«Department of Health and Human Services has submitted this rule to the Office of the Federal Register. The official version of the rule will be ...»
Response: We do not agree with these comments. As with all excepted benefits, what the coverage provides, rather than how it is labelled, is determinative of whether it is treated as excepted benefits. Accordingly, we have developed standards for when coverage would be considered exempt from the requirements of the Affordable Care Act and other provisions in Title XXVII of the PHS Act. In so doing, we have not encroached on State’s regulatory authority to regulate excepted benefits. Under this final rule, States will continue to have primary enforcement authority over such benefits, using the Federal definition as a floor, consistent with the overall framework for implementing Title XXVII of the PHS Act. We note that the statutory category which includes fixed indemnity coverage as an excepted benefit conditions its status on the coverage being “independent, noncoordinated” benefits, presuming the existence of other coverage. For purposes of the individual market, we are clarifying that there must be such other coverage, and that the other coverage in question must be minimum essential coverage.
Additionally, requiring that fixed indemnity insurance in the individual market must be sold as
any individual to purchase minimum essential coverage or otherwise engage in any economic activity. We will continue to work in partnership with States, along with consumer and issuer representatives, as we always have, to develop and fine-tune approaches to all Affordable Care Act provisions, including revisiting any aspect of these fixed indemnity provisions, as appropriate and necessary.
Comment: One commenter made the general assertion that the purpose of the excepted benefits provisions in the Affordable Care Act was not to indicate that the types of coverage listed as excepted benefits are excepted from the provisions of the Affordable Care Act, but to allow a health plan to include such categories of coverage under a health plan without having to conform this coverage (that is, the excepted benefits) to the provisions of the Affordable Care Act that apply to the health plan.
Response: Section 2722 of the PHS Act (42 U.S.C. 300gg-21)reads in relevant part in subparagraph (c)(2): “The requirements of subparts 1 and 2 shall not apply to any individual coverage or any group health plan (or group health insurance coverage) in relation to its provision of excepted benefits described in section 2791(c)(3) of this title.” We believe this statutory language is clear that the excepted benefits provisions apply to any individual coverage that meets the definition of any of the excepted benefits listed in section 2791(c)(3), including, but not limited to, hospital and other fixed indemnity policies. (We also believe that subparagraphs 2722(b), (c)(1), and (c)(3) are similarly clear that the excepted benefits provisions apply to any individual coverage in relation to its provision of any of the excepted benefits listed therein. In this final rule, we are making a relatively minor change to the introductory text (changing “individual health insurance coverage” to “individual coverage”), to bring it into
Comment: One commenter asserted that, because coverage provided as an excepted benefit can only be provided in relation to a health plan, proposed section 148.220(b)(4)(i), which states that fixed indemnity insurance is an excepted benefit only if, among other criteria, the individual has minimum essential coverage, is superfluous.
Response: We disagree that the statute and current regulations already provided that fixed indemnity coverage (or any other excepted benefit listed in the statute) is only an excepted benefit if provided in relation to another health plan (although as noted above, this is implicit).
Comment: While one commenter agreed with the inclusion of §148.220(b)(4)(ii) and (iii) as requirements in order for fixed-indemnity policies to qualify as excepted benefits, several commenters believed it would be beneficial to add in subparagraph (b)(4)(ii), a requirement that benefits may not be reduced on account of funds received from any other source. The commenter asserted that, in order to qualify as excepted benefits, a fixed indemnity policy should pay without regard to any other sources of payment.
Response: We do not believe such a requirement would be necessary. Subparagraph (b)(4)(ii) is intended to address the statutory provision in the PHS Act at section 2791(c)(3) that hospital indemnity or other fixed indemnity insurance is an excepted benefit if the benefits are offered as independent, noncoordinated benefits. In this context, we interpret “noncoordinated” as meaning noncoordinated with other coverage, as opposed to noncoordinated with other sources of financial support, such as friends or family members.
Comment: One commenter questioned whether it is the intent of HHS to regulate, and through such regulation prohibit, the sale of fixed indemnity policies on a stand-alone basis.
Response: It is not the intent of HHS to regulate or prohibit the sale of fixed-indemnity
circumstances under which such a policy would or would not qualify as excepted benefits. In the preamble to the proposed regulation, we mentioned that this proposal for determining whether fixed indemnity policies are excepted benefits is consistent with previously released guidance describing our intended approach.
Comment: One commenter argued that it would not make sense to require purchasers of fixed-indemnity coverage to have minimum essential coverage in order for the fixed indemnity coverage to be an excepted benefit, when there is no such requirement for other types of coverage to be an excepted benefit.
Response: As noted in the preamble to the proposed regulation, we proposed that fixed indemnity policies in the individual market be permitted to pay on a per-medical-service basis, to accommodate the concerns of several stakeholders. In order to accommodate those concerns in a reasonable way, we are requiring that individuals who purchase fixed-indemnity policies in the individual market have other minimum essential coverage in order for the fixed indemnity policy to be an excepted benefit. Because we are not expanding the definition of any other type of excepted benefit as we are here, we do not believe it is necessary to impose new conditions on other categories of excepted benefits that the purchaser have other minimum essential coverage.
