The Regulatory Storm Hitting Self-Funded Plans Right Now

Federal rules on short-term health plans, fixed indemnity, and excepted benefits have flipped twice in three years, and another rewrite is underway. The 4-month cap on short-term plans isn't a coming threat. It's a 2024 rule the agencies stopped enforcing in August 2025. What matters for a self-funded employer is narrower than the headlines. And one piece is a new opportunity.

What happened to the 4-month STLDI cap?

Short-term, limited-duration insurance has been redefined three times. The 2018 rule allowed an initial term under 12 months and up to 36 months with renewals. The 2024 final rule cut that to a 3-month initial term and 4 months total, for policies sold on or after September 1, 2024.

Then the direction reversed. On August 7, 2025, the Departments of Labor, HHS, and Treasury said they won't prioritize enforcement of the 2024 duration limits until new rulemaking is done. DOL's STLDI page tracks the current status. The next proposal is expected to restore longer terms.

So if someone tells you the 4-month cap is coming, ask which year they're reading from.

Does STLDI even touch a self-funded plan?

Not directly. STLDI is individual-market coverage sold to people. It's not a component of an ERISA group health plan, so your self-funded plan has no STLDI layer to audit.

It shows up at the edges. Seasonal or variable-hour workers who aren't eligible for your plan sometimes buy it. And STLDI doesn't satisfy ICHRA's requirement that each participant be enrolled in individual health insurance coverage. If you run an ICHRA for any class, that's part of your ICHRA compliance stack.

Are fixed indemnity products still at risk?

Less than they were. The 2023 proposal would have restricted how fixed indemnity plans pay benefits. The agencies left that piece out of the 2024 final rule and kept only a new consumer notice. A federal court in Texas vacated that notice requirement in December 2024.

That doesn't make every design safe. Fixed indemnity only stays an excepted benefit if it pays a fixed amount per day or period of hospitalization or illness, regardless of actual expenses, and isn't coordinated with your medical plan. Watch for "wellness indemnity" pitches built around payroll tax savings. The IRS called out that structure in a 2023 Chief Counsel memo. If you've got one, have counsel review it.

What about level-funded plans?

No rule restricts them. The 2023 proposed rule asked for public input on level-funded arrangements. It didn't propose any changes, and the 2024 final rule didn't add any.

The scrutiny is still worth knowing about. Regulators flagged concerns about how level-funded plans are sold to small groups and how much risk the employer really carries. If you're level-funded, know what you own. Bundled level-funded plans aren't self-funding, and the difference lives in your contracts, not your premium.

What's the new fertility benefit rule, and why does it matter?

This one is new. And it's an opportunity. A proposed rule published May 13, 2026 by the IRS, EBSA, and HHS would make certain fertility benefits a new category of limited excepted benefits. It follows Executive Order 14216 on IVF access. The comment period closed in July.

Key terms, as proposed:

• Covers diagnosis and treatment of infertility and related conditions.
• A lifetime dollar limit of up to $120,000, indexed to medical inflation.
• A required participant notice.
• Applies to plan years starting on or after January 1, 2027.

Why care? Excepted benefits sit outside most ACA group-market rules. That could let you offer fertility coverage with more flexibility than you'd have inside the medical plan. It's still proposed, though. Don't build around it until it's final.

What should CFOs actually do right now?

Three things. Short list.

1. Inventory everything sold as an excepted benefit: fixed indemnity, hospital indemnity, specified disease, other supplemental coverage. Confirm each one meets the excepted benefit conditions on paper.
2. Have counsel pressure-test any payroll-tax "wellness" indemnity arrangement.
3. Decide whether fertility belongs on your 2027 roadmap. If it does, watch for the final rule and model the cost against the $120,000 cap.

Fiduciary exposure doesn't come from missing a proposed rule. It comes from not documenting that you looked. Delegating benefits decisions doesn't take you off the hook under ERISA, so keep a short written record of what you reviewed and when. Bring your TPA into it, too. These TPA readiness questions are a good way to open that conversation.

Frequently asked questions

Is the 4-month STLDI limit in effect?

On paper, yes, for policies sold on or after September 1, 2024. In practice, the agencies said in August 2025 that they won't prioritize enforcing it while they write a replacement rule. State law can still set shorter limits, and some states don't allow STLDI at all.

Does the STLDI rule affect my self-funded plan?

Not directly. STLDI is individual coverage, not part of an employer group plan. It matters mostly for workers outside your plan and for ICHRA, where STLDI doesn't count as the individual coverage each participant must have.

Are level-funded plans being restricted?

No. The 2023 proposed rule only asked for information on level-funded arrangements. No rule has changed how they work.

When would the fertility excepted benefit take effect?

As proposed, for plan years starting on or after January 1, 2027. It's still a proposed rule, so the final version could change the limits or the timing.

Where do I start if I want to check my excepted benefit exposure?

List every benefit your employees get outside the medical plan. Note who issues it, how it pays, and whether premiums run pre-tax. Then have counsel or your advisor confirm each one still qualifies as an excepted benefit. The compliance calendar tracks the deadlines that follow.