By: HUB’s EB Compliance Team

Updated 01/09/25: The rules described below have been struck down by a court, but appeals could be forthcoming. More information is available here.

As HUB detailed here, regulations finalized earlier this year require fixed indemnity insurance plans to include a notice advising employees that the fixed indemnity policy is not comprehensive health insurance. As a reminder, fixed indemnity policies are those that generally pay a fixed amount per day (or other period) for hospitalization or illness and typically include hospital indemnity policies as well as critical illness and cancer coverages. A picture of the mandatory notice is available at the link. A Word editable version is available at this link or from your HUB advisor.

Where does this notice go?

The disclosure is required to be provided in 14-pt font and disclosed in a great many places. Specifically, the notice is required to be included on the first page of any marketing, application, or enrollment materials where a fixed indemnity plan is offered. If it is not, then the fixed indemnity plan would become subject to the Affordable Care Act (ACA). Its noncompliance with the ACA (which is inevitable due to the inability of a fixed indemnity policy to provide preventive coverage at 100% and unlimited lifetime benefits among other requirements) could result in substantial penalties.

The notice must be provided whether the marketing, application, or enrollment materials are distributed in paper or electronic form. This means that the notice must be posted in online enrollment portals and included in any enrollment packets if the employer is offering a fixed indemnity plan. If there is a separate enrollment form or application the employee must complete to secure the coverage, the notice must be on the first page there as well.

While carriers should include the required notice as an attachment to their policies, that may not satisfy all the places where it must be included. Some carriers are simply providing copies of the notice for clients who have purchased a policy from them to use, leaving the employer to decide how best to comply.

What are the challenges?

In addition to determining all the places this notice needs to go, one challenge is that enrollment materials and online portals often cover multiple types of benefits, not just fixed indemnity insurance. As a result, the notice could cause significant confusion if it appears to apply to more than just the fixed indemnity policy.

While not officially part of the notice, HUB is recommending the notice include a statement at the top that says “This notice relates to the fixed indemnity coverage offered through [carrier name(s)]”. This additional language will hopefully help make clear the limited policy or policies to which it applies.

Conclusion

Given that open enrollment is fast approaching, employers should work to include this notice where applicable. Hopefully future guidance will provide more clarity on where exactly the notice needs to be provided to avoid the need to post it in multiple places and locations that could prove confusing to employees.

If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory.

NOTICE OF DISCLAIMER

Neither Hub International Limited nor any of its affiliated companies is a law or accounting firm, and therefore they cannot provide legal or tax advice. The information herein is provided for general information only and is not intended to constitute legal or tax advice as to an organization’s or individual's specific circumstances. It is based on Hub International's understanding of the law as it exists on the date of this publication. Subsequent developments may result in this information becoming outdated or incorrect and Hub International does not have an obligation to update this information. You should consult an attorney, accountant, or other legal or tax professional regarding the application of the general information provided here to your organization’s specific situation in light of your or your organization’s particular needs.