Although a circuit court judge has ruled the Obama administration has no right to restrict the sale of fixed indemnity plans to consumers who also hold Affordable Care Act compliant insurance, the ruling will not have a material impact on the market, industry experts say.
Central United Life, a Houston-based company that sells these plans, filed suit against the Department of Health and Human Services to have the right to sell the plans to individuals, even if the plans don’t have minimum essential coverage as required under the ACA.
These plans are different from mini-med plans, which mimic major medical plans, but have very low annual limits and low costs. Mini-med plans were eliminated by HHS on Dec. 31, 2014. This suit focuses on indemnity products, which are under pressure from the Centers for Medicare and Medicaid Services and HHS. “Even though it is very clear in ACA guidance that [these] plans are exempt, they are still being challenged,” says George Duczak, president at The American Worker, a Hoffman Estates, Ill.-based provider of indemnity plans.
In his ruling, U.S. District Court Judge Royce C. Lamberth said the administration “went too far in interpreting the Affordable Care Act to mean they could require insurers, through rule making, to only sell fixed indemnity plans to people who attested” they also have minimum essential coverage, The Washington Times reported.
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“Forcing federal agencies to comply with the law is undoubtedly in the public interest, and defendants have not shown to the court’s satisfaction that this clear benefit would be outweighed by the harms putatively caused by [the administration’s] policies,” Lamberth wrote.
The individual mandate that requires Americans to carry health insurance meeting minimum essential coverage provisions or pay a penalty still exists, says George K. Katsoudas, division senior vice president, compliance counsel, at Arthur J. Gallagher & Co. in Itasca, Ill. “Nowhere in the [Sept. 11 court] ruling did the judge say these [fixed indemnity plans] are now minimum essential coverage,” Katsoudas says. The same is true from the employer prospective. In order to avoid a penalty, employer plans must meet minimum essential coverage requirements, he adds.
“Most every American needs to have a [plan with] minimum essential coverage,” he says. “While the ruling was interesting, it does not change the fact that fixed indemnity plans are not [compliant].”
This ruling only impacts individual plans, which are often sold as a voluntary personal protection product, Duczak says. However, sales of these plans have been declining in recent years in the individual market. Because normally only those who will use the coverage buy it, such plans are pricey, Duczak explains.
“The ability of [Central United Life] and other insurance companies to sell these plans to individuals who do not meet minimum essential coverage will be somewhat limited,” Katsoudas adds. Central United Life did not return repeated requests for comment.
Since these plans are not minimum essential coverage and pursuant to the ACA, to fulfill the employer mandate, where applicable, and the individual mandate, where applicable, one looks to see if the employer offers/individual has minimum coverage, Katsoudas explains.
“As such, folks that buy these plans will still need to buy minimum essential coverage, and therefore the demand for these plans — and necessarily the ability of the insurance companies to sell them — may be somewhat limited,” he adds.
