BREAKING NEWS: IRS Green Lights Health Plans to Take Effect June 17, 2024
In a landmark regulatory action, three federal agencies have issued final rules that fundamentally reshape the landscape for employer-sponsored health benefits. The rules, which take effect June 17, 2024, overturn Trump-era expansions of association health plans and short-term limited-duration insurance (STLDI) while imposing new notice requirements on fixed indemnity plans.
The regulations were issued jointly by the Internal Revenue Service (IRS), the Employee Benefits Security Administration (EBSA), and the U.S. Department of Health and Human Services (HHS). For employers, brokers, and benefits advisors, these changes require immediate attention.
Below, we break down exactly what changed, who is affected, and what employers need to do before the June 17 effective date.
The Regulatory Triple Play: Three Agencies, One Effective Date
In a rare show of interagency coordination, the IRS, DOL, and HHS issued final regulations on March 29, 2024, with a unified effective date of June 17, 2024 [citation:1][citation:2].
The rules address three distinct but related areas of employer-sponsored health benefits:
- Association Health Plans (AHPs) – New rules tightening the definition of qualifying associations
- Short-Term Limited-Duration Insurance (STLDI) – New limits on coverage duration and notice requirements
- Fixed Indemnity Insurance – New consumer disclosure requirements
Each set of changes has significant implications for employers, particularly those who adopted Trump-era AHPs or offered STLDI as a lower-cost alternative to ACA-compliant coverage.
What Changed for Association Health Plans (AHPs)?
The Trump-Era Expansion (2018-2024)
Under the Trump administration, the definition of “employer” was significantly expanded for AHP purposes. The 2018 rules allowed small employers and self-employed individuals to band together based on common geography or industry – not just common ownership or control – to sponsor health plans.
This expansion was highly controversial. Supporters argued it gave small businesses more purchasing power and lower-cost options. Critics warned that AHPs would segment the market, drawing healthier participants away from ACA-compliant plans and driving up premiums for everyone else.
The Biden Administration Reversal
The new final rules restore the prior, stricter definition of what constitutes a single employer for AHP purposes [citation:1]. Under the June 17, 2024 rules:
- Employers must have a “genuinely close” commonality of interest beyond mere geography or industry membership
- Associations must have been formed for purposes other than providing health insurance
- Employers must have meaningful control over the association
In practical terms, this means many AHPs formed under the Trump-era rules will no longer qualify as single employers under ERISA. Those plans may need to restructure, seek alternative coverage, or face potential compliance penalties.
What Employers Should Do
If your organization participates in an AHP:
- Review the association’s governance documents and formation history
- Determine whether the association meets the “genuinely close” standard
- Assess potential coverage gaps or alternative options before June 17
- Consult with legal counsel on compliance and transition strategies
Learn more about benefits compliance audits here →
What Changed for Short-Term Limited-Duration Insurance (STLDI)?
The Trump-Era Expansion (2018-2024)
Short-term limited-duration insurance was originally designed as a bridge product for individuals between coverage periods. The Trump administration extended the maximum coverage duration from 3 months to up to 36 months (with renewals).
STLDI plans are not subject to ACA requirements, including:
– Guaranteed issue
– Community rating
– Essential health benefits coverage
– Prohibition on pre-existing condition exclusions
As a result, STLDI plans are significantly cheaper than ACA-compliant plans – but offer far less protection.
The Biden Administration Reversal
The new final rules dramatically shorten the maximum duration of STLDI policies [citation:1]. Effective June 17, 2024:
- The maximum initial contract term is 3 months
- Renewals or extensions are limited to no more than 1 additional month
- The maximum total duration is 4 months – down from 36 months
New notice requirements also take effect for STLDI policies [citation:2]. Any marketing, application, or enrollment materials must prominently disclose that the policy:
- Is not comprehensive health insurance
- May not cover pre-existing conditions
- May not cover essential health benefits
- Does not satisfy the individual mandate (where applicable)
For STLDI policies effective on or after September 1, 2024, these notices are mandatory.
What Employers Should Do
If your organization offers STLDI as an option (to early retirees, COBRA bridge coverage, or new hires waiting for benefits eligibility):
- Review current STLDI policy terms and renewal dates
- Determine whether policies will need to be reissued or discontinued
- Identify alternative coverage options for affected individuals
- Update marketing and enrollment materials to include required disclosures
What Changed for Fixed Indemnity Insurance?
What Is Fixed Indemnity Insurance?
Fixed indemnity plans pay a set dollar amount per day, per hospitalization, or per service – regardless of the actual medical expenses incurred. For example, a plan might pay $500 per day for a hospital stay, even if the actual charges are $5,000 or $50,000.
These plans are considered “excepted benefits” under the ACA, meaning they are exempt from most ACA market reforms. However, to maintain excepted benefit status, fixed indemnity plans must meet specific requirements, including:
– No coordination with the employer’s group health plan
– Payment of fixed amounts regardless of expenses incurred
– Separate policy from comprehensive coverage
The New Notice Requirements
The final rules do not change the substantive requirements for fixed indemnity plans to remain excepted benefits. However, they impose significant new notice obligations [citation:2].
For plan years beginning on or after January 1, 2025, fixed indemnity plans must provide a clear disclosure to enrollees stating:
- The policy is a fixed indemnity policy that pays a limited amount if the individual is sick or hospitalized
- The policy does not cover the cost of medical care
- The policy is not health insurance and is not a substitute for comprehensive medical coverage
- Contact information for the Health Insurance Marketplace or other sources of comprehensive coverage
- Contact information for state insurance commissioners for questions or complaints
Notice Delivery Requirements
The notice must be:
- Prominently displayed on the first page of any marketing, application, and enrollment (or reenrollment) materials
- In 14-point font (or larger)
- Provided at or before the time participants are given the opportunity to enroll or reenroll
Either the plan sponsor or the insurance carrier can provide the notice. However, the responsibility ultimately lies with the employer offering the coverage.
