49M Americans Risk Losing Fixed Indemnity Health Insurance

October 04, 2016 - A new proposed rule called Expatriate Health Plans, Expatriate Health Plan Issuers, and Qualified Expatriates; Excepted Benefits; Lifetime and Annual Limits; and Short-Term, Limited-Duration Insurance may negatively impact access to fixed indemnity health insurance among millions of Americans, according to a letter sent by Chairman Fred Upton from the House of Representatives Committee on Energy and Commerce.

Additionally, the letter states that the proposed rule would actually go against current law and Congressional intent. A complete legal analysis outlining how the proposed rule conflicts with law adopted in HIPAA legislation can be found in a letter from the Law Office of William G. Schiffbauer sent to the Coalition to Preserve Health Plan Choices.

Joel White, President at the Council for Affordable Health Coverage, described how the proposed rule positioned by the Department of Health & Human Services (HHS) would restrict fixed indemnity health insurance and short-term medical coverage.

“The one problem we’ve focused on [in the proposed rule] is related to fixed indemnity and short-term medical plans,” White told HealthPayerIntelligence.com. “We, in fact, produced a legal analysis of the administration’s authority to regulate those plans and found that their authority is not such that they can actually add these new proposed changes to the fixed indemnity market. Our recommendations for them were that they withdraw that portion of the rule and stand down.”

White also spoke on how, if the proposed rule was finalized with this language, 49 million people who have fixed indemnity health insurance and other supplemental coverage would lose their health plans and be left with much larger out-of-pocket costs.

“We think that, first and foremost, this would significantly and negatively impact the 49 million people who have supplemental coverage,” White explained. “This is an additional benefit that many workers enjoy from their employer. It fills gaps in health insurance. We’re seeing higher deductibles and more significant cost-sharing among health plans. So these things really help out and they help out middle-class folks and the folks who’ve been hit particularly hard by increased health costs.”

“We think it’ll, in a major way, negatively impact those 49 million people. First, it will create confusion in the marketplace. HHS is talking about making a new noticed consumers that would be different from the notice that they get in the individual market. You’d have two different sets of notices that would seek to enhance confusion rather than clarify things,” White continued. “The second thing is that because of the per-service and per-day changes included in the rule, we think that the vast majority of policies in the marketplace that people find value in would not meet those standards. They’d have to be re-written and may lose their appeal for consumers.”

Hospitals and physician practices would also end up shouldering larger debt since some of their patients may be unable to cover their bills without supplemental insurance or fixed indemnity health insurance, said White.

“We’re not sure why HHS would want to do that [in the proposed rule] but what we do know is consumers would end up with the short end of stick,” White pointed out. “In terms of the hospitals, if folks are using these cash replacement or income benefit plans to pay for hospital care that’s not covered by major medical or fill in gaps for cost-sharing in hospitals, those hospitals would certainly experience more bad debt and be exposed to additional debt that they otherwise wouldn’t have. So we think this is a bad deal for the hospitals, for physicians, and for folks who need to better afford their prescription drugs. These are all negative consequences of the proposed rule.”

What can be done to keep the proposed rule from harming the supplemental insurance among millions of Americans? The Council for Affordable Health Coverage is asking HHS to strip the language from the proposed rule that would restrict access to fixed indemnity health insurance and other supplemental coverage.

Private health payers may see their consumer base as well as their provider network struggling without this supplemental coverage. Payers offering supplemental insurance may lose the majority of their consumers due to this ruling. During the comment period, payers can also send their public comments to HHS in support of changing the proposed rule from restricting fixed indemnity health insurance.

“We have suggested through our regulatory filing that they just withdraw this part of the rule. In other words, when the final rule comes out, there would be nothing on fixed indemnity and short-term medical plans,” White proposed. “That’s completely within the administration’s power. One of the reasons in addition to the negative impact on consumers, hospitals, and other providers is that in 1996 when HIPAA was passed, Congress established the definition of fixed indemnity in federal law in the accepted benefits portion of the statute.”

“There were two criteria that had to be met,” he continued. “One is that the benefit needs to be provided under a separate policy and the second one is that it would not be coordinated with major medical. Other than that, it is regulated at the state level. That was when Republicans controlled Congress in 1996. That definition was put in and it was further codified by Democrats when they controlled Congress in 2010 when they passed the Affordable Care Act. Since the proposed rule came out, the US courts, specifically the District Court of Appeals, ruled that HHS had regulatorily overreached on trying to add additional conditions on fixed indemnity plans.”

White advises HHS to remove the portion of the proposed rule that would limit fixed indemnity and short-term medical insurance plans. Essentially, HHS does not have the authority to continue with the language in their proposed ruling on fixed indemnity health insurance. With Congress and a number of other organizations telling HHS to change their proposed rule, it is likely that the agency will not move forward with limiting supplemental insurance plans among millions of Americans.

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