By: HUB’s EB Compliance Team
Earlier this year, the three agencies overseeing the Affordable Care Act (“ACA”) released updated rules (fact sheet here) that affect fixed indemnity policies. These updated rules required fixed indemnity plans to provide a notice advising employees that the fixed indemnity policy is not comprehensive health insurance. This notice requirement has now been struck down by a court.
Notice Requirement
The notice was intended to protect consumers from mistakenly believing a fixed indemnity policy was comprehensive health insurance. Highlighting the importance the agencies bestowed upon the notice, it was required to be provided in 14-pt font and disclosed in multiple places. Specifically, the notice was required to be included on the first page of any marketing, application, or enrollment materials where a fixed indemnity plan is offered, whether paper or electronic.
These requirements posed multiple challenges for employers, which may be why this requirement was ultimately challenged. Namely, this notice was required to be provided with open enrollment materials that also could have contained information on comprehensive health insurance, which would have been confusing to employees.
Notice Requirement Repealed
In Manhattan Life Insurance and Annuity Co. et. al vs. HHS; a Texas court invalidated the notice requirement. In their decision, the court found that the notice requirement exceeded the statutory authority of the agencies and did not see the notice as logically following from the notice requirement identified in the proposed rules.
Conclusion
This repeal is a welcome relief to any plan that has not provided the notice to their employees. Similarly, employers who have already provided the notice or posted it to their HRIS/Ben Admin platforms can (but are not required to) remove it from all current/future communications. However, given that this is a district court case (the lowest federal court), employers should keep an eye on appeals and any additional rulemaking that may come from the agencies in response.
If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory.
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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.