health insurance coverage. These
amendments would apply to new STLDI
policies, certificates, or contracts of insur-
ance sold or issued on or after the effec-
tive date of the final rules; that is, the date
that is 75 days after publication of the
final rules.
114
STLDI policies, certificates,
or contracts of insurance sold or issued
before the effective date of the final rules
(including any subsequent renewals or
extensions consistent with applicable law)
could still have an initial contract term
of less than 12 months and maximum
duration of up to 36 months (taking into
account any renewals or extensions), sub-
ject to any limits under applicable State
law, but would be required to comply with
the revised notice requirement for renew-
als and extensions.
1. “Short-term”
Under the current Federal regulations,
contracts for STLDI must specify an expi-
ration date that is less than 12 months
after the original effective date of the
contract, and, taking into account renew-
als or extensions, must have a duration of
no longer than 36 months in total.
115
The
Departments, however, are no longer of
the view that permitting the longer dura-
tion for STLDI is in the best interests of
consumers.
Taking into account the potential risk
to individuals who enroll in STLDI, the
increased availability of affordable com-
prehensive coverage options, the poten-
tial impact on the individual market risk
pools, and consumer challenges in differ-
entiating STLDI from individual health
insurance coverage, the Departments
propose to reinterpret the phrase “short-
term” to refer to a contract term of no
more than 3 months. More specifically,
the Departments propose to amend the
Federal definition for STLDI under 26
CFR 54.9801-2, 29 CFR 2590.701-2, and
45 CFR 144.103 such that the coverage
would have an expiration date specified in
the policy, certificate, or contract of insur-
ance that is no more than 3 months after
the original effective date. As discussed
further in section III.A.2 of this preamble,
the Departments also propose to amend
the Federal definition of STLDI to reinter-
pret the phrase “limited-duration” to mean
that the maximum permitted duration for
STLDI is no longer than 4 months in total,
taking into account any renewals or exten-
sions. Further, the new proposed Federal
definition would provide that a renewal
or extension includes the term of a new
STLDI policy, certificate, or contract of
insurance issued by the same issuer to
the same policyholder within a 12-month
period beginning on the original effective
date of the initial policy, certificate, or
contract of insurance.
As described further in section III.A.6
of this preamble, these proposed rules
would adopt a bifurcated approach to
the applicability date that distinguishes
between new STLDI that is sold or issued
on or after the effective date of the final
rules,
116
and existing STLDI sold or issued
before the effective date of the final rules.
The proposed new Federal definition and
maximum duration framework in these
proposed rules would apply for new
STLDI policies, certificates, or contracts
of insurance sold or issued on or after the
effective date of the final rules. Under
the framework in these proposed rules,
existing policies, certificates, or contracts
of insurance sold or issued before the
effective date (including any subsequent
renewals or extensions consistent with
applicable law) could still have an initial
contract term of less than 12 months, and
a maximum duration of up to 36 months
(taking into account any renewals or
extensions), subject to any limits under
applicable State law.

In the preamble to
the 2018 final rules, the Departments dis-
cussed the importance of ensuring that
consumers clearly understand the differ-
ences between these types of coverage in
order to select the type of coverage that
suits their needs. However, particularly in
light of recent reports regarding deceptive
marketing practices (as discussed in sec-
tion III.A.3 of this preamble) and the risk
of consumer confusion, the Departments
are now of the view that interpreting
“short-term” in a manner that prevents
STLDI from having terms that are simi-
lar in length to a 12-month policy year for
comprehensive individual health insur-
ance coverage is the most important tool
for consumers to distinguish between
STLDI and comprehensive coverage.
In addition, the Departments expressed
in the preamble to the 2018 final rules an
expectation that the amended definition
of STLDI would result in STLDI being
distinguishable from comprehensive cov-
erage because of the differences in their
initial contract terms; the maximum dura-
tion of a policy itself; the types of notice
requirements applicable to each type of
coverage; and the classification of com-
prehensive coverage, but not STLDI, as
MEC.
117
However, since the 2018 final
rules became effective, and in light of the
changes in the legal landscape and market
conditions discussed in section II of this
preamble, the Departments are now of the
view that the current Federal definition of
STLDI contributes to confusion between
STLDI and comprehensive coverage and
that confusion results in consumer harm.
The Departments’ proposal to reinterpret
“short-term” to refer to coverage with
a term of no more than 3 months is one
change that would help ensure consum-
ers are better able to distinguish between
the two types of coverage and therefore
make better informed coverage purchas-
ing decisions.
The Departments are concerned that
the current interpretation and definition
is too expansive and contributes to confu-
sion regarding whether a policy is STLDI
or comprehensive coverage. The combi-
nation of deceptive marketing practices
(as discussed in section III.A.3 of this
preamble) and the near-identical length of
coverage for the initial contract term has
proven to be confusing for consumers. As
114
For purposes of this document, the term “effective date of the final rules” refers to the date that is 75 days after the date of publication of the final rules.
115
See 26 CFR 54.9801-2, 29 CFR 2590.701-2, and 45 CFR 144.103. See also 83 FR 38212 (August 3, 2018).
116
The Departments are of the view that an effective date that is 75 days after the date of publication of the final rule provides sufficient time for interested parties to review, understand, and
meet their obligations under the final rule, without unnecessarily delaying the implementation of policies that are proposed to be finalized on the effective date. See sections III.A.6 (STLDI)
and III.B.1.g (fixed indemnity excepted benefits coverage) for additional discussion of applicability proposals.
117
83 FR at 38215 (August 3, 2018).

August 14, 2023 508 Bulletin No. 2023–33
such, STLDI policies that include an ini-
tial term just shy of 12 months have not
been easily distinguishable by consumers
from comprehensive coverage available
in the individual market, which generally
has a 12-month policy year.
118
In addition,
the ability to renew or extend STLDI poli-
cies for up to 36 months is also somewhat
similar to the structure of comprehensive
coverage sold in the individual and group
markets and makes STLDI harder to dis-
tinguish from comprehensive coverage
options. As a result, STLDI is being sold
in situations, including as a long-term
replacement for comprehensive cover-
age, that the exception from the definition
of individual health insurance coverage
was not intended to address.
119
In some
instances, individuals may mistakenly
purchase STLDI as long-term health
insurance coverage.
120
In determining the appropriate length
of STLDI for the proposed amended
Federal definition, and giving meaning to
“short-term,” the Departments reflected
on instances when individuals may expe-
rience a temporary gap in coverage. For
example, a college student enrolled in stu-
dent health insurance coverage that does
not provide coverage during the summer
when they are not enrolled in classes, or
a teacher who changes jobs and has to
wait until the fall to enroll in new cover-
age, would experience a temporary gap in
coverage of roughly 3 months and would
benefit from access to STLDI during that
period. Individuals transitioning between
other types of jobs may also experience
a temporary break in coverage, even if
their break in employment is negligible.
In particular, section 2708 of the PHS Act
and its implementing regulations permit
a group health plan or health insurance
issuer offering group health insurance
coverage to apply a waiting period (as
defined in section 9801(b)(4) of the Code,
section 701(b)(4) of ERISA, and 2704(b)
(4) of the PHS Act) of up to 90 days.
121

In addition, the implementing regula-
tions allow for a reasonable and bona fide
employment-based orientation period not
to exceed 1 month. These provisions can
result in a delay of approximately 3 to 4
months before coverage of an individual,
who is otherwise eligible to enroll under
the terms of a group health plan, can
become effective.
Therefore, the Departments propose
to amend the Federal definition of “short-
term, limited-duration insurance” in 26
CFR 54.9801-2, 29 CFR 2590.701-2, and
45 CFR 144.103 to reflect a new interpre-
tation of the phrase “short-term” to mean a
policy, certificate, or contract of insurance
with an issuer that has an expiration date
specified in the policy, certificate, or con-
tract of insurance that is no more than 3
months after the original effective date of
the policy, certificate, or contract of insur-
ance. This approach is consistent with the
group market rules regarding the 90-day
waiting period limitation provision under
the ACA and with STLDI’s role of serv-
ing as temporary coverage for individuals
transitioning between other types of com-
prehensive coverage. It also is similar to
the less-than-3-month maximum term in
the Federal definition of STLDI adopted
in the 2016 final rules and already enacted
in a number of States,
122
and aligns with
the goal of Executive Order 14009 to sup-
port protections for people with preex-
isting conditions, as there are no Federal
prohibitions or restrictions on preexist-
ing condition limitations with respect to
STLDI.
It is reasonable to look to the group
market waiting period rules to guide the
proposed amendments to the Federal defi-
nition of STLDI in giving meaning to
“short-term,” because a waiting period is
the type of coverage gap that STLDI was
initially intended to cover.
123
For longer
gaps in coverage, the guaranteed avail-
ability protections established under the
ACA, COBRA continuation coverage for
individuals who were enrolled in employ-
er-based coverage, and the special enroll-
ment period requirements for group health
plan and individual health insurance cov-
erage provide individuals various opportu-
nities to enroll in comprehensive coverage
through or outside of an Exchange.
The Departments request comments on
the proposed interpretation of the phrase
“short-term.” The Departments also
request comments on whether the inter-
pretation of “short-term” in the proposed
definition of STLDI should instead be no
more than 4 months or some other length,
and why.
2. “Limited-Duration”
Under the definition adopted in the
2018 final rules, the Departments inter-
preted the phrase “limited-duration” to
preclude renewals or extensions of STLDI
that extended a policy beyond a total of
up to 36 months, with the total number
of consecutive days of coverage under a
single (that is, the same) insurance con-
tract being the relevant metric to calcu-
late the permissible duration of coverage.
The Departments now propose an update
to the Federal definition of “short-term,
limited-duration insurance” under 26
CFR 54.9801-2, 29 CFR 2590.701-2, and
45 CFR 144.103 that would adopt a dif-
ferent interpretation of the phrase “limit-
ed-duration.” The Departments propose
to reinterpret “limited-duration” to refer
to a maximum coverage period that is
no longer than 4 months in total, taking
into account any renewals or extensions.
118
45 CFR 144.103 (defining policy year for non-grandfathered health plans offered in the individual health insurance market as a calendar year).
119
See, e.g., Palanker, Dania, and Volk JoAnn (2021). “Misleading Marketing of Non-ACA Plans Continued During COVID-19 Special Enrollment Period,” Center on Health Insurance
Reforms, available at: https://georgetown.app.box.com/s/mn7kgnhibn4kapb46tqmv6i7putry9gt. See also Fernandez, Bernadette, Vanessa Forsberg, and Annie Mach (2018). “Background
Information on Health Coverage Options Addressed in Executive Order 13813,” Congressional Research Service, available at: https://crsreports.congress.gov/product/pdf/R/R45216. See also
Corlette, Sabrina, Kevin Lucia, Dania Palanker, and Olivia Hoppe (2019). “The Marketing of Short-Term Health Plans: An Assessment of Industry Practices and State Regulatory Responses,”
Urban Institute, available at: https://www.urban.org/research/publication/marketing-short-term-health-plans-assessment-industry-practices-and-state-regulatory-responses.
120
Government Accountability Office (2022). “Private Health Insurance: Limited Data Hinders Understanding Short-Term Plans Role and Value During the COVID-19 Pandemic,” available
at: https://www.gao.gov/assets/730/720774.pdf.
121
26 CFR 54.9815–2708, 29 CFR 2590.715-2708, and 45 CFR 147.116.
122
Pollitz, Karen, Michelle Long, Ashley Semanskee, and Rabah Kamal (2018). “Understanding Short-Term Limited Duration Health Insurance,” KFF, available at: https://www.kff.org/
health-reform/issue-brief/understanding-short-term-limited-duration-health-insurance/.
123
81 FR 38020 at 38032 (June 10, 2016) (the intent of the initial regulation defining STLDI was to refer to coverage that filled temporary coverage gaps when an individual was transitioning
from one plan or coverage to another).

Bulletin No. 2023–33 509 August 14, 2023
This approach would allow STLDI to be
extended, when consistent with applicable
State law, to avoid a temporary gap in cov-
erage if, for example, an employer imple-
mented a bona fide employment-based
orientation period of up to 1 month under
the 90-day waiting period limitation pro-
vision under the ACA. An STLDI policy
would meet the Federal definition of “lim-
ited-duration” so long as the coverage was
not renewed or extended beyond a total
of 4 months from the original effective
date of the policy, certificate, or contract
of insurance, regardless of whether the
coverage has an initial term of 1, 2, or 3
months. For example, an STLDI policy
could have an initial term of 3 months and
a renewal term of 1 month, or an initial
term of 2 months and a renewal term of
2 months, consistent with the proposed
amended Federal definition of STLDI.
For this purpose, the Departments pro-
pose that a renewal or extension would
include the term of a new STLDI pol-
icy, certificate, or contract of insurance
issued by the same issuer to the same
policyholder within the 12-month period
beginning on the original effective date of
the initial policy, certificate, or contract
of insurance. In this context, the phrase
“same issuer” would refer to the entity
licensed to sell the policy, consistent with
the definition of health insurance issuer in
26 CFR 54.9801-2, 29 CFR 2590.701-2,
and 45 CFR 144.103. Under this proposal,
the relevant metric to calculate whether
the duration of coverage satisfies the new
Federal “limited-duration” standard is the
total number of days of coverage (either
consecutive or non-consecutive) that a
policyholder is enrolled in an STLDI pol-
icy with the same issuer. That calculation
would apply regardless of whether the
coverage is a renewal or extension under
the same policy, certificate, or contract of
insurance, or if it involves the issuance of
a new STLDI policy, certificate, or con-
tract of insurance to the same policyholder
within the 12-month period beginning on
the original effective date of the initial
policy, certificate, or contract of insurance.
In the 2018 final rules, the Departments
took the position that the maximum length
of COBRA continuation coverage serves
as an appropriate benchmark for inter-
preting the term “limited-duration” with
respect to STLDI. The 2018 final rules
likened the limited-duration maximum
to the maximum duration that employers
are required to provide COBRA continu-
ation coverage to qualified beneficiaries
(18, 29, or 36 months depending on the
nature of the qualifying event that precip-
itates the temporary coverage period).
124

However, unlike STLDI, COBRA
requires, and employees expect, that the
elected COBRA continuation coverage
provides the same benefits as the employ-
ee’s employment-based coverage, and
that the qualified beneficiaries may elect
either the same coverage they had the
day before the qualifying event occurred
or coverage options provided to similarly
situated current employees/participants.
125

Additionally, Federal consumer protec-
tions and requirements for comprehensive
coverage generally apply to COBRA con-
tinuation coverage. In contrast, STLDI is
primarily designed to fill shorter gaps in
coverage, such as when an individual is
between enrollment in employment-based
coverage, and it is generally not required
to comply with Federal consumer protec-
tions and requirements for comprehensive
coverage,
126
or provide robust, compre-
hensive benefits.
In response to the 2016 and 2018 pro-
posed rules, the Departments received
comments requesting that the Departments
not only limit renewals of the same pol-
icy, certificate, or contract of insurance,
but also prohibit issuers from offering
STLDI to consumers who have previously
purchased STLDI from the same or dif-
ferent issuer, to prevent consumers from
stringing together multiple consecutive
policies, a practice commonly referred
to as stacking.
127
The Departments share
the commenters’ concern that stacking
STLDI in effect lengthens the duration of
coverage without offering the benefits and
consumer protections of comprehensive
coverage. As those commenters pointed
out, this practice effectively circumvents
the rules related to maximum duration and
makes it more challenging for consumers
to distinguish STLDI from comprehensive
coverage, concerns that interested par-
ties have reiterated in 2021 and 2022.
128

If an issuer strings together multiple
STLDI policies (whether of a 12-month or
4-month maximum) the coverage could be
stacked to look very similar to the annual
renewals that are common for comprehen-
sive coverage but without the benefits the
consumer would receive from comprehen-
sive coverage. For example, when stack-
ing new policies, an issuer could increase
premiums and cost sharing and reset the
deductible every 4 months. In contrast, if
124
For example, when a qualified employee loses coverage due to the termination of an employee’s employment for any reason other than gross misconduct, or a reduction in the number of
hours of employment, the group health plan must provide the qualified employee and their covered dependents an opportunity to elect COBRA continuation coverage for up to 18 months. A
spouse or dependent child of a covered employee would have the opportunity to elect COBRA continuation coverage for up to 18 months if they lost coverage due to the termination of the
covered employee’s employment for any reason other than gross misconduct, a reduction in the hours worked by the covered employee, divorce or legal separation of the spouse from the
covered employee, or death of the covered employee. In addition, if a child loses coverage because of a loss of dependent child status, the child would have the opportunity to elect up to 36
months of COBRA continuation coverage. The group health plan is required to provide up to 29 months of COBRA continuation coverage only if one of the qualified beneficiaries is disabled
and meets certain requirements. A maximum COBRA period of 36 months is only available to a spouse and dependents in limited circumstances such as the occurrence of a second qualifying
event (for instance, the death of the covered employee, the divorce or legal separation of a covered employee and spouse, or a loss of dependent child status under the plan).
125
26 CFR 54.4980B-5.
126
As noted above, health insurance issuers offering STLDI are subject to the new agent and broker compensation disclosure and reporting requirements in section 2746 of the PHS Act.
127
The Departments declined to prohibit stacking in the 2016 final rules because the requirement that individuals obtain MEC in order to avoid making an individual shared responsibility
payment was an adequate deterrent to discourage consumers from purchasing multiple successive STLDI policies. See 81 FR at 75318. In the Department’s view, reconsideration of such a
prohibition is now warranted because the individual shared responsibility payment was reduced to $0 by the Tax Cuts and Jobs Act.
128
Partnership to Protect Coverage (2021). “Under-Covered: How ‘Insurance-Like’ Products are Leaving Patients Exposed,” available at: https://www.nami.org/NAMI/media/NAMI-Media/
Public%20Policy/Undercovered_Report_03252021.pdf. (“STLDI plans should not be renewable or allowed to continue for more than three months because of the significant financial risk
posed to consumers by their combination of extraordinary deductibles and limited catastrophic financial protection.”). See also Letter from 29 organizations to Sec. Xavier Becerra (January
31, 2022), available at: https://www.lung.org/getmedia/8a510945-cd82-41fe-968e-d83faf2292eb/013122-Letter-to-HHS-Re-Regulation-of-STLDI-policy-preferences-FINAL.pdf. (“Allowing
short-term plans to be renewed or to be sold such that nominally separate policies run consecutively... known as “stacking” — contributes to consumer confusion, increased premiums, and
financial risk for consumers.”).

August 14, 2023 510 Bulletin No. 2023–33
enrolled in comprehensive health insur-
ance coverage, a consumer is guaranteed
a stable level of coverage and cost shar-
ing throughout the 12-month plan year,
and the coverage is subject to Federal
consumer protections and requirements
that prohibit practices common to STLDI,
including medical underwriting and cov-
erage rescissions. Consumers that have
already purchased STLDI policies from
the same issuer may not be aware of, and
may be less likely, to explore other cover-
age options that provide more comprehen-
sive coverage at a better price. As a result,
some consumers may enroll in STLDI
mistaking it for comprehensive coverage
or not understanding the limitations of the
coverage.
In response to these concerns and
continued reports about the impact of
the existing Federal definition of STLDI
discussed in section III.A.I of this pream-
ble, under the Departments’ authority to
interpret the phrase “limited-duration,”
the Departments propose to add new lan-
guage that provides that, for purposes of
applying the new Federal definition, a
renewal or extension includes the term
of a new STLDI policy, certificate, or
contract of insurance issued by the same
issuer to the same policyholder within
the 12-month period beginning on the
original effective date of the initial pol-
icy, certificate, or contract of insurance.
129

As explained elsewhere in this preamble
section, under this proposal, the relevant
metric to calculate and evaluate if the
duration of coverage (taking into account
any renewals or extensions) satisfies the
proposed permitted maximum duration of
no more than 4 months is the total number
of days (either consecutive or non-con-
secutive) of coverage that a policyholder
is enrolled in an STLDI policy with the
same issuer within the 12-month period
beginning on the original effective date of
the initial policy, certificate, or contract of
insurance, regardless of whether the cov-
erage issued to the policyholder is under
the same or a new policy, certificate, or
contract of insurance. This calculation,
however, would not include an STLDI
policy, contract, or certificate of insur-
ance sold to the same policyholder by a
different issuer. This distinction would
effectively limit stacking of policies sold
by the same issuer, would be easier for
issuers to track and comply with, and
would allow consumers the flexibility to
purchase subsequent STLDI policies from
other issuers within a 12-month period.
The Departments are of the view that sub-
sequent sales to the same policyholder by
the same issuer should be treated compa-
rably to renewals for purposes of calculat-
ing and applying the maximum-duration
standard. To do otherwise would under-
mine the maximum-duration requirements
by allowing issuers to stack policies, and
would contravene the initial purpose of
STLDI policies to fill temporary gaps in
comprehensive coverage.
The Departments solicit comments
on the proposed revisions to the Federal
definition of “short-term, limited-duration
insurance,” including the new proposed
interpretation of the phrase “limited-dura-
tion,” and whether there are circumstances
under which issuers should be allowed to
renew or extend STLDI for periods of
time beyond what would be permitted in
these proposed rules. The Departments
also solicit comments on whether there
are additional ways to differentiate STLDI
from comprehensive coverage options,
including information on State approaches
or limits on the sale of STLDI by a differ-
ent issuer, and how the subsequent issuer
would determine whether or not an appli-
cant had previous STLDI with another
issuer. The Departments also solicit com-
ments on whether to broaden the limits on
stacking to include issuers that are mem-
bers of the same controlled group.
3. Sales and Marketing Practices
The Departments are concerned by
reports of aggressive and deceptive sales
and marketing practices related to STLDI.
According to these reports, STLDI is
often marketed as a substitute for compre-
hensive coverage,
130
despite being exempt
from most of the Federal individual mar-
ket consumer protections and require-
ments for comprehensive coverage. For
example, some websites selling STLDI
utilized logos of well-known issuers
even when not affiliated with such issu-
ers, and claimed to provide comprehen-
sive health insurance or be providers of
government-sponsored health insurance
policies. Misleading marketing includes
tactics such as designing websites to sug-
gest the product for sale is comprehensive
coverage and using the websites to gather
personal information for call centers or
brokers that later push consumers to make
quick decisions about purchasing STLDI
without disclosing that the insurance is
not comprehensive coverage.
131

As another example, consumers shop-
ping for health insurance online are often
directed to websites selling STLDI or
other plans that are not comprehensive
coverage, using terms like “Obamacare
plans” and “ACA enroll.” Websites use
those terms in an effort to associate STLDI
with the Federal consumer protections
and requirements for comprehensive cov-
erage.
132
A report from the Government
Accountability Office (GAO) uncovered
brokers engaging in deceptive marketing
practices that misrepresented or omitted
information about products or claimed
129
In response to the 2018 proposed rules, the Departments received comments regarding renewal guarantees. As explained in the preamble to the 2018 final rules, renewal guarantees
generally permit a policyholder, when purchasing his or her initial insurance contract, to pay an additional amount in exchange for a guarantee that the policyholder can elect to purchase,
for periods of time following expiration of the initial contract, another policy or policies at some future date, at a specific premium that would not require any additional underwriting. See
83 FR at 38219 – 38220 (Aug. 3, 2018). These proposed rules would not directly regulate renewal guarantees. However, the Departments acknowledge that the proposed revisions to the
federal definition—including the proposal to count the term of a new STLDI contract issued by the same issuer to the policyholder within the same 12-month period beginning on the original
effective date of the initial policy, contract, or certificate of insurance toward the total maximum duration of STLDI—would limit the guarantees that such instruments may be able to provide.
130
Federal Trade Commission (2018). “FTC Halts Purveyors of Sham Health Insurance Plans,” available at: https://www.ftc.gov/news-events/news/press-releases/2018/11/
ftc-halts-purveyors-sham-health-insurance-plans.
131
Palanker, Dania, JoAnn Volk, and Maanasa Kona (2019). “Seeing Fraud and Misleading Marketing, States Warn Consumers About Alternative Health Insurance Products,” Commonwealth
Fund, available at: https://www.commonwealthfund.org/blog/2019/seeing-fraud-and-misleading-marketing-states-warn-consumers-about-alternative-health. See also, Federal Trade
Commission (2022). “FTC Action Against Benefytt Results in $100 Million in Refunds for Consumers Tricked into Sham Health Plans and Charged Exorbitant Junk Fees,” available at:
https://www.ftc.gov/news-events/news/press-releases/2022/08/ftc-action-against-benefytt-results-100-million-refunds-consumers-tricked-sham-health-plans-charged.
132
Corlette, Sabrina, Kevin Lucia, Dania Palanker, and Olivia Hoppe (2019). “The Marketing of Short-Term Health Plans: An Assessment of Industry Practices and State Regulatory
Responses,” Urban Institute, available at: https://www.urban.org/research/publication/marketing-short-term-health-plans-assessment-industry-practices-and-state-regulatory-responses.

Bulletin No. 2023–33 511 August 14, 2023
that preexisting conditions were covered
when plan documents reflected that they
were not.
133
The GAO study also found
that brokers have a financial incentive
to enroll their clients in STLDI because
brokers receive higher commissions for
selling that coverage than for selling com-
prehensive coverage.
134
For example, the
financial incentive could be up to 10 times
higher commissions when compared
to individual market QHPs purchased
through an Exchange.
135
State regulators
have also received complaints alleging
that brokers engaged in deceptive prac-
tices to enroll consumers in STLDI over
the phone. These practices prevent con-
sumers from making an informed choice
about their coverage.
136

In addition, the Departments have
received feedback that the low levels of
health insurance literacy, particularly
among younger adults and underserved
populations, exacerbate the harm caused
by deceptive marketing practices of
STLDI by issuers and agents and bro-
kers.
137
Consumers have complained they
were unaware that the issuer could decide
not to renew or issue a new policy, cer-
tificate, or contract of insurance to the
same consumer at the end of the contract
term.
138
Some consumers unwittingly pur-
chase STLDI with fewer protections and
less robust benefits than comprehensive
coverage because they do not understand
the difference between these two types of
coverage.
139

In the Departments’ view, this risk of
misleading consumers could be further
minimized if STLDI was not marketed or
sold to consumers during certain periods
when a consumer is eligible to enroll in
comprehensive coverage, such as the indi-
vidual market open enrollment period.
Allowing STLDI to be marketed or sold
during open enrollment can confuse
consumers by causing them to perceive
STLDI as a substitute for comprehen-
sive coverage, rather than an option to fill
temporary gaps in coverage. Inadvertent
enrollment in STLDI may subject unin-
formed consumers to potentially severe
financial risks, and cause them not to
enroll in comprehensive coverage when
eligible to do so. In addition, some health-
ier individuals may also inadvertently
enroll in STLDI instead of comprehensive
coverage, and in so doing, either leave or
not enter an individual market risk pool.
As discussed in section II.C of this pream-
ble, this affects the risk pools for individ-
ual health insurance coverage, leading to
increased premiums.
The Departments solicit comments on
additional ways to help consumers distin-
guish between STLDI and comprehensive
coverage. In particular, the Departments
are interested in feedback on ways to pre-
vent or otherwise mitigate
the potential for
direct competition between STLDI and
comprehensive coverage during the open
enrollment period for individual market
coverage. For example, some States have
prohibited the sale of STLDI during open
enrollment.
140
The Departments are partic-
ularly interested in comments related to
experience in States that have prohibited
enrollment in STLDI during specific peri-
ods of time, including whether prohibiting
enrollment has increased enrollment in
comprehensive coverage, reduced decep-
tive marketing practices, or resulted in any
premium changes for comprehensive cov-
erage. In addition, the Departments request
comments on what additional steps the
Departments can take to help consumers
better understand and distinguish between
comprehensive coverage and other forms
of health insurance coverage, as well as
what steps can be taken to further support
State efforts to protect consumers from
misleading and deceptive marketing and
sales practices.
4. Notice
Under the 2018 final rules, to satisfy
the definition of STLDI, issuers must
display prominently in the contract and
in any application materials provided in
connection with enrollment in STLDI a
specific notice in at least 14-point type.
141

The 2018 final rules finalized two notices.
The first notice (Notice 1) was for pol-
icies with a coverage start date before
January 1, 2019, and includes language
related to the individual shared respon-
sibility payment under section 5000A of
the Code. The second notice (Notice 2),
which is for policies with a coverage start
date on or after January 1, 2019, omits the
language related to the individual shared
responsibility payment because, effective
for months beginning after December
31, 2018, the individual shared responsi-
bility payment was reduced to $0.
142
The
Departments propose a non-substantive
technical amendment to remove Notice 1,
because the period during which Notice 1
was applicable has ended; thus, that provi-
sion no longer has any effect.
The Departments continue to be of the
view that the notice is important to help
consumers distinguish between compre-
hensive coverage and STLDI. Therefore,
the Departments propose to amend the
notice to further clarify the differences
between STLDI and comprehensive cov-
erage, and identify options for consum-
ers to obtain comprehensive coverage in
concise, understandable language that
would be meaningful to them. The pro-
posed amendments to the notice would
133
Government Accountability Office (2020). “Private Health Coverage: Results of Covert Testing for Selected Offerings,” available at: https://www.gao.gov/products/gao-20-634r.
134
Ibid.
135
Keith, Katie (2020). “New Congressional Investigation of Short-Term Plans,” Health Affairs, available at: https://www.healthaffairs.org/do/10.1377/forefront.20200626.227261/full/.
136
Palanker, Dania, JoAnn Volk, and Maanasa Kona (2019). “Seeing Fraud and Misleading Marketing, States Warn Consumers About Alternative Health Insurance Products,” Commonwealth
Fund, available at: https://www.commonwealthfund.org/blog/2019/seeing-fraud-and-misleading-marketing-states-warn-consumers-about-alternative-health.
137
Government Accountability Office (2020). “Private Health Coverage: Results of Covert Testing for Selected Offerings,” available at: https://www.gao.gov/products/gao-20-634r.
138
Id.
139
Id.
140
Washington and Maine prohibit the sale of STLDI during open enrollment. In addition, Hawaii prohibits the sale of STLDI to individuals who were eligible to purchase an
Exchange plan during open enrollment in the previous calendar year. See U.S. House of Representatives Committee on Energy and Commerce (2020). “Shortchanged: How the Trump
Administration’s Expansion of Junk Short-Term Health Insurance Plans Is Putting Americans at Risk,” available at: https://democrats-energycommerce.house.gov/newsroom/press-releases/
ec-investigation-finds-millions-of-americans-enrolled-in-junk-health.
141
26 CFR 54.9801-2, 29 CFR 2590.701-2, and 45 CFR 144.103. See section I.C of this preamble for further discussion of this requirement.
142
See Pub. L. 115–97, December 22, 2017.

August 14, 2023 512 Bulletin No. 2023–33
apply to all STLDI policies sold or issued
on or after the effective date of the final
rules. The proposed amendments to the
notice would only apply to existing poli-
cies in connection with notices required to
be provided upon renewal or extension of
existing STLDI coverage on or after the
effective date of the final rules.
After consulting with plain-language
experts regarding improvements to the
current required notice, the Departments
propose the following revisions to both
the content and formatting of the notice
to inform consumers considering purchas-
ing STLDI about the differences between
STLDI and comprehensive coverage,
support informed coverage purchasing
decisions, and promote readability. The
Departments propose that issuers must
prominently display the notice (in either
paper or electronic form) in at least
14-point font, on the first page of the pol-
icy, certificate, or contract of insurance,
including for renewals or extensions. The
Departments further propose that issuers
must prominently display the notice in
any marketing and application materials
provided in connection with enrollment in
such coverage, including on websites that
advertise or enroll individuals in STLDI,
and in any enrollment materials that are
provided at or before the time an individ-
ual has the opportunity to enroll. In addi-
tion, if an individual is required to reenroll
for purposes of renewal or extension of
STLDI, the notice must be prominently
displayed in the reenrollment materials
(in either paper or electronic form) that
are provided to the individual at or before
the time the individual is given the oppor-
tunity to reenroll in coverage, as well as
on any websites used to facilitate reenroll-
ment in STLDI.
The notice would not affect any sep-
arate notice requirements under applica-
ble State law, except to the extent that a
State notice requirement would prevent
application of any Federal notice require-
ment. The text of the proposed STLDI
notice is as follows:
“Notice to Consumers About Short-
Term, Limited-Duration Insurance
IMPORTANT: This is short-term,
limited-duration insurance. This is
temporary insurance. It isn’t com-
prehensive health insurance. Review
your policy carefully to make sure you
understand what is covered and any
limitations on coverage.
• This insurance might not cover or
might limit coverage for:
• preexisting conditions; or
• essential health benefits (such as
pediatric, hospital, emergency,
maternity, mental health, and
substance use services, prescrip-
tion drugs, or preventive care).
• You won’t qualify for Federal finan-
cial help to pay for premiums or out-
of-pocket costs.
• You aren’t protected from surprise
medical bills.
• When this policy ends, you might
have to wait until an open enroll-
ment period to get comprehensive
health insurance.
Visit HealthCare.gov online or call
1-800-318-2596 (TTY: 1-855-889-
4325) to review your options for
comprehensive health insurance. If
you’re eligible for coverage through
your employer or a family member’s
employer, contact the employer for more
information. Contact your State depart-
ment of insurance if you have questions
or complaints about this policy.”
These proposals to revise and enhance
the required notice aim to increase con-
sumer understanding of STLDI and
combat potential misinformation related
to such coverage for all consumers,
including historically underserved com-
munities. As noted in section II.B of this
preamble, individuals belonging to his-
torically underserved communities often
experience more health care challenges,
and greater obstacles accessing and using
health care services compared to the gen-
eral population. Underserved communities
experience worse health outcomes, higher
rates of chronic conditions, lower access
to health care, and have more frequent
experiences of discrimination in health
care settings.
143
The COVID-19 PHE
amplified these longstanding inequities,
resulting in disparate rates of COVID-19
infection, hospitalization, and death.
144
In
addition, research has uncovered signif-
icant disparities in health insurance liter-
acy rates nationwide, particularly among
those who identify as female, members of
underserved racial and ethnic groups, indi-
viduals with income below the FPL, and
Spanish-speaking enrollees.
145
Because
low health insurance literacy increases
the likelihood of consumers not fully
understanding the differences between
comprehensive coverage and STLDI, as
well as the potential health and financial
risks of STLDI coverage,
146
and in light
of Executive Order 13985 which requires
the Administration to promote access to
equity for underserved communities,
147

the Departments are concerned that mem-
bers of underserved communities may be
particularly vulnerable to misinformation
or misleading or aggressive sales tactics.
In light of these concerns, it is important
for the notice to provide clear and easily
readable information alerting consum-
ers to the differences between STLDI
coverage and comprehensive coverage.
The Departments are of the view that the
notice must also provide resources where
consumers can access additional infor-
mation about STLDI coverage and other
143
See CMS Office of Minority Health (2022). “The Path Forward: Improving Data to Advance Health Equity Solutions,” available at: https://www.cms.gov/files/document/path-forward-
he-data-paper.pdf.
144
Moore, Jazmyn, Carolina Luna-Pinto, Heidi Cox, Sima Razi, Michael St. Louis, Jessica Ricaldi, and Leandris Liburd (2021). “Promoting Health Equity During the COVID-19 Pandemic,
United States,” Bulletin of the World Health Organization, available at: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8795842.
145
See, Edward, Jean, Amanda Wiggins, Malea Hoepf Young, Mary Kay Rayens (2019). “Significant Disparities Exist in Consumer Health Insurance Literacy: Implications for
Health Care Reform,” Health Literacy Research and Practice, available at: https://pubmed.ncbi.nlm.nih.gov/31768496/. See also Villagra, Victor and Bhumika Bhuva (2019).
“Health Insurance Literacy: Disparities by Race, Ethnicity, and Language Preference,” The American Journal of Managed Care, available at: https://www.ajmc.com/view/
health-insurance-literacy-disparities-by-race-ethnicity-and-language-preference.
146
Edward, Jean, Robin Thompson, and Amanda Wiggins (2022). “Health Insurance Literacy Levels of Information Intermediaries: How Prepared are They to Address the Growing Health
Insurance Access Needs of Consumers?,” Health Literacy Research and Practice, 6(1), available at: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8919673/.
147
See, Executive Order 13985 of January 20, 2021, 86 FR 7009.