What the Final Rules Did NOT Change
The proposed regulations had sought to clarify the tax treatment of fixed indemnity payments and to address level-funded plans and specified disease coverage. However, the agencies explicitly declined to address these issues in the final rules [citation:2].
In the preamble, the agencies stated they intend to address proposed changes to fixed indemnity plans, including tax treatment, in future rulemaking. Similarly, they will determine whether additional guidance on level-funded plans or specified disease coverage is warranted.
For employers using level-funded arrangements, this means the regulatory uncertainty remains. However, the fact that the agencies did not act now is not a safe harbor – future rulemaking could impose additional requirements.
What Was Not Addressed: Level-Funded Plans
Level-funded health plans – which combine self-insurance with stop-loss coverage and fixed monthly payments – have grown in popularity among small and mid-sized employers.
The proposed regulations had asked for comments on level-funded arrangements. Many in the industry feared the final rules would impose ACA market reforms on level-funded plans, effectively eliminating them.
That did not happen. The agencies deferred action on level-funded plans, stating they need more information and analysis [citation:2]. However, employers using level-funded arrangements should remain vigilant for future rulemaking.
Explore self-funded and level-funded plan options →
Effective Dates at a Glance
June 17, 2024 – All rules take effect [citation:1][citation:2]
- New AHP association definition applies
- STLDI duration limits apply (3 months + 1 month renewal max)
September 1, 2024 – STLDI notice requirements apply [citation:2]
- STLDI policies effective on or after this date must include new disclosures
January 1, 2025 – Fixed indemnity notice requirements apply [citation:2]
- Plan years beginning on or after this date must include fixed indemnity disclosures
Who Is Affected by These Changes?
The new rules affect a broad range of stakeholders:
Small Employers – Many small businesses joined AHPs to gain purchasing power. Those AHPs may no longer qualify under the new rules, forcing employers to seek alternative coverage in the small-group market.
Associations and Chambers of Commerce – Associations that sponsored health plans under the Trump-era rules must reassess their compliance status. Some may need to restructure or wind down their health plan offerings.
Insurers and Brokers – STLDI carriers must redesign products to comply with the 4-month maximum duration. Fixed indemnity carriers must develop compliant notice materials. Brokers must update their recommendations and client communications.
Employers Offering STLDI – Any employer that offers STLDI to early retirees, COBRA bridge participants, or new hires in waiting periods must adjust plan designs and communications.
Employers Offering Fixed Indemnity Plans – By January 1, 2025, all fixed indemnity plans must include the required disclosures. Employers should work with carriers to ensure compliance.
What Employers Should Do Now
With the June 17 effective date fast approaching, employers should take immediate action:
Step 1: Audit Your Current Benefit Offerings
Review all health benefit plans offered to employees, including:
– Medical plans (fully insured and self-insured)
– Association health plans
– Short-term limited-duration insurance
– Fixed indemnity and hospital indemnity plans
– Level-funded arrangements
– Health savings accounts (HSAs) – not directly affected
Step 2: Identify Affected Plans
For each plan, determine whether it falls under the new rules:
– Does your AHP meet the stricter “genuinely close” standard?
– Are your STLDI policies compliant with the 4-month maximum?
– Have your fixed indemnity plans incorporated the required notices?
Step 3: Develop a Transition Plan
For plans that are not compliant:
– Determine transition timelines and options
– Notify affected employees of coverage changes
– Identify alternative coverage options
– Update summary plan descriptions and enrollment materials
Step 4: Consult Legal and Benefits Advisors
The new regulations are complex and may interact with state laws. Consult with qualified ERISA counsel and benefits advisors before making changes.
Request a comprehensive benefits audit →
Conclusion: A New Era for Employer Health Benefits
The June 17, 2024 final rules represent a fundamental shift in federal health benefits policy. By tightening AHP requirements, shortening STLDI duration, and imposing new fixed indemnity disclosures, the Biden administration has restored pre-Trump standards and increased consumer protections.
For employers, the path forward requires careful review, strategic planning, and proactive compliance. Organizations that wait until the effective date may face coverage gaps, compliance penalties, or employee dissatisfaction.
The good news? Many employers have already transitioned away from Trump-era AHPs and STLDI products. For those who have not, there is still time – but action is required now.
Key Takeaways
- The IRS, DOL, and HHS issued final rules effective June 17, 2024 [citation:1]
- Association Health Plans (AHPs) – Trump-era expansion overturned; “genuinely close” commonality standard restored
- Short-Term Limited-Duration Insurance (STLDI) – Maximum duration reduced from 36 months to 4 months (3 months + 1 month renewal) [citation:1]
- STLDI notices – New disclosures required for policies effective September 1, 2024 [citation:2]
- Fixed Indemnity Insurance – New notice requirements effective for plan years beginning on or after January 1, 2025 [citation:2]
- Level-funded plans – Not addressed in final rules; future rulemaking possible [citation:2]
- Employers should audit benefit offerings, identify affected plans, and develop transition strategies before June 17
This analysis was published on May 15, 2026. Sources include the Federal Register, IRS, DOL, HHS final rule documents, and analysis from Ballard Spahr and JD Supra [citation:1][citation:2].
