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Life Health > Health Insurance > Health Insurance

Insurers clash on fixed indemnity proposal

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Some carriers that sell supplemental health insurance benefits say they’re comfortable with the idea of the federal government requiring buyers to have major medical coverage.

Other oppose that proposal and questions whether the Centers for Medicare & Medicaid Services, or the U.S. Department of Health and Human Services, have the authority to impose that requirement.

Carriers and industry groups have been responding to the proposal in comments on a batch of draft regulations CMS released last month.

CMS officials included a provision that affect sales of “fixed indemnity insurance” in an effort to discourage employers from offering the products such as hospital indemnity and critical illness in place of products that meet the Patient Protection and Affordable Care Act minimum essential coverage standards.

MEC plans are supposed to cover a basic package of preventive services with no out-of-pocket patient costs. An insured MEC plan must cover at least 60 percent of the actuarial value of a standard essential health benefits package.

Interest groups that generally support PPACA and some exchange managers wrote to say they support the proposal. 

Managers of the New York state exchange, for example, said they think its necessary to avoid consumer confusion.

Pieter Williams, senior regulatory counsel at Unum Group Corp., said the carriers supports the requirement that fixed indemnity buyers also have MEC. The company suggested minor changes in wording, and that the effective date be July 1, 2015, rather than Jan. 1, 2015.

America’s Health Insurance Plans is not taking a position, but does say that, if regulators impose an MEC requirement, they should only require an indemnity product buyer to have some kind of MEC plan, not necessarily one that covers the essential health benefits package.

The National Association of Insurance Commissioners says it wants to know a lot more about the proposal.

Consumers need to be protected against confusion, NAIC officials write.

“However, we are concerned that the proposed change in the definition raises many questions and concerns that need to be addressed,” officials write. 

Today, fixed indemnity products can fill gaps for consumers who aren’t eligible for a special enrollment period or who need a bridge between when type of coverage ends and another begins, officials say.

Byron Anderson, a vice president at Transamerica Life Insurance Co., says his company supports disclosure rules but doesn’t believe CMS has the legal authority to require fixed indemnity buyers to show proof they have MEC.

The Supreme Court held PPACA was constitutional only under the Taxing Clause, not under the Commerce Clause, Anderson says.

The Supreme Court concluded the federal government has the authority to impose a tax on people who fail to buy health insurance but does not have the power to order people to buy health insurance, Anderson says.

“The proposed rule, in effect, ‘orders’ consumers to purchase MEC if they desire to purchase other insurance products,” Anderson says.

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