END OF 2018 OPEN ENROLLMENT PERIOD (41 states)

Time: D H M S

Fed. court rules against HHS re. banning "fixed indemnity" policies

Earlier today I noted that a federal appeals court had ruled in favor of the HHS Dept. regarding a rather silly lawsuit brought against them by West Virginia over the "transitional plan" policy.

It turns out there were actually two ACA-related federal cases ruled on today...and the second one went against the Obama administration. This one has to do with "Fixed Indemnity plans". I admit to not knowing much about these, so here's an explainer courtesy of healthinsurance.org:

DEFINITION: A fixed-dollar indemnity plan is a type of medical insurance that pays a pre-determined amount on a per-period or per-incident basis, regardless of the total charges incurred. Plans might pay $200 upon hospital admission, for example, or $100 per day while a person is hospitalized.

The original rules released by the Department of Health and Human Services stipulated that fixed-dollar indemnity plans would only be exempt from Affordable Care Act regulation if they paid benefits on a “per-period” basis as opposed to a “per-service” basis. (So for example, they would need to pay a fixed-dollar amount per day in the hospital, as opposed to paying a fixed amount for each doctor visit, prescription, surgery, etc.)

But in early 2014, HHS proposed relaxing those guidelines and allowing per-service fixed-dollar indemnity plans to be exempt from Obamacare rules, as long as they are only sold to people who have minimum essential coverage in place through another policy (among other requirements). In short, these plans may be useful as supplement for high-deductible health plans, but are not adequate as stand-alone health coverage.

OK, so that's what they are. Basically, they don't meet ACA minimum coverage requirements, so anyone who enrolls in a fixed indemnity plan still has to pay the "shared responsibility mandate" tax if they don't also have some other type of qualifying coverage. In this sense, they're similar to "short term policies" and other assorted types of coverage.

Anyway, it looks like even with that "relaxing" of the guidelines, some insurance carriers weren't too keen on the HHS Dept. trying to put the squeeze on this type of policy, so they filed a lawsuit...one which it looks like they just won. ACA opponent Jonathan Adler explains:

In a second case decided Friday, the administration did not fare so well. In Central United Life Insurance, Co. v. Burwell, another unanimous panel invalidated an HHS regulation for exceeding the scope of its delegated powers under the Public Health Service Act (PHSA), as amended by the PPACA. Specifically, HHS had adopted regulations seeking to prevent consumers from obtaining fixed indemnity policies that fail to satisfy the PPACA’s minimum essential coverage requirements, despite the PHSA’s exemption of such plans from such requirements.

...Here again, I think the D.C. Circuit got it right. Federal agencies do not have the roving authority to fix statutory schemes that don’t produce results the agencies (or even the statute’s authors) like. Such authority, if it exists, must have been delegated by Congress. If it is a problem consumers are electing to purchase fixed indemnity policies and pay the individual mandate penalty, in lieu of qualifying health insurance, then it is a problem Congress must fix, either by amending the statute or delegating the requisite authority to the applicable agency. In the meantime, HHS can’t manufacture statutory ambiguity to justify its actions.

In other words, it sounds like this means that the court is saying that it's up to Congress to kill off this type of policy legally, not the HHS Dept.

I'm not sure how much of a difference this will make, really. It sounds like this makes it a bit easier to enroll in fixed indemnity plans, which isn't the same as going from illegal to legal. I'm also not sure how many people are currently covered by them anyway. This Forbes piece by Dan Munro makes it sound like there were up to 3.9 million people using these types of plans back in 2013...but that figure appears to include some other types of so-called "junk plans" as well. Even if that was the correct number at the time, I'm assuming that this number has dropped noticeably since the ACA exchanges and Medicaid expansion went into effect, but could be wrong.

In any event, it sounds like people can still sign up for these policies, but will still have to pay the penalty if they don't have ACA-compliant coverage as well, which presumably will limit the number who do so (basically, they'd have to pay both the "fixed indemnity" cost and the $695/2.5% of income penalty).

This situation also reminds me greatly of the "short term policy" crackdown I wrote about a few weeks ago. There, too, HHS is attempting to put the squeeze on non-ACA-compliant policies being sold. I'm not sure if today's ruling will have any impact on the new short term policy rules HHS just announced, but it sounds like there could be a connection.

UPDATE: Josh Schultz informs me that it's very similar to the short term policy rules, so it sounds like assuming today's ruling is the final word, HHS won't be able to put the kibosh on either type of policy beyond tacking on the individual mandate penalty.