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US Court of Appeals: OK to Buy Standalone Fixed Indemnity Plans

US Court of Appeals: OK to Buy Standalone Fixed Indemnity Plans

Catrina Reyes, J.D., M.P.A., Policy Analyst and Compliance Manager

On July 1, 2016, the U.S. Court of Appeals for the D.C. Circuit, agreed with the district court’s decision to stop the enforcement of Health and Human Service’s regulation regarding fixed indemnity insurance.

The Affordable Care Act (ACA) established certain requirements and limitations on health insurance plans. However, excepted benefits are exempt from these requirements and limitations. Fixed indemnity insurance is an excepted benefit if (a) the benefits are provided under a separate policy, certificate, or contract of insurance, and (b) they are offered as independent, non-coordinated benefits.

Fixed indemnity insurance policies pay out a fixed amount of cash upon the occurrence of a particular medical event. Some fixed indemnity insurance policies provide coverage only for specified diseases, such as cancer. These policies provide limited coverage and are not Minimum Essential Coverage, which is what individuals are required to have to comply with the Individual Mandate and Applicable Large Employers are required to offer to avoid one of the Large Employer Mandate penalties. Nevertheless, the Court noted that, “many individuals found it cost-effective to forego Minimum Essential Coverage (even despite the penalty) in favor of these fixed indemnity policies.”

In 2014, a Health and Human Services regulation added to the criteria that allowed fixed indemnity insurance to be considered excepted benefits. Particularly, fixed indemnity insurance plans are excepted benefits if they are provided only to individuals who have Minimum Essential Coverage. According to the Court, “this new rule effectively eliminated standalone fixed indemnity plans altogether.” In response, several providers challenged the regulation as going beyond the scope of Health and Human Services’ authority. The district court stopped Health and Human Service’s enforcement of the regulation and the U.S. Court of Appeals for the D.C. Circuit affirmed this decision. This means that consumers may continue to buy standalone fixed indemnity plans.

To learn more about the Large Employer Mandate and Minimum Essential Coverage, download Claremont’s essential ‘Play or Pay’ guides.

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