Bulletin, December 16, 2015, Central United Life v. Burwell

​​Last Updated: December 16, 2015

Date: December 16, 2015
To: All Insurers and Agents Writing Hospital Indemnity or Fixed Indemnity Coverage
From: Theodore K. Nickel, Commissioner of Insurance
Subject: Central United Life v. Burwell

On September 11, 2015, Judge Royce Lamberth issued his decision in Central United Life v. Burwell. At issue was a requirement under the Department of Health and Human Service's (HHS) final fixed indemnity rule which effectively barred insurers from selling fixed indemnity policies except as a supplement to major medical coverage. The rule required insurers to collect an attestation of coverage complying with the ACA's "minimum essential coverage" provisions. Because fixed indemnity policies are treated as excepted benefits under federal law, the plaintiffs contended that HHS did not have the authority to enforce these requirements.

Judge Lamberth issued a permanent injunction barring HHS from enforcing the final fixed indemnity rule. HHS has appealed Judge Lamberth's permanent injunction.

Wisconsin is the primary regulator of all insurance sold in the state. It remains our position that these policies are excepted from regulation under federal law. Insurers must meet all state requirements, such as providing all required disclosures to consumers. Consumers should also be made aware that fixed indemnity and hospital indemnity policies do not meet the "individual responsibility" requirements under the ACA.

Furthermore, it is our view that fixed indemnity policies that pay benefits on a "per period" basis or pay benefits on a "per service" basis are exempt from federal regulation provided the policy in question otherwise qualifies as an "excepted benefit" under federal law.

Thus, so long as they meet state requirements, Wisconsin will continue to accept all types of fixed or hospital indemnity filings.

Fixed indemnity and hospital indemnity products can provide useful, supplemental coverage to major medical, but it is important to note that some consumers missing the open enrollment time frames may not be able to purchase comprehensive major medical coverage. Similarly, consumers not eligible for subsidized coverage might not be able to afford ACA-compliant comprehensive health insurance policies. In short, fixed indemnity and hospital indemnity policies fill an important coverage gap for consumers unable to secure comprehensive health insurance.

If you have any questions, please e-mail James Boll at james.boll@wisconsin.gov.