Bulletin No. 2023–33 513 August 14, 2023
health coverage options so consumers can
make informed choices after consider-
ing a range of available health coverage
options.
The Departments propose to add lan-
guage to the notice to help consumers
identify where and how they might be able
to enroll in comprehensive coverage. The
Departments propose to add a website link
and telephone number for HealthCare.
gov to the notice as reliable resources for
consumers to get information on the dif-
ferent types of available health coverage
options. The Departments are also consid-
ering that the notice be tailored to specify
a telephone number and a link to the State
Exchange’s website if the STLDI is filed
in a State that does not use HealthCare.
gov.
148
The Departments seek comments
on this approach, including the proposed
requirement to provide the notice in the
marketing, application, and enrollment
(or reenrollment) materials, including the
extension of the notice requirement to
websites that advertise or offer the oppor-
tunity to enroll (or reenroll) in STLDI and
on the associated administrative burden
for issuers, agents, brokers, or others who
will be involved in providing the notice to
consumers.
If, under any future final rules, the
notice must be customized to specify
the website and telephone number for
HealthCare.gov or the State Exchange’s
website and telephone number, as appli-
cable, the Departments would state that
STLDI sold through associations
149

include a link to the website of the
Exchange that operates in the State in
which the individual to whom the STLDI
is sold or marketed resides, regardless of
the State in which the association has filed
the insurance product. The Departments
are considering this approach for coverage
sold through associations because associ-
ation coverage is sold across numerous
States, and consumers interested in other
coverage options would enroll through the
Exchange of the State in which the con-
sumer resides.
The proposed revised notice would
also remind consumers that if they are
eligible to enroll in employment-based
coverage they should contact their
employer or family member’s employer
about the health coverage offered by the
employer. In addition, the Departments
propose to add language to the notice that
directs consumers to contact the State
department of insurance for questions
and complaints about the STLDI. The
Departments seek comments on whether
this part of the notice should also be tai-
lored to include the name and phone num-
ber of the State department of insurance
of the State in which the product is filed.
If the State-specific information must be
included, for products that are filed in
multiple States, the Departments propose
that the notice include the name and the
phone number of the State department of
insurance of the State of residence of the
individual to whom the STLDI is sold or
marketed, unless the product is not filed
in that State. If the product is not filed in
the State of residence of the individual to
whom the STLDI is sold or marketed, the
notice would include the name and the
phone number of the State department of
insurance of the State in which the product
is filed.
The current regulations already state
that the applicable notice must be dis-
played prominently in the contract and
in any application materials provided in
connection with enrollment in such cov-
erage in at least 14-point type. However,
based on information that consumers are
not receiving adequate information prior
to enrollment in an STLDI policy,
150
the
Departments are concerned that the current
standard is too subjective and may be con-
tributing to consumers not understanding
the limits of STLDI and being unable to
distinguish it from comprehensive cover-
age. Ensuring that issuers, agents, brokers
or others who will be involved in providing
the notice to consumers also prominently
display the notice on the first page of mar-
keting materials would increase consumer
awareness, limit the impact of any decep-
tive marketing practices, and support
informed decision making and purchasing
decisions by consumers. The Departments
therefore propose that the notice be prom-
inently displayed, in at least 14-point font,
on the first page of any marketing materi-
als used in connection with enrollment (or
reenrollment) in STLDI. The Departments
propose to consider the notice to be prom
-
inently
displayed if it would be reasonably
noticeable to a typical consumer within
the context of the page on which it is dis-
played. For example, the notice would
be prominently displayed if it uses a font
color that contrasts with the background
of the document, is not obscured by any
other written or graphic content on the
page, and when displayed on a website, is
viewable without clicking on an additional
link. For this purpose, the Departments
would consider marketing materials to
include any documents or website pages
that advertise the benefits or opportunity
to enroll (or reenroll) in STLDI cover-
age. The Departments seek comments on
the benefits and burdens of applying the
notice requirements to marketing materi-
als, including websites used in connection
with advertising or enrollment (or reen-
rollment) in STLDI coverage, and on the
proposed definition of what would be con-
sidered marketing materials.
The Departments are considering
adding a statement to the STLDI notice
describing the maximum permitted length
of STLDI under Federal rules, explain-
ing that STLDI cannot be renewed or
extended beyond the maximum allowable
duration, and explaining that the length
of STLDI may be shorter subject to State
law. Adding this proposed additional lan-
guage may reduce the impact of decep-
tive marketing practices on consumers
that may otherwise be unaware or misin-
formed about the length of STLDI before
renewing or extending an existing STLDI
policy or enrolling in a new STLDI policy.
However, including such language would
also add to the length of the notice. The
Departments seek comment on whether
information about the maximum permit-
ted length of new or existing STLDI and
options regarding renewal and extensions
would be included in enrollment materi-
als (or reenrollment materials) provided to
148
Currently, 33 states use HealthCare.gov. See, https://www.healthcare.gov/marketplace-in-your-state/.
149
See discussion in section III.A.5 of this preamble regarding coverage sold through associations.
150
See, Corlette, Sabrina, Kevin Lucia, Dania Palanker, and Olivia Hoppe (2019). “The Marketing of Short-Term Health Plans: An Assessment of Industry Practices and State Regulatory
Responses,” Urban Institute, available at: https://www.urban.org/research/publication/marketing-short-term-health-plans-assessment-industry-practices-and-state-regulatory-responses.

August 14, 2023 514 Bulletin No. 2023–33
enrollees as part of the normal course of
business. The Departments seek comment
on this approach, including how best to
clearly and concisely communicate such
this information to consumers, including
on how to address the bifurcated applica-
bility dates with respect to the proposals
around maximum initial contract length
and maximum duration, whether such
information is already included elsewhere
in the plan documents; and on the asso-
ciated administrative burden for issuers,
agents, brokers, or others who would
be involved in providing the notice to
consumers.
The Departments also solicit com-
ments on whether it would be beneficial
to consumers to require issuers to include
language on the notice that clearly informs
consumers that the notice is an officially
required document, such as “This notice is
required by Federal law”.
The Departments seek comments on
all aspects of the proposed amendments
to the notice and the proposed new
Federal definition of STLDI, including
whether the proposed language and pro-
posed placement of the notice would
achieve the stated aims of helping to
inform consumers of the nature of the
coverage and combat potential decep-
tive marketing practices as described
in section III.A.3 of this preamble,
and whether alternative or additional
language, formatting, or mechanisms
for delivery of the notice could better
accomplish these goals. For example,
the Departments request feedback on
whether a different presentation, such
as a chart comparing the protections that
apply to comprehensive coverage and
STLDI, would result in a more useful,
consumer-friendly notice than the for-
mat proposed in these rules.
As an illustrative example of this differ-
ent presentation, the Departments offer for
consideration an alternative format for this
notice that would aim to succinctly show
important differences between STLDI and
comprehensive coverage using a table.
This alternative STLDI notice would
include all of the information discussed
earlier in this section of the preamble, but
it would simplify word choice and reduce
sentence length in order to further improve
readability. The Departments request feed-
back on which version of the notice more
effectively communicates information
to individuals and how the notice format
would impact accessibility, particularly
for individuals who are vision-impaired or
rely on screen readers or other technology
to review written documents. The text of
the alternative proposed STLDI notice is
as follows:
“WARNING
This is not comprehensive insurance. This is short-term, limited-duration insurance.
This plan has fewer protections than comprehensive insurance options you can find on HealthCare.gov.
This InsuranceInsurance on HealthCare.gov
• May deny you coverage if you have a preexisting condition• You cannot be denied coverage because of a preexisting
condition
• There may be no limit to the amount you have to pay out-of-
pocket for care
• The most you have to pay out-of-pocket for essential health
benefits in a year is limited
• You will not qualify for Federal financial help to pay your
premiums and out-of-pocket costs
• You may qualify for Federal financial help to pay your
premiums and out-of-pocket costs
• You may not have access to all essential health benefits,
including: pediatric, hospital, emergency, maternity, mental
health, and substance use disorder services, prescription
drugs, and preventive care
• You will have access to all essential health benefits,
including: pediatric, hospital, emergency, maternity, mental
health, and substance use disorder services, prescription
drugs, and preventive care
Questions?
• For more info about comprehensive coverage, visit HealthCare.gov online or call 1-800-318-2596 (TTY: 1-855-889-4325).
• For more info about your employer’s coverage, or a family member’s employer coverage, contact the employer.
• For questions or complaints about this policy, contact your State department of insurance.”
The Departments seek comments on
whether additional changes to the notice
language would improve readability
or further help individuals distinguish
STLDI from comprehensive coverage, and
whether there are practical or logistical
barriers that would present any challenges
to compliance with the new proposed
notice standards. The Departments are
also interested in comments on whether
the proposed placement requirements
would substantially improve the likeli-
hood that consumers have a meaningful
opportunity to review the notice and their
health coverage options before applying,
enrolling, or reenrolling in STLDI, as
well as any practical or logistical barriers
to providing this notice as proposed. The
Departments particularly seek comments
from members of underserved commu-
nities, and organizations that serve such
communities, on whether the language
accessibility, formatting, and content of
the notice sufficiently mitigate barriers
that exist to ensuring all individuals can
read, understand, and consider the full
range of their health coverage options.
The Departments also solicit comments
on the prevalence of instances where
agents and brokers complete sales trans-
actions with consumers for STLDI before
distributing the applicable notice, and
solicit comments on additional standards

Bulletin No. 2023–33 515 August 14, 2023
that would encourage salespeople, agents
and brokers to notify individuals of the
limitations of STLDI in accordance with
these proposed rules.
5. Short-Term, Limited-Duration
Insurance Sold Through Associations
The Departments understand that most
sales of STLDI occur through group
trusts or associations that are not related
to employment (sometimes referred to as
individual membership associations).
151

Under these arrangements, out-of-State
issuers file insurance products for approval
in one State and then sell the same poli-
cies in other States through an association,
many times with few requirements for par-
ticipation in the association by consumers,
other than payment of association dues.
Many State regulators have reported they
lack the authority to track sales of policies
made through out-of-State associations,
and are unable to approve or regulate such
policies when offered for sale by issuers
that are not licensed by their State. Further,
The Departments have received feedback
that many issuers are taking advantage of
the ambiguity about which State’s juris-
diction applies, to avoid local State regu-
lation. For example, one study found that
in a review of 34 policy brochures for
STLDI, 28 of the brochures included ref-
erences to associations.
152
Consumers may
not understand that some STLDI marketed
in their States is not regulated by their State
and does not include State-based consumer
protections.
Coverage that is provided to or through
associations, but not related to employ-
ment, and is sold to individuals, either as
certificate holders or policyholders, is not
group coverage under section 9832 of the
Code, section 733(b)(4) of ERISA, and
section 2791(b)(4) of the PHS Act.
153
If
the coverage is offered to an association
member other than in connection with a
group health plan, the coverage is con-
sidered coverage in the individual market
under Federal law, regardless of whether it
is considered group coverage under State
law. Thus, any health insurance sold to
individuals through a group trust or asso-
ciation, other than in connection with a
group health plan, or sold to a group trust
or association to the extent the insurance
is intended to cover association members
who are individuals, must meet the defi-
nition of STLDI at 26 CFR 54.9801-2, 29
CFR 2590.701-2, and 45 CFR 144.103,
or else be considered individual health
insurance coverage that is subject to all
the Federal individual market consumer
protections and requirements for compre-
hensive coverage.
The Departments are aware that some
group trusts and associations have also
marketed STLDI policies to employers as
a form of employer-sponsored coverage.
As explained in section I.C of this pream-
ble, there is no provision excluding STLDI
from the Federal definition of group health
insurance coverage.
154
Thus, any health
insurance that is sold to or through a group
trust or association in connection with a
group health plan and which purports to be
STLDI would in fact be group health insur-
ance coverage that must comply with the
Federal consumer protections and require-
ments for comprehensive coverage applica-
ble to the group market.
The Departments are not proposing
any policies or policy changes specific
to STLDI sold through associations, but
request comments on what steps, if any,
can be taken to support State oversight of
STLDI sold to or through associations.
6. Applicability Dates
In 26 CFR 54.9833-1, 29 CFR
2590.736, and 45 CFR 146.125 and
148.102, the Departments propose appli-
cability dates for the proposed amend-
ments to the Federal definition of STLDI
that distinguishes between new and exist-
ing STLDI. The Departments also pro-
pose a technical amendment to 26 CFR
54.9833-1, 29 CFR 2590.736, and 45 CFR
146.125 to remove outdated language that
references revisions to 45 CFR parts 144
and 146 that became effective on October
1, 2004 but were superseded by subse-
quent revisions that became effective on
July 1, 2005. The Departments propose
the technical amendment would apply to
all coverage (that is, both new and exist-
ing STLDI) as of the effective date of the
final rules.
For new STLDI sold or issued on
or after the effective date of the final
rules, the amendments to the defini-
tion of STLDI would apply for cover-
age periods beginning on or after such
date. The Departments are of the view
that timely implementation of the new
Federal definition of STLDI, including
both the maximum duration and revised
notice provisions, for new coverage sold
or issued on or after the effective date of
the final rules, is critical to maximize the
number of individuals benefiting from the
consumer protections described through-
out this preamble. This proposal would
prevent delays in implementation of the
new Federal definition of STLDI, while
providing a sufficient transition period for
interested parties to implement the new
definition for new coverage sold on or
after the effective date of the final rules.
However, for STLDI sold or issued
before the effective date of the final rules
(including any subsequent renewal or
extension consistent with applicable law),
the current Federal definition of such
coverage would continue to apply with
respect to the maximum allowable dura-
tion. Therefore, existing STLDI could
continue to have an initial contract term
of less than 12 months and a maximum
duration of up to 36 months (taking into
account any renewals or extensions), sub-
ject to any limits under applicable State
law. The Departments propose this appli-
cability date with respect to the maximum
allowable duration for existing STLDI
(including renewals and extensions) to
minimize disruption for individuals who
purchased or were enrolled in STLDI
prior to the effective date of the final rules.
151
See U.S. House of Representatives Committee on Energy and Commerce (2020). “Shortchanged: How the Trump Administration’s Expansion of Junk Short-Term Health Insurance Plans
Is Putting Americans at Risk,” available at: https://democrats-energycommerce.house.gov/newsroom/press-releases/ec-investigation-finds-millions-of-americans-enrolled-in-junk-health.
152
Curran, Emily, Dania Palanker, and Sabrina Corlette (2019). “Short-term Plans Sold Through Out-of-State Associations Threaten Consumer Protections,” Commonwealth Fund, available
at: https://www.commonwealthfund.org/blog/2019/short-term-health-plans-sold-through-out-state-associations-threaten-consumer-protections.
153
45 CFR 144.102(c).
154
See section 2791(b)(5) of the PHS Act, which excludes STLDI from the definition of “individual health insurance coverage.”

August 14, 2023 516 Bulletin No. 2023–33
The Departments recognize that consum-
ers already enrolled in STLDI may have
anticipated having the option of continu-
ing such coverage for a given period of
time, consistent with the current rules.
The proposal to permit such individuals to
remain covered under STLDI for the max-
imum initial contract term, as well as for
renewals and extensions to the extent per-
mitted under the current regulations, sub-
ject to any limits under applicable State
law, would promote continuous enroll-
ment in coverage and ensure that these
consumers have adequate time to transi-
tion to comprehensive coverage.
The Departments propose that the
amendments to the notice provision at
paragraph (2) of the definition of “short-
term, limited-duration insurance” in 26
CFR 54.9801-2, 29 CFR 2590.701-2, and
45 CFR 144.103 would apply for coverage
periods beginning on or after the effec-
tive date of the final rules, regardless of
whether the coverage was sold or issued
before, on, or after the effective date of the
final rules.
155
The Departments are of the
view that the benefit to consumers, includ-
ing those currently enrolled in STLDI,
of a timely notice update outweighs the
burden to issuers of implementing these
changes by the effective date of the final
rules. Given that the updates to the notice
are aimed at alerting consumers to the dif-
ferences between comprehensive cover-
age and STLDI and providing consumers
with the information necessary to make
an informed decision about their coverage
options, a delayed applicability date of
the proposed changes to the notice could
result in unnecessary harm to consumers.
The Departments seek comments
on whether the proposed revised notice
should apply to only new STLDI or should
apply to both new STLDI and existing
coverage upon renewal or extension, and
whether the application of the proposed
revised notice to existing STLDI should
instead be delayed until January 1, 2025,
or some other date. The Departments seek
comments on whether all STLDI policies
and any renewals or extensions of such
coverage, including existing coverage
sold or issued prior to the effective date
of the final rules, should instead end upon
the effective date of the final rules or some
other date. The Departments also seek
comments on whether an applicability
date that would provide a longer transi-
tion period for consumers with policies,
certificates, or contracts of STLDI sold or
issued before the effective date of the final
rules could help alleviate any potential
market disruption; for example, allowing
consumers to renew existing coverage for
an additional 12-month period after any
renewals under their original coverage
are exhausted. The Departments also seek
comments on whether it would be more
reasonable for all STLDI policies and any
renewals or extensions of such coverage
in effect before the date the final rules are
published to end before January 1, 2025,
or some other date.
7. Severability
In the event that any portion of the final
rules implementing one or more propos-
als in these proposed rules is declared
invalid or unenforceable, by its terms or
as applied to any entity or circumstance,
or stayed pending further agency action,
the Departments intend that the proposed
amendments to the definition of “short-
term, limited-duration insurance” be
severable, and that the proposed amend-
ments to the definition of “short-term,
limited-duration insurance” in 26 CFR
54.9801-2, 29 CFR 2590.701-2, and 45
CFR 144.103 would continue even if one
or more aspects of the proposed changes
is found invalid. To capture this intent,
the Departments propose to add a sever-
ability provision to the proposed amended
definition of “short-term, limited-dura-
tion insurance” at 26 CFR 54.9801-2, 29
CFR 2590.701-2, and 45 CFR 144.103.
The severability of these provisions is dis-
cussed in more detail in section VI of this
preamble.
B. Independent, Noncoordinated
Excepted Benefits Coverage
1. Fixed Indemnity Excepted Benefits
Coverage
As described in section I.D of this pre-
amble, Congress identified various types
of excepted benefits, each of which is not
subject to the Federal consumer protec-
tions and requirements for comprehensive
coverage.
156
In so doing, Congress estab-
lished an exemption for those types of
coverage that offer more limited and nar-
row benefits than comprehensive cover-
age.
157
Insurance that pays a fixed amount
under specified conditions without regard
to other insurance (that is, “hospital
indemnity or other fixed indemnity insur-
ance”) is considered an excepted benefit
if offered on an independent, noncoordi-
nated basis, and such insurance coverage
is exempt from Federal consumer protec-
tions and requirements for comprehensive
coverage.
158
In order to address reports of trou-
bling marketing and sales tactics and the
creation of new benefit designs that mis-
lead consumers to believe that hospital
indemnity or other fixed indemnity insur-
ance constitutes comprehensive cover-
age,
159
as well as the changes in market
conditions and in the legal landscape that
have taken place since the last regula-
tory activity on this coverage (discussed
in sections I and II of this preamble), the
Departments are proposing amendments
to the Federal regulations at 26 CFR
54.9831-1(c)(4), 29 CFR 2590.732(c)(4),
and 45 CFR 146.145(b)(4) that outline
the conditions for hospital indemnity and
other fixed indemnity insurance to qual-
ify as an excepted benefit in the group
155
As noted above, the proposed revised notice would also apply to new STLDI coverage for coverage periods beginning on or after the effective date of the final rules.
156
See sections 9831(b) – (c) and 9832(c) of the Code, sections 732(b) – (c) and 733(c) of ERISA, and sections 2722(b) – (c), 2763 and 2791(c) of the PHS Act.
157
See Interim Rules for Health Insurance Portability for Group Health Plans; Interim Rules, 62 FR 16894, 16903 (April 8, 1997).
158
See sections 9831(b) – (c) and 9832(c) of the Code, sections 732(b) – (c) and 733(c) of ERISA, and sections 2722(c)(2), 2763(b) and 2791(c)(3)(B) of the PHS Act. See also 26 CFR
54.9831-1(c)(4), 29 CFR 2590.732(c)(4), 45 CFR 146.145(b)(4), and 45 CFR 148.220(b)(4).
159
See, e.g., Young, Christen Linke and Kathleen Hannick (2020). “Fixed Indemnity Coverage is a Problematic Form of “Junk” Insurance,” USC-Brookings Schaeffer Initiative for Health
Policy, available at: https://www.brookings.edu/blog/usc-brookings-schaeffer-on-health-policy/2020/08/04/fixed-indemnity-health-coverage-is-a-problematic-form-of-junk-insurance. See
also Partnership to Protect Coverage (2021). “Under-Covered: How ‘Insurance-Like’ Products are Leaving Patients Exposed,” available at: https://www.nami.org/NAMI/media/NAMI-Media/
Public%20Policy/Undercovered_Report_03252021.pdf.

Bulletin No. 2023–33 517 August 14, 2023
market. HHS is also proposing several
amendments to the regulation at 45 CFR
148.220(b)(4) that outline the conditions
for such insurance to qualify as excepted
benefits coverage in the individual market.
These proposals would provide greater
clarity regarding what it means for fixed
indemnity excepted benefits coverage to
be offered on an “independent, nonco-
ordinated” basis and to provide benefits
in a “fixed” amount, consistent with the
statutory purpose of exempting this type
of coverage from the Federal consumer
protections and requirements for compre-
hensive coverage.
Specifically, HHS proposes to require
that fixed indemnity excepted benefits
coverage in the individual market must
provide benefits that are paid only on a
per-period basis. This change to the HHS
individual market regulations for excepted
benefits would align the standard for indi-
vidual market fixed indemnity excepted
benefits coverage with the Departments’
current group market regulations for such
coverage.
160

Additionally, the Departments pro-
pose to amend the group market regula-
tions for hospital indemnity and other
fixed indemnity insurance to qualify as
an excepted benefit, including proposing
new standards governing the payment
of fixed benefits and examples to clarify
these new proposed standards. HHS sim-
ilarly proposes to amend the standards
governing the payment of fixed benefits
under such coverage in the individual
market. The Departments further propose
to add a new example to the group mar-
ket regulations to address the prohibition
on coordination between fixed indem-
nity excepted benefits coverage and any
group health plan maintained by the same
plan sponsor. This example illustrates the
Departments’ proposed interpretation of
the “noncoordination” requirements for
hospital indemnity or other fixed indem-
nity coverage to qualify as excepted bene-
fits and the extension of this interpretation
to situations that do not involve a formal
coordination-of-benefits arrangement.
HHS similarly proposes to apply this
interpretation of the “noncoordination”
requirement to individual market fixed
indemnity excepted benefits coverage. As
detailed in section III.B.1.e of this pream-
ble, HHS further proposes to modify the
requirement at current 45 CFR 148.220(b)
(4)(ii) to align with the statutory require-
ment that “noncoordinated, excepted
benefits” in the individual market be pro-
vided without regard to whether benefits
are provided under any health insurance
coverage maintained by the same health
insurance issuer.
161,

162
The Departments also propose to
require a consumer notice be provided
when offering fixed indemnity excepted
benefits coverage in the group market, in
alignment with the existing requirement to
provide such a notice in connection with
fixed indemnity excepted benefits cover-
age offered in the individual market. HHS
also proposes changes to the consumer
notice that must be provided when offer-
ing fixed indemnity excepted benefits cov-
erage in the individual market.
163

These proposed changes are generally
intended to more clearly distinguish fixed
indemnity excepted benefits coverage
from comprehensive coverage in order
to reduce confusion and misinformation
related to fixed indemnity excepted bene-
fits coverage, increase consumers’ under-
standing of their health coverage options,
and provide more information to support
consumers in making informed coverage
purchasing decisions. In addition, as noted
in section II.B of this preamble, the recent
experience with the COVID-19 PHE has
highlighted the value of a framework that
encourages individuals to enroll in com-
prehensive coverage and also prompted
the Departments to examine the Federal
regulations governing fixed indemnity
excepted benefits coverage. The proposed
amendments are also designed to align the
fixed indemnity excepted benefits cover-
age regulations across the individual and
group markets when practical and appro-
priate and clarify the conditions applica-
ble to fixed indemnity excepted benefits
coverage for all interested parties, includ-
ing consumers, issuers, employers, agents,
brokers, and State regulators.
a. Per-Period Basis Fixed Payment
Standard
HHS
proposes to amend 45 CFR
148.220(b)(4) to reinstate the condition
that to qualify as an excepted benefit in
the individual market, hospital indemnity
or other fixed indemnity insurance must
pay fixed benefits only on a per-period
basis and to remove the current option for
such coverage to pay fixed benefits on a
per-service basis.
164
As proposed, HHS
would move the fixed payment standard
currently captured in 45 CFR 148.220(b)
(4)(iii) to a new proposed paragraph at
45 CFR 148.220(b)(4)(ii) and revise it
to require that benefits are paid in a fixed
dollar amount per day (or per other time
period) of hospitalization or illness (for
example, $100/day).
165

Fixed indemnity excepted benefits cov-
erage is intended to serve as a source of
income replacement or financial support,
paying benefits at a fixed amount per qual-
ifying medical event. This type of cover-
age is not comprehensive coverage, and
160
See 26 CFR 54.9831-1(c)(4)(i), 29 CFR 2590.732(c)(4)(i), and 45 CFR 146.145(b)(4)(i).
161
See section 2722(c)(2)(C) of the PHS Act.
162
As discussed in section III.B.1.f of this preamble, HHS is also proposing a technical amendment to redesignate 45 CFR 148.220(b)(4)(ii) as 45 CFR 148.220(b)(4)(i).
163
The consumer notice for individual market fixed indemnity excepted benefits coverage is currently codified at 45 CFR 148.220(b)(4)(iv). If HHS finalizes the proposed amendments to
the individual market fixed indemnity excepted benefit regulation as proposed, the individual market consumer notice would be revised and moved to 45 CFR 148.220(b)(4)(iii). See section
III.B.1.d of this preamble for more details.
164
As discussed further in section III.B.1.b of this preamble, HHS proposes other amendments to the new proposed paragraph at 45 CFR 148.220(b)(4)(ii) to capture the proposed new addi-
tional payment standards for hospital indemnity or other fixed indemnity insurance to qualify as excepted benefits. As part of other amendments to 45 CFR 148.220(b), HHS also proposes
to revise and move the consumer notice requirement applicable to individual market fixed indemnity excepted benefits coverage. See section III.B.1.d of this preamble for further details. As
part of other technical and conforming amendments to the individual market regulation, HHS also proposes to move and modify the existing individual market “noncoordination” standard
from its current location at 45 CFR 148.220(b)(4)(ii) to 45 CFR 148.220(b)(4)(i). See section III.B.1.e and III.B.1.f of this preamble for further details.
165
As discussed further in section III.B.1.b of this preamble, HHS proposes other amendments to the new proposed paragraph at 45 CFR 148.220(b)(4)(ii) to capture the proposed new addi-
tional payment standards for hospital indemnity or other fixed indemnity insurance to qualify as excepted benefits.

August 14, 2023 518 Bulletin No. 2023–33
benefit payments under fixed indemnity
excepted benefits coverage are paid with-
out regard to the actual amount of expenses
incurred by a covered individual.
166
HHS
is of the view that hospital indemnity or
other fixed indemnity insurance products
made available in the individual mar-
ket that closely resemble comprehensive
coverage, by incorporating features typi-
cally included in comprehensive cover-
age, obscure the difference between fixed
indemnity excepted benefits coverage and
comprehensive coverage. HHS is no lon-
ger of the view that the value of providing
issuers with the flexibility to offer fixed
indemnity excepted benefits coverage in
the individual market that pays benefits on
a per-service basis outweighs the poten-
tial harm to consumers who may purchase
fixed indemnity excepted benefits cover-
age as a substitute for, or under the mis-
apprehension that they are purchasing,
comprehensive coverage. Because fixed
indemnity excepted benefits coverage typ-
ically provides benefits that are far below
actual medical expenses, individuals who
rely on this type of coverage as their pri-
mary form of health insurance are at risk
of financial harm.
167
Significant legal and market develop-
ments since the 2014 final rule was pub-
lished have altered the landscape in which
fixed indemnity excepted benefits cover-
age is marketed and sold to consumers.
168

The Departments are of the view that
these changes have increased the likeli-
hood that individual market consumers
may purchase fixed indemnity excepted
benefits coverage as a substitute for com-
prehensive coverage, rather than as a
form of income replacement or financial
support that supplements comprehen-
sive coverage. Therefore, these changes
have also altered the balance that HHS
intended to achieve with the amendments
to the individual market fixed indemnity
excepted benefits coverage regulation in
its 2014 final rule.
In addition to these changes, HHS has
observed concerning trends in how fixed
indemnity excepted benefits coverage
in the individual market is designed and
marketed. As noted in the preamble to the
2014 proposed rule, hospital indemnity
or other fixed indemnity insurance pol-
icies that pay benefits on a “per-service”
basis have been widely available in the
individual market for many years, includ-
ing prior to the 2014 final rule, in part
because many State regulators determined
that consumers valued the ability to pur-
chase per-service hospital indemnity or
other fixed indemnity insurance to com-
plement MEC, emphasizing its value as
a
supplement to (rather than a replacement
for) comprehensive coverage.
169
Since
the 2014 final rule was finalized, how-
ever, HHS has seen products marketed
and sold in the individual market as fixed
indemnity excepted benefits coverage
with features that make the products more
closely resemble comprehensive coverage
than traditional forms of fixed indemnity
excepted benefits coverage, but without
many of the required consumer protec-
tions of comprehensive coverage.
For example, some issuers now offer
individual market fixed indemnity pol-
icies that pay benefits on the basis of
extensive, variable schedules with tens or
hundreds of thousands of different benefit
amounts that vary by item or service.
170

Some benefits associated with particu-
lar items and services appear to be based
on Medicare fee-for-service or Diagnosis
Related Group (DRG) service descrip-
tions.
171
Some marketing materials claim
that benefits are based on “relative value
units,” an apparent reference to an ele-
ment of Medicare’s physician fee schedule
formula, and that exact benefits will vary
by the Current Procedural Terminology
®

(CPT) code submitted by the health care
provider furnishing the relevant service,
suggesting that benefit levels are based
on either actual or estimated costs of care.
Benefits under this coverage might be pro-
vided related to the receipt of items and
services outside the scope of a traditional
understanding of “hospitalization or ill-
ness,” such as preventive cancer screen-
ings, pediatric vaccines, or wellness visits,
which further increases the likelihood that
a consumer could confuse the coverage
with comprehensive coverage.
Common benefit designs for individual
market fixed indemnity coverage include
fixed benefit schedules (for example, $50
per office visit, $100 per surgical proce-
dure, or $20 per generic prescription), pay-
ments made on a percentage basis up to a
cap that might itself vary based on bene-
fit category (for example, 25 percent of a
fixed amount for a hospitalization, capped
at $5,000), or on the basis of “tiers” of
complexity (for example, $500 for a low-
er-complexity “Tier 7” surgery such as a
tonsillectomy or up to $50,000 for a major
organ transplant categorized as a “Tier
1” procedure). Some issuers of hospital
indemnity or other fixed indemnity insur-
ance in the individual market advertise
the availability of a network of providers
that accept a lower rate of reimbursement.
Additionally, some hospital indemnity or
other fixed indemnity insurance pay ben-
efits directly to the health care provider
or facility that furnished services to the
covered individual, rather than directly to
the policyholder (as would be expected if
the benefits were actually functioning as
income replacement or a supplement to
comprehensive coverage).
172
In this man-
ner, these policies operate in a way that
is similar to the way in which plans and
166
26 CFR 54.9831-1(c)(4)(i), 29 CFR 2590.732(c)(4)(i), 45 CFR 146.145(b)(4)(i), and); 45 CFR 148.220(b)(4)(iii).
167
See Young, Christen Linke and Kathleen Hannick (2020). “Fixed Indemnity Coverage is a Problematic Form of “Junk” Insurance,” USC-Brookings Schaeffer Initiative for Health Policy,
available at: https://www.brookings.edu/blog/usc-brookings-schaeffer-on-health-policy/2020/08/04/fixed-indemnity-health-coverage-is-a-problematic-form-of-junk-insurance.
168
See discussion elsewhere in this preamble (for example, in sections I.A, I.D.1 and II of this preamble) related to such developments, including the enactment of the Tax Cuts and Jobs Act
and the decision in Central United Life v. Burwell.
169
National Association of Insurance Commissioners (2013). “Letter to Secretaries of Labor, Treasury, and Health and Human Services,” available at: https://naic.soutronglobal.net/Portal/
Public/en-GB/RecordView/Index/23541.
170
See Appleby, Julie (2021). “New Health Plans Offer Twists on Existing Options, With a Dose of ‘Buyer Beware’,” KFF Health News, available at: https://khn.org/news/article/
new-health-plans-offer-twists-on-existing-options-with-a-dose-of-buyer-beware.
171
Young, Christen Linke and Kathleen Hannick (2020). “Fixed Indemnity Coverage is a Problematic Form of “Junk” Insurance,” USC-Brookings Schaeffer Initiative for Health Policy,
available at: https://www.brookings.edu/blog/usc-brookings-schaeffer-on-health-policy/2020/08/04/fixed-indemnity-health-coverage-is-a-problematic-form-of-junk-insurance.
172
See section III.B.1.c of this preamble for a discussion of the Departments’ concerns with respect to benefit designs for hospital indemnity or other fixed indemnity insurance that provides
direct reimbursement to health care providers and facilities.

Bulletin No. 2023–33 519 August 14, 2023
issuers frequently reimburse providers
under comprehensive coverage.
Therefore, to limit the practice of
designing complex, fee-for-service style
fixed indemnity plans that are marketed
and sold as an alternative to comprehen-
sive coverage, HHS proposes to reinter-
pret what it means for hospital indemnity
or other fixed indemnity insurance to
provide “fixed” benefits in the individual
market and remove the language that per-
mits individual market fixed indemnity
excepted benefits coverage to provide
fixed benefits on a per-service basis. HHS
also proposes to update the parentheti-
cal reference that captures the allowance
for issuers to provide fixed benefits per
other period, to refer to per other “time”
period, to further emphasize the prohibi-
tion on providing benefits on a per-service
or per-item basis. To implement these
changes, HHS proposes to move the cur-
rent fixed payment standard from 45 CFR
148.220(b)(4)(iii) to a new proposed para-
graph at 45 CFR 148.220(b)(4)(ii) and
revise it to require that benefits are paid in
a fixed dollar amount per day (or per other
time period) of hospitalization or illness
(for example, $100/day).
173

Under this proposal, issuers may offer
coverage similar to hospital indemnity
or other fixed indemnity insurance that
pays benefits on a per-service basis, sub-
ject to applicable State law requirements,
but under Federal law these plans would
not be considered excepted benefits and
would be required to comply with the
Federal consumer protections and require-
ments for comprehensive coverage.
HHS seeks comments on these pro-
posed changes. In particular, HHS seeks
comments on how the proposed amend-
ment to require individual market fixed
indemnity excepted benefits coverage to
pay fixed benefits only on a per-period
basis may affect consumers’ ability to
make an informed choice regarding health
insurance options and how it may impact
affordability or access to health coverage
or care.
b. Additional Fixed Payment Standards
The Departments propose to amend the
group market fixed indemnity excepted
benefits coverage provisions at 26 CFR
54.9831-1(c)(4), 29 CFR 2590.732(c)(4),
and 45 CFR 146.145(b)(4) to recodify
existing payment standards and to estab-
lish additional standards related to the
payment of benefits under fixed indemnity
excepted benefits coverage in the group
market. These proposals are intended
to provide greater clarity and reduce the
potential for consumers to mistakenly
enroll in excepted benefits coverage as a
replacement for or alternative to compre-
hensive coverage by further interpreting
what it means for hospital indemnity or
other fixed indemnity insurance to provide
“fixed” benefits.
Specifically, these proposed rules pro-
vide that to be hospital indemnity or other
fixed indemnity insurance that qualifies as
an excepted benefit in the group market, the
benefits must also meet each of the addi-
tional fixed payment standards specified
in new proposed 26 CFR 54.9831-1(c)(4)
(ii)(D)(1), 29 CFR 2590.731-1 (c)(4)(ii)
(D)(1), and 45 CFR 146.145(b)(4)(ii)(D)
(1).
174
These new proposed rules would
retain and amend
175
the existing per-pe-
riod fixed payment standard to require
that benefits under hospital indemnity or
other fixed indemnity insurance be paid as
a fixed dollar amount per day (or per other
time period) of hospitalization or illness
(for example, $100 day) regardless of the
amount of expenses incurred.
176
In doing
so, these proposed rules would require that
benefits be offered as “fixed” amounts,
align with the statutory condition that the
coverage be offered on a noncoordinated
basis,
177
and distinguish fixed indemnity
excepted benefits coverage from coverage
for actual health care costs incurred or ser-
vices received. These proposed rules thus
reflect that fixed indemnity excepted ben-
efits coverage is intended to offer income
replacement or financial support for med-
ical expenses not covered by comprehen-
sive coverage or for non-medical related
expenses in the event of an unexpected or
serious health event.
Rather than transferring risk for health
care costs from a participant, beneficiary,
or enrollee to the issuer or plan sponsor or
otherwise providing comprehensive cov-
erage, fixed indemnity excepted benefits
coverage is intended to provide a fixed,
pre-determined level of cash benefits.
These benefits payments are made upon the
occurrence of a health-related event, such
as a period of hospitalization or illness,
but are otherwise unrelated to expenses
incurred or health care services received.
Coverage that varies benefits based on
health care costs, services received, or
benefits paid under other forms of cover-
age does not provide the kind of “fixed”
benefits that are fixed indemnity excepted
benefits exempt from the Federal con-
sumer protections and requirements for
comprehensive coverage.
The Departments therefore propose to
expand the existing payment standards for
group market fixed indemnity excepted
benefits coverage to further interpret what
it means to provide “fixed” benefits. The
Departments also propose to require that
benefits under fixed indemnity excepted
benefits coverage in the group market be
paid regardless of the actual or estimated
amount of expenses incurred, services
or items received, severity of illness or
173
As discussed in section III.B.1.b of this preamble, HHS proposes other amendments to the new proposed paragraph at 45 CFR 148.220(b)(4)(ii) to capture the proposed new additional
payment standards for hospital indemnity or other fixed indemnity insurance to qualify as excepted benefits in the individual market.
174
To qualify as excepted benefits coverage in the group market, hospital indemnity or other fixed indemnity insurance would continue to be required to satisfy each of the conditions currently
captured in 26 CFR 54.9831-1(c)(4)(ii)(A)-(C), 29 CFR 2590.731-1 (c)(4)(ii)(A)-(C), and 45 CFR 146.145(b)(4)(ii)(A)-(C). If these proposed rules are finalized as proposed, the issuer would
also be required to comply with the consumer notice requirements in new proposed 26 CFR 54.9831-1(c)(4)(ii)(D)(2)-(4), 29 CFR 2590.731-1(c)(4)(ii)(D)(2)-(4), and 45 CFR 146.145(b)
(4)(ii)(D)(2)-(4).
175
Similar to the individual market fixed indemnity excepted benefits coverage regulation, the Departments propose to update the parenthetical reference that captures the allowance for
plans and issuers to provide fixed benefits per other period to refer to per other “time” period, to further emphasize the prohibition on providing benefits on a per- service or per-item basis.
176
26 CFR 54.9831-1(c)(4)(i), 29 CFR 2590.731-1(c)(4)(i), and 45 CFR 146.145(b)(4)(i).
177
Section 9832(c)(3) of the Code, section 733(c)(3) of ERISA, and section 2791(c)(3) of the PHS Act. See also section 9831(c)(2) of the Code, section 732(c)(2) of ERISA, and sections
2722(c)(2) and 2763(b) of the PHS Act.

