New COMPETE Act Defines Short-Term Health Plans: 12-Month Limit with Guaranteed Renewal

The newly proposed COMPETE Act—short for the “Competition and Openness in Markets to Promote Efficiency, Transparency, and Enhanced affordability Act”—is taking aim at the definition of short-term health insurance plans. For anyone who has ever tried to navigate the health insurance marketplace between jobs or while waiting for benefits to kick in, this matters. This section of the bill establishes a federal definition for Short-Term Limited Duration (STLD) plans, setting clear parameters on how long they can last and how they must handle renewals.

The 12-Month Rule and the Renewal Guarantee

Under Section 2 of the COMPETE Act, STLD plans must meet two key requirements. First, the plan’s contract cannot exceed 12 months from the original effective date. This is the government drawing a line in the sand, saying these plans are designed to be temporary, not a permanent substitute for comprehensive coverage. Second, and this is the important part, the plan must include a renewal guarantee.

What does a renewal guarantee mean for you? It means that if you buy one of these short-term plans, you have the right to purchase another policy from the same insurer after the initial 12 months expires, without the insurer raising your premium based on any new health issues you developed during that first year. If you suddenly develop a chronic condition six months into your plan, the insurer can’t hit you with a massive rate hike or deny you coverage when you try to renew, solely because of new underwriting based on that condition. This prevents the classic scenario where you finally use the insurance and then find yourself uninsurable when the contract ends.

The Trade-Off: Clarity vs. Coverage Gaps

For people currently relying on short-term plans—maybe a freelancer or a recent college grad—this guaranteed renewal is a significant consumer protection. It adds a layer of predictability to an insurance product often criticized for leaving people exposed. Before this, insurers could simply re-underwrite you based on your current health status when the term was up, effectively dropping you if you got sick. Now, if you stick with the same plan, that specific trap is closed.

However, it’s crucial to remember what these plans don't cover. STLD plans are generally exempt from many of the consumer protections and essential health benefit requirements of the Affordable Care Act (ACA). While this bill section fixes the renewal problem, it doesn't require these plans to cover things like maternity care, prescription drugs, or mental health services in the same comprehensive way as ACA-compliant plans. For someone trying to use an STLD plan as long-term coverage, this can still lead to massive out-of-pocket costs if they need serious or ongoing medical care. The COMPETE Act provides clarity and a renewal safeguard for a specific type of insurance, but it doesn't magically turn these plans into full-coverage options.