Court Strikes Down Fixed Indemnity Coverage Notice Requirement

What You Need to Know 

• The new notice requirement for fixed indemnity coverage was struck down by the U.S. District Court for the Eastern District of Texas. This ruling applied to all employer-sponsored fixed indemnity plans within the United States.  
• The HHS may appeal, but under the new administration experts are saying this is unlikely. 
• Group health plans should watch this space and work closely with their counsel to determine whether to amend fixed indemnity notices that have already been created or to amend them in the future. 

Background: 

In April 2024, The Departments of Labor, Treasury and Health and Human Services (the Departments) issued a new rule that required health plans and insurers to provide employees with a notice in connection with employer-sponsored fixed indemnity policies.  The notice was intended to inform employees that these policies do not provide comprehensive health insurance coverage.  Failure to provide the notice meant that the policies will not qualify as excepted benefits and must therefore comply with the ACA’s health insurance mandates.  Because fixed indemnity policies, by design, do not meet those requirements, an employer that failed to give the notice could be subject to fines for offering a plan that is not ACA-compliant. 

More information on fixed indemnity policies. 

Court Rejected New Fixed Indemnity Notice Requirement: 

In December 2024, the U.S. District Court for the Eastern District of Texas vacated a new notice requirement for fixed indemnity coverage in the group market via a Final Judgement. This new notice requirement was scheduled to be effective for plan years beginning in 2025. 

By setting aside and vacating the provisions related to this required notice condition, the court effectively removed the requirement, impacting how fixed-indemnity insurance policies are regulated and potentially easing the compliance burden on insurers. 

What Does This Mean for Group Health Plans? 

Group health plans offering fixed indemnity policies should take immediate steps to evaluate their compliance strategies: 

• Consult Legal Counsel: Work closely with your legal team to determine the group health plans path forward regarding fixed indemnity notices. 

• Monitor Updates: Keep an eye on regulatory developments and judicial orders, as changes in the group health benefits space are frequent. 

• Adjust Future Plans: If you are planning to implement fixed indemnity coverage, you may no longer need to include the struck-down notice language. 

As predicted, judicial orders are becoming a bigger factor in the group health benefits space. Subscribe to our blog for the latest updates and insights!