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On December 4, 2024, the U.S. District Court for the Eastern District of Texas vacated a new notice requirement for fixed indemnity coverage in the group market, which was set to start in 2025.
Fixed Indemnity Coverage
Fixed indemnity coverage offers income replacement benefits, paying a set amount per day for health-related events like hospitalization, without being affected by the Affordable Care Act (ACA) reforms. Fixed indemnity benefits are paid directly to policyholders, allowing them to use the funds for any expenses, including nonmedical ones like childcare or transportation.
Notice Requirement and Court Ruling
On April 3, 2024, the U.S. Departments of Labor, Health and Human Services, and the Treasury released a final rule on health coverage types exempt from ACA protections, such as fixed indemnity coverage.
Starting January 1, 2025, a consumer notice must be clearly displayed on the first page of all marketing, application, or enrollment materials for fixed indemnity benefits in the group market. This ensures consumers can differentiate it from traditional health coverage.
After the final rule, fixed indemnity insurers challenged the new notice requirement, claiming it exceeded statutory authority. On December 4, 2024, the U.S. District Court in Texas sided with the insurers, striking down the requirement. An appeal seems unlikely. Download the bulletin for more details.
National Insurance Services is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Readers are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the readers’ business activities.
