January 14, 2025
On December 4, 2024, a federal court in the Eastern District of Texas issued a ruling vacating the final rules related to the notice requirement on hospital and fixed indemnity insurance that would have been required for group coverage plan years beginning on or after January 1, 2025.
As reported in the April 9, 2024, edition of Compliance Corner, under the final rules, a fixed indemnity coverage notice was required to be included in at least 14-point font on the first page of any marketing, application, and enrollment materials (whether in paper or electronic format) for fixed indemnity coverage. However, in May 2024, ManhattanLife Insurance and Annuity Co. and Paschall and Associates filed a lawsuit against the DOL, HHS, and Treasury (the departments) challenging the final rules. The insurers argued that the notice requirement exceeded the departments’ statutory authority and the final regulations’ notice language was not a logical outgrowth of the notice requirement in the proposed regulations. The district court agreed and set aside the provisions of the challenged rule requiring the notice for group fixed indemnity coverage to qualify as an ACA excepted benefit.
As a result of the district court ruling, the fixed indemnity coverage notice requirements issued under the final rule no longer apply at this time. However, the district court ruling is subject to appeal and it’s not clear if the incoming administration will take a position on this issue.
Employers should be aware of the ruling and monitor developments. Employers that have already distributed the notice for the 2025 plan year do not need to take any action currently. Employers that have not yet distributed the notice for the 2025 plan year are no longer required to do so but may want to review the situation with legal counsel since there could be further legal developments.
Manhattan Life Final Judgment
PPI Benefit Solutions does not provide legal or tax advice. Compliance, regulatory and related content is for general informational purposes and is not guaranteed to be accurate or complete. You should consult an attorney or tax professional regarding the application or potential implications of laws, regulations or policies to your specific circumstances.
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