A federal district court recently vacated a new consumer notice requirement for fixed indemnity excepted benefit plans (e.g., hospital indemnity and other fixed indemnity insurance). The consumer notice was designed to highlight the differences between fixed indemnity excepted benefits and comprehensive health insurance coverage. While the court decision eliminates the need to provide the notice at this time, it is unclear whether the government will appeal the court decision or whether the incoming Trump administration will take any action related to the decision.
As background, on March 28, 2024, the departments of Health and Human Services, Labor, and the Treasury released final regulations that modify the definition of short-term, limited-duration insurance (STLDI) and requires consumer notices for STLDI and fixed indemnity excepted benefit coverage. [1]
Among other things, the final regulations required that a consumer notice be displayed in marketing, application and enrollment (and reenrollment) materials, for fixed indemnity excepted benefit policies in the group market. The departments provided a template notice that plans were required to use without modification or customization.
Under the final regulations, the notice was required to be provided for plan years beginning on or after January 1, 2025. For calendar year plans, the notice would have been included in the open enrollment materials provided for the 2025 plan year (in 2024).
Two insurers (ManhattanLife Insurance and Annuity Co. and Paschall and Associates) filed a lawsuit against the departments in the U.S. District Court for the Eastern District of Texas in May 2024. The insurers argued that the consumer notice requirement for fixed indemnity excepted benefit insurance in the final regulations exceeds the departments’ authority. In July, the insurers filed for summary judgment, asking the court to vacate the portion of the final regulations imposing the consumer notice, which the court did on December 4, 2024.
