The insurance industry is fighting the Obama administration to overturn a new regulation it says could jeopardize health plans for millions of people.
The industry is lobbying Congress to take action against a proposed Obama administration regulation that would target fixed indemnity plans, which Congress has exempted from federal insurance requirements. The plans pay out a specific amount of money for a per-service, per-day benefit and are intended to offer a supplement for people in high-deductible plans, as they are cheap and pay out a fixed amount.
The plans are exempt from Obamacare’s minimum criteria on what healthcare plans should include. Fixed indemnity plans do not count as minimum essential coverage, meaning that buying only a fixed indemnity plan doesn’t allow a person to avoid the law’s individual mandate penalty for not having insurance.
About 49 million people are enrolled in the plans, which have an average cost of about $20 per week.
A fixed indemnity plan pays out benefits based on the type of service provided and provides a flat amount no matter how much the service costs. For instance, it may pay a consumer $200 a day for a hospital visit or $100 for a doctor appointment.
Insurers say that the Obama administration is trying to change the definition of the plans that was written in the 1996 Health Insurance Portability and Accountability Act. The change would ensure that a fixed indemnity plan pays the same amount regardless of what service is being done. So a visit to the doctor would pay out the same amount as surgery.
The administration is trying to regulate the plans “out of existence” so that people will turn to Obamacare’s exchanges because it is the “only option remaining,” said Joel White, president of the Council for Affordable Health Coverage, an industry group fighting the proposed rule.
The group, which includes large employers and insurance giants such as Aetna and Cigna, put together an ad-hoc group to fight the rule.
White said the group is meeting with members of Congress to say that fixed indemnity plans were meant to be exempted from “your regulatory reach and you ought to withdraw this portion of the rule as it runs counter to the statute and congressional intent.”
The administration has said the proposed rule would help eliminate confusion over fixed indemnity plans, specifically that they meet minimum essential coverage. The administration said in the Federal Register that the rule would help end that confusion for enrollees.
The feud is the latest battle between the administration and insurers over fixed indemnity and the Obama administration’s desire that it provide the same essential coverage as other insurance.
In 2014, the administration issued a rule that said the plan may only be offered to people with minimum essential coverage. Several insurers challenged the rule, and in July a federal appeals court overturned it. The court ruled that the Department of Health and Human Services didn’t have the authority to “demand more of fixed indemnity providers than Congress required.”
The outrage over the rule comes at a precarious time for the Obama administration. President Obama met with Obamacare insurers a few weeks ago to assuage fears about higher-than-expected costs from medical claims and the need for higher enrollment to shore up the law’s risk pools.
Several major insurers, such as Aetna and UnitedHealth, are pulling out of Obamacare markets in many states next year due to big financial losses. UnitedHealth, for instance, predicts it will lose about $600 million this year from its Obamacare business, with the losses stemming from low enrollment and a sicker-than-expected enrollee population.
