The U.S. Department of Health and Human Services is trying to eliminate any possibility that consumers will use limited-benefit health insurance as a substitute for traditional coverage.
HHS wants carriers to sell individual limited-benefit health insurance products – “fixed indemnity insurance” – only to consumers who have “minimum essential coverage.”
MEC is coverage consumers can use to get out of having to pay the new Patient Protection and Affordable Care Act penalty.
HHS proposed the rule on page 44 of a draft regulation that could apply to individual hospital indemnity insurance, individual critical illness insurance and other individual supplemental health insurance products.
If a carrier tried to sell an indemnity product by itself, HHS would classify the product as major medical coverage, not as an “excepted benefit.” The issuer would have to comply with PPACA underwriting standards that now apply to major medical, such as the requirement that the issuer sell the product on a guaranteed-issue basis.
Originally, HHS and other departments proposed letting an issuer classify a health product as an excepted benefit if the product paid benefits based on a period of time after a triggering event – such as a day, a week or a month after the insured had a heart attack – rather than based on a service, such as a cardiologist visit.
State insurance regulators told HHS that they’ve been treating policies that pay per-service benefits as excepted benefits for years, HHS officials say in a preamble to the proposed regulations.
Under the proposed rules, a carrier could pay either a service-based benefit or a time-based benefit, but, once an insured had a triggering event, such as a diagnosis of cancer, the carrier would have to pay a set benefit. The carrier couldn’t coordinate the benefits with other health coverage or base the benefits on the insured's medical expenses.