HHS Appeals Adverse Decision on Fixed Indemnity Attestations

12 November 2015 Legal News Alert: Insurance Regulation Publication
Author(s): Thomas R. Hrdlick Morgan J. Tilleman

Legal News Alert: Insurance Regulation

On Monday, November 9, 2015, the U.S. Department of Health & Human Services (HHS) filed a Notice of Appeal from the decision issued by Judge Royce Lamberth of the United States District Court for the District of Columbia in the case of Central United Life, Inc. v. Burwell.

The Burwell decision enjoined enforcement by HHS of that portion of a  new rule it issued in 2014 which, effective January 1, 2015, prohibited insurers from selling new fixed indemnity health insurance policies in the individual market unless they first obtain an attestation from the policyholder, stating that they have other health coverage that meets the minimum essential coverage required under the Affordable Care Act (ACA). Fixed indemnity health insurance products provide limited and fixed medical benefits, and thus are not designed or intended to provide comprehensive medical coverage and do not satisfy the individual mandate contained in the ACA. For that reason, some federal and state regulators have tried to regulate and limit the sale of such products – ostensibly to prevent consumers from confusing the coverage provided under a fixed indemnity policy with comprehensive medical coverage – and the attestation requirement imposed by HHS is another example of that regulatory objective.

In addition to the attestation requirement for new policies issued after January 1, 2015, the new HHS rule also provided that the attestation requirement would have to be met at the time of the first renewal after October 1, 2016, for any policies that were already issued and in-force as of January 1, 2015.

In a decision dated September 11, 2015, Judge Lamberth concluded that the attestation requirement in the new rule reflected an attempt by HHS to interpret and define the concept of fixed indemnity insurance “in a way that imports wholly foreign concepts” and “contravene[s] the very statute they are implementing.” He therefore permanently enjoined HHS from enforcing the attestation requirement (other less controversial aspects of the new rule were left untouched).

Given that, under the current political environment, there would not be a viable legislative path available to HHS to clarify its authority to issue the attestation requirement, the appeal by HHS to the Federal Circuit Court of Appeals was expected. At this point it is too early to predict when the appeal will be heard and/or a decision issued, but Foley’s Insurance & Reinsurance Industry Team is monitoring the case and will report on material developments as they arise.

If you have any questions about this article, the Burwell decision, or the HHS rule at issue, please contact Thomas R. Hrdlick, Chair of the Insurance & Reinsurance Industry Team, at the information below.


Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and our colleagues. If you have any questions about this update or would like to discuss this topic further, please contact your Foley attorney or the following:

Thomas R. Hrdlick
Milwaukee, Wisconsin

Morgan J. Tilleman
Milwaukee, Wisconsin

Foley & Lardner LLP Legal News is intended to provide information (not advice) about important new legislation or legal developments. The great number of legal developments does not permit the issuing of an update for each one, nor does it allow the issuing of a follow-up on all subsequent developments.

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