Comment: The majority of commenters supported the disclosure requirement in order to inform consumers of the nature and extent of fixed indemnity insurance coverage. One commenter recommended that the notice requirement be expanded to indicate that the consumer has been advised on the difference between major medical coverage and fixed indemnity insurance and has been informed on how to acquire major medical coverage from the carrier.
Another commenter stated that the last line of the HHS proposed disclosure notice could easily
provisions of the individual shared responsibility payment, and recommended that it be replaced with this line: “This policy does not provide the minimum essential coverage that individuals may be required to have under the Affordable Care Act.” One commenter requested clarification that the requirement that the notice be displayed in plan materials does not specifically require the notice be inserted in the filed contract forms. Several commenters recommended that the disclosure language be consumer tested. One commenter objected to a Federal prescription of specific wording.
Response: We believe the proposed content of the notice is sufficient to meet its objectives. To ensure that the objectives are met, we believe the standardized language is necessary. With respect to where the notice is displayed, we believe, for policies issued after January 1, 2015, the most appropriate place is in the application for coverage, as this is the most likely document in which a purchaser of fixed indemnity coverage would actually see the notice.
Therefore, in this final rule, we are requiring that the notice be displayed in the application. As described below, policies issued before January 1, 2015 are not required to come into compliance with the notice requirements until the first renewal on or after January 1, 2015. For policies issued before January 1, 2015, we believe it would be appropriate for the notice to be delivered shortly before the first renewal date occurring on or after January 1, 2015, but we defer to State law on the timing. In an effort to minimize industry burden, we are not requiring that fixed indemnity insurers, in order for the coverage to be an excepted benefit, insert the notice in filed contract forms or into any other specific document.
Comment: Many commenters opined that an attestation would be sufficient but others suggested that issuers be required to request documentation from the consumer verifying that
required upon renewal of the fixed indemnity coverage, noting that individuals could lose their minimum essential coverage after the initial attestation. Another commenter recommended that the attestation be expanded to have the consumer attest that the difference between major medical coverage and fixed indemnity insurance had been explained to them and had been informed on how to purchase major medical coverage.
Response: Although methods in addition to attestation might help ensure that individuals have and maintain minimum essential coverage, we seek to balance this objective against the burden of verification. Therefore, this final rule requires that the purchaser of fixed indemnity coverage attest that he or she has minimum essential coverage, but does not require any further documentation. In this final rule, this is a one-time attestation upon issuance of the policy that does not have to be re-performed upon renewal of the policy or any other time. For policies issued before January 1, 2015, we believe it would be appropriate for the one-time attestation to be collected from the policyholder shortly before the first renewal occurring on or after October 1, 2016, but we defer to State law on the timing. We do not believe it is necessary that the attestation be expanded to have consumers attest that the difference between major medical coverage and fixed indemnity insurance had been explained to them and they had been notified about how to purchase major medical coverage.
Comment: We proposed that individuals must have minimum essential coverage in order to be sold fixed indemnity insurance coverage but solicited comments on whether that was sufficient protection. As an alternative standard, we sought comment on whether individuals could be required to have a policy that provided all of the EHB. Many commenters opined that the requirement to have minimum essential coverage is sufficient protection. One commenter
applied nationally. Other commenters felt that the protection should be expanded to require individuals to have coverage that complied with the EHB requirement in order to be sold fixed indemnity insurance.
Response: We believe it is appropriate and sufficient to require that fixed indemnity insurance be sold as supplemental to minimum essential coverage, in order to be an excepted benefit. As having minimum essential coverage is generally the standard for determining whether an individual complies with the shared responsibility provision, we believe it is also the appropriate standard for this purpose.
Comment: One commenter requested clarification that fixed indemnity insurance can pay in a combination of per day and per service amounts, in addition to being able to pay per day or per service amounts.
Response: We believe such a clarification would be helpful, and have changed “or” to “and/or” in this final rule. As part of this clarification, we are revising the phrase “per day of hospitalization or illness” so it reads “per period of hospitalization or illness.” This clarification makes this provision of the individual market rule, consistent with the corresponding provision in the group market rule on hospital and fixed indemnity policies.
Comment: One commenter indicated that it should be clear that the fixed indemnity insurance provisions apply to individual products as defined in the PHS Act regardless of whether the products are filed as group products under State law. The commenter noted that there can be conflicting definitions of group and individual products under State and Federal law.
Response: The PHS Act defines individual market in terms of health insurance (that is, not in terms of excepted benefits), and defines individual health insurance coverage.
market” as that term is defined in §144.103, absent the reference to “health insurance.” This would preempt any State law that classifies an individual product as a “group” product (for example, individual products sold through associations).