Benefits and Compensation

Appeals Court Rebuffs HHS On Treatment of Fixed Indemnity Coverage Under ACA

By David Slaughter, JD, Senior Legal Editor

A 2014 rule restricting the sale of fixed indemnity coverage was struck down by a federal appeals court, which ruled that the U.S. Department of Health and Human Services (HHS) had exceeded its authority under the Affordable Care Act (ACA).

By effectively requiring individuals to have ACA-compliant minimum essential coverage (MEC) before they could get fixed indemnity coverage, the HHS departed from the clear text of the underlying provisions on “excepted benefits,” according to the U.S. Court of Appeals for the District of Columbia Circuit. The court therefore upheld the U.S. District Court’s injunction blocking the HHS from enforcing the rule. The case is Central United Life v. Burwell, No. 15-5310 (D.C. Cir., July 1, 2016).

Background

The Health Insurance Portability and Accountability Act’s (HIPAA) portability provisions included exemptions for certain “excepted benefits,” including certain hospital and other fixed-dollar indemnity insurance that is provided under a separate policy and not coordinated with the group health plan. The ACA made substantial changes to HIPAA portability, as codified in the Public Health Service Act (PHSA), but largely retained the excepted benefits provisions.

In 2014, the HHS amended its excepted benefits rules on fixed indemnity policies to require, among other things, that such benefits be provided only to individuals who attest they already have the MEC called for by the individual mandate.

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