The Departments of Labor, Treasury and Health and Human Services (the Departments) have issued a new rule that requires health plans and insurers to provide employees with a notice in connection with employer-sponsored fixed indemnity policies. The notice is intended to inform employees that these policies do not provide comprehensive health insurance coverage. Failure to provide the notice will mean that the policies will not qualify as excepted benefits and must therefore comply with the ACA’s health insurance mandates. Because fixed indemnity policies, by design, do not meet those requirements, the employer that fails to give the notice could be subject to fines for offering a plan that is not ACA-compliant.
What’s a Fixed Indemnity Policy?
A fixed indemnity policy is a health insurance policy that meets all of the following requirements:
- the benefits must be provided under a separate insurance policy,
- there is no coordination between the provision of those benefits and any exclusion of benefits under any group health plan maintained by the same plan sponsor;
- the benefits are paid with respect to an event without regard to whether benefits are provided with respect to such event under any group health plan maintained by the
same plan sponsor.
Under prior rules, a fixed indemnity policy is considered an excepted benefit (snd not subject to ACA coverage rules) if it pays a fixed dollar amount per day (or other period) of hospitalization or illness, regardless of the amount of expenses incurred.
Why Are the Departments Imposing a Notice Requirement?
The Departments were concerned that individuals may mistakenly believe that fixed indemnity insurance offered by an employer was comprehensive health insurance coverage, similar to what they would receive through an ACA-compliant health plan or coverage purchased though the ACA Marketplace. Accordingly, the new rule provides that a fixed indemnity policy will not be considered an excepted benefit unless plans and issuers also provide a specified notice that explains that the policy is not comprehensive coverage.
What Is the Notice Requirement?
Group health plans and issuers must prominently display a specified notice on the first page or any marketing, application and enrollment materials provided to participants at or before enrollment (including reenrollment) for coverage under a fixed indemnity policy. The notice requirement applies to materials provided on paper or electronically. It must be in at least 14-point type. Notice to beneficiaries is not required.
In discussing the new rule, the Departments state that they will consider a notice to be prominently displayed if:
- It is easily noticeable to a typical consumer within the context of the page (either paper or electronic) on which it is displayed (for example, using a font color that contrasts with the background of the document;
- It is not obscured by any other written or graphic content on the page; and,
- When displayed on a website, it is visible without requiring the viewer to click on a link to view the notice).
The notice must accompany marketing materials. This includes any documents or website pages that advertise the benefits of, or offer an opportunity to enroll (or reenroll) in, group market fixed indemnity excepted benefits coverage.
The actual text of the notice, which should be followed exactly, follows at the end of this blog.
Who Must Give the Notice?
The notice obligation falls on both the insurer and the group health plan. It is expected that the insurer will give the notice on marketing, application and enrolment materials that it provides. Employers should confirm that the insurer is complying with the rule.
However, employers should also be alert to the broad definition of marketing materials discussed above. If the employer prepares and distributes any materials which includes mention of the fixed indemnity policy, the notice should be included with those materials well.
When Does the Notice Requirement Go Into Effect?
The notice requirement applies for plan years the begin on or after January 1, 2025.
IMPORTANT: This is a fixed indemnity policy, NOT health insurance
This fixed indemnity policy may pay you a limited dollar amount if you’re sick or hospitalized. You’re still responsible for paying the cost of your care.
- The payment you get isn’t based on the size of your medical bill.
- There might be a limit on how much this policy will pay each year.
- This policy isn’t a substitute for comprehensive health insurance.
- Since this policy isn’t health insurance, it doesn’t have to include most Federal consumer protections that apply to health insurance.
Looking for comprehensive health insurance?
- Visit HealthCare.gov or call 1-800-318-2596 (TTY: 1-855-889-4325) to find health coverage options.
- To find out if you can get health insurance through your job, or a family member’s job, contact the employer.
Questions about this policy?
- For questions or complaints about this policy, contact your State Department of Insurance. Find their number on the National Association of Insurance Commissioners’ website (naic.org) under “Insurance Departments.”
- If you have this policy through your job, or a family member’s job, contact the employer.