The indemnity insurance model is alive and well thanks to a federal appeals court for the District of Columbia. So-called “fixed indemnity” insurance pays a fixed amount for a given claim – such as $500 per day for hospitalization or $50 for a doctor visit. Often, fixed indemnity plans only cover specific conditions, such as cancer.
In 2014 the Obama Administration ruled that only individuals who already had comprehensive coverage could purchase fixed indemnity. The reason the administration did not want fixed indemnity coverage available was because it was trying to prop up Obamacare. The administration thought a cheaper option would undermine the goal of “maximizing the number of individuals who have comprehensive, major medical coverage.”
Under the administration ruling, individuals buying fixed indemnity coverage had to attest on their application they already had comprehensive coverage with minimal essential coverage. The plaintiffs argued the 2014 regulatory ruling essentially destroyed the market for their products. The federal court and the appeals court agreed, ruling that the administration had overstepped its regulatory power. Fixed indemnity insurance has been exempt from federal insurance standards for 20 years. The appeals court explained the Affordable Care Act did not change that nor was there evidence Congress planned for the ACA to change that fact. Unfortunately, people who buy fixed indemnity coverage still must buy Obamacare coverage to avoid getting fined. But they can now at least make the choice.