Appeals Court Ruling Saves Fixed Indemnity Health Coverage

The indemnity insurance model is alive and well thanks to a federal appeals court for the District of Columbia. So-called “fixed indemnity” insurance pays a fixed amount for a given claim – such as $500 per day for hospitalization or $50 for a doctor visit.  Often, fixed indemnity plans only cover specific conditions, such as cancer.

In 2014 the Obama Administration ruled that only individuals who already had comprehensive coverage could purchase fixed indemnity. The reason the administration did not want fixed indemnity coverage available was because it was trying to prop up Obamacare. The administration thought a cheaper option would undermine the goal of “maximizing the number of individuals who have comprehensive, major medical coverage.”

Under the administration ruling, individuals buying fixed indemnity coverage had to attest on their application they already had comprehensive coverage with minimal essential coverage. The plaintiffs argued the 2014 regulatory ruling essentially destroyed the market for their products. The federal court and the appeals court agreed, ruling that the administration had overstepped its regulatory power. Fixed indemnity insurance has been exempt from federal insurance standards for 20 years. The appeals court explained the Affordable Care Act did not change that nor was there evidence Congress planned for the ACA to change that fact. Unfortunately, people who buy fixed indemnity coverage still must buy Obamacare coverage to avoid getting fined. But they can now at least make the choice.

Comments (6)

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  1. Devon Herrick says:

    I think the appeals court should go further and allow Americans to buy health plans that limit benefits to, say, $10,000 deductible with 50% cost-sharing up to $100,000.

  2. Lee benham says:

    Unfortunately, people who buy fixed indemnity coverage still must buy Obamacare coverage to avoid getting fined.

    Devon you know this is not a correct statement . Because of the high cost of ACA compliant plans most Americans who do not receive tax credits are exempt from the penalty because of the 8.13% affordability exemption. Why don’t you explain this to people.?

    • Devon Herrick says:

      You have a point. Although technically there is a mandate with a penalty, most of the uninsured are exempt from the penalty for one reason or another. Those who would have qualified for an expanded Medicaid program are exempt from the penalty. Those who owe no taxes are exempt. As you suggest, there is an affordability exemption for which many people would qualify. Other have argued you can tailor your withholding in such a way that there you do not have to pay the penalty. I have not really explored whether or not it is safe to refuse to pay.

  3. Lee benham says:

    Exactly , then why propagate the Obama administrations scare tatics like the rest of the media? All people want is the truth. Why has there never been an in depth artical about the affordability exemption? With rate increases coming in the 30% -60% range for 2017 A typical family of 4 would have to earn over $150,000 magi before they would owe a penalty .

    With HHS attacking short term plans. indemnity plans might be the only affordable option for people who do not receive tax credits.

    Healthy people will now look to cover about $50,000 in hospital and surgical expenses and $100,000 in ci expenses. Self insure for the first $5,000 and make it to the next open enrollment .

  4. Don Levit says:

    Thanks for mentioning the exemption for unaffordability
    I totally forgot about it
    The ACA does not provide for plans with say a $250,000 annual cap to apply even though that probably covers 95 percent of claims
    We are looking into building a product like that over the next year
    We believe there is great demand for it
    The reason is that ACA plans without subsidues are not worth the cost even if affordable
    We will set up a community fund to reimburse participants who actually pay the non compliance penalty

  5. Kylie McIlwain says:

    We also have to remember this may change once Obama is out of office. But yes I agree we need some sort of health plan especially for the less fortunate. Whatever the ACA plans to do let’s hope it helps us more than hurts us.