August 14, 2023 520 Bulletin No. 2023–33
injury experienced by a covered partici-
pant or beneficiary, or any other charac-
teristics particular to a course of treatment
received by a covered participant or ben-
eficiary. The Departments further propose
to amend the group market fixed indem-
nity excepted benefit regulations to affirm
that benefits cannot be paid on any other
basis (such as on a per-item or per-ser-
vice basis). The Departments propose to
set forth these new payment standards for
group market fixed indemnity excepted
benefits coverage at 26 CFR 54.9831-
1(c)(4)(ii)(D)(1), 29 CFR 2590.732(c)(4)
(ii)(D)(1), and 45 CFR 146.145(b)(4)(ii)
(D)(1). HHS proposes parallel amend-
ments to similarly expand the payment
standards for individual market fixed
indemnity excepted benefits coverage
in 45 CFR 148.220(b)(4)(ii). These new
proposed payment standards are designed
to further distinguish fixed indemnity
excepted benefits coverage from compre-
hensive coverage, in order to reduce the
potential for consumer confusion that can
result in consumers mistakenly enroll-
ing in hospital indemnity or other fixed
indemnity insurance as a replacement for
or alternative to comprehensive cover-
age. Additionally, these proposals would
ensure that hospital indemnity or other
fixed indemnity insurance that qualifies as
excepted benefits is providing benefits in a
“fixed” amount per-day or per other time
period.
These proposals also would help to
prevent attempts to circumvent otherwise
applicable Federal consumer protections
and requirements for comprehensive
coverage by labeling a policy that pro-
vides extensive benefits that vary based
on expenses incurred, services or items
received, or other clinical or diagnostic
criteria as fixed indemnity excepted ben-
efits coverage.
178
The Departments are
aware of some policies sold as hospital
indemnity or other fixed indemnity insur-
ance in the group market that appear to
label benefits as though they are being
paid on a “per-period” basis, when bene-
fits are effectively based on the types of
services or items received. For example,
a policy may provide a fixed payment of
$25 “per day” that a participant or ben-
eficiary fills a prescription, receives a
medical exam, or undergoes a wellness
screening. In these cases, the benefit is
effectively provided on a per-service basis
because typically an individual does not
fill a prescription or receive a medical
exam or wellness screening more than
once per day; therefore, merely affix-
ing “per day” (or per other period) to the
benefit description does not serve to limit
payment to a per-period benefit in any
meaningful sense.
In addition, some issuers offering
these policies pay benefits according
to a “tiered” payment schedule under
which the benefit amount increases (or
decreases) based on the severity of the
participant’s, beneficiary’s, or enrollee’s
condition or the complexity of a service or
item received, with exact benefit amounts
based on the relative value unit for the
exact service code for the service or item
provided. Similarly, a structure that pro-
vides higher benefit amounts as a result
of a covered individual taking air versus
ground transportation services represents
another example of a benefit and payment
structure for hospital indemnity or other
fixed indemnity insurance that varies
based on actual costs or estimated cost of
services or severity of the illness, injury
or condition of a covered participant or
beneficiary.
The Departments are of the view
that these benefit designs and practices
circumvent the requirement that fixed
indemnity excepted benefits coverage
provide benefits on a fixed, per-period
basis. The proposed regulatory amend-
ments and changes to the interpretation
of what it means to provide benefits in a
“fixed” amount, particularly the proposal
that benefits be paid without regard to
items or services received, would further
safeguard against practices designed to
evade the existing per-period requirement
in the group market and would strengthen
the proposed parallel requirement in the
individual market. The proposed update
to the parenthetical reference in new pro-
posed 26 CFR 54.9831-1(c)(4)(ii)(D)(1),
29 CFR 2590.732(c)(4)(ii)(D)(1), and 45
CFR 146.145(b)(4)(ii)(D)(1) that cap-
tures the allowance for plans and issuers
to provide fixed benefits per other period,
to refer to per other “time” period, further
emphasizes the prohibition on provid-
ing benefits on a per-service or per-item
basis. Additionally, the proposed new
example at 26 CFR 54.9831-1(c)(4)(iv)
(B), 29 CFR 2590.732(c)(4)(iv)(B), and
45 CFR 146.145(b)(4)(iii)(B), and dis-
cussed elsewhere in this preamble section,
specifically provides that merely append-
ing a “per day” (or per other time period)
label to a benefit that is being paid on the
basis of the provision of an item or service
does not meet the requirement that fixed
indemnity excepted benefits coverage pro-
vide benefits on the basis of a period of
hospitalization or illness.
The Departments will closely examine
as part of potential enforcement actions
whether any product offered as fixed
indemnity excepted benefits coverage in
the group market that claims to provide
benefits per day (or other period) of hos-
pitalization or illness is in effect making
payment on any other basis, such as a
per-service or per-item basis, for exam-
ple, by simply affixing a “per day” term
to benefits offered that are related to the
receipt of specific items and services.
HHS will take a similar approach with
respect to products offered as fixed indem-
nity excepted benefits in the individual
market if the proposal to require that indi-
vidual market fixed indemnity excepted
benefits be paid only on a per-period basis
is finalized.
In addition, some interested parties
have suggested that a fixed indemnity
plan that pays benefits on a per-service
schedule is paying benefits regardless
of the amount of expenses incurred if
the plan does not vary benefits based on
the actual amounts charged for services
received. However, varying benefits based
on items or services increases the risk that
consumers will confuse fixed indemnity
excepted benefits coverage with compre-
hensive coverage, undermining a central
reason for exempting this type of cover-
age from the Federal consumer protec-
tions and requirements for comprehensive
178
When analyzing whether a policy, certificate, or contract of insurance is subject to the federal consumer protections and requirements for comprehensive coverage, the Departments look
past the label used, to examine whether the policy, certificate, or contract of insurance meets applicable requirements or conditions to qualify as an excepted benefit, or whether it is compre-
hensive coverage that is subject to the federal consumer protections and requirements applicable to such coverage.

Bulletin No. 2023–33 521 August 14, 2023
coverage. The provisions of these pro-
posed rules to require that fixed indemnity
excepted benefits coverage pay benefits in
a fixed amount regardless of the actual or
estimated amount of expenses incurred,
services or items received, or severity
of illness or injury experienced would
help further distinguish fixed indemnity
excepted benefits coverage from compre-
hensive coverage, mitigate the potential
for consumers to confuse the two types
of coverage, and thereby reduce the risk
that a consumer would enroll in fixed
indemnity excepted benefits coverage as a
replacement for or alternative to compre-
hensive coverage.
The Departments are also consider-
ing whether the requirement that hospital
or other fixed indemnity insurance pay a
fixed dollar amount “per day (or per other
period) of hospitalization or illness” in
the group market regulations
179
should be
interpreted as a requirement that benefits
be paid on the basis of an actual period
of time during which a covered individual
experiences a qualifying period of hospi-
talization or illness (subject to the terms
of the contract) in order to qualify as an
excepted benefit. Under this interpreta-
tion, hospital or fixed indemnity insurance
that pays a fixed dollar benefit on a per-pe-
riod basis but not specifically related to
a period of “hospitalization or illness”
– such as $50 per day that an individual
receives one or more specified screening
tests – would not qualify as fixed indem-
nity excepted benefits. For example, ben-
efit payments that are provided solely on
the basis of the receipt of a surgical ser-
vice or medical exam rather than a period
of time during which a covered individ-
ual is hospitalized or experiences an ill-
ness would not qualify as fixed indemnity
excepted benefits under the approach the
Departments are considering.
The Departments seek comment on
this interpretation, including how adopt-
ing this approach would affect existing
products that are sold and marketed as
fixed indemnity excepted benefits cover-
age and how such an interpretation would
enhance or detract from consumer access
to high-quality, affordable health care.
HHS similarly requests comment on the
effects of applying this interpretation of
the phrase “per day (or per other period) of
hospitalization or illness” in the individual
market regulation at 45 CFR 148.220(b)
(ii),
180
if the proposal to require that indi-
vidual market fixed indemnity excepted
benefits be paid only on a per-period basis
is finalized and the Departments finalize
this additional interpretation of what it
means to provide benefit payments in a
“fixed” amount.

Finally, the Departments propose to
amend the payment standards for fixed
indemnity excepted benefits coverage
to require that benefits be paid in a fixed
amount regardless of any other character-
istics particular to a course of treatment
received by the covered participant or
beneficiary. This standard is proposed as
part of the proposed new payment stan-
dards in the group market regulations at
26 CFR 54.9831-1(c)(4)(ii)(D)(1), 29
CFR 2590.732(c)(4)(ii)(D)(1), and 45
CFR 146.145(b)(4)(ii)(D)(1). For pur-
poses of this proposal, a “course of treat-
ment” refers to a coordinated series of
items or services intended to treat a partic-
ular health condition over a fixed period of
time or indefinitely, pursuant to a plan of
care established and managed by a health
care professional or team of health care
professionals. For example, an oncolo-
gist may establish a course of treatment
for an individual with a cancer diagnosis
that includes a sequence of surgery, che-
motherapy, and radiation, scheduled to
begin and end over a set period of months;
or a psychiatrist and therapist may work
together to establish a course of treatment
for an individual with a chronic mental
health condition that includes prescrip-
tion medication and group and individual
talk therapy on an ongoing basis without a
specified end date.
Because a course of treatment is a
set of coordinated services, interpret
-
ing “fixed” benefits to exclude payments
based on a course of treatment is aligned
with and strengthens the proposal to
require that benefits be paid regardless of
items or services received. Such interpre
-
tation also
prevents plans and issuers of
hospital indemnity or other fixed indem-
nity insurance from basing payment on a
set of multiple items or services, thereby
circumventing the requirement that pay-
ment not be based on items or services
received. It is similarly aligned with the
proposals to require that benefits be paid
regardless of actual or estimated cost of
services and regardless of the severity of
illness or injury. Additionally, consumers
are more likely to have difficulty distin-
guishing between comprehensive cover-
age and fixed indemnity excepted benefits
coverage that adopts such benefit designs
and are therefore more likely to enroll in
fixed indemnity excepted benefits cover-
age under the mistaken belief that it is a
suitable replacement for or alternative to
comprehensive coverage.
The Departments are concerned about
the practice among some issuers, employ-
ers, agents, brokers, and associations of
offering fixed indemnity excepted benefits
coverage as a package in combination with
other products (including other excepted
benefits) in order to appear to provide
comprehensive coverage.
181
In addition,
as discussed in section III.B.1.e of this
preamble, the Departments are concerned
about the practice among some employers
and issuers of presenting a group health
plan that includes only limited benefits
coupled with an extensive fixed indemnity
policy. In light of the potential harm to
consumers who may enroll in fixed indem-
nity excepted benefits coverage under the
mistaken impression that they have access
to comprehensive coverage because it was
paired with a limited employer-sponsored
group health plan, the Departments are of
the view that prohibiting fixed indemnity
excepted benefits coverage from paying
benefits on the basis of a course of treat-
ment would further reduce the risk that this
coverage would be packaged with other
forms of coverage to circumvent Federal
consumer protections and requirements
179
26 CFR 54.9831-1(c)(4)(i), 29 CFR 2590.731-1(c)(4)(i), and 45 CFR 146.145(b)(4)(i).
180
As discussed in section III.B.1.f of this preamble, HHS is also proposing a technical amendment to redesignate 45 CFR 148.220(b)(4)(ii) as 45 CFR 148.220(b)(4)(i).
181
Palanker, Dania and Kevin Lucia (2021). “Limited Plans with Minimal Coverage Are Being Sold as Primary Coverage, Leaving Consumers at Risk,” Commonwealth Fund, available at:
https://www.commonwealthfund.org/blog/2021/limited-plans-minimal-coverage-are-being-sold-primary-coverage-leaving-consumers-risk.

August 14, 2023 522 Bulletin No. 2023–33
for comprehensive coverage. Therefore,
the Departments propose to adopt a new
interpretation of what it means for fixed
indemnity excepted benefits coverage to
provide “fixed” benefits and require such
coverage to also pay benefits in a “fixed”
amount that does not vary based on the
characteristics particular to a course of
treatment received by a covered partici-
pant or beneficiary. The Departments seek
comments on whether this proposal is a
necessary complement to the other addi-
tional fixed payment standards in these
proposed rules.
The Departments also propose includ-
ing a new example (Example 2) in the
group market regulations, at new pro-
posed 26 CFR 54.9831-1(c)(4)(iv)(B),
29 CFR 2590.732(c)(4)(iv)(B), 45 CFR
146.145(b)(4)(iii)(B), to illustrate the
requirement that fixed indemnity excepted
benefits coverage in the group market
must pay a fixed dollar amount per day
(or per other period) of hospitalization
or illness. This proposed example would
also illustrate the new payment stan-
dards proposed in these rules that fixed
indemnity excepted benefits coverage
in the group market pay benefits with-
out regard to services received. This new
example describes a group health plan or
health insurance issuer offering coverage
through an insurance policy that provides
benefits related to the receipt of specific
items and services in a fixed amount, such
as $50 per blood test or $100 per visit. The
example concludes that the policy would
not qualify as fixed indemnity excepted
benefits coverage, because the benefits
are not paid in a fixed dollar amount per
day (or per other time period) of hospital-
ization or illness. The proposed example
also explains that the conclusion would
be the same even if the policy added a
per day (or per other time period) term to
the benefit description, such as “$50 per
blood test per day,” because the benefits
are not paid regardless of the services or
items received. The Departments also pro-
pose to retain, while making technical and
conforming amendments to, the existing
example (which the Departments propose
to designate as Example 1) in the group
market rules.
182

HHS also proposes parallel amend-
ments to the individual market fixed
indemnity excepted benefits coverage
regulation at new proposed 45 CFR
148.220(b)(4)(ii) to require that fixed
indemnity excepted benefits coverage in
the individual market provide benefits in
a “fixed” amount regardless of the actual
or estimated amount of expenses incurred,
services or items received, severity of ill-
ness or injury experienced by a covered
individual, or any other characteristics
particular to a course of treatment received
by a covered individual.
In addition, and as discussed in greater
detail in section III.B.1.e of this pream-
ble, HHS proposes to include language
in new proposed 45 CFR 148.220(b)(4)
(ii) to align with section 2722(c)(2)(C) of
the PHS Act, which provides that benefits
under fixed indemnity excepted benefits
coverage in the individual market must
also be paid without regard to whether
benefits are provided with respect to the
event under any other health insurance
coverage maintained by the same health
insurance issuer. HHS further proposes
in new proposed 45 CFR 148.220(b)(4)
(ii) to affirm that benefits cannot be paid
on any other basis (such as on a per-item
or per-service basis). For the same reasons
as described in this section with respect
to the Departments’ parallel changes to
the group market regulations, HHS is of
the view that these changes to the inter-
pretation of what it means to provide ben-
efits in a “fixed” amount are necessary
to ensure that issuers of fixed indemnity
excepted benefits coverage in the individ-
ual market are not able to circumvent the
fixed payment standards at new proposed
45 CFR 148.220(b)(4)(ii) that the cov-
erage be provided on a per-period basis.
These proposed changes would also align
the payment standards for what it means to
provide “fixed” benefits across the group
and individual markets and serve to fur-
ther distinguish fixed indemnity excepted
benefits coverage from comprehensive
coverage in both markets.
The Departments request comments on
all aspects of these proposed additional
standards for fixed payment as they would
apply to fixed indemnity excepted benefits
coverage offered in the group and individ-
ual markets, as well as the proposed new
example to illustrate the proposed new
“fixed” payment standards. Specifically,
the Departments seek comments on the
effectiveness of the proposed additional
fixed payment standards in furthering the
Departments’ goal of differentiating fixed
indemnity excepted benefits coverage
from comprehensive coverage to reduce
the likelihood that consumers would enroll
in fixed indemnity excepted benefits cov-
erage as an alternative to or replacement
for comprehensive coverage, including
feedback on each proposed payment stan-
dard. Additionally, the Departments seek
comments on how the proposed payment
standards, if finalized, would interact
with the existing requirement that group
market fixed indemnity excepted benefits
coverage provide benefits on a per-period
basis only, either individually or collec-
tively, and whether the proposed payment
standards would support the effectiveness
of the per-period basis requirement and
prevent issuers from attempting to cir-
cumvent Federal requirements. Similarly,
HHS seeks comments on how the pro-
posed additional fixed payment stan-
dards would interact with the proposed
requirement that individual market fixed
indemnity excepted benefits coverage
offer benefits on a per-period basis only,
if the per-period-only requirement were
finalized, including whether the proposed
additional payment standards would sup-
port the effectiveness of the proposed
per-period payment standard, either indi-
vidually or collectively.
c. Payments Made Directly to Providers
The Departments are aware that some
hospital indemnity and other fixed indem-
nity insurance in the group and individual
markets labeled as excepted benefits pay
benefits directly to the providers or facili-
ties providing the services or items, rather
182
The Departments propose to retain the existing example describing a group health plan that provides benefits only for hospital stays at a fixed percentage of expenses up to a maximum of
$100 a day in new proposed 26 CFR 54.9831-1(c)(4)(iv)(A), 29 CFR 2590.732(c)(4)(iv)(A), and 45 CFR 146.145(b)(4)(iii)(A). Consistent with the conclusion reflected in the Departments’
current group market regulations, even if the benefits under such a policy satisfy the other applicable conditions, because the policy pays benefits based on a percentage of expenses incurred,
the policy does not qualify as excepted benefits coverage. This is the result even if, in practice, the policy pays the maximum of $100 for every day of hospitalization.

Bulletin No. 2023–33 523 August 14, 2023
than to the participant, beneficiary, or
enrollee. These arrangements may remove
participants, beneficiaries, and enrollees
from the payment transaction entirely,
if the benefit amount under the hospital
indemnity or other fixed indemnity insur-
ance is less than or equal to the provid-
er’s or facility’s billed charges for care.
In other cases, the hospital indemnity or
other fixed indemnity insurance may pay
benefits directly to the provider or facility
as a form of reimbursement for items and
services, and issue any balance of benefits
to the participant, beneficiary, or enrollee
after paying the provider or facility.
For example, one fixed indemnity
insurance issuer provides policyholders
with a debit card that allows for payment
of benefits at the point of service in the
form of a temporary advance of the ben-
efits the policyholder may ultimately be
eligible to receive. In these cases, the
policyholder cannot access any benefit
payment under the fixed indemnity insur-
ance until the advance payment to the
provider or facility is reconciled with the
actual costs and a final determination of
benefits is made. Other products labeled
as fixed indemnity insurance advertise
plan ID cards that participants, beneficia-
ries, or enrollees are encouraged to use to
allow providers to file claims directly with
the plan or third-party administrator.
183

Another fixed indemnity plan advertises
that members who go to an “in-network”
retail clinic or urgent care clinic for cov-
ered services for the cost of a flat “co-pay”
will avoid a “balance bill,” suggesting that
the fixed indemnity coverage is providing
direct payment for “in-network” services.
By providing direct reimbursement
for health care items and services to a
provider or facility, these arrangements
further obscure the differences between
fixed indemnity excepted benefits cover-
age and comprehensive coverage. In the
Departments’ view, these arrangements
generally are not structured in a way that
would meet the current requirement in the
group market for benefits to be paid on a
per-period basis or the parallel proposed
requirement for the individual market.
Because the amount of any payment to
a provider is often based on the amount
reimbursed by another plan or coverage,
these arrangements may also be structured
in a way that does not meet the statutory
requirement that benefits be noncoordi-
nated and paid without regard to whether
benefits are provided with respect to the
event under any group health plan main-
tained by the same plan sponsor, or with
respect to individual health insurance cov-
erage, under any health insurance cover-
age offered by the same health insurance
issuer.
184
The Departments are also con-
cerned that some of these arrangements
may not meet the existing requirement for
fixed indemnity excepted benefits cover-
age to pay a fixed amount regardless of the
amount of the expenses incurred.
185
The Departments reiterate that it is
important to look past the label used on
any given product to examine whether
the coverage meets applicable require-
ments to qualify as an excepted benefit or
is instead coverage that is subject to the
Federal consumer protections and require-
ments for comprehensive coverage. The
Departments will closely examine as
part of enforcement actions
186
whether
any product labeled as fixed indemnity
excepted benefits coverage actually sat-
isfies all the applicable requirements,
including products that employ a design
feature (as opposed to a case-by-case
assignment of benefits specifically made
by a covered participant, beneficiary, or
enrollee) under which benefits are paid
directly to health care providers and facil-
ities rather than to the policyholder or
participant. HHS intends to follow a sim-
ilar approach for examining whether any
given individual market product meets
applicable requirements to qualify as an
excepted benefit or is instead compre-
hensive coverage subject to the Federal
consumer protections and requirements
for comprehensive coverage.
Although these proposed rules do not
include policy or regulatory changes spe-
cific to the payment of benefits to pro-
viders under fixed indemnity excepted
benefits coverage, the Departments seek
comments on changes that interested par-
ties think may be useful in this context.
The Departments
also seek comments on
whether additional guidance or rulemak-
ing is needed with respect to such pay-
ment arrangements.
d. Notice
To further ensure that consumers pur-
chasing fixed indemnity excepted benefits
coverage are aware of the limitations of
the coverage and that it is not mistakenly
purchased as an alternative or replace-
ment for comprehensive coverage, the
Departments propose to require that a
consumer notice be provided in relation
to group market fixed indemnity excepted
benefits coverage.
By requiring a notice be provided
to consumers considering enrolling or
re-enrolling in group market fixed indem-
nity excepted benefits coverage, the
Departments aim to reduce the potential
for consumers to mistakenly enroll in
hospital indemnity or other fixed indem-
nity insurance as their primary source of
coverage and increase consumer under-
standing of the differences between fixed
indemnity excepted benefits coverage
and comprehensive coverage. As noted
in section II.B of this preamble, individ-
uals belonging to historically marginal-
ized populations often experience greater
health challenges, as well as greater chal-
lenges accessing and using health care
services, compared to the general popu-
lation, including worse health outcomes,
higher rates of chronic conditions, lower
access to health care, and more frequent
experiences of discrimination in health
care settings.
187
The Departments are
183
Young, Christen Linke, and Kathleen Hannick (2020). “Fixed Indemnity Coverage is a Problematic Form of “Junk” Insurance,” USC-Brookings Schaeffer Initiative for Health Policy,
available at: https://www.brookings.edu/blog/usc-brookings-schaeffer-on-health-policy/2020/08/04/fixed-indemnity-health-coverage-is-a-problematic-form-of-junk-insurance.
184
See section 9831(c)(2)(C) of the Code, section 732(c)(2)(C) of ERISA, and sections 2722(c)(2)(B)-(C) of the PHS Act.
185
See 26 CFR 54.9831-1(c)(4)(i), 29 CFR 2590.732(c)(4)(i), 45 CFR 146.145(b)(4)(i), and 45 CFR 148.220(b)(4)(iii).
186
For an overview of applicable enforcement mechanisms, see Staman, Jennifer (2020). “Federal Private Health Insurance Market Reforms: Legal Framework and Enforcement,”
Congressional Research Service, available at https://crsreports.congress.gov/product/pdf/R/R46637.
187
See CMS Office of Minority Health (2022). “The Path Forward: Improving Data to Advance Health Equity Solutions,” available at: https://www.cms.gov/files/document/path-forward-
he-data-paper.pdf.

August 14, 2023 524 Bulletin No. 2023–33
concerned that members of these popu-
lations may be particularly vulnerable to
misinformation or misleading or aggres-
sive sales tactics. The COVID-19 PHE
amplified these longstanding inequities,
resulting in disparate rates of COVID-19
infection, hospitalization, and death.
188
In
light of these concerns, as well as research
identifying disparities in health insurance
literacy among certain racial and ethnic
minorities and people with incomes below
the FPL,
189
these proposals aim to ensure
that all consumers, including those in
underserved communities, have the nec-
essary information to make an informed
choice after considering and comparing
the full range of health coverage options
available to them.
The current notice requirement, which
applies only in the individual market,
requires that the following language be
provided in application materials in at
least 14-point type:
“THIS IS A SUPPLEMENT TO
HEALTH INSURANCE AND IS NOT A
SUBSTITUTE FOR MAJOR MEDICAL
COVERAGE. LACK OF MAJOR
MEDICAL COVERAGE (OR OTHER
MINIMUM ESSENTIAL COVERAGE)
MAY RESULT IN AN ADDITIONAL
PAYMENT WITH YOUR TAXES.”
190

In order to align the notice with the
changes made by the Tax Cuts and Jobs
Act to section 5000A of the Code, and
to clarify the message to consumers, the
Departments propose to require the fol-
lowing consumer notice for group mar-
ket fixed indemnity excepted benefits
coverage:
“Notice to Consumers About Fixed
Indemnity Insurance
IMPORTANT: This is fixed indem-
nity insurance. This isn’t comprehen-
sive health insurance coverage and
doesn’t have to include most Federal
consumer protections for health
insurance.
Visit HealthCare.gov online or call
1-800-318-2596 (TTY: 1-855-889-
4325) to review your options for
comprehensive health insurance. If
you’re eligible for coverage through
your employer or a family member’s
employer, contact the employer for
more information. Contact your State
department of insurance if you have
questions or complaints about this
policy.”
This proposed notice would not affect
any separate notice requirements under
applicable State law, except to the extent
that a State notice requirement would
prevent application of any Federal notice
requirement.
In developing the proposed notice lan-
guage, the Departments sought to balance
the goals of distinguishing fixed indem-
nity excepted benefits coverage from
comprehensive coverage and combat-
ting potential sources of misinformation
by directing consumers to appropriate
resources to learn more about comprehen-
sive coverage, with the need to provide a
concise, understandable notice that would
be meaningful to and actionable by con-
sumers. After consulting with plain- lan-
guage experts, the Departments propose
to require the notice as proposed in this
section of the preamble, including both
the content and formatting of the notice,
in order to promote readability, including
requiring the notice be provided in sen-
tence
case rather than all-caps case (except
for the lead-in word “IMPORTANT”)
and requiring the limited use of bold
formatting.
191
The Departments propose to require
that plans and issuers prominently display
the notice (in either paper or electronic
form, including on a website) in at least
14-point font, on the first page of any mar-
keting, application, and enrollment mate-
rials that are provided to participants at or
before the time participants are given the
opportunity to enroll in the coverage. For
this purpose, the Departments would con-
sider marketing materials to include any
documents or website pages that adver-
tise the benefits or opportunity to enroll
(or reenroll) in fixed indemnity excepted
benefits coverage. The Departments are of
the view that requiring plans and issuers
of
fering fixed indemnity excepted benefits
coverage in the group market to provide
the proposed notice to participants (rather
than to both participants and any benefi-
ciaries) would appropriately balance the
need to ensure that consumers who are
considering whether to enroll themselves
and their beneficiaries in such coverage
are sufficiently informed of their health
coverage options with the administrative
burden on plans and issuers to provide
the notice. The Departments propose to
consider the notice to be prominently dis-
played if it would be easily noticeable to a
typical consumer within the context of the
page (either print or electronic) on which
it is displayed (for example, using a font
color that contrasts with the background
of the document; ensuring the notice is not
obscured by any other written or graphic
content on the page; and, when displayed
on a website, ensuring the notice is visi-
ble without requiring the viewer to click
on a link to view the notice). Additionally,
if participants are required to reenroll (in
either paper or electronic form) for pur-
poses of renewal or reissuance of the group
market fixed indemnity excepted benefits
coverage, the notice would be required to
be displayed in the reenrollment materials
that are provided to the participants at or
before the time they are given the oppor-
tunity to reenroll in coverage. If a plan or
issuer provides the required group market
notice in accordance with the timeframes
in these proposed rules, the obligation to
provide the notice would be satisfied for
both the plan and issuer.
HHS also proposes to revise the exist-
ing individual market consumer notice
requirement to use the same content and
formatting proposed to be required for the
188
Moore, Jazmyn, Carolina Luna-Pinto, Heidi Cox, Sima Razi, Michael St. Louis, Jessica Ricaldi, and Leandris Liburd (2021). “Promoting Health Equity During the COVID-19 Pandemic,
United States,” Bulletin of the World Health Organization, available at: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8795842.
189
Edward, Jean, Amanda Wiggins, Malea Hoepf Young, and Mary Kay Rayens (2019). “Significant Disparities Exist in Consumer Health Insurance Literacy: Implications for
Health Care Reform,” Health Literacy Research and Practice, available at: https://pubmed.ncbi.nlm.nih.gov/31768496/. See also Villagra, Victor and Bhumika Bhuva (2019).
“Health Insurance Literacy: Disparities by Race, Ethnicity, and Language Preference,” The American Journal of Managed Care, available at: https://www.ajmc.com/view/
health-insurance-literacy-disparities-by-race-ethnicity-and-language-preference.
190
45 CFR 148.220(b)(4)(iv). In these proposed rules, HHS proposes to revise and move the individual market consumer notice to 45 CFR 148.220(b)(4)(iii).
191
Arbel, Yonathan and Andrew Toler (2020). “ALL-CAPS,” Journal of Empirical Legal Studies, available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3519630. (Finding that
all-caps clauses in consumer contracts fail to appreciably improve consumer understanding or information recall, and may have a disproportionately harmful effect on older consumers).

