Court Struck Down Bar on Sale of Fixed-Benefits Benefits Coverage

Consumers have the right to purchase stand-alone health insurance coverage, despite the fact that the coverage may not meet the qualification of the Affordable Care Act (ACA), otherwise known as Obamacare.

The United States Court of Appeals in Washington, D.C., struck down a rule that barred the sale of stand-alone health insurance products that pay a fixed benefit amount to consumers. Prior to the ruling, if a person purchased coverage that limited benefits – such as $50 per physician visit or $500 per day in the hospital – the coverage was not deemed to have met the minimal essential coverage required under the ACA. The Obama Administration has long cited stand-alone products as being inadequate, since they don’t pay a specific percentage of a person’s medical costs or offer the benefits of major medical coverage.

More than 4 million people have some type of stand-alone coverage, either in the form of disease specific coverage or in a fixed benefit amount option. Both types of policies are significantly less expensive than the coverage mandated by the ACA.

The Obama Administration says that consumers don’t understand that fixed benefits products are not as comprehensive as major medical. While it is true that consumers have less protection with fixed-benefits products, the plaintiffs – who make a living on the sale of fixed benefits coverage – say that consumers with low income simply can’t afford coverage under the ACA.  However, some insurers are concerned that the ruling will enable healthier people to opt out of enrolling in ACA approved plans, which will push costs higher.

The three judges on the federal appeals court panel were critical over what they called the “administrative overreach” of the Obama Administration. Fixed-indemnity coverage has been exempt from federal insurance criteria since 1996 and the enactment of the ACA did not alter that exemption.

For additional information see Central United Life Insurance vs. Burwell