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January 2013


A Polsinelli Shughart Update

Restrictions on Fixed Indemnity Coverage


In the Insurance Regulatory Group at Polsinelli Shughart PC, we have been closely following the issues regarding hospital indemnity and fixed indemnity policies and can provide direct and practical advice to your organization.


The Department of Labor Employee Benefits Security Administration issued guidance on the issuance of fixed indemnity insurance on January 24, 2013 in its FAQs about Affordable Care Act Implementation Part XI. These FAQs are prepared by the Departments of Labor, Health and Human Services (HHS), and the Treasury (collectively the Departments). Question 7 of this FAQ addressed under what circumstances fixed indemnity coverage constitutes excepted benefits.

The FAQ noted that fixed indemnity coverage under a group health plan is an excepted benefit under PHS § 2791(c)(3)(B) [42 U.S.C. § 300gg-91(c)(3)(B)], ERISA § 733(c)(3)(B), and Code § 9832(c)(3)(B) if it meets the conditions outlined in the Departments' regulations. Provisions in HIPAA, 42 U.S.C. § 300gg-91(c)(3)(B), also applies to exclude fixed indemnity coverage from the definition of excepted benefits in the individual market. After commenting on the exemption, the FAQ stated: "The Departments have noticed a significant increase in the number of health insurance policies labeled as fixed indemnity coverage."

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