Bulletin No. 2023–33 525 August 14, 2023
group market fixed indemnity excepted
benefits coverage notice and to move
the individual market notice requirement
to new proposed 45 CFR 148.220(b)(4)
(iii). With respect to the individual market
fixed indemnity excepted benefits cover-
age notice, HHS proposes to require that
issuers prominently display the notice (in
either print or electronic form) in at least
14-point font on the first page of any mar-
keting, application, and enrollment mate-
rials that are provided at or before the time
an individual has the opportunity to enroll
or re-enroll in coverage, in alignment
with the proposed group market notice
requirements set out in this section of the
preamble. For this purpose, HHS would
also consider marketing materials to
include any documents or website pages
that advertise the benefits or opportunity
to enroll (or reenroll) in fixed indemnity
excepted benefits coverage. HHS further
proposes that the individual market notice
must also be provided on the first page of
the policy, certificate, or contract of insur-
ance, including any documents related to
renewals or extensions of fixed indemnity
excepted benefit coverage. Similar to the
proposed group market notice require-
ment, the proposed individual market
notice would not affect any separate notice
requirements under applicable State law,
except to the extent that a State notice
requirement would prevent the application
of any Federal notice requirement.
The Departments are proposing slightly
different placement requirements with
respect to the group market consumer
notice compared to those proposed by
HHS with respect to the individual market
consumer notice. These different proposed
placement requirements are intended to
reflect the differences between the types of
documents that consumers in the individual
market typically receive when considering
enrolling or reenrolling in fixed indemnity
excepted benefits coverage compared to
participants in the group market.
Because the group policy, certificate,
or contract of insurance in the group mar-
ket is often provided to the plan sponsor
or the group health plan administrator, the
Departments do not propose to require
that plans and issuers include the con-
sumer notice in these documents for group
market fixed indemnity excepted bene-
fits coverage. Rather, the Departments
propose to require that plans and issuers
provide this notice on the first page of
any marketing, application and enroll-
ment materials (including on a website
advertising or offering an opportunity to
enroll in fixed indemnity excepted ben-
efits coverage) provided to participants
at or before the time they are given the
opportunity to enroll. In addition, if par-
ticipants are required to reenroll (in either
paper or electronic form) for purposes of
renewal or reissuance of group market
fixed indemnity excepted benefits cover-
age, the notice must be displayed in all
reenrollment materials that are provided
to the participants at or before the time
participants are given the opportunity to
reenroll in coverage.
With respect to individual market fixed
indemnity excepted benefits coverage,
HHS proposes that issuers in the individual
market also provide the notice on the first
page of the policy, certificate, or contract
of insurance, including renewals or exten-
sions, because individual market consumers
are likely to receive these documents upon
enrollment. This is in addition to providing
the notice in all marketing, application and
enrollment (or reenrollment) materials for
individual market excepted benefit cover-
age, and also includes prominently display-
ing the notice on websites that advertise or
offer an opportunity to enroll (or reenroll)
in fixed indemnity excepted benefits cov-
erage. These proposed requirements related
to notice placement are intended to ensure
that the notice is provided on documents
that consumers are most likely to have the
opportunity to review before application,
enrollment or reenrollment, based on the
Departments’ and HHS’ understanding
of how consumers receive information
related to group market versus individual
market fixed indemnity excepted benefits
coverage.
The Departments also solicit com-
ments on whether it would be beneficial to
consumers to require plans and issuers to
include some language on the notice that
clearly informs consumers that the notice
is an officially required document, such as
“This notice is required by Federal law.”
The Departments seek comments on all
aspects of the proposed consumer notice
for both individual and group market
fixed indemnity excepted benefits cov-
erage, including whether its language,
formatting, and placement would achieve
the stated aims of informing consumers of
the nature of the coverage and reducing
misinformation, and whether alternative
or additional language or mechanisms or
timing for delivery could better accom-
plish these goals. For example, the
Departments seek comments on whether
providing more detailed information
about the Federal consumer protections
and requirements for comprehensive cov-
erage versus fixed indemnity excepted
benefits coverage, similar to the proposed
amendments to the consumer notice for
STLDI discussed in section III.A.4 of this
preamble, would be valuable to consum-
ers; and if so, what details would be most
helpful to highlight for consumers and
what format (such as a chart, list, or other
presentation) would be most effective to
convey this more detailed information.
In addition, the Departments seek com-
ment on alternative language to convey
the information in the proposed notice.
The Departments offer for consideration
an illustrative example. This alternative
notice would include the information in
the proposed notice, with simplified word
choice and reduced sentence length in
order to further improve readability. The
Departments request feedback on which
version of the notice more effectively
communicates information to individuals.
The text of the alternative proposed fixed
indemnity excepted benefits coverage
notice is as follows:
“WARNING
This is not comprehensive health insur-
ance. This is fixed indemnity insurance.
This may provide a cash benefit when
you are sick or hospitalized. It is not
intended to cover the cost of your care.
Contact your State department of insur-
ance if you have questions or complaints
about this policy.
For info on comprehensive health insur-
ance coverage options:
• Visit HealthCare.gov online
or call 1-800-318-2596 (TTY:
1-855-889-4325)
• Contact your employer or family
member’s employer”

August 14, 2023 526 Bulletin No. 2023–33
Similar to the proposed consumer
notice for STLDI, the Departments are
also considering whether the fixed indem-
nity excepted benefits consumer notice
should include State-specific contact
language. The Departments therefore
also seek comments on any benefits or
burdens associated with requiring plans
and issuers of fixed indemnity excepted
benefits coverage to direct consumers to
State-specific resources, including requir-
ing that the notice identify the applicable
State Exchange, if the fixed indemnity
excepted benefits coverage is filed in a
State that does not use HealthCare.gov.
The Departments also seek comments
on any burdens that would be created by
a requirement to provide State-specific
contact information for the State agency
responsible for regulating fixed indemnity
excepted benefits coverage in the State
where the coverage is filed, rather than a
generic reference to the consumer’s State
department of insurance, as is proposed. If
the notice were finalized to require State-
specific information, for products that are
filed in multiple States, the Departments
are considering and solicit comments
on whether the notice should include
the name of and the phone number for
the State department of insurance of the
State in which the individual to whom the
fixed indemnity excepted benefits cov-
erage is sold or marketed resides, unless
the product is not filed in that State. If the
product is not filed in the State in which
the individual to whom the fixed indem-
nity excepted benefits coverage is sold or
marketed resides, under this approach, if
adopted, the Departments would require
that the notice include the name and phone
number for the department of insurance
of the State in which the fixed indemnity
excepted benefits coverage policy is filed.
The Departments particularly seek
comments from members of underserved
communities, and organizations that
serve such communities, on whether the
language accessibility, formatting, and
content of the notice sufficiently mitigate
barriers that exist to help all individuals
read, understand, and consider the full
range of their health coverage options.
The Departments also seek comments on
the proposed requirement to provide the
notice in the marketing, application, and
enrollment (or reenrollment) materials for
group market coverage, and in the policy,
certificate, or contract of insurance, as
well as in the marketing, application and
enrollment (or reenrollment) materials,
for individual market coverage, including
the extension of the notice requirement
to websites that advertise or offer the
opportunity to enroll (or reenroll) in fixed
indemnity excepted benefits coverage in
the individual and group markets.
The Departments are also interested
in comments on whether the proposed
placement requirements would substan-
tially improve the likelihood that con-
sumers have a meaningful opportunity
to review the notice and their health cov-
erage options before applying, enroll-
ing, or reenrolling in the fixed indemnity
excepted benefits coverage, as well as any
practical or logistical barriers to providing
this notice requirement as proposed.
e. “Noncoordination” Requirements
To be considered excepted benefits cov-
erage, hospital indemnity or other fixed
indemnity insurance must provide ben-
efits on an independent, noncoordinated
basis.
192
Thus, benefits under the coverage
must be provided under a separate policy,
certificate, or contract of insurance.
193
In
addition, consistent with section 9831(c)
(2)(B) of the Code, section 732(c)(2)(B)
of ERISA, and section 2722(c)(2)(B) of
the PHS Act, the group market regula-
tions at 26 CFR 54.9831-1(c)(4)(ii)(B), 29
CFR 2590.732(c)(4)(ii)(B), and 45 CFR
146.145(b)(4)(ii)(B) prohibit coordination
between the provision of benefits under
fixed indemnity excepted benefits cover-
age and an exclusion of benefits under any
group health plan maintained by the same
plan sponsor. Consistent with section
9831(c)(2)(C) of the Code, section 732(c)
(2)(C) of ERISA, and section 2722(c)
(2)(C) of the PHS Act, the group market
regulations at 26 CFR 54.9831-1(c)(4)(ii)
(C), 29 CFR 2590.732(c)(4)(ii)(C), and
45 CFR 146.145(b)(4)(ii)(C) further pro-
vide that benefits under fixed indemnity
excepted benefits coverage must be paid
with respect to an event without regard to
whether benefits are provided with respect
to such an event under any group health
plan maintained by the same plan sponsor.
Despite these statutory and regulatory
requirements regarding noncoordination,
the Departments are aware that some
employers offer employees a “package”
of coverage options that include a non-ex-
cepted benefit group health plan that pro-
vides minimal coverage (for example,
coverage of preventive services only) with
fixed indemnity insurance that provides
benefits associated with receiving a broad
category of other services, but is labeled as
an excepted benefit. An employee’s cov-
erage associated with any non-preventive
service provided under the fixed indem-
nity insurance is typically treated by the
plan or issuer as exempt from the Federal
consumer protections and requirements
for comprehensive coverage because the
insurance has been labeled an excepted
benefit.
194
The Departments are concerned
that some employers are attempting to cir-
cumvent the Federal consumer protections
and requirements for comprehensive cov-
erage that otherwise apply to group health
plans by offering most benefits associated
with receiving health care services as fixed
indemnity insurance with an excepted
benefit label, potentially leaving employ-
ees without crucial Federal consumer pro-
tections. This is particularly concerning if
the employees are under the impression or
are misled to believe that their employee
health benefits package or plan provides
comprehensive coverage and therefore
forgo pursuing other available options that
would provide comprehensive coverage.
To further address this concern and
capture the Departments’ interpretation
of the requirement that hospital indem-
nity and other fixed indemnity insurance
must offer “noncoordinated” benefits to
be considered an excepted benefit, the
Departments propose to include a new
example (Example 3) in the group market
192
See section 9832(c) of the Code, section 733(c)(3) of ERISA, and sections 2722(c), 2763(b) and 2791(c)(3) of the PHS Act.
193
Id.
194
The Departments note that such an arrangement would not be treated as providing minimum value if it failed to provide substantial coverage of inpatient hospital services and physician
services. 26 CFR 1.36B-6; 45 CFR 156.145.

Bulletin No. 2023–33 527 August 14, 2023
regulations at 26 CFR 54.9831-1(c)(4)
(iii)(C), 29 CFR 2590.731-1(c)(4)(iii)(C),
and 45 CFR 146.145(b)(4)(iii)(C).
195
This
new example illustrates the Departments’
proposed interpretation of the “noncoordi-
nation” requirements for hospital indem-
nity or other fixed indemnity coverage to
qualify as excepted benefits and reflects
that the prohibition on coordination of
benefits is not limited to only those sit-
uations involving a formal coordination
of benefits arrangement, but rather also
encompasses other situations that involve
“coordination.”
In this proposed new example, an
employer sponsors a group health plan
that provides two benefit packages. The
first benefit package excludes benefits
associated with all services other than
preventive services.
196
The second bene-
fit package provides coverage through an
insurance policy that pays a fixed dollar
amount per day of hospitalization or ill-
ness, for a wide variety of illnesses that
are not preventive services covered under
the first benefit package. The two benefit
packages are offered to employees at the
same time and can be elected together.
The benefit packages are not subject to
a coordination-of-benefits arrangement.
However, as explained in the new exam-
ple, because the benefits under the fixed
indemnity insurance are designed to fill
coverage gaps in, and are effectively
tied to an exclusion of benefits under,
the group health plan maintained by the
same plan sponsor (in this case, the pre-
ventive services benefit package), the
benefits offered under the fixed indemnity
insurance would not satisfy the “nonco-
ordination” requirements. Instead, under
this arrangement, there is coordination
between the provision of benefits under the
fixed indemnity insurance with an exclu-
sion(s) of benefits under a group health
plan maintained by the same plan sponsor.
This arrangement violates the “noncoor-
dination” requirements because benefits
under the fixed indemnity insurance are
provided, and therefore paid, with respect
to an event with regard to (rather than
without regard to) whether benefits are
provided with respect to the event under a
group health plan maintained by the same
plan sponsor. Therefore, the insurance
policy under the second benefit package
is not hospital indemnity or other fixed
indemnity insurance that is an excepted
benefit under the Federal framework. The
proposed new example also notes that
the conclusion would be the same even if
the benefit packages were not offered to
employees at the same time or if the sec-
ond benefit option’s insurance policy did
not pay benefits associated with a wide
variety of illnesses.
The term “noncoordination” (or “coor-
dination”) for purposes of hospital indem-
nity or other fixed indemnity insurance
to be considered excepted benefits is not
defined in the relevant statutory provisions
or enacting legislation. While the current
examples make clear that the existing
framework prohibits coordination of ben-
efits when there is a formal coordination
of benefits arrangement, the current group
market regulations do not directly address
other situations that involve coordination
and therefore violate the “noncoordina-
tion” requirements. The new proposed
example, which would be added to the
group market fixed indemnity excepted
benefits coverage regulations, reflects the
Departments’ proposed interpretation of
the undefined term “noncoordination,”
when applied to fixed indemnity excepted
benefits coverage, as also including a
scenario in which a sponsor of a group
health plan offers both hospital indem-
nity or other fixed indemnity insurance
along with a second benefit package that
excludes benefits with respect to events
that are covered by the hospital indemnity
or other fixed indemnity insurance.
In these cases, the hospital indemnity
or other fixed indemnity insurance and the
other benefit
package offered by the same
group health plan sponsor to the same
employees (and their dependents, if appli-
cable) are reasonably considered to be
“coordinated” in terms of providing com-
plementary benefits. It is the Departments’
view that these arrangements violate the
“noncoordination” requirements for hos-
pital indemnity or other fixed indemnity
insurance to be considered an excepted
benefit, even though they do not involve
formal coordination of benefits. As
explained elsewhere in this preamble
section, these arrangements
violate these
requirements because they involve coor-
dination between the provision of bene-
fits under the hospital indemnity or other
fixed indemnity insurance and an exclu-
sion of benefits under a group health plan
maintained by the same plan sponsor.
Under these arrangements, benefits are
provided, and therefore paid, under the
fixed indemnity insurance with respect to
an event with regard (rather than without
regard) to whether benefits are provided
with respect to the event under a group
health plan maintained by the same plan
sponsor. Thus, as reflected in the proposed
new example, the Departments would not
consider the hospital indemnity or other
fixed indemnity insurance offered as part
of this arrangement to be an excepted ben-
efit that is exempt from the Federal con-
sumer protections and requirements for
comprehensive coverage.
The Departments seek comments on
the proposed addition of this example to
the group market regulations and the pro-
posal to interpret the term “noncoordina-
tion” (or “coordination”) to also prohibit
situations involving benefit coordination
beyond those that involve formal coordi-
nation-of-benefits arrangements.
Although the proposed example would
be added to the group market regulations,
parallel statutory and regulatory require-
ments related to “noncoordination” apply
in the individual market. Under 2722(c)
(2)(C) of the PHS Act, “noncoordinated,
excepted benefits” with respect to indi-
vidual market hospital indemnity or other
195
As detailed in section III.B.1.b of this preamble, the Departments also propose including another new example (Example 2) in the group market regulations, at new proposed 26 CFR
54.9831-1(c)(4)(iv)(B), 29 CFR 2590.732(c)(4)(iv)(B), and 45 CFR 146.145(b)(4)(iii)(B), to illustrate the new proposed payment standards for fixed indemnity excepted benefits coverage.
196
The Departments are aware that some large employers offer group health plans that cover only preventive services, as reflected in this hypothetical example, and are not directly addressing
such plans in these proposed rules, which are instead focused on the accompanying coverage, labeled “fixed indemnity” insurance in the example. However, the Departments discourage the
provision of such limited coverage because it exposes employees to significant health and financial risk in the event that they require any health care services other than preventive services.
See, e.g., Hancock, Jay (2015). “How Not to Find Out Your Health Plan Lacks Hospital Benefits,” KFF, available at: https://khn.org/news/how-not-to-find-out-your-health-plan-lacks-hos-
pital-benefits. Additionally, such coverage would not provide minimum value, such that the employer may be subject to an assessable payment under 4980H(b) of the Code if one or more
full-time employees is certified as having enrolled in a qualified health plan for which a premium tax credit or cost-sharing reduction is allowed.

August 14, 2023 528 Bulletin No. 2023–33
fixed indemnity excepted benefits cov-
erage must be paid with respect to an
event without regard to whether benefits
are provided under any health insurance
coverage maintained by the same health
insurance issuer. Consistent with the inter-
pretation and application of the statutory
requirement that fixed indemnity excepted
benefits coverage in the individual mar-
ket must be offered on a noncoordinated
basis, HHS is proposing to modify the
requirement at current 45 CFR 148.220(b)
(4)(ii)
197
to specify that benefits under
fixed indemnity excepted benefits cover-
age must be paid with respect to an event
without regard to whether benefits are
provided with respect to such an event
under any other health coverage “main-
tained by the same issuer”. For this pur-
pose, HHS proposes that the phrase “same
issuer” would refer to the entity licensed
to sell the policy, consistent with the defi-
nition of health insurance issuer in 45
CFR 144.103. HHS solicits comments on
whether to broaden the limits on coordina-
tion to include issuers that are members of
the same controlled group.
In parallel with this proposed amend-
ment, HHS proposes to apply the same
interpretation of the term “noncoordina-
tion” to individual market fixed indemnity
excepted benefits coverage as proposed
in this preamble section for group mar-
ket fixed indemnity excepted benefits.
If this proposal is finalized, benefits that
are paid under fixed indemnity insurance
with respect to an event with regard to
whether benefits are provided with respect
to the event under any other health cover-
age maintained by the same issuer would
not meet the requirement that individual
market fixed indemnity excepted benefits
coverage be provided on a noncoordinated
basis, regardless of whether there is a for-
mal coordination-of-benefits arrangement
between the fixed indemnity insurance
and any other coverage. HHS seeks com-
ment on these proposals.
f. Technical Amendments
The Departments propose to strike
the last sentence in 26 CFR 54.9831-
1(c)(4)(i), 29 CFR 2590.732(c)(4)(i),
and 45 CFR 146.145(b)(4)(i), in order
to consolidate the requirements that are
specific to hospital indemnity or other
fixed indemnity insurance to qualify as
an excepted benefit in a new proposed
paragraph at 26 CFR 54.9831-1(c)(4)
(ii)(D), 29 CFR 2590.732(c)(4)(ii)(D),
and 45 CFR 146.145(b)(4)(ii)(D). This
current fixed payment standard would
be retained as part of the fixed payment
standards proposed to be captured in new
proposed 26 CFR 54.9831-1(c)(4)(ii)(D)
(1), 29 CFR 2590.732(c)(4)(ii)(D)(1), and
45 CFR 146.145(b)(4)(ii)(D)(1).
The Departments also propose tech-
nical amendments to clarify certain
language in the existing example (now
proposed Example 1) at new proposed
26 CFR 54.9831-1(c)(4)(iii)(A), 29 CFR
2590.732(c)(4)(iii)(A), and 45 CFR
146.146(b)(4)(iii)(A). The proposed tech-
nical amendments would clarify that the
insurance policy in the example provides
benefits only “related to” hospital stays
(as opposed to “for” hospital stays), and
emphasize the requirement that such ben-
efits must be provided on a per-period
basis. The general facts and ultimate con-
clusion in this example, however, remain
the same.
HHS further proposes a technical
amendment to the individual market
excepted benefits rules to remove the exist-
ing requirement at 45 CFR 148.220(b)(4)
(i) that fixed indemnity excepted benefits
coverage must be provided only to indi-
viduals who attest, in their fixed indem-
nity insurance application, that they have
other health coverage that is MEC, or that
they are treated as having MEC due to
their status as a bona fide resident of any
possession of the United States pursuant to
section 5000A(f)(4)(B) of the Code. This
proposal would remove the regulatory
provision that was invalidated in Central
United v. Burwell.
198
As an accompany-
ing conforming technical amendment,
HHS also proposes to move the pro-
posed revised noncoordination require-
ment described in section III.B.1.e of this
preamble, that there is no coordination
between the provision of benefits under
the individual market hospital indemnity
or other fixed indemnity insurance and
an exclusion of benefits under any other
health coverage maintained by the same
issuer, from 45 CFR 148.220(b)(4)(ii) to
paragraph (b)(4)(i).
g. Applicability Dates
In 26 CFR 54.9831-1(c)(4)
(iv), 29 CFR 2590.732(c)(4)(iv),
and 45 CFR 146.145(b)(4)(iv), the
Departments are proposing applicability
dates that distinguish between new and
existing fixed indemnity excepted ben-
efits coverage in the group market. HHS
proposes a similar approach to appli-
cability with respect to new and exist-
ing fixed indemnity excepted benefits
coverage in the individual market at 45
CFR 148.220(b)(iv). The applicability
date proposals described in this section
of the preamble are similar to the bifur-
cated approach for STLDI applicability
dates proposed at 26 CFR 54.9833-1, 29
CFR 2590.736, and 45 CFR 146.125 and
148.102 and described in section III.A.6
of this preamble.
The Departments propose that the
proposed amendments related to group
market fixed indemnity excepted benefits
coverage would apply to new coverage
that is sold or issued on or after the effec-
tive date of the final rules with respect
to plan years that begin on or after such
date. HHS proposes the same applica-
bility date for the proposed amendments
related to individual market fixed indem-
nity excepted benefits coverage for new
coverage that is sold or issued on or after
the effective date of the final rules. The
Departments are of the view that timely
implementation of the proposed amend-
ments to the fixed indemnity excepted
benefits coverage regulations is essen-
tial for maximizing the number of indi-
viduals benefiting from the consumer
protections described throughout this
preamble.
The Departments propose that the
proposed amendments related to group
market fixed indemnity excepted benefit
coverage would apply to existing cover-
age that is sold or issued before the effec-
tive date of the final rules with respect to
plan years that begin on or after January 1,
197
As discussed in section III.B.1.f of this preamble, HHS is also proposing a technical amendment to redesignate 45 CFR 148.220(b)(4)(ii) as 45 CFR 148.220(b)(4)(i).
198
827 F.3d 70 (D.C. Cir July 1, 2016).

Bulletin No. 2023–33 529 August 14, 2023
2027, except with respect to the new group
market notice requirements proposed at
26 CFR 54.9831-1(c)(4)(ii)(D)(2)-(4), 29
CFR 2590.732-1(c)(4)(ii)(D)(2)-(4), and
45 CFR 146.145(b)(4)(ii)(D)(2)-(4), the
technical amendments described in sec-
tion III.B.1.f of this preamble, and the
proposed severability provision at 26 CFR
54.9831-1(c)(4)(v), 29 CFR 2590.732-
1(c)(4)(v), and 45 CFR 146.145(b)(4)(v).
The Departments propose that the provi-
sions related to the notice would apply for
plan years beginning on or after the effec-
tive date of the final rules and the technical
amendments and severability provision
would apply to new and existing group
market fixed indemnity excepted benefits
coverage beginning on the effective date
of the final rules. As discussed further in
this preamble section, HHS proposes to
adopt a similar bifurcated approach to the
applicability date for the proposed amend-
ments related to individual market fixed
indemnity excepted benefits coverage.
The Departments are aware that the
proposed amendments to the group and
individual market regulations for fixed
indemnity excepted benefits coverage
could, if finalized, affect hospital or other
fixed indemnity insurance coverage that
was sold or issued before the effective
date of the final rules. In these cases, con-
sumers may have chosen to purchase or
enroll in fixed indemnity excepted bene-
fits coverage in reliance on a framework
that could be altered by the final rules.
The Departments recognize that these
proposed rules, if finalized, could also
affect existing policies, including cover-
age or costs. Therefore, the Departments
are of the view that the proposed bifur-
cated approach to the applicability date
that provides for a more extended transi-
tion period for existing coverage to come
into compliance with the applicable new
payment standards and noncoordination
requirements is appropriate with respect
to fixed indemnity excepted benefits
coverage sold or issued before the effec-
tive date of the final rules. This period
is intended to provide plans, issuers, and
those currently enrolled in group and indi-
vidual market fixed indemnity excepted
benefits with sufficient time to consider
the effects and prepare for implementation
of these proposed rules with respect to
existing fixed indemnity excepted benefits
coverage, without unnecessarily delaying
their applicability to new coverage.
However, the Departments propose
that the proposed notice requirement at
26 CFR 54.9831-1(c)(4)(ii)(D)(2)-(4),
29 CFR 2590.732-1(c)(4)(ii)(D)(2)-(4),
and 45 CFR 146.145(b)(4)(ii)(D)(2)-(4)
would apply with respect to all group
market fixed indemnity excepted benefits
coverage that was sold or issued before
the effective date of the final rules (includ-
ing renewals) for plan years that begin
on or after the effective date of the final
rules. HHS proposes a similar applicabil-
ity date for the revised individual market
fixed indemnity excepted benefits cover-
age notice at 45 CFR 148.220(b)(4)(iii).
As such, the proposed notice requirements
would apply to both new and existing fixed
indemnity excepted benefit coverage in
the group or individual market for notices
required to be provided for coverage peri-
ods (including renewals) beginning on or
after the effective date of the final rules. In
the Departments’ view, the benefit to con-
sumers, including those currently enrolled
in group market fixed indemnity excepted
benefits coverage, of this information out-
weighs the burden to plans and issuers of
implementing these changes for existing
fixed indemnity excepted benefits cover-
age by the effective date of the final rules.
The Departments also propose that the
technical amendments to the group market
regulations described in section III.B.1.f
of this preamble would apply to group
market fixed indemnity excepted bene-
fits on the effective date of the final rules.
These changes are primarily aimed at con-
solidating and clarifying existing require-
ments and aligning regulatory language
with current legal standards, and would
impose limited if any additional burden on
interested parties, if finalized. Therefore,
the Departments are of the view that a lon-
ger transition period is unnecessary, and a
bifurcated approach could contribute to
confusion without benefitting interested
parties.
For similar reasons, the Departments
propose that the severability provision
proposed at 26 CFR 54.9831-1(c)(4)
(v), 29 CFR 2590.731-2(c)(4)(v), and 45
CFR 146.145(b)(4)(v) would apply on the
effective date of the final rules. This provi-
sion is intended to ensure that, in the event
of any successful legal challenge to one or
more discrete provisions of the final rules,
remaining provisions of the final rules
can continue to be successfully imple-
mented. The Departments are of the view
that delaying the applicability date of this
provision for fixed indemnity excepted
benefits coverage sold or issued prior to
the effective date of the final rules would
be confusing and difficult to implement in
the event of a legal challenge and would
not provide any clear benefit to consum-
ers, issuers, States, or other interested
parties.
HHS similarly proposes that the pro-
posed amendments related to individual
market fixed indemnity excepted benefits
coverage would generally apply to cover-
age that is sold or issued before the effec-
tive date of the final rule beginning on the
first renewal on or after January 1, 2027.
However, the changes related to the notice
proposed at 45 CFR 148.220(b)(4)(iii)
would apply to notices required to be pro-
vided in connection with the first renewal
on or after the effective date of the final
rules. The technical amendments to the
individual market regulation described
in section III.B.1.f of this preamble and
the severability provision proposed at
45 CFR 148.220(b)(4)(v) would also
become effective on the effective date of
the final rules for existing individual mar-
ket excepted benefits coverage. Under the
proposed bifurcated applicability date,
all of the proposed amendments related
to individual market fixed indemnity
excepted benefits coverage would apply
to new coverage that is sold or issued on
or after the effective date of the final rules
beginning with coverage periods (includ-
ing renewals) on or after the effective date
of the final rules.
The Departments seek comments on
their approach to applicability for fixed
indemnity excepted benefits coverage,
including whether applying the updated
fixed indemnity excepted benefits regu-
lations to fixed indemnity excepted ben-
efits coverage sold or issued on or after
the effective date of the final rules would
provide a sufficient transition period in the
group and individual markets for new cov-
erage, or whether delaying the applicabil-
ity date, such as for plan years or coverage
periods beginning on or after January 1,
2025, would ensure a smoother transition
to the new Federal standards for the sale of

August 14, 2023 530 Bulletin No. 2023–33
new fixed indemnity excepted benefits cov-
erage. Additionally, the Departments seek
comments on whether delaying applicabil-
ity of most of the proposed changes to the
fixed indemnity excepted benefits regula-
tions for existing fixed indemnity excepted
benefits coverage until plan years begin-
ning on or after January 1, 2027 provides
a sufficient transition period or if it should
be modified to provide a shorter transition.
In particular, the Departments are inter-
ested in feedback on whether the proposed
January 1, 2027 effective date would leave
consumers with this coverage at risk of
harm generally, or with respect to any spe-
cific proposal, and if so, whether a more
immediate applicability date (such as the
effective date of the final rules or an interim
date such as January 1, 2025), would strike
a better balance by applying new consumer
protections sooner while still providing a
smooth transition to the new requirements.
The Departments also seek comment on
the proposal to apply the proposed notice
requirements to existing fixed indemnity
excepted benefits coverage beginning with
plan years or coverage periods (including
renewals) on or after the effective date
of the final rules, and whether a differ-
ent applicability date (such as January 1,
2027 or an interim date such as January 1,
2025) for the notice requirements would
be appropriate for this cohort since they
already opted to enroll in such coverage
and would be permitted to continue their
existing coverage or could seek to enroll
in new coverage on or after the effective
date of the final rules.
h. Severability
In the event that any portion of the final
rules implementing one or more proposals
in these proposed rules is declared invalid,
the Departments intend that the propos-
als related to group market fixed indem-
nity excepted benefits coverage in these
proposed rules be severable, and that the
amendments the Departments propose with
respect to the Federal regulations at 26 CFR
54.9831-1(c)(4), 29 CFR 2590.732(c)(4),
and 45 CFR 146.145(b)(4) that outline the
conditions for hospital indemnity and other
fixed indemnity insurance to qualify as an
excepted benefit in the group market would
continue even if one or more aspects of the
proposed changes is found invalid. To cap-
ture this intent, the Departments propose
to add a severability provision at 26 CFR
54.9831-1(c)(4)(v), 29 CFR 2590.731-
2(c)(4)(v), and 45 CFR 146.145(b)(4)(v).
Similarly, HHS intends that its proposed
amendments to the regulation at 45 CFR
148.220(b)(4) that outlines the conditions
for such insurance to qualify as excepted
benefits coverage in the individual market
continue even if one or more of the pro-
posed changes is found invalid. To capture
this intent, HHS proposes to add a sever-
ability provision at 45 CFR 148.220(b)(4)
(v). The severability of these provisions is
discussed in more detail in section VI of
these proposed rules.
2. Specified Disease Excepted Benefits
Coverage
These proposed rules do not propose
amendments to the Federal regulations
regarding specified disease excepted ben-
efits coverage. However, the Departments
solicit comments on whether the proposed
changes to fixed indemnity excepted bene-
fits coverage in these proposed rules could
have unintended consequences that would
affect the market for specified disease
excepted benefits coverage, if finalized.
For example, would such changes have
the effect of shifting consumers from hos-
pital indemnity or other fixed indemnity
insurance to specified disease excepted
benefits coverage as an alternative to or
replacement for comprehensive coverage?
Would the proposed changes incentiv-
ize issuers, agents, and brokers that offer
specified disease excepted benefits cover-
age to shift the misleading or aggressive
sales, advertising, and marketing tactics to
encourage enrollment in specified disease
excepted benefits coverage as an alterna-
tive to or replacement for comprehensive
coverage? The Departments also seek
comments on whether and what additional
protections or clarifications are necessary
or would be helpful to more clearly distin-
guish specified disease excepted benefits
coverage from comprehensive coverage
and to increase consumer understanding
of the differences between these two types
of health coverage.
Additionally, the Departments seek
comments on typical benefit design fea-
tures of specified disease excepted ben-
efits coverage. For example, under what
circumstances would that coverage pay
benefits based on a diagnosis versus on
the basis of receipt of services for one or
more specified medical conditions, and
which design is more common? Under
what circumstances and how common is
it for specified disease excepted benefits
coverage to pay benefits in a hybrid fash-
ion, meaning some benefits are paid based
on a diagnosis, and other benefits are paid
based on receipt of services for one or
more specified medical conditions? To
the extent benefits under specified disease
excepted benefits coverage policies are
paid based on receipt of services for one
or more specified medical conditions, are
benefits typically paid to the policyholder
or to the provider of the services? If the
latter, do the issuers typically require use
of a provider network for the enrollee to
receive benefits (or more favorable bene-
fits) under the specified disease excepted
benefits coverage policy?
The Departments also seek comments
on potential sources of information and
data related to specified disease excepted
benefits coverage policies offered for
sale in the group and individual markets,
including the number of policies sold, the
types of individuals who typically pur-
chase this coverage, the reasons for which
they purchase it, and the types of common
benefit exclusions or limitations.
C. Level-Funded Plan Arrangements
As stated in section I.F of this pream-
ble, the Departments understand that an
increasing number of group health plan
sponsors, particularly small employers,
are utilizing a funding mechanism or
plan arrangement known as level-fund-
ing. According to the KFF Employer
Health Benefits Survey, 42 percent of
small employers (defined as having 3-199
workers) reported offering a level-funded
plan in 2021, compared to just 13 per-
cent in 2020.
199
This figure remained at
199
KFF (2021). “2021 Employer Health Benefits,” available at: https://www.kff.org/report-section/ehbs-2021-section-10-plan-funding/.

Bulletin No. 2023–33 531 August 14, 2023
approximately the same level in 2022,
with 38 percent of small employers
reporting that they offered a level-funded
plan.
200
These arrangements are often mar-
keted to small employers on the premise
that level-funding provides predictable,
and generally lower, costs and risk associ-
ated with potential high-dollar claims for
plan sponsors, relative to traditional meth-
ods of self-funding.
As the uptake of level-funded plan
arrangements increases, the Departments
have heard concerns and received ques-
tions from interested parties related to
level-funded arrangements’ status as
self-funded plans. Because level-funded
arrangements purport to be, and are often
regulated as, self-funded plans, they are
typically not regulated by States.
201

In general, ERISA applies to pri-
vate, employment-based group health
plans.
202,203
Therefore, in a level-funded
plan arrangement sponsored by a private
employer, the self-funded plan is the entity
that is legally responsible for compliance
with ERISA group health plan require-
ments. The parallel group market PHS
Act requirements apply to health insur-
ance issuers offering group health insur-
ance coverage and also generally apply to
non-Federal Governmental plans.
204,205
In
a self-insured, level-funded arrangement
sponsored by a public employer, the plan
sponsor or employer is the entity legally
responsible for compliance with applica-
ble group health plan requirements under
the PHS Act.
206

Interested parties have raised concerns
that stop-loss coverage, a product tradi-
tionally purchased by large employers
sponsoring self-funded plans, is not
required to comply with the Federal con-
sumer protections and requirements
applicable to group health plans or health
insurance issuers offering group health
insurance coverage, or meet requirements
under State regulations that apply to
health insurance coverage. Interested par-
ties have expressed that these concerns are
exacerbated when small employers utilize
level-funded plan arrangements with stop-
loss coverage that has low attachment
points. This is because the majority of the
benefits covered under such an arrange-
ment would be provided via the stop-loss
coverage, which may deny or limit the
individual’s claim in a way that would be
prohibited under the group market Federal
consumer protections and requirements.
This means that if the stop-loss insurer
defines the scope of coverage more nar-
rowly than otherwise permitted by the
Federal consumer protections and require-
ments applicable to group health plans or
health insurance issuers offering group
health insurance coverage (for exam-
ple, by including a preexisting condition
exclusion), the small employer remains
liable for the claim for coverage, yet may
be unprepared to absorb such costs. This
is in large part due to the complexity of
level-funding arrangements; because
small employers typically pay a monthly
amount that resembles a premium, they
may not understand whether their health
plan is self-funded or insured and, fur-
thermore, that coverage of certain ben-
efits may vary depending on where the
attachment point is set. In addition, cov-
ered individuals generally do not know
whether their claim is being paid by the
group health plan itself or by the stop-loss
coverage. This raises additional concerns
when an extensive portion of the individ-
uals’ claims are covered by the stop loss
coverage that is not subject to the group
market Federal consumer protections and
requirements and has a low attachment
point. For example, the stop loss coverage
might deny a claim due to application of
a lifetime or annual dollar limit in a way
that would be prohibited under the group
market Federal consumer protections and
requirements.
Level-funded plans are most com-
monly adopted by small employers who
are leaving the small group health insur-
ance market, where policies must cover
State- and Federally-mandated benefits
and include various essential health ben-
efits and consumer protections such as
those included in MHPAEA.
207
Interested
parties have expressed that small employ-
ers that switch from fully-insured cover-
age to level-funded arrangements may be
unaware that the self-funded plans they
are offering to their employees may not
include certain benefits that would have to
be covered if the plan were fully-insured.
The Departments are also aware of
interested parties’ concerns that if lev-
el-funded plan arrangements are marketed
only to small employer plan sponsors
with relatively low expected claims costs,
this may lead to adverse selection in the
State’s small group health insurance mar-
ket and may destabilize the States’ small
group market risk pools. The poten-
tial for adverse selection caused by the
increasing use of these level-funded plan
200
KFF (2022). “2022 Employer Health Benefits,” available at: https://www.kff.org/report-section/ehbs-2022-section-10-plan-funding/.
201
The Departments further recognize that increased uptake of level-funded plans among small employers with fewer than 20 employees has caused continuation- of- coverage issues. This
is because (i) the federal COBRA rules do not apply to such plan sponsors, and (ii) a plan that is a level-funded plan is treated as self-insured, such that state continuation-of- coverage rules
would not apply.
202
Section 3(1) of Title I of ERISA defines the term “employee welfare benefit plan” to include: “[A]ny plan, fund, or program which was heretofore or is hereafter established or maintained
by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or
their beneficiaries, through the purchase of insurance or otherwise...”
203
The PHS Act cross-references ERISA in its definitions. See, e.g., the definitions for “group health plan”, “group health insurance coverage”, “employer”, “employee”, “church plan”,
“governmental plan”, “participant”, and “plan sponsor” in section 2791(a)(1), (b)(4), (d)(5) - (d)(8), (d)(11) and (d)(13) of the PHS Act, respectively.
204
The definition of “non-federal governmental plan” at section 2791(d)(8)(C) of the PHS Act incorporates the definition of “governmental plan” under ERISA section 3(32).
205
Sponsors of self-funded non-federal governmental group health plans are permitted to elect to exempt those plans from (“opt out of”) certain provisions of title XXVII of the PHS Act.
See, e.g., section 2722(a)(2) of the PHS Act, as amended by the Consolidated Appropriations Act, 2023 (Pub. L. 117–328), and 45 C.F.R. § 146.180. Also see the Patient Protection and
Affordable Care Act; Exchange and Insurance Market Standards for 2015 and Beyond; Proposed Rule, 79 FR 15807 at 15814 – 15815 (March 21, 2014) and https://www.cms.gov/CCIIO/
Programs-and-Initiatives/Health-Insurance-Market-Reforms/nonfedgovplans.
206
See, e.g., 45 CFR 150.305.
207
MHPAEA does not apply directly to plans offered by small employers. Code section 9812(c)(1), ERISA section 712(c)(1), and PHS Act section 2716(c)(1). However, most plans offered
by small employers are insured and therefore subject to MHPAEA through regulations implementing the essential health benefit coverage requirements. 45 CFR 156.115(a)(3). In the case of
a level-funded plan, if the entire arrangement is treated as self-insured, the essential health benefit requirements would not apply.

