News

In case you missed it, on April 3, 2024, the Departments of Treasury, Labor, and Health and Human Services (collectively, the Departments) issued finalized rules regarding new notice requirements for employers and plan sponsors who offer fixed indemnity excepted benefits coverage, like hospital indemnity insurance. This new notice requirement applies to coverage periods beginning on or after January 1, 2025, and applies to both new and existing coverage.

As a refresher, fixed indemnity insurance policies are a type of excepted benefit. These insurance policies pay a pre-determined amount per period of hospitalization or illness or per service and are not subject to all of the Affordable Care Act mandates. Under the new regulations, to remain an excepted benefit, hospital and other fixed indemnity policies must include a specific notice in at least 14-point font and on the first page (whether in paper or electronic form, including a website) of any enrollment, application, or marketing materials provided to participants at or before the time such participants have the opportunity to enroll in the coverage. The specific language of the notice is set forth in the regulations.

This new mandatory notice is designed to highlight the differences between fixed indemnity insurance policies and traditional health insurance so that employees are aware of the type of coverage they are purchasing, including the limitations of such coverage. The intent is to ensure that employees do not mistakenly purchase a fixed indemnity policy as an alternative or replacement for comprehensive medical coverage.

When finalizing benefit enrollment materials for the upcoming plan year, employers and plan sponsors should ensure that enrollment, application, and marketing materials for hospital and other fixed indemnity insurance policies include the required notice. While we anticipate brokers or insurance issuers will have provided the language to most employers, Michael Best is able to assist employers with any disclosure challenges presented by this new requirement.