As previously reported, the federal agencies responsible for drafting the rules implementing the Affordable Care Act (ACA) (the U.S. Labor Department, the U.S. Department of Health and Human Services and the U.S. Treasury Department (together, the “Departments”)) on January 9, 2014 issued FAQ Part XVIII, regarding implementation of the market reform provisions of the ACA.
These FAQs are part of the government’s efforts to provide so-called “subregulatory guidance,” to provide relatively quick helpful guidance in response to issues and trends affecting group health plans and insurers. FAQ Part XVIII includes new relaxed rules for fixed indemnity plans that meet certain key requirements. A fixed indemnity plan generally pays a fixed dollar amount upon the occurrence of a covered illness or injury, rather than an amount based on expenses actually incurred by the individual. For example, it might pay $100 upon admission to a hospital for particular treatments. These fixed indemnity plans can be designed to fit within the category of “excepted benefits” that are generally exempt from many of the market reform requirements of the ACA.
In an earlier FAQ, FAQ Part XI, the Departments had indicated that a fixed indemnity plan could not pay on a “per-service basis.” Instead, it would have to pay benefits on a “per-period basis.” For example, if an individual was injured, the preferred way to pay the benefit was to pay a certain amount per day regardless of the services provided as opposed to reimbursing different amounts for different services. By contrast, a plan that covers doctors’ visits at $50 per visit, surgical procedures at $75 per procedure, or prescription drugs at $15 per prescription would not be considered to be a fixed indemnity plan under FAQ Part XI (and would not be an excepted benefit) because the payments would be provided on a per-service basis.
In the new FAQ Part XVIII, the Departments have signaled a change in course: they are considering drafting regulations that permit a fixed indemnity plan to reimburse on a per-service basis and still be considered excepted benefits if the plan:
- Is sold only to individuals who have other health coverage that is minimum essential coverage;
- Does not coordinate between the provision of benefits and an exclusion of benefits under any other health coverage;
- Pays benefits in a fixed dollar amount regardless of the amount of expenses incurred and without regard to the amount of benefits provided with respect to an event or service under any other health coverage; and
- Includes a prominently displayed notice informing policyholders that the coverage does not meet the definition of minimum essential coverage and will not satisfy the individual mandate.
Until the regulations are written, the Departments have indicated that fixed indemnity plans that pay on a per-service basis will continue to be considered to be excepted benefits as long as the requirements described above are met.