August 14, 2023 532 Bulletin No. 2023–33
arrangements is further compounded by
the fact that these arrangements are not
generally treated as being subject to the
guaranteed renewability and single risk
pool requirements that apply to fully-in-
sured small group market coverage.
The Departments also acknowledge
interested parties’ concerns that if lev-
el-funded plan sponsors’ contributions are
not properly segregated from other funds
held by the plans’ service providers, those
service providers might inadvertently be
establishing multiple employer welfare
arrangements, which would result in the
plans being subject to a wide range of State
regulation and additional requirements
under ERISA.
208
If they are unaware that
their plan is a multiple employer welfare
arrangement, they may not be complying
with all of the applicable requirements.
Given the growing number of lev-
el-funded plans, the Departments are
soliciting comments to better understand
the prevalence of level-funded plans,
such plans’ designs and whether addi-
tional guidance or rulemaking is needed
to clarify a plan sponsor’s obligation with
respect to coverage provided through
a level-funded plan arrangement. The
Departments solicit comments on the fol-
lowing issues:
How prevalent are level-funded group
health plans among private and public
employers? How many individuals are
covered under level-funded plans? The
Departments are also interested in infor-
mation or data on whether the percentage
of plan sponsors offering level-funded
plans varies by State, geographic area, or
other factors.
Are there data other than KFF’s
Employer Health Benefits Survey that the
Departments should consider?
What factors are leading an increas-
ing number of plan sponsors, particularly
small employers, to utilize level-funded
plans?
What are the administrative costs asso-
ciated with offering level-funded plans,
and how do these costs compare to the
administrative costs associated with offer-
ing fully-insured plans?
What types of benefits are commonly
offered or not offered by level-funded
plans?
What kinds of level-funded benefit
options are generally made available to
plan sponsors? How do the benefit pack-
ages differ from fully-insured plans? Do
level-funded plan arrangements offer
robust benefits similar to the comprehen-
sive coverage offerings of fully-insured
plans?
Are benefits provided by level-funded
plans generally as comprehensive as
fully-insured plans available to small
employers? What benefits and consumer
protections are generally no longer
included when a small employer converts
its plan from fully-insured coverage to a
level-funded arrangement? Are changes in
benefits and consumer protections com-
municated to plan participants and bene-
ficiaries, and if so, how?
Are additional safeguards needed with
respect to level-funded arrangements
to ensure that individuals and/or small
employers are not subjected to unexpected
costs resulting from the stop-loss coverage
failing to comply with Federal group health
plan requirements? How do level-funded
plans determine anticipated administrative
costs and expected claims costs?
With respect to stop-loss coverage,
how, and by whom, is the attachment point
determined and what factors are consid-
ered in setting the attachment point?
What impact, if any, does the use of
level-funding for plans offered by small
employers have on the insured small
group market?
How do plans’ service providers man-
age plan sponsors’ contributions for lev-
el-funded plans, including amounts that
exceed actual plan costs (that is, costs for
claims, administrative fees, and stop-loss
premiums)? Are such arrangements con-
sistent with section 403 of ERISA?
How are the amounts of any refunds
paid to plan sponsors by stop-loss
providers determined? Are refunds remit-
ted to participants and beneficiaries who
have made contributions under the plan? If
so, how are they determined and remitted?
How do plan sponsors of level-funded
arrangements account for compliance with
the consumer protections and mandated
benefits that would apply to health ben-
efits provided by a plan sponsor through
a level-funded arrangement that is reim-
bursed through stop-loss insurance?
Do employers offering level-funded
plans generally understand and comply
with any applicable reporting require-
ments under sections 6055 and 6056 of
the Code?
IV. Overview of the Proposed Rules
on Tax Treatment and Substantiation
Requirements for Fixed Indemnity
Insurance and Certain Other Accident
or Health Insurance – Department of
the Treasury and the IRS
The Treasury Department and the IRS
are proposing amendments to the rules
under section 105(b) of the Code. These
amendments would clarify the tax treat-
ment of amounts received by a taxpayer
through employment-based accident or
health insurance that are paid without
regard to the amount of incurred medi-
cal expenses under section 213(d) of the
Code and where the premiums or con-
tributions for the coverage are paid on a
pre-tax basis. These amendments would
also clarify that, under longstanding
regulations and guidance issued by the
Treasury Department and the IRS, the
substantiation requirements for reim-
bursement of qualified medical expenses
apply to reimbursements under section
105(b) of the Code in order for those
reimbursements to be excluded from an
individual’s gross income. Additionally,
the amendments would update several
cross-references in the rules implement-
ing section 105(b) of the Code to reflect
statutory changes since the rules were
first issued.
209
208
See ERISA section 3(40); see also ERISA section 514(b)(6); see also U.S. Department of Labor, Employee Benefits Security Administration (2022). “MEWAs: Multiple Employer Welfare
Arrangements under the Employee Retirement Income Security Act (ERISA): A Guide to Federal and State Regulation,” available at: https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/
our-activities/resource-center/publications/mewa-under-erisa-a-guide-to-federal-and-state-regulation.pdf.
209
The current rules reference section 105(d) of the Code, which has been repealed. The rules also reference the definition of a dependent in section 152(f) which may, in some circumstances,
not include children up to the age of 26 that must be eligible to enroll in a group health plan or group or individual health insurance coverage under section 2714 of the PHS Act (which is
incorporated by reference in section 9815 of the Code) if the plan or coverage makes available dependent coverage of children.

Bulletin No. 2023–33 533 August 14, 2023
The Treasury Department and the IRS
are aware of certain arrangments that pur-
port to avoid income and employment
taxes by characterizing income replace-
ment benefits or other cash benefits as
amounts paid for reimbursement of med-
ical care, even though those amounts are
paid without regard to the actual amount
of any incurred, and otherwise unreim-
bursed, medical expenses. Frequently,
these arrangements are marketed as sup-
plemental coverage that saves employ-
ers and employees money by avoiding
employment taxes when replacing income
lost by an employee due to a health-re-
lated event experienced by the employee.
In some arrangements, employees are
paid an amount every month, purportedly
for medical expenses, even if they do not
incur any medical expenses, or if they
simply complete certain health-related
activities.
Fixed indemnity excepted benefits
210

coverage pays pre-determined benefits
upon the occurrence of certain health-re-
lated events. Benefits under this type of
coverage in the group market must be
paid in a fixed amount on a per period
basis.
211
Although a benefit payment at the
pre-determined level under that coverage
may incidentally cover all or a portion of
the cost of medical care stemming from
the precipitating health-related event, it is
typically not designed to do so and is paid
without regard to the amount of the medi-
cal care expense incurred. Some specified
disease excepted benefits coverage oper-
ates in a similar manner. For example,
coverage only for a specified disease or
illness might offer lump sum payments
upon a specific diagnosis or on the basis of
treatment received, or it might offer fixed
payments per day or other time period of
hospitalization or illness.
212

The principle that these types of acci-
dent or health insurance are not gener-
ally intended to provide reimbursement
for incurred medical expenses is fur-
ther illustrated by the fact that taxpay-
ers covered by these arrangments will,
in many cases, receive benefits upon the
occurrence of a health-related event under
these arrangements even if any incurred
expenses associated with that event are
already reimbursed through other cover-
age. This is because these types of group
market excepted benefits must be “non-
coordinated” such that benefits are paid
with respect to an event without regard
to whether benefits are provided for that
same event under any group health plan
maintained by the same plan sponsor.
213

Thus, for example, if a particular medical
expense incurred during hospitalization is
reimbursed by a taxpayer’s primary, com-
prehensive coverage and the taxpayer also
receives a benefit in a fixed amount for the
hospitalization from fixed indemnity or
specified disease excepted benefits cover-
age, the taxpayer would receive the fixed
benefit without having any need to use the
fixed amount received to pay for that med-
ical expense.
These amendments are being proposed
in response to ongoing questions about
the proper tax treatment of payments pur-
suant to these arrangements. While these
arrangments are sold under a variety of
names, they are commonly sold as fixed
indemnity excepted benefits coverage or
specified disease excepted benefits cover-
age. However, the changes in these pro-
posed amendments would not be limited
to these types of coverage. The Treasury
Department and the IRS note that it is
important to look past the label on any
given accident or health insurance product
to determine whether amounts received by
an employee are, in fact, for reimburse-
ment of medical expenses or whether the
amounts could be used for any purpose.
For example, even if a benefit payment
under the arrangement is used to reim-
burse an employee’s medical
expenses,
if the amount of the payment is not tied
to the amount of the expense incurred
and the employee is entitled to keep any
amounts by which the benefit payment
exceeds the incurred expenses, that would
indicate that the benefit is not actually a
reimbursement for medical expenses. The
Treasury Department and the IRS request
comments on whether additional clarifica-
tion is needed regarding how these rules
would apply to types of benefits provided
through employment-based accident or
health insurance other than fixed indem-
nity excepted benefits coverage or speci-
fied disease excepted benefits coverage,
including incentives offered through well-
ness programs, where the insurance, those
programs, or both provide benefits without
regard to the amount of medical expenses
incurred and where the premiums are paid
on a pre-tax basis.
A. Tax Treatment of Benefits
As described in section I.E of this pre-
amble, hospital indemnity and other fixed
indemnity insurance and coverage only
for a specified disease or illness are treated
as accident or health insurance under
sections 104, 105, and 106 of the Code
whether or not they are excepted benefits.
Amounts received from accident or health
insurance are excluded from a taxpayer’s
gross income under section 104(a)(3) of
the Code if the premiums are paid for on
an after-tax basis. The taxation of amounts
received by an employee from accident or
health insurance where the premiums or
contributions are paid on a pre-tax basis
by the employer or through salary reduc-
tion under a cafeteria plan is determined
under section 105 of the Code.
Under section 105(a) of the Code,
amounts received by an employee
through accident or health insurance
for personal injuries or sickness are
included in gross income; however, sec-
tion 105(b) of the Code excludes from
gross income amounts received by an
employee to reimburse the employee’s
medical expenses under section 213(d)
of the Code. As is noted in section I.E of
this preamble, 26 CFR 1.105-2 provides
that the exclusion from gross income in
section 105(b) of the Code “applies only
to amounts that are paid specifically to
reimburse the taxpayer for expenses
incurred by him for the prescribed med-
ical care. Thus, section 105(b) does
210
Excepted benefits are described in section 9832 of the Code. Excepted benefits are generally not subject to the consumer protections under Chapter 100 of the Code, part 7 of ERISA, and
title XXVII of the PHS Act.
211
26 CFR 54.9831-1(c)(4).
212
Id.
213
Id.

August 14, 2023 534 Bulletin No. 2023–33
not apply to amounts that the taxpayer
would be entitled to receive irrespective
of whether or not he incurs expenses for
medical care.” Further, 26 CFR 1.105-2
also provides that “section 105(b) is
not applicable to the extent that such
amounts exceed the actual expenses for
such medical care.”
The Treasury Department and the IRS
are cognizant that the language in the
current rule has led to confusion among
taxpayers about the circumstances under
which benefits from accident or health
insurance may be excluded from an indi-
vidual’s gross income when the premiums
for the coverage were paid on a pre-tax
basis and the benefits are not directly
related to a medical expense incurred by
an employee. In particular, some have
interpreted the current rule to mean that
benefits provided to a taxpayer through
an accident or health insurance policy that
provides benefits without regard to the
amount of medical expenses incurred, such
as fixed indemnity excepted benefits cov-
erage or specified disease excepted ben-
efits coverage, are nonetheless excluded
from the taxpayer’s gross income because
they are paid upon the occurrence of a
health-related event. Others have inter-
preted the current rule to mean that ben-
efits can be excluded from gross income
so long as the amount received does not
exceed the amount of the medical expense
arising from the occurrence of a health-re-
lated event.
214

The Treasury Department and the IRS
interpret section 105(b) of the Code to not
apply to benefits paid without regard to
the actual amount of incurred and other-
wise unreimbursed section 213(d) med-
ical expenses. Because payment of these
amounts is not a reimbursement of section
213(d) medical expenses, the amount of
reimbursement is immaterial, with the
result that the payment is not excluded
from gross income under section 105(b)
of the Code. The benefits would, there-
fore, be included in the taxpayer’s gross
income.
Thus, the Treasury Department and the
IRS propose to amend 26 CFR 1.105-2
to clarify that the exclusion from gross
income under section 105(b) of the Code
does not apply to amounts received from
accident or health insurance that pays
an amount or distributes a benefit if the
benefit is paid without regard to the
actual amount of section 213(d) medical
expenses incurred by the employee. This
interpretation would apply, for example,
to benefit payments under fixed indem-
nity excepted benefits coverage and to
benefit payments under specified disease
excepted benefits coverage that pays ben-
efits without regard to the amount of med-
ical expenses incurred.
Payments that are excludible from
gross income under sections 104 or 105(b)
of the Code and under section 3121(a) of
the Code are excluded from wages sub-
ject to Federal Insurance Contributions
Act (FICA) taxes under sections 3101 and
3111. Similarly, under section 3306(b) of
the Code, these payments are not wages
subject to Federal Unemployment Tax
Act (FUTA) taxes under section 3301 of
the Code. Also, under section 3401(a) of
the Code, they are not wages subject to
income tax withholding under section
3402 of the Code. Temporary 26 CFR
32.1 provides rules governing the appli-
cation of FICA taxes to payments on
account of sickness or accident disability.
Section 32.1(a) provides, in effect, that
payments to or on behalf of an employee
on account of sickness or accident dis-
ability are not excluded from wages
unless the payments are received under a
workers’ compensation law or qualify for
an exception under section 3121(a)(4) of
the Code (payments on account of sick-
ness or accident disability made after the
expiration of 6 calendar months). Section
32.1(d) provides that for purposes of 26
CFR 32.1(a) “payments on account of
sickness or accident disability” subject
to FICA tax include payments includible
in gross income under section 105(a) of
the Code and, thus, does not include any
amount that is not expended for medical
care as described in section 105(b) of the
Code and 26 CFR 1.105-2. Under the
proposed amendment to 26 CFR 1.105-
2, accident and health insurance pay-
ments that would not be excluded from
employees’ gross income under section
105(b) because the amounts were paid
without regard to the actual amount of
incurred or otherwise unreimbursed sec-
tion 213(d) medical care expenses would
be wages subject to FICA, FUT
A, and
income tax withholding. Thus, if these
rules are finalized as proposed, taxpayers
would need to consider the impact this
proposal would have on determinations
of whether amounts received under acci-
dent and health plans constitute wages
for employment tax and income tax with-
holding purposes.
B. Substantiation Requirement
26 CFR 1.105-2 currently states, in
part, that “[i]f the amounts are paid to
the taxpayer solely to reimburse him for
expenses which he incurred for the pre-
scribed medical care, section 105(b) is
applicable even though such amounts
are paid without proof of the amount of
the actual expenses incurred by the tax-
payer...” This language has been inter-
preted by certain interested parties to
suggest that substantiation of a taxpayer’s
incurred medical expenses is not required
for the exclusion under section 105(b) of
the Code to apply.
In this rulemaking, the Treasury
Department and the IRS propose to amend
26 CFR 1.105-2 to clarify that, for amounts
to be excluded from income under sec-
tion 105(b) of the Code, the payment or
reimbursement must be substantiated.
Longstanding regulations and guidance
issued by the Treasury Department and the
IRS have confirmed that amounts paid to
reimburse medical expenses under section
213(d) of the Code by employment-based
accident or health insurance must be sub-
stantiated to be excluded under section
214
Revenue Ruling 69-154, 1969-1 CB 46, provides that section 105(b) of the Code is not applicable to the extent that amounts received from accident or health insurance exceed the amount
of the actual expenses for the medical care. The facts of the revenue ruling concerned a medical expense reimbursed by multiple coverages, with neither coverage paying the entire expense
but the combination of coverages paying more than the amount of the medical expense. Nevertheless, the Treasury Department and the IRS are aware that some individuals have relied on
the ruling to support their claims that section 105(b) allows for an exclusion from gross income for all benefits provided by accident or health insurance up to the amount of medical expenses
with only the excess “indemnification” being included in gross income, even when the taxpayer is enrolled in only one coverage.

Bulletin No. 2023–33 535 August 14, 2023
105(b) of the Code.
215
Further, if there
were not a substantiation requirement
under section 105(b) of the Code, the
other proposed clarification that would be
made to 26 CFR 1.105-2—that amounts
received from accident or health insurance
must be for reimbursement of incurred
medical expenses for section 105(b) of
the Code to apply—could be manipulated.
The Treasury Department and the IRS
understand that, in most circumstances,
substantiation of medical expenses typ-
ically occurs prior to reimbursement but
are of the view that substantiation must
occur at least within a reasonable period
thereafter. The Treasury Department and
the IRS request comments on whether any
final rules should specifically address tim-
ing requirements for substantiation.
C. Applicability Date
Generally, the proposed modifications
to the tax treatment of employer reim-
bursements of employee medical expenses
under certain accident and health plans are
a clarification of long-standing Treasury
Department and IRS rules and guidance
limiting the exclusion from gross income
to amounts that are fully substantiated and
paid only with respect to the actual amount
of section 213(d) medical care expenses
incurred by the employee. However, in
recognition that some plan sponsors and
issuers may not have understood the
requirements and may require time to
come into compliance with the proposed
amendments to 26 CFR 1.105-2, assum-
ing that they are finalized as proposed, it
is proposed that these amendments would
apply as of the later of the date of publi-
cation of the final regulations or January
1, 2024.
V. Response to Comments
Because of the large number of com-
ments the Departments normally receive
on Federal Register documents, the
Departments are not able to acknowl-
edge or respond to them individually. The
Departments will consider all comments
received by the date and time specified
in the “DATES” section of the preamble,
and, when the Departments proceed with
a subsequent document, the Departments
will respond to the comments in the pre-
amble to that document.
VI. Severability
As previously described, the
Departments are proposing to amend the
Federal definition of “short-term, lim-
ited-duration insurance” and the condi-
tions for hospital indemnity and other
fixed indemnity insurance to qualify as
an excepted benefit in the group market,
for the purpose of distinguishing STLDI
and fixed indemnity excepted benefits
coverage from comprehensive coverage.
Similarly, HHS is proposing to amend
the conditions for hospital indemnity
and other fixed indemnity insurance to
qualify as an excepted benefit in the indi-
vidual market for the same purpose. The
Departments and HHS are also propos-
ing certain technical amendments to the
regulations governing fixed indemnity
excepted benefits in the group and individ-
ual markets, respectively, in order to con-
solidate and clarify existing requirements
and align the individual market regula-
tions with the decision of the U.S. Court
of Appeals for the District of Columbia in
Central United Life Insurance Company
v. Burwell. The Departments’ and HHS’
authority to propose these amendments is
well-established in law and practice, and
should be upheld in any legal challenge.
However, in the event that any portion of
the final rules related to any of the pro-
posals in this notice of proposed rulemak-
ing is declared invalid, the Departments
intend that the other provisions would be
severable.
For example, if any proposed provi-
sion in this rulemaking related to STLDI
is held to be invalid or unenforceable by
its terms, or as applied to any person or
circumstance, or stayed pending further
agency action, it shall be considered sev-
erable from its section and other sections
of these rules; and it shall not affect the
remainder thereof or the application of the
provision to other entities not similarly
situated or to dissimilar conditions. Thus,
if the Departments were to finalize the
portion of the STLDI definition that limits
the sale of multiple consecutive policies
exceeding a total duration of 4 months by
the same issuer to the same policyholder
within a 12-month period, and a court were
to find that portion or any other aspect
of the new Federal STLDI definition to
be unlawful, the Departments intend the
remaining aspects of these proposed rules
related to STLDI would stand, if finalized.
Similarly, the Departments propose that
if any proposed provision in this rulemak-
ing related to group market fixed indem-
nity excepted benefits coverage is held to
be invalid or unenforceable by its terms, or
as applied to any person or circumstance,
or stayed pending further agency action, it
shall be considered severable from its sec-
tion and it shall not affect the remainder
thereof or the application of the provision
to other entities not similarly situated or to
dissimilar conditions. For example, if the
Departments were to finalize all proposals
related to additional fixed payment stan-
dards for group market fixed indemnity
excepted benefits coverage and a court
were to find one or more of those payment
standards to be unlawful, the Departments
intend that the other payment standards,
along with the other proposals related to
fixed indemnity excepted benefits cover-
age in the group market set forth in these
proposed rules would stand, if finalized.
Similarly, HHS proposes that if any
proposed provision in this rulemaking
related to individual market fixed indem-
nity excepted benefits is held to be invalid
or unenforceable by its terms, or as applied
to any person or circumstance, or stayed
pending further agency action, it shall be
considered severable from its section and
it shall not affect the remainder thereof or
the application of the provision to other
entities not similarly situated or to dissim-
ilar conditions. For example, if HHS were
to finalize all proposals related to the addi-
tional fixed payment standards for indi-
vidual market fixed indemnity excepted
benefits coverage and a court were to find
one or more of the payment standards to
be unlawful, HHS intends that the other
215
See, e.g., 84 FR 28888, 28917 (June 20, 2019) (describing substantiation requirements for employer-sponsored health reimbursement arrangements); see also Q44-55 of IRS Notice 2017-
67, 2017-47 IRB 517; Prop. Treas. Reg. § 1.125-6; IRS Notice 2002-45, 2002-2 CB 93.

August 14, 2023 536 Bulletin No. 2023–33
payment standards for individual market
fixed indemnity excepted benefits cover-
age, along with the other proposals related
to fixed indemnity excepted benefits cov-
erage in the individual market set forth
in these proposed rules would stand, if
finalized.
The Departments also intend for the
STLDI proposals in this rulemaking to
be severable from the fixed indemnity
excepted benefits coverage proposals, and
vice versa.
VII. Regulatory Impact Analysis
A. Summary – Departments of Health and
Human Services and Labor
These proposed rules would revise
the Federal definition of STLDI for new
policies, certificates, or contracts of insur-
ance to require the coverage to have an
expiration date specified in the policy,
certificate, or contract of insurance that
is no more than 3 months after the orig-
inal effective date. These proposed rules
would also revise the Federal definition
of STLDI so that the maximum total cov-
erage duration, taking into account any
renewals or extensions, is no longer than
4 months. For purposes of this definition,
a renewal or extension would include the
term of a new STLDI policy, certificate, or
contract of insurance issued by the same
issuer to the same policyholder within the
12-month period beginning on the original
effective date of the initial policy, certifi-
cate, or contract of insurance.
For new STLDI, meaning policies,
certificates, or contracts of STLDI sold or
issued on or after the effective date of the
final rules, the maximum duration amend-
ments to the definition of STLDI in these
proposed rules would apply for coverage
periods beginning on or after the effec-
tive date of the final rules. Under these
proposed rules, existing STLDI, mean-
ing policies, certificates, or contracts of
STLDI sold or issued before the effective
date of the final rules (including any sub-
sequent renewals or extensions consistent
with applicable law) could still have an
initial contract term of less than 12 months
and a maximum duration of up to 36
months (taking into account any renewals
or extensions), subject to any limits under
applicable State law.
These proposed rules would also revise
the notice that must be prominently dis-
played (in either paper or electronic form)
in at least 14-point font on the first page of
the policy, certificate, or contract of insur-
ance and in any marketing, application,
and enrollment materials including for
renewals or extensions (including on web-
sites that advertise or enroll individuals in
STLDI) for both new and existing STLDI
for coverage periods beginning on or after
the effective date of the final rules.
These proposed rules also would
require that to be fixed indemnity
excepted benefits coverage, the insurance
must pay only a fixed dollar amount per
day (or per other time period) of hospi-
talization or illness (for example, $100/
day), and not on a per-service or per-item
basis, as is possible under the current HHS
excepted benefit regulation applicable to
the individual market. Further, for hos-
pital indemnity or other fixed indemnity
insurance to be considered an excepted
benefit in the group or individual mar-
ket under these proposed rules, payment
must be made regardless of the actual or
estimated amount of expenses incurred,
services or items received, severity of ill-
ness or injury experienced by a covered
participant, beneficiary, or enrollee, or
other characteristics particular to a course
of treatment, or on any other basis (such
as per-item or per-service). All of these
proposed provisions and amendments,
if finalized, would apply to new group
and individual market fixed indemnity
excepted benefits coverage sold or issued
on or after the effective date of the final
rules. For existing group market fixed
indemnity excepted benefits coverage
sold or issued before the effective date
of the final rules, the proposed provisions
generally would apply with respect to
plan years beginning on or after January
1, 2027. The technical amendments to
the group market regulations described
in section III.B.1.f of this preamble and
the severability provision at 26 CFR
54.9831-1(c)(4)(v), 29 CFR 2590.732-
1(c)(4)(v), and 45 CFR 146.145(b)(4)(v)
would apply beginning on the effective
date of the final rules. HHS similarly
proposes that these requirements gen-
erally would apply to individual market
fixed indemnity excepted benefits cover-
age sold before the effective date of the
final rule upon the first renewal on or
after January 1, 2027, except the techni-
cal amendments to the individual market
regulation described in section III.B.1.f
of this preamble and the severability pro-
vision at 45 CFR 148.220(b)(4)(v) would
apply beginning on the effective date of
the final rule.
Additionally, these proposed rules
would revise the notices that must be
prominently displayed (in either paper or
electronic form) on the first page of the
policy, certificate, or contract of insurance,
and any marketing and application mate-
rials provided in connection with enroll-
ment (or re-enrollment) in fixed indemnity
excepted benefits coverage in the individ-
ual market and would require a similar
notice be provided for fixed indemnity
excepted benefits coverage in the group
market. The Departments propose that the
new notice requirements for group market
fixed indemnity coverage be applicable to
both new and existing coverage for notices
required to be provided with respect to
plan years (including renewals) begin-
ning on or after the effective date of the
final rules. Similarly, HHS proposes that
the changes to the notice requirements for
individual market fixed indemnity cov-
erage be applicable to existing individ-
ual market fixed indemnity coverage for
notices required to be provided beginning
upon the first renewal on or after the effec-
tive date of the final rule. For new individ-
ual market fixed indemnity coverage sold
or issued on or after the effective date of
the final rules, HHS proposes to apply the
updated notice requirements with respect
to coverage periods (including renewals)
beginning on or after the effective date of
the final rules.
The Departments have examined
the effects of these proposed rules as
required by Executive Order 12866
on Regulatory Planning and Review
(September 30, 1993),
216
Executive Order
13563 on Improving Regulation and
216
Executive Order 12866 of September 30, 1993, 58 FR 51735.

Bulletin No. 2023–33 537 August 14, 2023
Regulatory Review (January 18, 2011),
217

Executive Order 14094 (April 6, 2023),

218
the Regulatory Flexibility Act (RFA)
(September 19, 1980, Pub. L. 96–354),
section 1102(b) of the Social Security Act,
section 202 of the Unfunded Mandates
Reform Act of 1995 (March 22, 1995,
Pub. L. 104–4), Executive Order 13132
on Federalism (August 4, 1999).
219

B. Executive Orders 12866, 13563, and
14094 – Departments of Health and
Human Services and Labor
Executive Orders 12866 and 13563
direct agencies to assess all costs and
benefits of available regulatory alterna-
tives and, if regulation is necessary, to
select regulatory approaches that max-
imize net benefits (including potential
economic, environmental, public health
and safety effects, distributive impacts,
and equity). Executive Order 14094 on
Modernizing Regulatory Review amends
section 3(f) of Executive Order 12866
(Regulatory Planning and Review).
The amended section 3(f) of Executive
Order 12866 defines a “significant regu-
latory action” as an action that is likely
to result in a rule: (1) having an annual
effect on the economy of $200 million
or more in any 1 year (adjusted every 3
years by the Administrator of the Office
of Information and Regulatory Affairs
(OIRA) of the Office of Management
and Budget (OMB) for changes in gross
domestic product), or adversely affecting
in a material way the economy, a sector of
the economy, productivity, competition,
jobs, the environment, public health or
safety, or State, local, Territorial, or Tribal
governments or communities; (2) creating
a serious inconsistency or otherwise inter-
fering with an action taken or planned by
another agency; (3) materially altering the
budgetary impacts of entitlement grants,
user fees, or loan programs or the rights
and obligations of recipients thereof;
or (4) raising legal or policy issues for
which centralized review would meaning-
fully further the President’s priorities or
the principles set forth in this Executive
Order, as specifically authorized in a
timely manner by the Administrator of
OIRA in each case.
A regulatory impact analysis (RIA)
must be prepared for rules with signifi-
cant regulatory action or with significant
effects as per section 3(f)(1) ($200 mil-
lion or more in any 1 year). Based on the
Departments’ estimates, OMB’s OIRA
has determined this rulemaking is signif-
icant under section 3(f)(1) as measured
by the $200 million threshold in any 1
year. With respect to Subtitle E of the
Small Business Regulatory Enforcement
Fairness Act of 1996, also known as the
Congressional Review Act, OMB’s OIRA
has also determined that these rules fall
within the definition provided by 5 U.S.C.
804(2). Therefore, OMB has reviewed
these proposed rules, and the Departments
have provided the
following assessment
of their impact.
1. Need for Regulatory Action
The 2018 final rules permit enrollment
in an STLDI policy with a total dura-
tion that could extend up to 36 months
(including renewals or extensions). This
insurance might therefore be viewed as a
substitute for (and, in some cases, has been
deceptively marketed as) comprehensive
coverage, rather than as a way to bridge
a temporary gap in comprehensive cov-
erage.
220
Evidence shows the number
of consumers buying STLDI increased
following the effective date of the 2018
final rules. Data from the NAIC indicate
that the number of individuals covered
by STLDI sold to individuals more than
doubled between 2018 and 2019, from
approximately 87,000 to 188,000, and fur-
ther increased to approximately 238,000
in 2020 before declining to approximately
173,000 in 2021 following the expansion
of PTC subsidies provided through the
ARP.
221
While these figures do not capture
the total number of individuals covered by
STLDI throughout each year (rather, only
at the end of the calendar year), and do
not include individuals covered by STLDI
sold to or through associations, they do
show the trend of increased enrollment
in STLDI following the implementation
of the 2018 final rules. Projections by the
Congressional Budget Office (CBO) and
the Joint Committee on Taxation (JCT)
suggest that 1.5 million people could cur-
rently be enrolled in STLDI,
222
and CMS
previously estimated that 1.9 million indi-
viduals would enroll in STLDI by 2023.
223

However, as noted in section VII.B.2.b,
these projections were developed prior to
the expansion of PTC subsidies provided
through the ARP and the IRA.
Given that STLDI generally is not sub-
ject to the Federal consumer protections
and requirements for comprehensive cov-
erage sold in the individual market, STLDI
policies tend to offer limited benefit cov-
erage and have relatively low actuarial
values.
224
These plans therefore expose
enrollees to the risk of high out-of-pocket
health expenses and medical debt.
225

217
Executive Order 13563 of January 18, 2011, 76 FR 3821.
218
Executive Order 14094 of April 6, 2023, 88 FR 21879.
219
Executive Order 13132 of August 4, 1999, 64 FR 43255.
220
For one example of deceptive marketing practices, see Federal Trade Commission (2022). “FTC Action Against Benefytt Results in $100 Million in Refunds for Consumers Tricked
into Sham Health Plans and Charged Exorbitant Junk Fees,” available at: https://www.ftc.gov/news-events/news/press-releases/2022/08/ftc-action-against-benefytt-results-100-million-
refunds-consumers-tricked-sham-health-plans-charged.
221
National Association of Insurance Commissioners (2021). “Accident and Health Policy Experience Reports for 2018-2021,” available at: https://naic.soutronglobal.net/portal/Public/
en-US/Search/SimpleSearch.
222
Congressional Budget Office (2020). “CBO’s Estimates of Enrollment in Short-Term, Limited-Duration Insurance,” available at: https://www.cbo.gov/publication/56622. CBO and JCT
projected that enrollment in STLDI would reach 1.6 million by 2028. See Congressional Budget Office (2019). “How CBO and JCT Analyzed Coverage Effects of New Rules for Association
Health Plans and Short-Term Plans,” available at: https://www.cbo.gov/publication/54915.
223
CMS Office of the Actuary (2018). “Estimated Financial Effects of the Short-Term, Limited-Duration Policy Proposed Rule,” available at: https://www.cms.gov/Research-Statistics-Data-
and-Systems/Research/ActuarialStudies/Downloads/STLD20180406.pdf.
224
See, e.g., Dieguez, Gabriela and Dane Hansen (2020). “The Impact of Short-Term Limited-Duration Policy Expansion on Patients and the ACA Individual Market,” Milliman, available at:
https://www.milliman.com/en/insight/the-impact-of-short-term-limited-duration-policy-expansion-on-patients-and-the-aca-individual-market.
225
See, e.g., Deam, Jenny (2021). “He Bought Health Insurance for Emergencies. Then He Fell Into a $33,601 Trap,” ProPublica, available at: https://www.propublica.org/article/junk-insurance.

August 14, 2023 538 Bulletin No. 2023–33
In recent years, fixed indemnity
excepted benefits coverage is increas-
ingly being designed to resemble com-
prehensive coverage and might therefore
also be mistakenly viewed as a substitute
for comprehensive coverage, rather than
as independent, noncoordinated benefits
that are supplemental to comprehensive
coverage.
226

Because both types of coverage are
sold outside of the Exchanges and are
not generally subject to the Federal
consumer protections and requirements
for comprehensive coverage, consum-
ers may have limited information about
the limitations, value, and quality of
the coverage being sold.
227
The recent
reports of consumer confusion regard-
ing STLDI and fixed indemnity excepted
benefits coverage
228
support the need
to improve consumer understanding of
these types of coverage (and their cov-
erage limitations) compared to compre-
hensive coverage. These proposed rules
would revise the notice that must be
prominently displayed (in either paper
or electronic form) in at least 14-point
font, on the first page of the policy, cer-
tificate, or contract of insurance and in
any marketing, application, and enroll-
ment materials provided at or before the
time an individual has the opportunity
to enroll (or reenroll) in STLDI, includ-
ing on any websites used to advertise or
enroll (or reenroll) individuals in STLDI.
These proposed rules would also revise
the notice that must be prominently
displayed (in either paper or electronic
form) in at least 14-point font on the first
page of any marketing, application, and
enrollment materials provided in con-
nection with fixed indemnity excepted
benefits coverage in the individual mar-
ket, and on the first page of the policy,
certificate, or contract of insurance of
such coverage.
These proposed rules would also
require the same notice be provided in
the same manner in connection with fixed
indemnity excepted benefits coverage in
the group market in any marketing, appli-
cation, or enrollment materials provided
to participants at or before the time par-
ticipants are given an opportunity to
enroll in the coverage. The fixed indem-
nity excepted benefits coverage required
notices would also be required to be prom
-
inently displayed on websites used in con-
nection with advertising or enrolling (or
re-enrolling) individuals in such coverage.
This would help ensure that consumers
can better understand and properly distin-
guish fixed indemnity excepted benefits
coverage from comprehensive coverage.
These proposed rules would encourage
enrollment in comprehensive coverage
and lower the risk that STLDI and fixed
indemnity excepted benefits coverage are
viewed or marketed as a substitute for
comprehensive coverage.
229

2. Summary of Impacts
The expected benefits, costs, and
transfers associated with these proposed
rules are summarized in Table 1 and dis-
cussed in detail later in this section of this
preamble.
226
See, e.g., Young, Christen Linke and Kathleen Hannick (2020). “Fixed Indemnity Health Coverage Is a Problematic Form of “Junk Insurance” USC-Brookings Schaeffer Initiative for Health
Policy, available at: https://www.brookings.edu/blog/usc-brookings-schaeffer-on-health-policy/2020/08/04/fixed-indemnity-health-coverage-is-a-problematic-form-of-junk-insurance/.
227
See Williams, Jackson (2022). “Addressing Low-Value Insurance Products With Improved Consumer Information: The Case of Ancillary Health Products,” National Association of
Insurance Commissioners, Journal of Insurance Regulation, available at: https://content.naic.org/sites/default/files/cipr-jir-2022-9.pdf.
228
Regarding consumer confusion related to short-term, limited-duration insurance, see, e.g., Deam, Jenny (2021). “He Bought Health Insurance for Emergencies. Then He Fell Into a
$33,601 Trap,” ProPublica, available at: https://www.propublica.org/article/junk-insurance. See also Palanker, Dania and Kevin Lucia (2021). “Limited Plans with Minimal Coverage Are
Being Sold as Primary Coverage, Leaving Consumers at Risk,” Commonwealth Fund, available at: https://www.commonwealthfund.org/blog/2021/limited-plans-minimal-coverage-are-be-
ing-sold-primary-coverage-leaving-consumers-risk.
See also Schwab, Rachel and Maanasa Kona (2018). “State Insurance Department Consumer Alerts on Short-Term Plans Come Up
Short,” Center on Health Insurance Reforms, available at: https://chirblog.org/state-insurance-department-consumer-alerts-short-term-plans-come-short/. See also Corlette, Sabrina, Kevin
Lucia, Dania Palanker, and Olivia Hoppe (2019). “The Marketing of Short-Term Health Plans: An Assessment of Industry Practices and State Regulatory Responses,” Urban Institute,
available at: https://www.urban.org/research/publication/marketing-short-term-health-plans-assessment-industry-practices-and-state-regulatory-responses. For a discussion of consumer
confusion related to fixed indemnity excepted benefits coverage, see, e.g., Young, Christen Linke and Kathleen Hannick (2020). “Fixed Indemnity Health Coverage Is a Problematic
Form of “Junk Insurance,” USC-Brookings Schaeffer Initiative for Health Policy, available at: https://www.brookings.edu/blog/usc-brookings-schaeffer-on-health-policy/2020/08/04/
fixed-indemnity-health-coverage-is-a-problematic-form-of-junk-insurance/.
229
As discussed in section I.B of this preamble, these proposed rules would build on Executive Order 14009, “Strengthening Medicaid and the Affordable Care Act” and Executive Order
14070, “Continuing to Strengthen Americans’ Access to Affordable, Quality Health Coverage” by encouraging enrollment in high-quality, comprehensive coverage. The Departments also
note that the affordability of comprehensive coverage offered in the individual market has increased for many consumers in recent years, due in part to the expanded PTC subsidies provided
through the ARP and the IRA, as discussed in section II of this preamble. Further, as discussed in section II of this preamble, the COVID-19 PHE has highlighted the importance of encour-
aging enrollment in comprehensive coverage.

