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Indemnity insurance exceptions for Affordable Care Act more clearly defined

Health Care and Health Insurance
by Suzanne Heasley and Karen Elsom
Health insurance costs still a central issue for many
Health insurance costs still a central issue for many

Various provisions of the Affordable Care Act are slowly being implemented nationwide ahead of the January 1, 2014, date on which the majority of Americans will be mandated to have health insurance coverage. There are several types of health coverage which do not directly fall under the purview of the ACA requirements; however, some of these health coverages will have to change in order to become compliant with the new rules.

Certain types of fixed indemnity coverage will be exempted from the ACA requirements  according to a guidance report issued by the U.S. Departments of Labor, Health and Human Services, and the Treasury. In particular, those that provide indemnities may only be excepted if the benefits are provided under another policy, certificate or contract, if there is no coordination between those benefits and another exclusion also maintained by the sponsor, or those benefits are paid regardless of whether other benefits are provided under another such plan.

Further, to qualify as a hospital or other fixed indemnity, the insurance is required to pay out a set amount per period (whether it is a day, a week, a month, and so forth) regardless of how much medical debt may be racked up during that time, the report said. This requirement in particular is in place because the federal departments found that many policies advertised as being fixed indemnities paid out on a the basis of the kind of treatment or health-related purchase being sought (such as $50 for a doctor's visit, $15 per prescription, etc.), rather than per-period. As such, this means that they are technically not indemnity insurance, and thus aren't excepted under the new federal laws.

Consequently, insurers who offer the above type of policy will likely have to alter their contracts to be more compliant when it comes to federal rules for indemnity insurance going forward. Making the simple change from paying certain amounts for specific events to paying on a per-period basis will help to get policy issuers back within exception compliance and allow them to better serve their customers at the same time.



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