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New Mexico Freezes the 'Excepted Benefits' Approval Pipeline

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Insurers are filing hundreds of applications for new health insurance products other than major medical insurance with the New Mexico Office of the Superintendent of Insurance.

Russell Toal, the New Mexico superintendent, says he wants more time to make sure the new “excepted benefits” products really comply with the state’s new Short-Term Health Plan and Excepted Benefit Act.

Toal has declared a temporary moratorium on approvals of new excepted benefits products that are not governed by state regulations that are already in place.


  • A copy of the New Mexico excepted benefits filing approval moratorium bulletin is available here.
  • An article about one company’s approach to short-term health insurance is available here.

Toal says he’ll lift the approval moratorium once New Mexico has developed the regulations needed to implement the state excepted benefits act.

Issuers can re-submit any excepted benefits filings affected by the approval freeze, and New Mexico will waive the filing fee for the resubmissions, according to a moratorium bulletin.

Excepted Benefits

Regulators, product designers and others have used the term “excepted benefits” to refer to the types of benefits — such as dental insurance, critical illness insurance, hospital indemnity insurance, short-term health insurance — that were exempt by the major medical insurance standards in the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA).

When the Affordable Care Act (ACA) came along, in 2010, the health insurance community began to apply the term to health insurance products that fall outside the scope of the ACA as well as of HIPAA.

Officials in the administration of President Donald Trump see expanding access to excepted benefits as a way to help insurers and consumers get around costly ACA rules, such as the ban on medical underwriting, and the ACA requirement that individual major medical insurance cover at least about 58% of the actuarial value of a standard “essential health benefits” package for most insureds.

The administration has supported expanded use of short-term health insurance, for example, by reversing an Obama-era regulation that limited the benefits period for short-term health insurance policies to three months.

State regulators and insurers now can choose to have short-term health insurance policies stay in effect, with renewals, for as long as three years, without the policies coming under ACA requirements.

Some regulators and insurers oppose use of excepted benefits products as alternatives to major medical insurance. Critics of using excepted benefits as major medical substitutes say excepted benefits tend offer much less coverage, and that consumers lured by low premiums may not understand the limitations until they are seriously ill.

The critics also argue that excessive use of excepted benefits could kill the traditional major medical market, by leading younger, healthier, less-benefits-conscious consumers out of that market.

The New Mexico Situation

Toal says in the bulletin announcement that New Mexico has received 891 excepted benefits coverage form filings since June 14, 2019, when the state’s excepted benefits act took effect.

The act requires the insurance superintendent to make sure issuers and producers aren’t marketing and selling excepted benefits products as substitutes for major medical plans, Toal says.

“The continued approval of excepted benefit forms without the standards contemplated by the act could exacerbate the problems that the act was intended to eliminate,” according to the bulletin announcement.

The excepted benefits approval moratorium will give all stakeholders time to participate in the rulemaking process required by the act, and lead to rules that give New Mexicans residents to the excepted benefits products without hurting the major medical insurance market, Toal says.

— Read Short-Term Health May Go Major, on ThinkAdvisor.

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