Bulletin No. 2023–33 539 August 14, 2023
TABLE 1: Accounting Table
Benefits:
Non-Quantified:
• Reductions in information asymmetries in health insurance markets through increased consumer understanding of STLDI and
fixed indemnity excepted benefits coverage in relation to comprehensive coverage.
• Increased enrollment in comprehensive coverage, with an estimated increase in enrollment in individual health insurance
coverage purchased on an Exchange by approximately 60,000 people in 2026, 2027, and 2028 associated with the proposed
provisions regarding STLDI.
• Improvement in market stability and market risk pools for comprehensive coverage.
• Reduction in the risk of high out-of-pocket health expenses, lower incidence of medical debt, improved health outcomes, and
increased health equity, for individuals who switch to comprehensive coverage.
• Potential reduction in the overall number of STLDI coverage rescissions or claims denials, if enrollment in STLDI declines.
• Potential reduction in deceptive or aggressive marketing practices regarding the sale of STLDI and fixed indemnity excepted
benefits coverage.
Costs:EstimateYear DollarDiscount RatePeriod Covered
Annualized Monetized ($/year)$17,36920237 percent2024-2028
$16,15420233 percent2024-2028
Quantified:
• One-time regulatory review cost of approximately $76,200 for issuers of STLDI, issuers of fixed indemnity excepted benefits
coverage, and other interested parties.
Non-Quantified:
• Potential increase in premium costs for individuals who switch from STLDI to comprehensive coverage and are not eligible
for the PTC.
• Potential increase in the number of uninsured individuals, if some individuals with STLDI who would no longer be permitted
to renew or extend their coverage with the same issuer are unable to purchase STLDI from another issuer during a 12-month
period, and must wait until open enrollment to obtain comprehensive coverage, or choose not to purchase comprehensive
coverage.
• Potential increase in health care spending, if individuals switch to comprehensive coverage and increase their use of health
care as a result.
• Potential costs to States associated with enacting new legislation and implementing new laws regarding STLDI and fixed
indemnity excepted benefits coverage in response to the provisions included in these proposed rules.
Transfers:EstimateYear DollarDiscount RatePeriod Covered
Annualized Monetized ($/year)- $67.1 million20237 percent2024-2028
- $69.9 million20233 percent2024-2028
Quantified:
• Decrease in Federal spending on PTC of approximately $120 million in 2026, 2027, and 2028 associated with the proposed
provisions regarding STLDI.
• Reduction in gross premiums for individuals enrolled in individual health insurance coverage purchased on an Exchange by
approximately 0.5 percent in 2026, 2027, and 2028 associated with the proposed provisions regarding STLDI.
Non-Quantified:
• Potential transfer from issuers to consumers if consumers switch from STLDI and fixed indemnity excepted benefits coverage
to comprehensive coverage and experience a reduction in out-of-pocket costs.

August 14, 2023 540 Bulletin No. 2023–33
Table 2 presents the estimated effects
of the provisions regarding STLDI on
enrollment in and gross premiums for
individual health insurance coverage pur-
chased on an Exchange and on Federal
spending on the PTC (by calendar year),
as discussed further in sections VII.B.2.c
and VII.B.2.e of this preamble.
TABLE 2: Estimated Effects of the Provisions Regarding STLDI on Enrollment in and Gross Premiums for Individual
Health Insurance Coverage Purchased on an Exchange and on Federal Spending on the PTC
Calendar Year20242025202620272028
Change in Enrollment in Individual Health Insurance Coverage
Purchased on an Exchange
0060,00060,00060,000
Percentage Change in Gross Premiums for Individual Health
Insurance Coverage Purchased on an Exchange
00-0.5-0.5-0.5
Change in Federal Spending on the PTC (in millions)$0$0-$120-$120-$120
a. Background
STLDI and fixed indemnity excepted
benefits coverage generally are not subject
to the Federal consumer protections and
requirements for comprehensive coverage
as discussed in more detail in section I.A
of this preamble. STLDI and fixed indem-
nity excepted benefits coverage therefore
expose enrollees to financial and health
risks, as discussed in this section and sec-
tion II.B of this preamble.
STLDI and fixed indemnity excepted
benefits coverage typically do not cover
all essential health benefits (including, for
example, prescription drugs, maternity
services, and mental health and substance
use disorder services), and typically do not
cover preexisting conditions.
230
STLDI
can offer fewer benefits overall.
231
While
fixed indemnity excepted benefits cov-
erage is designed to provide a source of
income replacement or financial support
following a covered illness or injury, fixed
indemnity benefits are often far below a
covered individual’s incurred costs.
232

Both STLDI and fixed indemnity excepted
benefits coverage typically have lower
medical loss ratios (MLRs) or lower actu-
arial values than coverage subject to the
Federal consumer protections and require-
ments for comprehensive coverage. In one
study of the medical claims of approxi-
mately 47 million enrollees in commercial
plans in 2016, for example, the implied
actuarial value of the STLDI coverage in
the study was 49 percent, compared to an
implied actuarial value of approximately
74 percent for off-Exchange comprehen-
sive coverage plans and an implied actu-
arial value of 87 percent for on-Exchange
plans.
233
Additionally, according to an
NAIC report, across 28 issuers of STLDI
for individuals in 2021, the nationwide
loss ratio was approximately 70 percent.
234

Across 95 issuers of other non-compre-
hensive coverage for individuals, which
includes fixed indemnity excepted ben-
efits coverage, the nationwide loss ratio
was approximately 40 percent in 2021.
235

By contrast, according to data from MLR
annual reports for the 2021 MLR report-
ing year, the average MLR in the individ-
ual market for comprehensive coverage
was approximately 87 percent in 2021.
236

These statistics suggest that relative
to issuers of comprehensive coverage,
issuers of STLDI and fixed indemnity
excepted benefits coverage tend to spend
a lower percentage of premium dollars on
health care items and services or, in the
case of fixed indemnity excepted bene-
fits coverage, payment of benefits. Such
insurance might therefore be highly profit-
able for issuers,
237
depending on the extent
to which issuers incur costs related to
230
See, e.g., Dieguez, Gabriela and Dane Hansen (2020). “The Impact of Short-Term Limited-Duration Policy Expansion on Patients and the ACA Individual Market,” Milliman, available
at: https://www.milliman.com/en/insight/the-impact-of-short-term-limited-duration-policy-expansion-on-patients-and-the-aca-individual-market. See also Pollitz, Karen, Michelle Long,
Ashley Semanskee, and Rabah Kamal (2018). “Understanding Short-Term Limited Duration Health Insurance,” KFF, available at: https://www.kff.org/health-reform/issue-brief/understand-
ing-short-term-limited-duration-health-insurance/. See also Sanger-Katz, Margot (2018). “What to Know Before You Buy Short-Term Health Insurance,” The New York Times, available
at: https://www.nytimes.com/2018/08/01/upshot/buying-short-term-health-insurance-what-to-know.html. See also Young, Christen Linke and Kathleen Hannick (2020). “Fixed Indemnity
Health Coverage Is a Problematic Form of “Junk Insurance,” USC-Brookings Schaeffer Initiative for Health Policy, available at: https://www.brookings.edu/blog/usc-brookings-schaeffer-
on-health-policy/2020/08/04/fixed-indemnity-health-coverage-is-a-problematic-form-of-junk-insurance. See also Partnership to Protect Coverage (2021). “Under-Covered: How ‘Insurance-
Like’ Products are Leaving Patients Exposed,” available at: https://www.nami.org/NAMI/media/NAMI-Media/Public%20Policy/Undercovered_Report_03252021.pdf.
231
See, e.g., Dieguez, Gabriela and Dane Hansen (2020). “The Impact of Short-Term Limited-Duration Policy Expansion on Patients and the ACA Individual Market,” Milliman, available at:
https://www.milliman.com/en/insight/the-impact-of-short-term-limited-duration-policy-expansion-on-patients-and-the-aca-individual-market.
232
See Williams, Jackson (2022). “Addressing Low-Value Insurance Products With Improved Consumer Information: The Case of Ancillary Health Products,” National Association of
Insurance Commissioners, Journal of Insurance Regulation, available at: https://content.naic.org/sites/default/files/cipr-jir-2022-9.pdf.
233
Pelech, Daria and Karen Stockley (2022). “How Price and Quantity Factors Drive Spending in Nongroup and Employer Health Plans,” Health Services Research, available at: https://
onlinelibrary.wiley.com/doi/10.1111/1475-6773.13962.
234
National Association of Insurance Commissioners (2022). “2021 Accident and Health Policy Experience Report,” available at: https://content.naic.org/sites/default/files/publica-
tion-ahp-lr-accident-health-report.pdf. Data regarding issuers of STLDI and non-comprehensive coverage are only available for the individual market.
235
Id.
236
Based on internal calculations. Source: CMS, Medical Loss Ratio Data and System Resources, available at: https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.
237
See Appleby, Julie (2018). “Short-Term Health Plans Boost Profits For Brokers And Insurers,” NPR, available at: https://www.npr.org/sections/health-shots/2018/12/21/678605152/short-
term-health-plans-boost-profits-for-brokers-and-insurers. See also Pear, Robert (2018). “‘Short Term’ Health Insurance? Up to 3 Years Under New Trump Policy,” The New York Times,
available at: https://www.nytimes.com/2018/08/01/us/politics/trump-short-term-health-insurance.html.

Bulletin No. 2023–33 541 August 14, 2023
marketing (including agent/broker com-
pensation
238
), policy underwriting, and
overhead. At the same time, the limited
coverage provided through most STLDI
and fixed indemnity excepted benefits
coverage exposes individuals enrolled in
such plans to health and financial risks,
including the risk of high medical bills
and high out-of-pocket expenses. These
high out-of-pocket expenses, in turn,
could contribute to an increased risk of
medical debt and bankruptcy, which is
particularly problematic given the extent
of medical debt already present in the
United States.
239
Compensation for agents and bro-
kers from sales of STLDI can also be
significant, incentivizing aggressive
and/or deceptive marketing tactics that
may mislead customers into enrolling in
STLDI instead of comprehensive cover-
age.
240,241,242
One study suggests that com-
missions for STLDI are up to 10 times
higher than those obtained for enrollment
in individual health insurance coverage
(averaging approximately 23 percent for
STLDI, compared to 2 percent for indi-
vidual health insurance coverage).
243

Data that specify compensation levels for
agents and brokers selling fixed indem-
nity excepted benefits coverage are not
available. However, one survey suggests
that lead-generating websites direct con-
sumers to insurance brokers selling both
STLDI and other types of non-compre-
hensive coverage, including fixed indem-
nity excepted benefits coverage, and that
both types of coverage are often marketed
to resemble comprehensive coverage.
244
Misleading marketing of STLDI and
fixed indemnity excepted benefits cover-
age is reported to have taken place during
individual health insurance coverage open
enrollment periods or special enrollment
periods (including during the COVID-19
special enrollment period, under which
the Exchanges that used the Federal eli-
gibility and enrollment platform opera-
tionalized functionality during a 6-month
period in 2021 to make a special enroll-
ment period available on HealthCare.gov
to allow qualified individuals to enroll
in 2021 individual health insurance cov-
erage through those Exchanges amid the
COVID-19 PHE).
245
For example, one
study showed that enrollment in STLDI
policies by brokers increased by approx-
imately 60 percent in December 2018
and by more than 120 percent in January
2019, suggesting that overall enrollment
in STLDI spiked during the ACA open
enrollment season.
246

In order to protect consumers, a num-
ber of States and the District of Columbia
enacted legislation or issued regulations
regarding STLDI after the 2018 final
rules were published.
247
State regulatory
actions regarding such coverage have
been wide-ranging. For example, accord-
ing to one report, as of January 2020, 5
States prohibited underwritten STLDI, 9
States limited the total duration of enroll-
ment in underwritten STLDI (including
renewals or extensions) to less than 364
days, and 11 States limited the initial con-
tract term for enrollment in STLDI to less
than 364 days.
248
Other State regulatory
actions on STLDI have included banning
coverage rescissions (except in cases such
as fraud on the part of the enrollee), add-
ing preexisting condition protections, and
requiring a certain MLR, among other
restrictions.
249
Lastly, some States have
largely aligned their regulations regard-
ing STLDI with the 2018 final rules.
250
In
some States that allow sales of STLDI, but
otherwise regulate STLDI, issuers do not
offer STLDI.
251

Recent analysis has found that States
that allow the initial contract term of
STLDI to last up to 364 days have seen
a 27 percent reduction in enrollment, on
average, in non-Exchange plans that are
238
Compensation includes commissions, fees, or other incentives (for example, rewards or bonuses) as established in the relevant contract between an issuer and the agent or broker.
239
See, e.g., Consumer Financial Protection Bureau (2022). “Medical Debt Burden in the United States,” available at: https://files.consumerfinance.gov/f/documents/cfpb_medical-debt-bur-
den-in-the-united-states_report_2022-03.pdf.
240
See, e.g., Appleby, Julie (2018). “Short-Term Health Plans Boost Profits For Brokers And Insurers,” NPR, available at: https://www.npr.org/sections/health-shots/2018/12/21/678605152/
short-term-health-plans-boost-profits-for-brokers-and-insurers.
241
Government Accountability Office (2020). “Private Health Coverage: Results of Covert Testing for Selected Offerings,” available at: https://www.gao.gov/products/gao-20-634r.
242
However, even as some issuers offer higher compensation for STLDI, many brokers continue to refuse to sell products they view as overly risky for consumers, like STLDI. See, e.g.,
Corlette, Sabrina, Erik Wengle, Ian Hill, and Olivia Hoppe (2020). “Perspective from Brokers: The Individual Market Stabilizes While Short-Term and Other Alternative Products Pose Risks,”
Urban Institute, available at: https://www.urban.org/research/publication/perspective-brokers-individual-market-stabilizes-while-short-term-and-other-alternative-products-pose-risks.
243
U.S. House of Representatives Committee on Energy and Commerce (2020). “Shortchanged: How the Trump Administration’s Expansion of Junk Short-Term Health Insurance Plans is
Putting Americans at Risk,” available at: https://democrats-energycommerce.house.gov/newsroom/press-releases/ec-investigation-finds-millions-of-americans-enrolled-in-junk-health.
244
Corlette, Sabrina, Kevin Lucia, Dania Palanker, and Olivia Hoppe (2019). “The Marketing of Short-Term Health Plans: An Assessment of Industry Practices and State Regulatory
Responses,” Urban Institute, available at: https://www.urban.org/research/publication/marketing-short-term-health-plans-assessment-industry-practices-and-state-regulatory-re-
sponses.
245
See Palanker, Dania and JoAnn Volk. (2021). “Misleading Marketing of Non-ACA Health Plans Continued During COVID-19 Special Enrollment Period,” Center on
Health Insurance Reforms, available at: https://georgetown.app.box.com/s/mn7kgnhibn4kapb46tqmv6i7putry9gt. See also Corlette, Sabrina, Kevin Lucia, Dania Palanker, and Olivia
Hoppe (2019). “The Marketing of Short-Term Health Plans: An Assessment of Industry Practices and State Regulatory Responses,” Urban Institute, available at: https://www.urban.
org/research/publication/marketing-short-term-health-plans-assessment-industry-practices-and-state-regulatory-responses. Regarding the COVID-19 special enrollment period, see
E.O. 14009; see also CMS (2021). “2021 Special Enrollment Period in Response to the COVID-19 Emergency,” available at: https://www.cms.gov/newsroom/fact-sheets/2021-special-
enrollment-period-response-covid-19-emergency. Regarding the extension of the COVID-19 special enrollment period (to the 6-month period between February 15, 2021 and August
15, 2021), see CMS (2021). “Extended Access Opportunity to Enroll in More Affordable Coverage Through HealthCare.gov,” available at: https://www.cms.gov/newsroom/fact-sheets/
extended-access-opportunity-enroll-more-affordable-coverage-through-healthcaregov.
246
U.S. House of Representatives Committee on Energy and Commerce (2020). “Shortchanged: How the Trump Administration’s Expansion of Junk Short-Term Health Insurance Plans Is
Putting Americans at Risk,” available at: https://democrats-energycommerce.house.gov/newsroom/press-releases/ec-investigation-finds-millions-of-americans-enrolled-in-junk-health.
247
Norris, Louise (2020). “‘So Long’ to Limits on Short-Term Plans,” Healthinsurance.org, available at: https://www.healthinsurance.org/so-long-to-limits-on-short-term-plans/. See also
Dieguez, Gabriela and Dane Hansen (2020). “The Impact of Short-Term Limited-Duration Policy Expansion on Patients and the ACA Individual Market,” Milliman, available at: https://
www.milliman.com/en/insight/the-impact-of-short-term-limited-duration-policy-expansion-on-patients-and-the-aca-individual-market.
248
As of January 2020. Giovannelli, Justin, JoAnn Volk, and Kevin Lucia (2020). “States Work to Make Individual Market Health Coverage More Affordable, But Long-Term Solutions Call for Federal
Leadership,” Commonwealth Fund, available at: https://www.commonwealthfund.org/publications/issue-briefs/2020/jan/states-make-indivldual-coverage-more-affordable-federal-needed.
249
Palanker, Dania, Maanasa Kona, and Emily Curran (2019). “States Step Up to Protect Insurance Markets and Consumers from Short-Term Health Plans,” Commonwealth Fund, available
at: https://www.commonwealthfund.org/publications/issue-briefs/2019/may/states-step-up-protect-markets-consumers-short-term-plans.
250
Norris, Louise (2020). “‘So Long’ to Limits on Short-Term Plans,” Healthinsurance.org, available at: https://www.healthinsurance.org/so-long-to-limits-on-short-term-plans/.
251
See Dieguez, Gabriela and Dane Hansen (2020). “The Impact of Short-Term Limited-Duration Policy Expansion on Patients and the ACA Individual Market,” Milliman, available at:
https://www.milliman.com/en/insight/the-impact-of-short-term-limited-duration-policy-expansion-on-patients-and-the-aca-individual-market.

August 14, 2023 542 Bulletin No. 2023–33
subject to the ACA Federal consumer
protections and requirements for com-
prehensive coverage from 2018 to 2020,
compared with a 4 percent reduction in
enrollment, on average, in those plans in
States that banned STLDI or limited its
duration to 6 months or less.
252
This analy-
sis also found that market-wide risk scores
(a measure of relative expected health care
costs for a population) declined more in
States that banned or limited STLDI cov-
erage (-11.8 percent) than in States with
less restrictions on STLDI (-8.3 percent),
suggesting that the less restrictive States
saw more healthier individuals enroll in
STLDI policies in lieu of comprehen-
sive coverage, which put upward pres-
sure on the average expected health care
costs among those with comprehensive
coverage.
b. Number of Affected Entities
These proposed rules would directly
impact individuals who are currently
enrolled in STLDI or fixed indemnity
excepted benefits coverage or who may
choose to purchase or consider purchas-
ing such coverage in the future. The
Departments have limited information
about the number of individuals currently
enrolled in STLDI. Data from the NAIC
indicate that approximately 173,000
individuals were covered by STLDI
sold to individuals at the end of 2021.
253

However, as noted in section VII.B.1, this
figure does not capture the total number of
individuals covered by STLDI throughout
the year, and does not include individuals
covered by STLDI sold to or through asso-
ciations. As noted in section VII.B.1, pro-
jections by CBO and JCT suggest that 1.5
million people could currently be enrolled
in STLDI,
254
and CMS previously esti-
mated that 1.9 million individuals would
enroll in STLDI by 2023.
255
However, the
CBO and JCT and CMS estimates were
developed prior to the expansion of PTC
subsidies provided through the ARP and
the IRA, which likely supported increased
enrollment in individual health insurance
coverage purchased on an Exchange in
lieu of STLDI and other forms of health
insurance not subject to the Federal con-
sumer protections and requirements for
comprehensive coverage.
256
The number
of enrollees in STLDI might have also
been affected by any changes in State law
or regulation that occurred since the 2018
final rules were issued. The Departments
are unaware of any estimates or sources of
information for the number of individuals
enrolled in fixed indemnity excepted ben-
efits coverage.
These proposed rules would also
directly impact issuers of STLDI and
fixed indemnity excepted benefits cover-
age, and agents and brokers who enroll
consumers in that coverage. The NAIC
reported that there were at least 28 issu-
ers of STLDI for individuals across the
U.S.
in 2021.
257
Due to a lack of data, the
Departments are unable to estimate the
number of issuers of individual market
fixed indemnity excepted benefits cover-
age that would be affected by these pro-
posed rules, though as noted earlier in
this section of this preamble, the NAIC
reported that there were at least 95 issu-
ers of “other non-comprehensive cover-
age” (including fixed indemnity excepted
benefits coverage) for individuals across
the U.S. in 2021.
258
The Departments also
lack data about the number of agents and
brokers that currently enroll individuals in
STLDI or fixed indemnity excepted bene-
fits coverage.
Lastly, these proposed rules could also
indirectly impact consumers enrolled
in comprehensive coverage due to the
effects of increased enrollment in com-
prehensive coverage on risk pools,
premiums, plan offerings, or issuer par-
ticipation in the markets for that cover-
age. While the Departments are unable
to estimate whether or how these pro-
posed rules would impact plan offerings
or issuer participation in the markets for
comprehensive coverage, in sections
VII.B.2.c and VII.B.2.e of this preamble,
the
Departments discuss the estimated
effects of the provisions regarding STLDI
included in these proposed rules on enroll-
ment in and premiums for individual
health insurance coverage purchased on
an Exchange.
The Departments seek comments
on the number of entities that would be
affected by these proposed rules. In partic-
ular, the Departments seek comments on
the number of issuers and the number of
associations offering STLDI, the number
of issuers offering individual market fixed
indemnity excepted benefits coverage, the
number of issuers offering group market
fixed indemnity excepted benefits cover-
age, the number of enrollees in each type
of coverage, and the number of agents and
brokers that enroll individuals in these
types of non-comprehensive coverage
options.
c. Benefits
These proposed rules are expected to
reduce the harm caused to consumers who
are misled into enrolling in STLDI or fixed
indemnity excepted benefits coverage as an
alternative to or replacement for compre-
hensive coverage. The proposed notices
would improve consumer understanding
of STLDI and fixed indemnity excepted
benefits coverage in relation to compre-
hensive coverage. The Departments are of
the view that the proposed notices would
252
Hall, Mark and Michael McCue (2022). “Short-Term Health Insurance and the ACA Market,” Commonwealth Fund, available at: https://www.commonwealthfund.org/blog/2022/
short-term-health-insurance-and-aca-market.
253
National Association of Insurance Commissioners (2022). “2021 Accident and Health Policy Experience Report,” available at: https://content.naic.org/sites/default/files/publica-
tion-ahp-lr-accident-health-report.pdf.
254
Congressional Budget Office (2020). “CBO’s Estimates of Enrollment in Short-Term, Limited-Duration Insurance,” available at: https://www.cbo.gov/publication/56622. CBO and JCT
projected that enrollment in STLDI would reach 1.6 million by 2028. See Congressional Budget Office (2019). “How CBO and JCT Analyzed Coverage Effects of New Rules for Association
Health Plans and Short-Term Plans,” available at: https://www.cbo.gov/publication/54915.
255
CMS Office of the Actuary (2018). ”Estimated Financial Effects of the Short-Term, Limited-Duration Policy Proposed Rule,” available at: https://www.cms.gov/Research-Statistics-Data-
and-Systems/Research/ActuarialStudies/Downloads/STLD20180406.pdf.
256
See, e.g., Ortaliza, Jared, Krutika Amin, and Cynthia Cox (2022). “As ACA Marketplace Enrollment Reaches Record High, Fewer Are Buying Individual Market Coverage Elsewhere,”
KFF, available at: https://www.kff.org/policy-watch/as-aca-marketplace-enrollment-reaches-record-high-fewer-are-buying-individual-market-coverage-elsewhere/.
257
National Association of Insurance Commissioners (2022). “2021 Accident and Health Policy Experience Report,” available at: https://content.naic.org/sites/default/files/publica-
tion-ahp-lr-accident-health-report.pdf.
258
Id.

Bulletin No. 2023–33 543 August 14, 2023
help ensure individuals are made aware
that these plans are not comprehensive
coverage. This is also expected to reduce
the level of deceptive marketing of STLDI
and fixed indemnity excepted benefits
coverage. Consumers who switch from
STLDI or fixed indemnity excepted ben-
efits coverage to comprehensive coverage
would have better access to health care,
better consumer protections, more robust
benefits, and therefore would be expected
to experience better health outcomes.
The Departments anticipate these pro-
posed rules would lead to an increase in
enrollment in high-quality, affordable,
comprehensive coverage that is subject
to the Federal consumer protections and
requirements for comprehensive cover-
age. Individuals would be less likely to
wait until after they incur major medical
expenses or develop a medical condition
to switch from STLDI or fixed indem-
nity excepted benefits coverage to com-
prehensive coverage. This could lead to
more stable markets for comprehensive
coverage and improved market risk pools
for such coverage. However, as noted
earlier in this section of this preamble,
the expanded PTC subsidies provided
through the ARP and the IRA have likely
already resulted in increased enrollment in
individual health insurance coverage pur-
chased on an Exchange in lieu of STLDI
or fixed indemnity excepted benefits cov-
erage, so the immediate overall effects of
these proposed rules on enrollment, mar-
ket stability, and risk pools are expected
to be limited in 2024 and 2025.
259
The
CMS Office of the Actuary (OACT) esti-
mates that, relative to current law, the
proposed provisions regarding STLDI
would not affect enrollment in individual
health insurance coverage purchased on
an Exchange in 2024 and 2025, but would
increase enrollment by approximately
60,000 people in 2026, 2027, and 2028.
260
To the extent that these proposed rules
would lead to an increase in enrollment in
comprehensive coverage that is subject
to the Federal consumer protections and
requirements for comprehensive cover-
age, these rules would likely result in a
reduction in out-of-pocket expenses, med-
ical debt, and risk of medical bankruptcy
for consumers switching to comprehen-
sive coverage. These proposed rules could
also lead to a reduction in surprise bills
from out-of-network providers in certain
circumstances, to the extent the proposed
rules lead to an increase in enrollment in
coverage that is subject to the surprise
billing protections for consumers under
the No Surprises Act.
By encouraging enrollment in compre-
hensive coverage, these proposed rules
could also reduce the number of cover-
age rescissions, claims denials, premium
increases, or coverage exclusions that are
common for STLDI.
d. Costs
Individuals with STLDI or fixed
indemnity excepted benefits coverage
who switch to individual health insurance
coverage—particularly those individuals
who are not eligible for the PTC—might
incur higher premium costs depending on
their choice of available Exchange and
off-Exchange comprehensive coverage
plans, their PTC eligibility (if applicable),
and the amount of advance payment of the
PTC they receive (if any).
261

These proposed rules could also lead to
an increase in the number of individuals
without some form of health insurance
coverage, if some individuals with STLDI
or fixed indemnity excepted benefits cov-
erage lose coverage and have to wait until
the next open enrollment period to pur-
chase comprehensive coverage (for exam-
ple, if an individual with existing coverage
exhausts their renewal options outside of
an open enrollment period), or choose to
become uninsured. Those individuals who
become uninsured could face an increased
risk of higher out-of-pocket expenses
and medical debt, reduced access to
health care, and potentially worse health
outcomes.
To the extent that these proposed rules
would lead to an increase in enrollment
in comprehensive coverage, they could
result in an increase in overall health care
utilization and spending, given that this
coverage tends to have higher MLRs and
actuarial values and might offer lower
cost-sharing requirements and more gen-
erous benefits.
262

Additionally, these proposed rules
could impose costs on States that change
their laws regarding STLDI or fixed
indemnity excepted benefits coverage
in response to the proposed provisions
included in these proposed rules. The
Departments seek comments on the mag-
nitude of the costs that States might incur
associated with enacting new legislation,
implementing new laws, and updating
existing regulations regarding STLDI
and fixed indemnity excepted benefits
coverage.
The Departments expect that plans
and issuers would incur minimal costs
to replace the existing notices with the
revised ones (which would be provided by
the Departments, as discussed in section
VII.D of this preamble). The Departments
also expect that since plans and issuers
259
See, e.g., Ortaliza, Jared, Krutika Amin, and Cynthia Cox (2022). “As ACA Marketplace Enrollment Reaches Record High, Fewer Are Buying Individual Market Coverage Elsewhere,”
KFF, available at: https://www.kff.org/policy-watch/as-aca-marketplace-enrollment-reaches-record-high-fewer-are-buying-individual-market-coverage-elsewhere/.
260
In developing these estimates, OACT assumed that STLDI coverage would be significantly less expensive than individual health insurance coverage purchased on an Exchange (where
available) and would be an attractive option for individuals and families with relatively low health care costs and little to no subsidies. Using their health reform model, OACT estimated that,
under current law, about 60,000 people would move from individual health insurance coverage purchased on an Exchange to STLDI in 2026, when the additional PTC subsidies available
through 2025 through the IRA expire. In addition, since those switching to STLDI are assumed to be healthier than average, the average premium for individual health insurance coverage
purchased on an Exchange would increase by roughly 0.5 percent. Changing the maximum duration of an STLDI policy, certificate, or contract of insurance to no more than 3 months, as
proposed in these proposed rules, would negate these effects.
261
This might occur if premiums for STLDI are lower than premiums for individual health insurance coverage. One study, for example, showed that by screening out individuals with pre-
existing conditions and providing fewer comprehensive benefits, issuers may be able to offer STLDI at rates 54 percent below those for (unsubsidized) comprehensive coverage. See Levitt,
Larry, Rachel Fehr, Gary Claxton, Cynthia Cox, and Karen Pollitz (2018). “Why do Short-Term Health Insurance Plans Have Lower Premiums than Plans that Comply with the ACA?,” KFF,
available at: https://files.kff.org/attachment/Issue-Brief-Why-Do-Short-Term-Health-Insurance-Plans-Have-Lower-Premiums-Than-Plans-That-Comply-with-the-ACA.
262
As noted earlier in this RIA, many STLDI policies offer limited benefits coverage and have relatively low actuarial values. Many STLDI issuers spend a relatively high percentage of
premium dollars on administration and overhead See National Association of Insurance Commissioners (2022). “Accident and Health Policy Experience Report for 2021,” available at:
https://content.naic.org/sites/default/files/publication-ahp-lr-accident-health-report.pdf. Regarding the differences in cost-sharing requirements and out-of-pocket expenses between STLDI
and individual health insurance coverage, see, e.g., Dieguez, Gabriela and Dane Hansen (2020). “The Impact of Short-Term Limited-Duration Policy Expansion on Patients and the ACA
Individual Market,” Milliman, available at: https://www.milliman.com/en/insight/the-impact-of-short-term-limited-duration-policy-expansion-on-patients-and-the-aca-individual-market.

August 14, 2023 544 Bulletin No. 2023–33
change their policy documents routinely,
the costs to plans and issuers to change
their policy documents in response to
these proposed rules would be part of
plans’ and issuers’ usual business costs.
e. Transfers
Individuals currently enrolled in
STLDI may be healthier on average than
individuals enrolled in comprehensive
coverage, as STLDI policies are not sub-
ject to Federal requirements that would
prohibit them from excluding individuals
or charging individuals higher premiums
on the basis of health status, gender, and
other factors. These proposed rules might
cause some of these individuals to switch
to comprehensive coverage. If such a
switch occurs, it would improve the indi-
vidual market (or merged market) risk
pools and lead to lower overall premiums
for individual health insurance coverage.
CMS previously estimated that gross pre-
miums for individual health insurance
coverage purchased on an Exchange in
2022 would be 6 percent higher under
the 2018 proposed rules than they would
have been in the absence of those rules.
263

CBO and JCT previously estimated that
the 2018 final rules for STLDI, in con-
junction with changes made through the
2018 Department of Labor rule entitled
“Definition of ‘Employer’ Under Section
3(5) of ERISA—Association Health
Plans”,
264
would increase premiums in the
individual and small group health insur-
ance coverage markets by around 3 per-
cent.
265
An analysis of individual health
insurance coverage rate filing materials
for 2020 also found that the few carri-
ers that explicitly included a premium
adjustment because of the 2018 final
rules increased premiums by between 0.5
percent and 2 percent in 2020.
266
These
analyses suggest that these proposed rules
could have an effect in the opposite direc-
tion, potentially reducing gross premiums
for individual health insurance coverage.
However, since the expanded PTC sub-
sidies provided through the ARP and the
IRA have likely already led to a reduction
in enrollment in STLDI and fixed indem-
nity excepted benefits coverage and an
increase in enrollment in individual health
insurance coverage purchased on an
Exchange, the Departments anticipate that
the premium impact of these proposed
rules would be relatively small. OACT
estimates that the proposed provisions
regarding STLDI would not affect gross
premiums for individuals with individual
health insurance coverage purchased on
an Exchange in 2024 and 2025, but would
reduce gross premiums by approximately
0.5 percent in 2026, 2027, and 2028.
267
The proposed provisions regarding
STLDI are expected to reduce Federal
spending on PTC after the end of the
expanded PTC subsidies provided
through the IRA. These proposed provi-
sions are expected to reduce gross pre-
miums for individual health insurance
coverage purchased on an Exchange and
therefore lower per capita PTC spend-
ing. This effect would be partly offset
by an increase in the number of individ-
uals enrolling in Exchange coverage that
would be eligible to receive the PTC (by
approximately 20,000 in 2026, 2027,
and 2028). On net, OACT estimates that
these proposed provisions would have no
impact on Federal spending on PTC in
2024 and 2025 given the expanded PTC
subsidies provided through the IRA, but
would reduce Federal spending on the
PTC by approximately $120 million in
2026, 2027, and 2028.
268
This reduction
in Federal spending on the PTC would be
viewed as a reduction in the amount of the
transfer from the Federal government to
individuals.
These proposed rules could also lead
to a transfer in the form of reduced out-
of-pocket expenses from issuers to con-
sumers who switch from STLDI or fixed
indemnity excepted benefits coverage
to comprehensive coverage, since more
health care services would be covered
under comprehensive coverage and the
cost-sharing requirements for comprehen-
sive coverage might be lower than those
for STLDI or fixed indemnity excepted
benefits coverage.
269
f. Uncertainty
As noted throughout this preamble, due
to a lack of data and information, there are
several areas of uncertainty regarding the
potential
impacts of these proposed rules.
The Departments are unable to forecast
how all of the provisions of these pro-
posed rules would affect enrollment in
STLDI and fixed indemnity excepted
benefits coverage, as the Departments
are uncertain how many individuals are
currently enrolled in these types of cov-
erage and would switch to comprehensive
coverage, how many individuals would
try to find another issuer of STLDI once
their current policy ends, how many indi-
viduals would choose to remain enrolled
in fixed indemnity excepted benefits
coverage (particularly if their employers
restructure their plan offerings in response
to these proposed rules), or how many
individuals would choose not to purchase
any form of coverage as a result of these
proposed rules.
270
As a result, there is
also some uncertainty about the potential
impact on risk pools, premiums, Federal
263
CMS Office of the Actuary (2018). ”Estimated Financial Effects of the Short-Term, Limited-Duration Policy Proposed Rule,” available at: https://www.cms.gov/Research-Statistics-Data-
and-Systems/Research/ActuarialStudies/Downloads/STLD20180406.pdf.
264
83 FR 28912 (June 21, 2018). The District Court of D.C. vacated this rule. See State of New York, et al. v. United States Department of Labor, et al., 363 F.Supp.3d 109 (D.D.C. 2019).
265
Congressional Budget Office (2019). “How CBO and JCT Analyzed Coverage Effects of New Rules for Association Health Plans and Short-Term Plans,” available at: https://www.cbo.
gov/publication/54915.
266
Dieguez, Gabriela and Dane Hansen (2020). “The Impact of Short-Term Limited-Duration Policy Expansion on Patients and the ACA Individual Market,” Milliman, available at: https://
www.milliman.com/en/insight/the-impact-of-short-term-limited-duration-policy-expansion-on-patients-and-the-aca-individual-market.
267
This estimate accounts for the end of the expanded PTC subsidies provided through the IRA.
268
In fiscal year terms, this would be a reduction in federal spending of $90 million in 2026, $120 million in 2027, and $120 million in 2028.
269
As noted in the Costs subsection of this RIA, regarding the differences in cost-sharing requirements and out-of-pocket expenses between STLDI and individual health insurance coverage,
see, e.g., Dieguez, Gabriela and Dane Hansen (2020). “The Impact of Short-Term Limited-Duration Policy Expansion on Patients and the ACA Individual Market,” Milliman, available at:
https://www.milliman.com/en/insight/the-impact-of-short-term-limited-duration-policy-expansion-on-patients-and-the-aca-individual-market.
270
Previous studies have estimated the impact of the STLDI definition adopted in the 2018 final rules on enrollment in individual health insurance coverage, but in conjunction with the impact of elim-
ination of the individual shared responsibility payment. See Dieguez, Gabriela and Dane Hansen (2020). “The Impact of Short-Term Limited-Duration Policy Expansion on Patients and the ACA
Individual Market,” Milliman, available at: https://www.milliman.com/en/insight/the-impact-of-short-term-limited-duration-policy-expansion-on-patients-and-the-aca-individual-market.

