In April 2024, the Departments of Treasury, Labor, and Health and Human Services issued finalized regulations that required fixed indemnity plans (such as hospital indemnity policies) to provide a notice advising employees that the fixed indemnity policy is not comprehensive health insurance. Read the details of the regulations as they were issued here.
The notice requirement was recently struck down by a federal court.
The Original Notice Requirement
The notice was intended to advise consumers so that they would not mistakenly believe that a fixed indemnity policy was comprehensive health insurance. The regulations outlined numerous content, style, and communication requirements including:
- An explanation that a fixed indemnity policy pays a limited amount, will not cover the cost of medical care, and is not a substitute for comprehensive medical coverage.
- Must be in at least 14-point font and on the first page.
- Must be provided at or before the time participants have the opportunity to enroll in the coverage.
- Applies to any enrollment process/form, any application process/forms, and any marketing materials provided to participants, including websites.
Notice Requirement Repealed
The regulations were challenged in a Texas court (Manhattan Life Insurance and Annuity Co. et. al vs. HHS). The court invalidated the notice requirement, finding that the notice requirements exceeded the statutory authority of the agencies that issued the regulations. The court deemed the notice requirements as outlined in the regulations as an overreach from the notice requirement outlined in the proposed rules.
Looking to the Future
Many employers and fixed indemnity insurers have already implemented the notice, however, as of this time, the notice requirements are no longer required. To that end, employers who may have posted a notice on internal benefits sites can remove the notice (although removing the notice is not a requirement).
Looking forward, the repeal ruling was made by a district court case (the lowest federal court). As such, it is possible that the court ruling will be appealed by the departments in the future.
For Vita Clients
For Vita's clients, the notice will be modified in benefit enrollment materials on a go-forward basis. Our template language will be streamlined and formatted to match the existing document. However, the intent of the notice (that fixed indemnity policies are not a replacement for comprehensive major medical insurance) will be preserved.
