A U.S. District Court for the Eastern District of Texas issued a final judgment vacating the new group hospital indemnity notice requirement nationwide.
The lawsuit was filed by hospital indemnity insurers who viewed the final rule issued in April 2024 as exceeding regulators’ authority on two fronts:
- Failing to provide the new notice would make the group hospital fixed indemnity coverage lose its excepted benefits status, meaning it must comply with the ACA’s comprehensive major medical insurance rules.
- The statutes only require such a notice for individual, not group, fixed indemnity plans, so the insurers argued that regulators exceeded their authority in creating a new fourth requirement for group indemnity plans to be excepted benefits.
- The new notice said the indemnity coverage is “not health insurance” when the proposal had been for it to say it is “not comprehensive health insurance.”
- The judge agreed this revised language “was not a logical outgrowth” of language previously proposed. It could be misconstrued by plan enrollees that fixed indemnity coverage is not insurance at all, when it actually is insurance but is not comprehensive coverage.
- As a result, the court also reversed the problematic new language needing to apply to individual indemnity plans, meaning they can continue to provide the notice they have been providing since 2014.
Practical Impact to Employers:
Employers who have adopted the new notice into their plan materials and/or enrollment websites may want to review this decision and determine whether to remove the new notice since it cannot be altered to add the word “comprehensive” to it.
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