Bulletin No. 2023–33 545 August 14, 2023
expenditures on PTC, and compensation
for agents and brokers selling STLDI,
fixed indemnity excepted benefits cover-
age, and individual health insurance cov-
erage. The Departments seek comments
on all of these areas of uncertainty regard-
ing the impacts of these proposed rules.
g. Health Equity Impact
Due to the typical underwriting prac-
tices and plan eligibility requirements in
the market for STLDI, individuals might
face higher premiums or might not be
able to purchase STLDI because of preex-
isting health conditions, gender, or other
factors.
271
STLDI and fixed indemnity
excepted benefits coverage typically do
not cover certain essential health bene-
fits including prescription drugs, mental
health and substance use disorder ser-
vices, or maternity services,
272
which
could contribute to disparities in access to
health care and health outcomes (regard-
ing mental health, maternal health, or
infant health, for instance).
273

Consumers with low health literacy,
which disproportionately includes con-
sumers with low incomes, may also be
misled into purchasing STLDI or fixed
indemnity excepted benefits coverage
under the mistaken impression that it
would lower their out-of-pocket costs
while providing comprehensive coverage
with lower premiums. Consumers with
low income or who are members of under-
served racial and ethnic groups are more
likely to be uninsured and face barriers in
accessing care.
274
Individuals in these pop-
ulations arguably face the greatest health
and financial consequences in the event
that STLDI or fixed indemnity excepted
benefits coverage proves inadequate.
These individuals are also potentially
most vulnerable to practices like post-
claims underwriting and rescission that
are common in the STLDI market, which
could leave them without any coverage in
a health crisis.
These proposed rules would partly
address these health inequities by increas-
ing regulation of issuers offering STLDI
and fixed indemnity excepted benefits
coverage and encouraging enrollment in
comprehensive coverage.
The Departments seek comments on
the potential health equity implications of
these proposed rules.
h. Regulatory Review Cost Estimation
If regulations impose administrative
costs on entities, such as the time needed
to read and interpret rules, regulatory
agencies should estimate the total cost
associated with regulatory review. The
Departments assume that approximately
250 entities will review these proposed
rules, including 28 issuers of STLDI,
275

95 issuers of other non-comprehensive
coverage,
276
and other interested parties
(for example, State insurance depart-
ments, State legislatures, industry asso-
ciations, and advocacy organizations).
The Departments acknowledge that this
assumption may understate or overstate
the number of entities that will review
these proposed rules.
Using wage information from the
Bureau of Labor Statistics, for Business
Operations Specialists, All Other (Code
13-1199), to account for average labor
costs (including a 100 percent increase
for the cost of fringe benefits and other
indirect costs), the Departments estimate
that the cost of reviewing these proposed
rules will be $76.20 per hour.
277
The
Departments estimate that it will take
each reviewing individual approximately
4 hours to review these proposed rules,
with an associated cost of approximately
$305 (4 hours x $76.20). Therefore, the
Departments estimate that the (one-time)
total cost of reviewing these proposed
rules will be approximately $76,200 (250
x $305).
The Departments welcome comments
on this approach to estimating the total
burden and cost for interested parties to
read and interpret these proposed rules.
C. Regulatory Alternatives – Departments
of Health and Human Services and Labor
In developing the proposed rules, the
Departments considered various alterna-
tive approaches.
With respect to the proposed amend-
ments to the definition of STLDI, the
Departments considered leaving in place
the duration standards established in the
2018 final rules, but concluded that the
2018 final rules’ duration standards were
too lengthy for the reasons described
in section III.A.2 of this preamble. The
Departments also considered proposing
to limit the maximum duration of STLDI
policies to a less-than-6-month period
to minimize disruption for consumers in
some (but not all) States that have imple-
mented a less-than-6-month period, a
less-than-3-month period as implemented
in the 2016 final rules, or otherwise short-
ening the maximum duration to a time
period shorter than allowed under current
regulations. However, the Departments
271
See, e.g., Barnes, Justin and Fumiko Chino (2022). “Short-term Health Insurance Plans Come Up Short for Patients with Cancer,” JAMA Oncology, Vol 8 Issue 8: 1101-1103, available at:
https://jamanetwork.com/journals/jamaoncology/article-abstract/2793127.
272
Dieguez, Gabriela and Dane Hansen (2020). “The Impact of Short-Term Limited-Duration Policy Expansion on Patients and the ACA Individual Market,” Milliman, available at: https://
www.milliman.com/en/insight/the-impact-of-short-term-limited-duration-policy-expansion-on-patients-and-the-aca-individual-market.
273
See, e.g., Hill, Latoya, Samantha Artiga, and Usha Ranji (2022). “Racial Disparities in Maternal and Infant Health: Current Status and Efforts to Address Them,” KFF, available at: https://
www.kff.org/racial-equity-and-health-policy/issue-brief/racial-disparities-in-maternal-and-infant-health-current-status-and-efforts-to-address-them/.
274
See Tolbert, Jennifer, Kendal Orgera, and Anthony Damico (2020). “Key Facts about the Uninsured Population,” KFF, available at: https://www.kff.org/uninsured/issue-brief/
key-facts-about-the-uninsured-population/. See also Artiga, Samantha, Latoya Hill, Kendal Orgera, and Anthony Damico (2021). “Health Coverage by Race and Ethnicity, 2010-2019,”
KFF, available at: https://www.kff.org/racial-equity-and-health-policy/issue-brief/health-coverage-by-race-and-ethnicity/. See also KFF (2021). “Adults Who Report Not Having a
Personal Doctor/Health Care Provider by Race/Ethnicity,” available at: https://www.kff.org/other/state-indicator/percent-of-adults-reporting-not-having-a-personal-doctor-by-raceethnic-
ity/. See also KFF (2021). “Adults Who Report Not Seeing a Doctor in the Past 12 Months Because of Cost by Race/Ethnicity,” available at: https://www.kff.org/other/state-indicator/
percent-of-adults-reporting-not-seeing-a-doctor-in-the-past-12-months-because-of-cost-by-raceethnicity/.
275
National Association of Insurance Commissioners (2022). “2021 Accident and Health Policy Experience Report,” available at: https://content.naic.org/sites/default/files/publica-
tion-ahp-lr-accident-health-report.pdf.
276
Id. The Departments assume that all issuers of other non-comprehensive coverage will review these proposed rules.
277
See Bureau of Labor Statistics (2022). “National Occupational Employment and Wage Estimates,” available at: https://www.bls.gov/ oes/ current/ oes_ nat.htm.

August 14, 2023 546 Bulletin No. 2023–33
ultimately decided to propose a maximum
duration of no more than 4 months to align
with the rules regarding the 90-day wait-
ing period limitation and the optional rea-
sonable and bona fide employment-based
orientation period that is permitted under
the ACA.
278

The Departments considered propos-
ing to limit stacking of STLDI coverage,
whether sold by the same or different
issuer. However, after considering the
potential challenges issuers and State
regulators would face in attempting to
determine whether an individual had
previously enrolled in an STLDI policy
with a different issuer, the Departments
decided to propose to limit stacking only
where STLDI is sold to an individual by
the same issuer, while seeking comments
on whether the Departments should extend
the limit on stacking to STLDI sold to an
individual by issuers that are members of
the same controlled group.
The Departments considered propos-
ing a limit on the marketing and/or sale of
STLDI during the individual health insur-
ance coverage open enrollment period.
The Departments are concerned that
aggressive and deceptive marketing prac-
tices by some issuers have lured consum-
ers, looking for comprehensive coverage,
into enrolling in STLDI, exposing them
to financial risk. The Departments solicit
comments on how the Departments can
support State efforts to limit the market-
ing and/or sale of STLDI during the open
enrollment period.
With respect to the proposed amend-
ments to the notices provided to consum-
ers considering enrolling in STLDI, the
Departments considered including a com-
plete list of Federal protections that apply
to consumers enrolled in comprehensive
coverage versus STLDI. This approach
would more fully distinguish STLDI from
comprehensive coverage and highlight in
greater detail the risks to consumers of
enrolling in STLDI instead of compre-
hensive coverage. However, after con-
sulting with plain language experts, the
Departments are of the view that provid-
ing a complete comparison of protections
that a consumer would forego by enroll-
ing in STLDI rather than comprehensive
coverage would result in a lengthy,
complex notice that could be difficult
for the typical consumer to understand.
Increasing the length and complexity of
the notice would also increase burden for
issuers to provide the notice on policy
documents and marketing and applica-
tion materials as proposed in these rules.
However, the Departments are soliciting
comments on all aspects of the revised
notice, including whether a different for-
mat or presentation would result in a more
useful, consumer-friendly notice.
The Departments considered propos-
ing a more detailed notice be provided to
consumers who are considering enroll-
ing in fixed indemnity excepted benefits
coverage, including language that would
highlight in greater detail the differences
between fixed indemnity excepted benefits
coverage and comprehensive coverage and
include a reference to potential financial
support available for Exchange coverage,
similar to the proposed consumer notice
for STLDI. However, the Departments
ultimately determined that the value of
providing a more concise, readable notice
for fixed indemnity excepted benefits cov-
erage outweighed the benefits of providing
that more detailed information. Because
fixed indemnity excepted benefits cover-
age differs so significantly in purpose and
scope from comprehensive coverage, the
Departments were also concerned that
providing the additional details could sug-
gest to consumers that fixed indemnity
excepted benefits coverage is something
more than a form of income replacement
or financial support.
The Departments also considered
proposing alternative applicability dates
for the proposed changes to the fixed
indemnity excepted benefits regulations,
including a uniform applicability date for
new and existing coverage, either aligned
with the effective date of the final rules or
with a longer transition. The Departments
acknowledge that consumers may have
purchased fixed indemnity excepted ben-
efits coverage in reliance on requirements
in place prior to the publication of the final
rules, and that changes to the regulations
may af
fect the availability of such cover-
age, benefit design, and costs. Plans and
issuers, similarly, have designed and sold
fixed indemnity excepted benefits cover-
age on the basis of the current regulatory
framework, on which State regulators
have also developed enforcement poli-
cies. In light of these reliance interests,
the Departments are of the view that it is
appropriate to adopt the special rule for
existing coverage to delay applicability
for certain changes to January 1, 2027, in
order to provide a transition period with
respect to fixed indemnity excepted ben-
efits coverage sold or issued before the
effective date of the final rules. However,
such reliance interests would not be pres-
ent with respect to new fixed indemnity
excepted benefits coverage sold or issued
on or after the effective date of the final
rules. Further, delaying application of the
final rules prolongs the risk of harm to
new consumers and would frustrate the
purpose of these proposed rules to distin-
guish between comprehensive coverage
and fixed indemnity excepted benefits
coverage and promote consumer access
to high-quality, affordable, comprehen-
sive coverage. In addition, as discussed
in section III.B.1.g of this preamble, there
are certain proposed changes (such as
the applicable notice requirements, tech-
nical amendments, and the severability
provisions) that do not raise concerns
about reliance interests and therefore the
Departments propose an earlier applica-
bility date for those proposals for fixed
indemnity excepted benefits coverage sold
or issued before the effective date of the
final rules.
The Departments considered propos-
ing to apply the fixed indemnity excepted
benefits coverage proposals in these pro-
posed rules to specified disease excepted
benefits coverage, to apply uniform stan-
dards to both statutorily-defined forms
of independent, noncoordinated excepted
benefits. However, the Departments deter-
mined that additional information about
specified disease excepted benefits cover-
age would be useful prior to engaging in
rulemaking. Therefore, the Departments
have included a comment solicitation
aimed at gathering information about spec-
ified disease excepted benefits coverage,
including whether additional guidance or
278
26 CFR 54.9815–2708, 29 CFR 2590.715-2708, and 45 CFR 147.116.

Bulletin No. 2023–33 547 August 14, 2023
rulemaking on this type of coverage may
be necessary.
D. Paperwork Reduction Act
These proposed rules provide that to be
considered STLDI for coverage periods
beginning on or after the effective date of
the final rules, a revised consumer notice
must be prominently displayed (in either
paper or electronic form) on the first page
of the policy, certificate, or contract of
insurance and in any marketing, applica-
tion, and enrollment materials (including
reenrollment materials) provided to indi-
viduals at or before the time an individual
has the opportunity to enroll (or reenroll)
in the coverage.
These proposed rules also provide that
to be considered fixed indemnity excepted
benefits coverage in the group market for
plan years beginning on or after the effec-
tive date of the final rules, a notice must be
included in any marketing, application, or
enrollment materials provided to partici-
pants at or before the time participants are
given an opportunity to enroll in the cov-
erage. The notice would indicate that the
hospital indemnity or other fixed indem-
nity insurance is not comprehensive cov-
erage and does not have to include most
Federal consumer protections for health
insurance, outline the availability of other
health coverage options, and explain
that individuals may contact the State
department of insurance for questions or
complaints. These proposed rules would
propose revisions, comparable to the
group market standards, for the notice that
must be provided for hospital indemnity
and other fixed indemnity insurance to be
considered an excepted benefit in the indi-
vidual market for notices required with
respect to coverage periods beginning on
or after the effective date of the final rules.
The proposed rules provide that the indi-
vidual market fixed indemnity excepted
benefits notice must be included on the
first page of any marketing, application,
and enrollment or reenrollment materials
that are provided at or before the time an
individual has the opportunity to enroll or
reenroll in the coverage, and on the first
page of the policy, certificate, or contract
of insurance.
The Departments propose to provide
the exact text for these notices, and the
language would not need to be custom-
ized. The burden associated with these
notices would therefore not be subject
to the Paperwork Reduction Act of 1995
in accordance with 5 CFR 1320.3(c)(2)
because they do not contain a “collection
of information” as defined in 44 U.S.C.
3502(3). Consequently, this document
need not be reviewed by OMB under the
authority of the Paperwork Reduction Act
of 1995 (44 U.S.C. 3501 et seq.).
These proposed rules also amend 26
CFR 1.105-2 to clarify that, for amounts
to be excluded from income under section
105(b) of the Code, the payment or reim-
bursement must be substantiated by the
health plan. Any information required to
substantiate the expenses under this regu-
lation is considered a usual and customary
business practice and a record provided
during the normal course of business in
administering health plans. These cus-
tomary business records impose no addi-
tional burden on respondents and are not
required to be reviewed by OMB in accor-
dance with 5 CFR 1320.3(b)(2).
The Departments seek comments on
potential burden on issuers if the final rules
were to include required notices with lan-
guage that would need to be customized.
E. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA),
(5 U.S.C. 601, et seq.), requires agencies
to analyze options for regulatory relief of
small entities to prepare an initial regu-
latory flexibility analysis to describe the
impact of a proposed rule on small enti-
ties, unless the head of the agency can
certify that the rule will not have a sig-
nificant economic impact on a substantial
number of small entities. The RFA gener-
ally defines a “small entity” as (1) a pro-
prietary firm meeting the size standards of
the Small Business Administration (SBA),
(2) a not-for-profit organization that is not
dominant in its field, or (3) a small gov-
ernment jurisdiction with a population of
less than 50,000. States and individuals
are not included in the definition of “small
entity.” HHS uses a change in revenues of
more than 3 to 5 percent as its measure of
significant economic impact on a substan-
tial number of small entities.
The provisions in these proposed rules
would affect issuers of STLDI and issuers
of fixed indemnity excepted benefits cov-
erage. Health insurance issuers are gener-
ally classified under the North American
Industry Classification System (NAICS)
code 524114 (Direct Health and Medical
Insurance Carriers). According to SBA
size standards,
279
entities with average
annual receipts of $47 million or less are
considered small entities for this NAICS
code. The Departments expect that few,
if any, insurance companies underwriting
health insurance policies fall below these
size thresholds. Based on data from MLR
annual report submissions for the 2021
MLR reporting year, approximately 87
out of 483 issuers of health insurance cov-
erage nationwide had total premium rev-
enue of $47 million or less.
280
However,
it should be noted that over 77 percent of
these small companies belong to larger
holding groups, and many, if not all, of
these small companies are likely to have
non-health lines of business that will result
in their revenues exceeding $47 million.
The Departments expect this to be the
case for issuers of STLDI and issuers of
fixed indemnity excepted benefits cover-
age. However, as noted earlier in this RIA,
due to a lack of data, the Departments
are unable to estimate how many small
issuers of STLDI and small issuers of
fixed indemnity excepted benefits cover-
age would be affected by these proposed
rules. The Departments seek comments on
this analysis, and seek information on the
number of small issuers of STLDI and the
number of small issuers of fixed indem-
nity excepted benefits coverage.
Agents and brokers would be classified
under NAICS code 524210 (Insurance
Agencies and Brokerages), with a size
standard of $15 million or less. There is
the potential for the compensation
281
of
small agents and brokers associated with
the sale of STLDI and fixed indemnity
279
Small Business Administration (2023). “Table of Size Standards (last updated March 2023),” available at: https://www.sba.gov/document/support—table-size-standards.
280
Based on internal calculations. Source: CMS, Medical Loss Ratio Data and System Resources, available at: https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.
281
Compensation includes commissions, fees, or other incentives (for example, rewards or bonuses) as established in the relevant contract between an issuer and the agent or broker.

August 14, 2023 548 Bulletin No. 2023–33
excepted benefits coverage to be nega-
tively affected by these proposed rules, if
there is a reduction in sales of that cov-
erage. There is also the potential for the
compensation of small agents and bro-
kers associated with the sale of individual
health insurance coverage to be positively
affected by these proposed rules, if there
is an increase in sales of that cover-
age. However, due to a lack of data, the
Departments are unable to precisely esti-
mate how many agents and brokers might
be affected by these proposed rules and
the magnitudes of the potential changes
in compensation.
282
The Departments seek
information on the number of agents and
brokers who sell STLDI, fixed indemnity
excepted benefits coverage, and individ-
ual health insurance coverage, respec-
tively, and how their compensation might
be affected by these proposed rules, if
finalized.
In addition, section 1102(b) of the
Social Security Act requires agencies to
prepare a regulatory impact analysis if
a rule may have a significant economic
impact on the operations of a substan-
tial number of small rural hospitals. This
analysis must conform to the provisions
of section 603 of the RFA. While these
rules are not subject to section 1102 of
the Social Security Act, the Departments
are of the view that these proposed rules
would not have a significant impact on
the operations of a substantial number of
small rural hospitals. The Departments
seek comments on this
F. Special Analyses – Department of the
Treasury
Pursuant to the Memorandum
of Agreement, Review of Treasury
Regulations under Executive Order 12866
(June 9, 2023), tax regulatory actions
issued by the IRS are not subject to the
requirements of section 6 of Executive
Order 12866, as amended. Therefore,
a regulatory impact assessment is not
required. Pursuant to section 7805(f) of
the Code, these regulations have been sub-
mitted to the Chief Counsel for Advocacy
of the Small Business Administration
for comment on their impact on small
business.
G. Unfunded Mandates Reform Act
Section 202 of the Unfunded
Mandates Reform Act of 1995 (UMRA)
requires that agencies assess anticipated
costs and benefits and take certain other
actions before issuing a proposed rule
that includes any Federal mandate that
may result in expenditures in any 1 year
by State, local, or Tribal governments, in
the aggregate, or by the private sector,
of $100 million in 1995 dollars, updated
annually for inflation. That threshold is
approximately $177 million in 2023. The
Departments anticipate the combined
impact on State, local, or Tribal govern-
ments and the private sector would not be
above the threshold.
H. Federalism
Executive Order 13132 establishes
certain requirements that Federal agen-
cies must meet when they issue proposed
rules that impose substantial direct costs
on State and local governments, preempt
State law, or otherwise have Federalism
implications.
In compliance with the requirement
of Executive Order 13132 that agencies
examine closely any policies that may
have Federalism implications or limit the
policy-making discretion of the States, the
Departments have engaged in efforts to
consult with and work cooperatively with
affected States, including participating in
conference calls with and attending con-
ferences of the NAIC.
In the Departments’ view, these pro-
posed rules have Federalism implications
because they would have direct effects
on the States, the relationship between
the national government and the States,
or on the distribution of power and
responsibilities among various levels of
government. Under these proposed rules,
health insurance issuers offering STLDI
or fixed indemnity excepted benefits cov-
erage would be required to follow the min-
imum Federal standards for such coverage
to not be subject to the Federal consumer
protections and requirements for compre-
hensive coverage.
In general, through section 514,
ERISA supersedes State laws to the
extent that they relate to any covered
employee benefit plan, and preserves
State laws that regulate insurance, bank-
ing, or securities. While ERISA prohib-
its States from regulating an employee
benefit plan as an insurance or invest-
ment company or bank, the preemption
provisions of section 731 of ERISA and
sections 2724 and 2762 of the PHS Act

(implemented in 29 CFR 2590.731(a)
and 45 CFR 146.143(a) and 148.210(b))
apply so that the Federal consumer pro-
tections and requirements for compre-
hensive coverage are not to be construed
to supersede any provision of State law
which establishes, implements, or contin-
ues in effect any standard or requirement
solely relating to health insurance issuers
in connection with individual or group
health insurance coverage except to the
extent that such standard or requirement
prevents the application of a Federal
requirement.
283
The conference report
accompanying HIPAA, when this Federal
preemption standard was first established
for the requirements in title XXVII of the
PHS Act, indicates that this is intended
to be the “narrowest” preemption of State
laws.
284
States may continue to apply State law
requirements except to the extent that
such requirements prevent the applica-
tion of the Federal requirements that are
the subject of this rulemaking. In general,
State insurance requirements that are more
stringent or more consumer protective
than the Federal requirements are unlikely
to “prevent the application of” the Federal
provisions, and therefore are unlikely to
282
Previously, in 86 FR 51730, 51756, the Departments noted that a total of 55,541 agents and brokers work with issuers. Many of these agents and brokers are likely to be employed by
small entities.
283
A similar preemption provision was established for the Exchange and other federal health insurance requirements that are codified outside of title XXVII of the PHS Act. See section
1311(k) and 1321(d) of the ACA.
284
See House Conf. Rep. No. 104–736, at 205, reprinted in 1996 U.S. Code Cong. & Admin. News 2018 and available at https://www.congress.gov/congressional-report/104th-congress/
house-report/736/1.

Bulletin No. 2023–33 549 August 14, 2023
be preempted.
285
Accordingly, States have
significant latitude to impose require-
ments on health insurance issuers that are
more restrictive or more consumer pro-
tective than the Federal requirements.
286

States that have current requirements for
STLDI or fixed indemnity excepted bene-
fits coverage that are the same as or more
restrictive or consumer protective than the
Federal standards in these proposed rules
could thus continue to apply such State law
requirements. States would also have the
flexibility to require additional consumer
disclosures and to establish additional
restrictions under State law in response to
market-specific needs or concerns, as long
as those requirements would not prevent
the application of the Federal require-
ments. For example, a State law or reg-
ulation cannot require issuers to remove
language from the Federal consumer
notice, as that would prevent the applica-
tion of the Federal notice requirements.
These proposed rules, if finalized,
would not impose requirements on
STLDI. Rather, they would define STLDI.
Therefore, to the extent a State were to
permit or require an issuer of STLDI to
issue a policy, certificate, or contract of
insurance that has a longer initial contract
term or a longer total coverage period than
these proposed rules, if finalized, would
specify, that would not constitute a State
law that is more generous or consum-
er-protective than Federal requirements.
Rather, any such policy would not fall
within the Federal definition of STLDI,
and the policy would therefore be subject
to all the Federal consumer protections
and requirements that apply to individual
health insurance coverage.
The Departments are of the view that
there is a need for regulatory action at
the Federal level given, among other fac-
tors, the prevalence of marketing of and
enrollment in STLDI through out-of-State
associations, and the potential inability
of States to regulate and collect informa-
tion about these associations.
287
There is
also limited State-level information about
STLDI enrollment and premiums.
288

While developing these proposed
rules, to the extent feasible within the
applicable preemption provisions, the
Departments have attempted to balance
States’ interests in regulating health insur-
ance issuers and their health insurance
markets, with Congress’ intent to provide
uniform minimum protections to consum-
ers in every State. By doing so, it is the
Departments’ view that they have com-
plied with the requirements of Executive
Order 13132.
Douglas W. O’Donnell,
Deputy Commissioner for Services
and Enforcement,
Internal Revenue Service.
Lisa M. Gomez,
Assistant Secretary, Employee Benefits
Security Administration, Department of
Labor.
Chiquita Brooks-LaSure,
Administrator,
Centers for Medicare & Medicaid
Services.
Xavier
Becerra,
Secretary
Department of Health and Human
Services.
(Filed by the Office of the Federal Register July 7,
2023, 8:45 a.m., and published in the issue of the
Federal Register for July 12, 2023, 88 FR 44596)
285
See, e.g., 62 FR 16904 (April 8, 1997), 69 FR 78739 (Dec. 30, 2004), 79 FR 10303 (Feb. 24, 2014), and 86 FR 36872, 36887 (July 13, 2021).
286
Ibid.
287
Keith, Katie (2020). “New Congressional Investigation of Short-Term Plans,” Health Affairs, available at: https://www.healthaffairs.org/do/10.1377/forefront.20200626.227261/full/. See
also Curran, Emily, Dania Palanker, and Sabrina Corlette (2019). “Short-Term Health Plans Sold Through Out-of-State Associations Threaten Consumer Protections,” Commonwealth Fund,
available at: https://www.commonwealthfund.org/blog/2019/short-term-health-plans-sold-through-out-state-associations-threaten-consumer-protections.
288
Government Accountability Office (2022). “Private Health Insurance: Limited Data Hinders Understanding of Short-Term Plans’ Role and Value During the COVID-19 Pandemic,”
available at: https://www.gao.gov/products/gao-22-104683. See also Palanker, Dania and Christina Goe (2020). “States Don’t Know What’s Happening in Their Short-Term Health Plan
Markets and That’s a Problem,” Commonwealth Fund, available at:
https://www.commonwealthfund.org/blog/2020/states-dont-know-whats-happening-their-short-term-health-plan-mar-
kets-and-thats-problem. See also Congressional Budget Office (2020). “CBO’s Estimates of Enrollment in Short-Term, Limited-Duration Insurance,” available at: https://www.cbo.gov/
publication/56622.

August 14, 2023 550 Bulletin No. 2023–33
List of Subjects
26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements
26 CFR Part 54
Excise taxes, Health care, Health
Insurance, Pensions, Reporting and
recordkeeping requirements.
29 CFR Part 2590
Child support, Employee benefit plans,
Health care, Health insurance, Maternal
and child health, Penalties, Pensions,
Privacy, Reporting and recordkeeping
requirements.
45 CFR Part 144
Health care, Health insur-
ance, Reporting and recordkeeping
requirements.
45 CFR Part 146
Health care, Health insur-
ance, Reporting and recordkeeping
requirements.
45 CFR Part 148
Administrative practice and procedure,
Health care, Health insurance, Insurance
companies, Penalties, Reporting and
recordkeeping requirements.

Bulletin No. 2023–33 551 August 14, 2023
DEPARTMENT OF THE TREASURY
Internal Revenue Service
Proposed Amendments to the
Regulations
Accordingly, the Treasury Department
and the IRS propose to amend 26 CFR
parts 1 and 54 as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805. * * *
Par 2. Section 1.105-2 is revised to
read as follows:
§ 1.105-2 Amounts expended for
medical care.
(a) In general. Section 105(b) pro-
vides an exclusion from gross income
with respect to the amounts referred to
in section 105(a) (see § 1.105-1) which
are paid, directly or indirectly, to the
taxpayer to reimburse the taxpayer for
expenses incurred for the medical care
(as defined in section 213(d)) of the
taxpayer, the taxpayer’s spouse, the
taxpayer’s dependents (as defined in
section 152, determined without regard
to subsections (b)(1), (b)(2), and (d)
(1)(B) thereof) (dependents), and any
child of the taxpayer who, as of the end
of the taxable year, has not attained age
27. Any child to whom section 152(e)
applies shall be treated as a dependent
of both parents for purposes of section
105(b). (All references to the taxpayer’s
medical expenses in this section include
the medical expenses of the taxpayer, the
taxpayer’s spouse, the taxpayer’s depen-
dents, and any child of the taxpayer who,
as of the end of the taxable year, has not
attained age 27.) However, the exclu-
sion does not apply to amounts which
are attributable to (and not in excess of)
deductions allowed under section 213
(relating to medical, etc., expenses) for
any prior taxable year. See section 213
and the regulations thereunder. Section
105(b) applies only to amounts which
are paid specifically to reimburse the
taxpayer for section 213(d) medical care
expenses that have been incurred by
the taxpayer and that are substantiated
by the plan. Thus, section 105(b) does
not apply to amounts that the taxpayer
would be entitled to receive irrespective
of the amount of medical care expenses
the taxpayer incurs or that are paid to
reimburse the taxpayer for incurred
section 213(d) medical care expenses
if the medical care expenses have not
been substantiated by the plan. For
example, if under a wage continuation
plan the taxpayer is entitled to regular
wages during a period of absence from
work due to sickness or injury, amounts
received under such plan are not exclud-
able from the taxpayer’s gross income
under section 105(b) even though the
taxpayer may have incurred medical
expenses during the period of illness.
Any amounts received under a fixed
indemnity plan treated as an excepted
benefit under section 9832(c)(3), or any
plan that pays amounts regardless of the
amount of section 213(d) medical care
expenses actually incurred, are not pay-
ments for medical care under section
105(b) and are included in the employ-
ee’s gross income under section 105(a).
If the taxpayer incurs an obligation for
medical care, payment to the obligee in
discharge of such obligation shall con-
stitute indirect payment to the taxpayer
as reimbursement for medical care.
Similarly, payment to or on behalf of the
taxpayer’s spouse or dependents or any
child of the taxpayer who, as of the end
of the taxable year, has not attained age
27 shall constitute indirect payment to
the taxpayer.
(b) Applicability date. These regula-
tions apply as of the later of the date of
the publication of the final regulations or
January 1, 2024.
PART 54—PENSION AND EXCISE
TAX
Par 3. The authority citation for part 54
continues to read as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 4. Section 54.9801-2 is amended
by revising the definition of “Short-term,
limited-duration insurance” to read as
follows:
§ 54.9801-2 Definitions.
* * * * *
Short-term, limited-duration insurance
means health insurance coverage provided
pursuant to a policy, certificate, or contract
of insurance with an issuer that:
(1) Has an expiration date specified
in the policy, certificate, or contract of
insurance that is no more than 3 months
after the original effective date of the pol-
icy, certificate, or contract of insurance,
and taking into account any renewals or
extensions, has a duration no longer than
4 months in total. For purposes of this
paragraph (1), a renewal or extension
includes the term of a new short-term,
limited-duration insurance policy, certif-
icate, or contract of insurance issued by
the same issuer to the same policyholder
within the 12-month period beginning on
the original effective date of the initial
policy, certificate, or contract of insur-
ance; and
(2) Displays prominently on the first
page (in either paper or electronic form,
including on a website) of the policy, cer-
tificate, or contract of insurance, and in any
marketing, application, and enrollment
materials (including reenrollment mate-
rials) provided to individuals at or before
the time an individual has the opportunity
to enroll (or reenroll) in the coverage, in
at least 14-point font, the language in the
following notice:
“Notice to Consumers About Short-Term,
Limited-Duration Insurance
IMPORTANT: This is short-term, limit-
ed-duration insurance. This is temporary
insurance. It isn’t comprehensive health
insurance. Review your policy carefully
to make sure you understand what is cov-
ered and any limitations on coverage.
• This insurance might not cover or
might limit coverage for:
○preexisting conditions; or
○ essential health benefits (such as
pediatric, hospital, emergency,
maternity, mental health, and
substance use services, prescrip-
tion drugs, or preventive care).
• You won’t qualify for Federal finan-
cial help to pay for premiums or out-
of-pocket costs.
• You aren’t protected from surprise
medical bills.
• When this policy ends, you might
have to wait until an open enrollment

August 14, 2023 552 Bulletin No. 2023–33
period to get comprehensive health
insurance.
Visit HealthCare.gov online or call
1-800-318-2596 (TTY: 1-855-889-4325)
to review your options for comprehen-
sive health insurance. If you’re eligible
for coverage through your employer or a
family member’s employer, contact the
employer for more information. Contact
your State department of insurance if you
have questions or complaints about this
policy.”
(3) If any provision of this definition of
“short-term, limited-duration insurance”
is held to be invalid or unenforceable by
its terms, or as applied to any entity or
circumstance, or stayed pending further
agency action, the provision shall be con-
strued so as to continue to give the maxi-
mum effect to the provision permitted by
law, along with other provisions not found
invalid or unenforceable, including as
applied to entities not similarly situated or
to dissimilar circumstances, unless such
holding is that the provision is invalid
and unenforceable in all circumstances, in
which event the provision shall be sever-
able from the remainder of the definition
and shall not affect the remainder thereof.
* * * * *
Par. 5. Section 54.9831-1 is amended
by:
a. Revising paragraph (c)(4)(i);
b. Adding paragraph (c)(4)(ii)(D);
c. Revising paragraph (c)(4)(iii); and
d. Adding paragraphs (c)(4)(iv) and (c)
(4)(v).
The revisions and additions read as
follows:
§ 54.9831-1 Special rules relating to
group health plans.
* * * * *
(c) * * *
(4) * * *
(i) Excepted benefits that are not coor-
dinated. Coverage for only a specified dis-
ease or illness (for example, cancer-only
policies) or hospital indemnity or other
fixed indemnity insurance is excepted
only if it meets each of the applicable con-
ditions specified in paragraph (c)(4)(ii) of
this section.
(ii) * * *
(D) With respect to hospital indemnity
or other fixed indemnity insurance –
(1) The benefits are paid in a fixed
dollar amount per day (or per other time
period) of hospitalization or illness (for
example, $100/day) regardless of the
actual or estimated amount of expenses
incurred, services or items received,
severity of illness or injury experienced
by a covered participant or beneficiary, or
other characteristics particular to a course
of treatment received by a covered partic-
ipant or beneficiary, and not on any other
basis (such as on a per-item or per-service
basis).
(2) The plan or issuer displays prom-
inently on the first page (in either paper
or electronic form, including on a web-
site) of any marketing, application, and
enrollment materials that are provided to
participants at or before the time partici-
pants are given the opportunity to enroll in
the coverage, in at least 14-point font, the
language in the following notice:
“Notice to Consumers About Fixed
Indemnity Insurance
IMPORTANT: This is fixed indemnity
insurance. This isn’t comprehensive
health insurance coverage and doesn’t
have to include most Federal consumer
protections for health insurance.
Visit HealthCare.gov online or call 1-800-
318-2596 (TTY: 1-855-889-4325) to
review your options for comprehensive
health insurance. If you’re eligible for cov-
erage through your employer or a family
member’s employer, contact the employer
for more information. Contact your State
department of insurance if you have ques-
tions or complaints about this policy.”
(3) If participants are required to reen-
roll (in either paper or electronic form) for
purposes of renewal or reissuance of the
insurance, the notice described in para-
graph (c)(4)(ii)(D)(2) of this section is
displayed in any marketing and reenroll-
ment materials provided at or before the
time participants are given the opportunity
to reenroll in coverage.
(4) If a plan or issuer provides a notice
satisfying the requirements in paragraph
(c)(4)(ii)(D)(2) and (3) of this section to
a participant, the obligation to provide the
notice is considered to be satisfied for both
the plan and issuer.
(iii) Examples. The rules of this para-
graph (c)(4) are illustrated by the follow-
ing examples:
(A) Example 1—
(1) Facts. An employer sponsors a group health
plan that provides coverage through an insurance
policy. The policy provides benefits only related
to hospital stays at a fixed percentage of hospital
expenses up to a maximum of $100 a day.
(2) Conclusion. Even if the other conditions
in paragraph (c)(4)(ii) of this section are satisfied,
because benefits are paid based on a percentage of
expenses incurred rather than a fixed dollar amount
per day (or per other time period, such as per week),
the policy does not qualify as an excepted benefit
under this paragraph (c)(4). This is the result even if,
in practice, the policy pays the maximum of $100 for
every day of hospitalization.
(B) Example 2—
(1) Facts. An employer sponsors a group health
plan that provides coverage through an insurance
policy. The policy provides benefits when a person
receives certain specific items and services in a fixed
amount, such as $50 per blood test or $100 per visit.
The fixed amounts apply to each specific item or ser-
vice and are not paid per day or per other time period
of hospitalization or illness.
(2) Conclusion. Even if the other conditions in
paragraph (c)(4)(ii) of this section are satisfied, the
policy does not qualify as an excepted benefit under
this paragraph (c)(4) because the benefits are not
paid in a fixed dollar amount per day (or per other
time period) of hospitalization or illness, and are not
paid without regard to the services or items received.
The conclusion would be the same even if the policy
added a per day (or per other time period) term to the
benefit description (for example, “$50 per blood test
per day”), because the benefits are not paid regard-
less of the services or items received.
(C) Example 3—
(1) Facts. An employer sponsors a group health
plan that provides two benefit packages. The first ben-
efit package includes benefits only for preventive ser-
vices and excludes benefits for all other services. The
second benefit package provides coverage through an
insurance policy that pays a fixed dollar amount per
day of hospitalization for a wide variety of illnesses
that are not preventive services covered under the first
benefit package. The two benefit packages are offered
to employees at the same time and can be elected
together. The benefit packages are not subject to a for-
mal coordination of benefits arrangement.
(2) Conclusion. Even if the other conditions in
paragraph (c)(4)(ii) of this section are satisfied, the
second benefit package’s insurance policy does not
qualify as an excepted benefit under this paragraph
(c)(4) because the benefits under the second benefit
package are coordinated with an exclusion of bene-
fits under another group health plan maintained by
the same plan sponsor (that is, the preventive-ser-
vices-only benefit package). The conclusion would
be the same even if the benefit packages were not
offered to employees at the same time or if the sec-
ond benefit package’s insurance policy did not pay
benefits associated with a wide variety of illnesses.
(iv) Applicability date
—
(A) For hos-
pital indemnity or other fixed indemnity

