Compliance FYI: Requirements for Employer Sponsored Fixed Indemnity Coverage
UPDATE:
On Wednesday, December 4, 2024, the U.S. District Court for the Eastern District of Texas issued an order setting aside and vacating the regulation imposing the notice requirement discussed below. As result, the notice discussed below is not required to be on the first page of any marketing, application, or enrollment materials for hospital or other fixed indemnity coverages. M3’s compliance team continues to monitor the situation and will provide updates as necessary.
In spring 2024, the Departments of Labor, Health and Human Services, and the Treasury issued final regulations imposing a new notice requirement for group hospital indemnity or other fixed indemnity coverages. Fixed indemnity coverages generally provide income replacement benefits in fixed dollars amounts on a per day or per other period of hospitalization or illness (for example $100 per day). Fixed indemnity coverages do not include accident, critical illness, or specified disease insurances.
Effective for plan years beginning on or after January 1, 2025, a group plan and issuer must provide a notice on the first page of any marketing, application, and enrollment materials for hospital or other fixed indemnity coverages that are provided to participants at or before the time the participant enrolls or re-enrolls in coverage. The notice is required regardless of whether the materials are in paper or electronic format. Employers, as plan sponsors, are responsible for ensuring their plan complies with the notice requirement.
The notice is intended to inform individuals they are purchasing indemnity coverage and not traditional health insurance. The goal is to avoid individuals accidently purchasing indemnity coverage with the belief they have traditional health insurance.
The notice must be on the first page of any marketing, application, and enrollment materials and must contain the following language in at least 14-point font:
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.
Key Takeaways
Employers who sponsor hospital indemnity or other fixed indemnity coverage should verify with their insurance carrier that the required notice is included in all materials created by the carrier. Employers who create their own marketing, application, or enrollment materials for hospital indemnity or other fixed indemnity coverage should verify that the required notice is included on the first page of those materials. Please contact your M3 Team for assistance.
The information provided is a summary of laws and regulations relating to employee benefit plan compliance. This information should not be construed as legal advice. In all cases, employers should consult with their own legal counsel.