Bulletin No. 2023–33 553 August 14, 2023
insurance sold or issued on or after a date
75 days after the date of publication of the
final rule, the requirements of this para-
graph (c)(4) apply for plan years begin-
ning on or after the date 75 days after the
date of publication of the final rule.
(B) For hospital indemnity or other
fixed indemnity insurance sold or issued
before [THE DATE THAT IS 75 DAYS
AFTER THE DATE OF PUBLICATION
OF THESE REGULATIONS AS FINAL],
the requirements of this paragraph (c)(4)
apply for plan years beginning on or after
January 1, 2027, except that the require-
ments of paragraphs (c)(4)(ii)(D)(2)-(4)
and (c)(4)(v) of this section, apply for
plan years beginning on or after [THE
DATE THAT IS 75 DAYS AFTER THE
DATE OF PUBLICATION OF THESE
REGULATIONS AS FINAL].
(C) Until the relevant applicability date
for the requirements of this paragraph (c)
(4), plans and issuers are required to con-
tinue to comply with the corresponding
section of § 54.9831-1(c)(4) contained in
the 26 CFR, part 54, edition revised as of
April 1, 2023.
(v) Severability. If any provision of this
paragraph (c)(4) is held to be invalid or
unenforceable by its terms, or as applied
to any entity or circumstance, or stayed
pending further agency action, the provi-
sion shall be construed so as to continue
to give the maximum effect to the provi-
sion permitted by law, along with other
provisions not found invalid or unenforce-
able, including as applied to entities not
similarly situated or to dissimilar circum-
stances, unless such holding is that the
provision is invalid and unenforceable in
all circumstances, in which event the pro-
vision shall be severable from the remain-
der of this paragraph (c)(4) and shall not
affect the remainder thereof.
* * * * *
DEPARTMENT OF LABOR
Employee Benefits Security
Administration
29 CFR Chapter XXV
For the reasons stated in the pream-
ble, the Department of Labor proposes
to amend 29 CFR part 2590 as set forth
below:
PART 2590—RULES AND
REGULATIONS FOR GROUP
HEALTH PLANS
6. The authority citation for part 2590
continues to read as follows:
Authority: 29 U.S.C. 1027, 1059,
1135, 1161-1168, 1169, 1181-1183, 1181
note, 1185, 1185a, 1185b, 1191, 1191a,
1191b, and 1191c; sec. 101(g), Pub. L.
104-191, 110 Stat. 1936; sec. 401(b),
Pub. L. 105-200, 112 Stat. 645 (42 U.S.C.
651 note); sec. 512(d), Pub. L. 110-343,
122 Stat. 3881; sec. 1001, 1201, and
1562(e), Pub. L. 111-148, 124 Stat. 119,
as amended by Pub. L. 111-152, 124 Stat.
1029; Division M, Pub. L. 113-235, 128
Stat. 2130; Secretary of Labor’s Order
1-2011, 77 FR 1088 (Jan. 9, 2012).
7. Section 2590.701-2 is amended by
revising the definition of “short-term,
limited-duration insurance” to read as
follows:
§ 2590.701-2 Definitions.
* * * * *
Short-term, limited-duration insurance
means health insurance coverage provided
pursuant to a policy, certificate, or contract
of insurance with an issuer that:
(1) Has an expiration date specified
in the policy, certificate, or contract of
insurance that is no more than 3 months
after the original effective date of the pol-
icy, certificate, or contract of insurance,
and taking into account any renewals or
extensions, has a duration no longer than 4
months in total. For purposes of this para-
graph (1), a renewal or extension includes
the term of a new short-term, limited-du-
ration insurance policy, certificate, or
contract of insurance issued by the same
issuer to the same policyholder within the
12-month period beginning on the original
effective date of the initial policy, certifi-
cate, or contract of insurance; and
(2) Displays prominently on the first
page (in either paper or electronic form,
including on a website) of the policy, cer-
tificate, or contract of insurance, and in any
marketing, application, and enrollment
materials (including reenrollment mate-
rials) provided to individuals at or before
the time an individual has the opportunity
to enroll (or reenroll) in the coverage, in
at least 14-point font, the language in the
following notice:
“Notice to Consumers About Short-Term,
Limited-Duration Insurance
IMPORTANT: This is short-term, limit-
ed-duration insurance. This is temporary
insurance. It isn’t comprehensive health
insurance. Review your policy carefully
to make sure you understand what is cov-
ered and any limitations on coverage.
• This insurance might not cover or
might limit coverage for:
○preexisting conditions; or
○ essential health benefits (such as
pediatric, hospital, emergency,
maternity, mental health, and
substance use services, prescrip-
tion drugs, or preventive care).
• You won’t qualify for Federal finan-
cial help to pay for premiums or out-
of-pocket costs.
• You aren’t protected from surprise
medical bills.
• When this policy ends, you might
have to wait until an open enrollment
period to get comprehensive health
insurance.
Visit HealthCare.gov online or call
1-800-318-2596 (TTY: 1-855-889-4325)
to review your options for comprehen-
sive health insurance. If you’re eligible
for coverage through your employer or a
family member’s employer, contact the
employer for more information. Contact
your State department of insurance if you
have questions or complaints about this
policy.”
(3) If any provision of this definition of
“short-term, limited-duration insurance”
is held to be invalid or unenforceable by
its terms, or as applied to any entity or
circumstance, or stayed pending further
agency action, the provision shall be con-
strued so as to continue to give the maxi-
mum effect to the provision permitted by
law, along with other provisions not found
invalid or unenforceable, including as
applied to entities not similarly situated or
to dissimilar circumstances, unless such
holding is that the provision is invalid
and unenforceable in all circumstances, in
which event the provision shall be sever-
able from the remainder of the definition
and shall not affect the remainder thereof.
* * * * *

August 14, 2023 554 Bulletin No. 2023–33
8. Section 2590.732 is amended by:
a. Revising paragraph (c)(4)(i);
b. Adding paragraph (c)(4)(ii)(D);
c. Revising paragraph (c)(4)(iii); and
d. Adding paragraphs (c)(4)(iv) and (c)
(4)(v).
The revisions and additions read as
follows:
§ 2590.732 Special rules relating to
group health plans.
* * * * *
(c) * * *
(4) * * *
(i) Excepted benefits that are not coor-
dinated. Coverage for only a specified dis-
ease or illness (for example, cancer-only
policies) or hospital indemnity or other
fixed indemnity insurance is excepted
only if it meets each of the applicable con-
ditions specified in paragraph (c)(4)(ii) of
this section.
(ii) * * *
(D) With respect to hospital indemnity
or other fixed indemnity insurance –
(1) The benefits are paid in a fixed
dollar amount per day (or per other time
period) of hospitalization or illness (for
example, $100/day) regardless of the
actual or estimated amount of expenses
incurred, services or items received,
severity of illness or injury experienced
by a covered participant or beneficiary, or
other characteristics particular to a course
of treatment received by a covered partic-
ipant or beneficiary, and not on any other
basis (such as on a per-item or per-service
basis).
(2) The plan or issuer displays prom-
inently on the first page (in either paper
or electronic form, including on a web-
site) of any marketing, application, and
enrollment materials that are provided to
participants at or before the time partici-
pants are given the opportunity to enroll in
the coverage, in at least 14-point font, the
language in the following notice:
“Notice to Consumers About Fixed
Indemnity Insurance
IMPORTANT: This is fixed indemnity
insurance. This isn’t comprehensive
health insurance coverage and doesn’t
have to include most Federal consumer
protections for health insurance.
Visit HealthCare.gov online or call
1-800-318-2596 (TTY: 1-855-889-4325)
to review your options for comprehen-
sive health insurance. If you’re eligible
for coverage through your employer or a
family member’s employer, contact the
employer for more information. Contact
your State department of insurance if you
have questions or complaints about this
policy.”
(3) If participants are required to reen-
roll (in either paper or electronic form) for
purposes of renewal or reissuance of the
insurance, the notice described in para-
graph (c)(4)(ii)(D)(2) of this section is
displayed in any marketing and reenroll-
ment materials provided at or before the
time participants are given the opportunity
to reenroll in coverage.
(4) If a plan or issuer provides a notice
satisfying the requirements in paragraph
(c)(4)(ii)(D)(2) and (3) of this section to
a participant, the obligation to provide the
notice is considered to be satisfied for both
the plan and issuer.
(iii) Examples. The rules of this para-
graph (c)(4) are illustrated by the follow-
ing examples:
(A) Example 1—
(1) Facts. An employer sponsors a group health
plan that provides coverage through an insurance
policy. The policy provides benefits only related
to hospital stays at a fixed percentage of hospital
expenses up to a maximum of $100 a day.
(2) Conclusion. Even if the other conditions
in paragraph (c)(4)(ii) of this section are satisfied,
because benefits are paid based on a percentage of
expenses incurred rather than a fixed dollar amount
per day (or per other time period, such as per week),
the policy does not qualify as an excepted benefit
under this paragraph (c)(4). This is the result even if,
in practice, the policy pays the maximum of $100 for
every day of hospitalization.
(B) Example 2—
(1) Facts. An employer sponsors a group health
plan that provides coverage through an insurance
policy. The policy provides benefits when a person
receives certain specific items and services in a fixed
amount, such as $50 per blood test or $100 per visit.
The fixed amounts apply to each specific item or ser-
vice and are not paid per day or per other time period
of hospitalization or illness.
(2) Conclusion. Even if the other conditions in
paragraph (c)(4)(ii) of this section are satisfied, the
policy does not qualify as an excepted benefit under
this paragraph (c)(4) because the benefits are not
paid in a fixed dollar amount per day (or per other
time period) of hospitalization or illness, and are not
paid without regard to the services or items received.
The conclusion would be the same even if the policy
added a per day (or per other time period) term to the
benefit description (for example, “$50 per blood test
per day”), because the benefits are not paid regard-
less of the services or items received.
(C) Example 3—
(1) Facts. An employer sponsors a group health
plan that provides two benefit packages. The first
benefit package includes benefits only for preven-
tive services and excludes benefits for all other ser-
vices. The second benefit package provides coverage
through an insurance policy that pays a fixed dollar
amount per day of hospitalization for a wide vari-
ety of illnesses that are not preventive services cov-
ered under the first benefit package. The two benefit
packages are offered to employees at the same time
and can be elected together. The benefit packages
are not subject to a formal coordination of benefits
arrangement.
(2) Conclusion. Even if the other conditions in
paragraph (c)(4)(ii) of this section are satisfied, the
second benefit package’s insurance policy does not
qualify as an excepted benefit under this paragraph
(c)(4) because the benefits under the second benefit
package are coordinated with an exclusion of bene-
fits under another group health plan maintained by
the same plan sponsor (that is, the preventive-ser-
vices-only benefit package). The conclusion would
be the same even if the benefit packages were not
offered to employees at the same time or if the sec-
ond benefit package’s insurance policy did not pay
benefits associated with a wide variety of illnesses.
(iv) Applicability dates.
(A) For hospital indemnity or other
fixed indemnity insurance sold or
issued on or after [THE DATE THAT
IS 75 DAYS AFTER THE DATE
OF PUBLICATION OF THESE
REGULATIONS AS FINAL], the
requirements of this paragraph (c)(4)
apply for plans beginning on or after [THE
DATE THAT IS 75 DAYS AFTER THE
DATE OF PUBLICATION OF THESE
REGULATIONS AS FINAL].
(B) For hospital indemnity or other fixed
indemnity insurance sold or issued before
[THE DATE THAT IS 75 DAYS AFTER
THE DATE OF PUBLICATION OF
THESE REGULATIONS AS FINAL],
the requirements of this paragraph (c)(4)
apply for plan years beginning on or after
January 1, 2027, except that the require-
ments of paragraphs (c)(4)(ii)(D)(2)-(4)
and (c)(4)(iii)(A) of this section, apply
for plan years beginning on or after [THE
DATE THAT IS 75 DAYS AFTER THE
DATE OF PUBLICATION OF THESE
REGULATIONS AS FINAL].
(C) Until the relevant applicability date
for the requirements of this paragraph (c)
(4), plans and issuers are required to con-
tinue to comply with the corresponding
section of § 2590.732(c)(4) contained in
the 29 CFR, parts 1927 to end, edition
revised as of July 1, 2022.

Bulletin No. 2023–33 555 August 14, 2023
(v) Severability. If any provision of this
paragraph (c)(4) is held to be invalid or
unenforceable by its terms, or as applied
to any entity or circumstance, or stayed
pending further agency action, the provi-
sion shall be construed so as to continue
to give the maximum effect to the provi-
sion permitted by law, along with other
provisions not found invalid or unenforce-
able, including as applied to entities not
similarly situated or to dissimilar circum-
stances, unless such holding is that the
provision is invalid and unenforceable in
all circumstances, in which event the pro-
vision shall be severable from the remain-
der of this paragraph (c)(4) and shall not
affect the remainder thereof.
* * * * *
9. Section 2590.736 is revised to read
as follows:
§ 2590.736 Applicability dates.
Sections 2590.701–1 through
2590.701–8 and 2590.731 through
2590.736 are applicable for plan years
beginning on or after July 1, 2005. Until
the applicability date for this regulation,
plans and issuers are required to continue
to comply with the corresponding sections
of 29 CFR part 2590, contained in the 29
CFR, parts 1927 to end, edition revised as
of July 1, 2022. Notwithstanding the pre-
vious sentence, for short-term, limited-du-
ration insurance sold or issued on or after
[THE DATE THAT IS 75 DAYS AFTER
THE DATE OF PUBLICATION OF
THESE REGULATIONS AS FINAL],
the definition of “short-term, limited-du-
ration insurance” in § 2590.701–2 applies
for coverage periods beginning on or after
[THE DATE THAT IS 75 DAYS AFTER
THE DATE OF PUBLICATION OF
THESE REGULATIONS AS FINAL].
For short-term, limited-duration insur-
ance sold or issued before [THE DATE
THAT IS 75 DAYS AFTER THE
DATE OF PUBLICATION OF THESE
REGULATIONS AS FINAL] (includ-
ing any subsequent renewal or extension
consistent with applicable law), the defi-
nition of “short-term, limited-duration
insurance” in the corresponding section
of § 2590.701–2 of this subchapter con-
tained in the 29 CFR, parts 1927 to end,
edition revised as of July 1, 2022, con-
tinues to apply, except that paragraph
(2) of the definition of short-term, limit-
ed-duration insurance in § 2590.701–2
of this subchapter applies for coverage
periods beginning on or after [THE
DATE THAT IS 75 DAYS AFTER THE
DATE OF PUBLICATION OF THESE
REGULATIONS AS FINAL].
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
For the reasons stated in the pream-
ble, the Department of Health and Human
Services proposes to amend 45 CFR parts
144, 146, and 148 as set forth below:
PART 144—REQUIREMENTS
RELATING TO HEALTH
INSURANCE COVERAGE
10. The authority citation for part 144
continues to read as follows:
Authority: Secs. 2701 through 2763,
2791, and 2792 of the Public Health
Service Act, 42 U.S.C. 300gg through
300gg–63, 300gg–91, and 300gg–92.
11. Section 144.103 is amended by
revising the definition of “short-term,
limited-duration insurance” to read as
follows:
§ 144.103 Definitions.
* * * * *
Short-term, limited-duration insurance
means health insurance coverage provided
pursuant to a policy, certificate, or contract
of insurance with an issuer that:
(1) Has an expiration date specified
in the policy, certificate, or contract of
insurance that is no more than 3 months
after the original effective date of the pol-
icy, certificate, or contract of insurance,
and taking into account any renewals or
extensions, has a duration no longer than 4
months in total. For purposes of this para-
graph (1), a renewal or extension includes
the term of a new short-term, limited-du-
ration insurance policy, certificate, or
contract of insurance issued by the same
issuer to the same policyholder within the
12-month period beginning on the original
effective date of the initial policy, certifi-
cate, or contract of insurance; and
(2) Displays prominently on the first
page (in either paper or electronic form,
including on a website) of the policy,
certificate, or contract of insurance, and
in any marketing, application, and enroll-
ment materials (including reenrollment
materials) provided to individuals at or
before the time an individual has the
opportunity to enroll (or reenroll) in the
coverage, in at least 14-point font, the lan-
guage in the following notice:
“Notice to Consumers About Short-Term,
Limited-Duration Insurance
IMPORTANT: This is short-term, limit-
ed-duration insurance. This is temporary
insurance. It isn’t comprehensive health
insurance. Review your policy carefully
to make sure you understand what is cov-
ered and any limitations on coverage.
• This insurance might not cover or
might limit coverage for:
○preexisting conditions; or
○ essential health benefits (such as
pediatric, hospital, emergency,
maternity, mental health, and
substance use services, prescrip-
tion drugs, or preventive care).
• You won’t qualify for Federal finan-
cial help to pay for premiums or out-
of-pocket costs.
• You aren’t protected from surprise
medical bills.
• When this policy ends, you might
have to wait until an open enrollment
period to get comprehensive health
insurance.
Visit HealthCare.gov online or call
1-800-318-2596 (TTY: 1-855-889-4325)
to review your options for comprehen-
sive health insurance. If you’re eligible
for coverage through your employer or a
family member’s employer, contact the
employer for more information. Contact
your State department of insurance if you
have questions or complaints about this
policy.”
(3) If any provision of this definition of
“short-term, limited-duration insurance”
is held to be invalid or unenforceable by
its terms, or as applied to any entity or
circumstance, or stayed pending further
agency action, the provision shall be con-
strued so as to continue to give the maxi-
mum effect to the provision permitted by
law, along with other provisions not found

August 14, 2023 556 Bulletin No. 2023–33
invalid or unenforceable, including as
applied to entities not similarly situated or
to dissimilar circumstances, unless such
holding is that the provision is invalid
and unenforceable in all circumstances, in
which event the provision shall be sever-
able from the remainder of the definition
and shall not affect the remainder thereof.
* * * * *
PART 146—REQUIREMENTS FOR
THE GROUP HEALTH INSURANCE
MARKET
12. The authority citation for part 146
continues to read as follows:
Authority: Secs. 2702 through 2705,
2711 through 2723, 2791, and 2792 of
the Public Health Service Act (42 U.S.C.
300gg–1 through 300gg–5, 300gg–11
through 300gg– 23, 300gg–91, and
300gg–92).
13. Section 146.125 is revised to read
as follows:
§ 146.125 Applicability dates.
Section 144.103, §§ 146.111 through
146.119, 146.143, and 146.145 are appli-
cable for plan years beginning on or after
July 1, 2005 (But see § 146.145(b)(4)
(iv) for the applicability dates for hos-
pital indemnity or other fixed indemnity
insurance offered in the group market).
Notwithstanding the previous sentence,
for short-term, limited-duration insur-
ance sold or issued on or after [THE
DATE THAT IS 75 DAYS AFTER THE
DATE OF PUBLICATION OF THESE
REGULATIONS AS FINAL], the defi-
nition of “short-term, limited-duration
insurance” in § 144.103 of this subchapter
applies for coverage periods beginning on
or after [THE DATE THAT IS 75 DAYS
AFTER THE DATE OF PUBLICATION
OF THESE REGULATIONS AS
FINAL]. For short-term, limited-dura-
tion insurance sold or issued before [THE
DATE THAT IS 75 DAYS AFTER THE
DATE OF PUBLICATION OF THESE
REGULATIONS AS FINAL] (includ-
ing any subsequent renewal or exten-
sion consistent with applicable law), the
definition of “short-term, limited-du-
ration insurance” in the corresponding
section of § 144.103 of this subchapter
contained in the 45 CFR, parts 1 to 199,
edition revised as of October 1, 2021,
continues to apply, except that para-
graph (2) of the definition of short-term,
limited-duration insurance in § 144.103
of this subchapter applies for cover-
age periods beginning on or after [THE
DATE THAT IS 75 DAYS AFTER THE
DATE OF PUBLICATION OF THESE
REGULATIONS AS FINAL].
14. Section 146.145 is amended by—
a. Revising paragraph (b)(4)(i);
b. Adding paragraph (b)(4)(ii)(D);
c. Revising paragraph (b)(4)(iii); and
d. Adding paragraphs (b)(4)(iv) and (b)
(4)(v).
The revisions and additions read as
follows:
§ 146.145 Special rules relating to
group health plans.
* * * * *
(b) * * *
(4) * * *
(i) Excepted benefits that are not coor-
dinated. Coverage for only a specified dis-
ease or illness (for example, cancer-only
policies) or hospital indemnity or other
fixed indemnity insurance is excepted
only if it meets each of the applicable con-
ditions specified in paragraph (b)(4)(ii) of
this section.
(ii) * * *
(D) With respect to hospital indemnity
or other fixed indemnity insurance –
(1) The benefits are paid in a fixed
dollar amount per day (or per other time
period) of hospitalization or illness (for
example, $100/day) regardless of the
actual or estimated amount of expenses
incurred, services or items received,
severity of illness or injury experienced
by a covered participant or beneficiary, or
other characteristics particular to a course
of treatment received by a covered partic-
ipant or beneficiary, and not on any other
basis (such as on a per-item or per-service
basis).
(2) The plan or issuer displays prom-
inently on the first page (in either paper
or electronic form, including on a web-
site) of any marketing, application, and
enrollment materials that are provided to
participants at or before the time partici-
pants are given the opportunity to enroll in
the coverage, in at least 14-point font, the
language in the following notice:
“Notice to Consumers About Fixed
Indemnity Insurance
IMPORTANT: This is fixed indemnity
insurance. This isn’t comprehensive
health insurance coverage and doesn’t
have to include most Federal consumer
protections for health insurance.
Visit HealthCare.gov online or call 1-800-
318-2596 (TTY: 1-855-889-4325) to
review your options for comprehensive
health insurance. If you’re eligible for cov-
erage through your employer or a family
member’s employer, contact the employer
for more information. Contact your State
department of insurance if you have ques-
tions or complaints about this policy.”
(3) If participants are required to reen-
roll (in either paper or electronic form) for
purposes of renewal or reissuance of the
insurance, the notice described in para-
graph (b)(4)(ii)(D)(2) of this section is
displayed in any marketing and reenroll-
ment materials provided at or before the
time participants are given the opportunity
to reenroll in coverage.
(4) If a plan or issuer provides a notice
satisfying the requirements in paragraph
(b)(4)(ii)(D)(2) and (3) of this section to
a participant, the obligation to provide the
notice is considered to be satisfied for both
the plan and issuer.
(iii) Examples. The rules of this para-
graph (b)(4) are illustrated by the follow-
ing examples:
(A) Example 1—
(1) Facts. An employer sponsors a group health
plan that provides coverage through an insurance
policy. The policy provides benefits only related
to hospital stays at a fixed percentage of hospital
expenses up to a maximum of $100 a day.
(2) Conclusion. Even if the other conditions in
paragraph (b)(4)(ii) of this section are satisfied,
because benefits are paid based on a percentage of
expenses incurred rather than a fixed dollar amount
per day (or per other time period, such as per week),
the policy does not qualify as an excepted benefit
under this paragraph (b)(4). This is the result even if,
in practice, the policy pays the maximum of $100 for
every day of hospitalization.
(B) Example 2—
(1) Facts. An employer sponsors a group health
plan that provides coverage through an insurance
policy. The policy provides benefits when a person
receives certain specific items and services in a fixed
amount, such as $50 per blood test or $100 per visit.
The fixed amounts apply to each specific item or ser-
vice and are not paid per day or per other time period
of hospitalization or illness.

Bulletin No. 2023–33 557 August 14, 2023
(2) Conclusion. Even if the other conditions in
paragraph (b)(4)(ii) of this section are satisfied, the
policy does not qualify as an excepted benefit under
this paragraph (b)(4) because the benefits are not
paid in a fixed dollar amount per day (or per other
time period) of hospitalization or illness, and are not
paid without regard to the services or items received.
The conclusion would be the same even if the policy
added a per day (or per other time period) term to the
benefit description (for example, “$50 per blood test
per day”), because the benefits are not paid regard-
less of the services or items received.
(C) Example 3—
(1) Facts. An employer sponsors a group health
plan that provides two benefit packages. The first ben-
efit package includes benefits only for preventive ser-
vices and excludes benefits for all other services. The
second benefit package provides coverage through an
insurance policy that pays a fixed dollar amount per
day of hospitalization for a wide variety of illnesses
that are not preventive services covered under the first
benefit package. The two benefit packages are offered
to employees at the same time and can be elected
together. The benefit packages are not subject to a for-
mal coordination of benefits arrangement.
(2) Conclusion. Even if the other conditions in
paragraph (b)(4)(ii) of this section are satisfied, the
second benefit package’s insurance policy does not
qualify as an excepted benefit under this paragraph
(b)(4) because the benefits under the second benefit
package are coordinated with an exclusion of bene-
fits under another group health plan maintained by
the same plan sponsor (that is, the preventive-ser-
vices-only benefit package). The conclusion would
be the same even if the benefit packages were not
offered to employees at the same time or if the sec-
ond benefit package’s insurance policy did not pay
benefits associated with a wide variety of illnesses.
(iv) Applicability dates.
(A) For hospital indemnity or other
fixed indemnity insurance sold or issued
on or after [THE DATE THAT IS 75 DAYS
AFTER THE DATE OF PUBLICATION
OF THESE REGULATIONS AS FINAL],
the requirements of this paragraph (b)(4)
apply for plan years beginning on or after
[THE DATE THAT IS 75 DAYS AFTER
THE DATE OF PUBLICATION OF
THESE REGULATIONS AS FINAL].
(B) For hospital indemnity or other
fixed indemnity insurance sold or issued
before [THE DATE THAT IS 75 DAYS
AFTER THE DATE OF PUBLICATION
OF THESE REGULATIONS AS
FINAL], the requirements of this para-
graph (b)(4) apply for plan years begin-
ning on or after January 1, 2027, except
that the requirements of paragraphs (b)
(4)(ii)(D)(2)-(4) of this section apply for
plan years beginning on or after [THE
DATE THAT IS 75 DAYS AFTER THE
DATE OF PUBLICATION OF THESE
REGULATIONS AS FINAL].
(C) Until the relevant applicability date
for the requirements of this paragraph (b)
(4), plans and issuers are required to con-
tinue to comply with the corresponding
section of § 146.145(b)(4) contained in
the 45 CFR, parts 1 to 199, edition revised
as of October 1, 2021.
(v) Severability. If any provision of this
paragraph (b)(4) is held to be invalid or
unenforceable by its terms, or as applied
to any entity or circumstance, or stayed
pending further agency action, the provi-
sion shall be construed so as to continue
to give the maximum effect to the provi-
sion permitted by law, along with other
provisions not found invalid or unenforce-
able, including as applied to entities not
similarly situated or to dissimilar circum-
stances, unless such holding is that the
provision is invalid and unenforceable in
all circumstances, in which event the pro-
vision shall be severable from the remain-
der of this paragraph (b)(4) and shall not
affect the remainder thereof.
* * * * *
PART 148—REQUIREMENTS
FOR THE INDIVIDUAL HEALTH
INSURANCE MARKET
15. The authority citation for part 148
continues to read as follows:
Authority: Secs. 2701 through 2763,
2791, and 2792 of the Public Health
Service Act (42 U.S.C. 300gg through
300gg–63, 300gg–91, and 300gg–92), as
amended.
16. Section 148.102 is amended by
revising paragraph (b) to read as follows:
§ 148.102 Scope and applicability
dates.
* * * * *
(b) Applicability dates. Except as pro-
vided in § 148.124 (certificate of cred-
itable coverage), § 148.170 (standards
relating to benefits for mothers and new-
borns), and § 148.180 (prohibition of
health discrimination based on genetic
information), the requirements of this
part apply to health insurance coverage
offered, sold, issued, renewed, in effect,
or operated in the individual market after
June 30, 1997. Notwithstanding the pre-
vious sentence, for short-term, limited-du-
ration insurance sold or issued on or after
[THE DATE THAT IS 75 DAYS AFTER
THE DATE OF PUBLICATION OF
THESE REGULATIONS AS FINAL], the
definition of “short-term, limited-duration
insurance” in § 144.103 of this subchapter
applies for coverage periods beginning on
or after [THE DATE THAT IS 75 DAYS
AFTER THE DATE OF PUBLICATION
OF THESE REGULATIONS AS
FINAL]. For short-term, limited-dura-
tion insurance sold or issued before [THE
DATE THAT IS 75 DAYS AFTER THE
DATE OF PUBLICATION OF THESE
REGULATIONS AS FINAL] (includ-
ing any subsequent renewal or extension
consistent with applicable law), the defi-
nition of “short-term, limited-duration
insurance” in the corresponding section
of § 144.103 of this subchapter contained
in the 45 CFR, parts 1 to 199, edition
revised as of October 1, 2021, continues
to apply, except that paragraph (2) of the
definition of “short-term, limited-duration
insurance” in § 144.103 of this subchapter
applies for coverage periods beginning on
or after [THE DATE THAT IS 75 DAYS
AFTER THE DATE OF PUBLICATION
OF THESE REGULATIONS AS FINAL].
17. Section 148.220 is amended by
revising paragraph (b)(4) to read as
follows:
§ 148.220 Excepted benefits.
* * * * *
(b) * * *
(4) Hospital indemnity or other fixed
indemnity insurance only if -
(i) There is no coordination between
the provision of benefits and an exclusion
of benefits under any other health cover-
age maintained by the same issuer with
respect to the same policyholder.
(ii) The benefits are paid in a fixed
dollar amount per day (or per other time
period) of hospitalization or illness (for
example, $100/day) regardless of the
actual or estimated amount of expenses
incurred, services or items received,
severity of illness or injury experienced
by a covered individual, or any other char-
acteristics particular to a course of treat-
ment received by the covered individual
and not on any other basis (such as on a
per-item or per-service basis), and without
regard to whether benefits are provided
with respect to the event under any other

August 14, 2023 558 Bulletin No. 2023–33
health insurance coverage maintained
by the same health insurance issuer with
respect to the same policyholder.
(iii) The issuer displays prominently
on the first page of any marketing, appli-
cation, and enrollment or reenrollment
materials that are provided at or before
the time an individual has the opportu-
nity to apply, enroll or reenroll in cover-
age, and on the first page of the policy,
certificate, or contract of insurance, in at
least 14-point font, the language in the
following notice:
“Notice to Consumers About Fixed
Indemnity Insurance
IMPORTANT: This is fixed indemnity
insurance. This isn’t comprehensive
health insurance coverage and doesn’t
have to include most Federal consumer
protections for health insurance.
Visit HealthCare.gov online or call
1-800-318-2596 (TTY: 1-855-889-4325)
to review your options for comprehen-
sive health insurance. If you’re eligible
for coverage through your employer or a
family member’s employer, contact the
employer for more information. Contact
your State department of insurance if you
have questions or complaints about this
policy.”
(iv)(A) For hospital indemnity or other
fixed indemnity insurance sold or issued
on or after [THE DATE THAT IS 75 DAYS
AFTER THE DATE OF PUBLICATION
OF THESE REGULATIONS AS FINAL],
the requirements of this paragraph (b)(4)
apply for coverage periods beginning on
or after [THE DATE THAT IS 75 DAYS
AFTER THE DATE OF PUBLICATION
OF THESE REGULATIONS AS FINAL].
(B) For hospital indemnity or other
fixed indemnity insurance sold or issued
before [THE DATE THAT IS 75 DAYS
AFTER THE DATE OF PUBLICATION
OF THESE REGULATIONS AS FINAL],
the requirements of this paragraph (b)
(4) apply for coverage periods begin-
ning on or after January 1, 2027, except
that the requirements of paragraph (b)
(4)(iii) of this section apply for cover-
age periods beginning on or after [THE
DATE THAT IS 75 DAYS AFTER THE
DATE OF PUBLICATION OF THESE
REGULATIONS AS FINAL].
(C) Until the relevant applicability date
for the requirements of this paragraph (b)
(4), issuers are required to continue to
comply with the corresponding section
of § 148.220(b)(4) contained in the 45
CFR, parts 1 to 199, edition revised as of
October 1, 2021.
(v) Severability. If any provision
of this paragraph (b)(4) is held to be
invalid or unenforceable by its terms, or
as applied to any entity or circumstance,
or stayed pending further agency action,
the provision shall be construed so as to
continue to give the maximum effect to
the provision permitted by law, along
with other provisions not found invalid
or unenforceable, including as applied to
entities not similarly situated or to dis-
similar circumstances, unless such hold-
ing is that the provision is invalid and
unenforceable in all circumstances, in
which event the provision shall be sever-
able from the remainder of this paragraph
(b)(4) and shall not affect the remainder
thereof.
* * * * *

Bulletin No. 2023–33 i August 14, 2023
Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarified is used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion. It
is not used where a position in a prior rul-
ing is being changed.
Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the

new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings that
are obsoleted because of changes in laws or
regulations. A ruling may also be obsoleted
because the substance has been included in
regulations subsequently adopted.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previous-
ly published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspended is used in rare situations
to show that the previous published rul-
ings will not be applied pending some
future action such as the issuance of new
or amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current
use and formerly used will appear in
material published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.

August 14, 2023 ii Bulletin No. 2023–33
Numerical Finding List
1
Bulletin 2023–33
Announcements:
2023-18, 2023-30 I.R.B. 366
2023-19, 2023-30 I.R.B. 367
2023-20, 2023-30 I.R.B. 368
2023-17, 2023-31 I.R.B. 412
2023-21, 2023-31 I.R.B. 413
2023-22, 2023-32 I.R.B. 429
Notices:
2023-29, 2023-29 I.R.B. 1
2023-45, 2023-29 I.R.B. 317
2023-47, 2023-29 I.R.B. 318
2023-37, 2023-30 I.R.B. 359
2023-50, 2023-30 I.R.B. 361
2023-51, 2023-30 I.R.B. 362
2023-54, 2023-31 I.R.B. 382
2023-53, 2023-32 I.R.B. 424
2023-55, 2023-32 I.R.B. 427
Proposed Regulations:
REG-124123-22, 2023-30 I.R.B. 369
REG-124930-21, 2023-31 I.R.B. 431
REG-120730-21, 2023-33 I.R.B. 491
Revenue Procedures:
2023-31, 2023-25 I.R.B. 386
2023-26, 2023-33I.R.B. 486
Revenue Rulings:
2023-13, 2023-32 I.R.B. 413
2023-14, 2023-333 I.R.B. 484
Treasury Decisions:
9976, 2023-30 I.R.B. 354
9977, 2023-31 I.R.B. 375
9978, 2023-32 I.R.B. 415
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2023–27 through 2023–52 is in Internal Revenue Bulletin
2023–52, dated December 27, 2023.

Bulletin No. 2023–33 iii August 14, 2023
Finding List of Current Actions on
Previously Published Items
1
Bulletin 2023–33
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2023–27 through 2023–52 is in Internal Revenue Bulletin
2023–52, dated December 27, 2023.

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