New 2025 Notice Requirement for Fixed Indemnity Coverage

As we move towards 2025, employers offering fixed indemnity coverage need to be aware of a new notice requirement. This mandatory notice, effective for plan years beginning on or after January 1, 2025, aims to clarify the limitations of fixed indemnity plans, ensuring that employees do not mistakenly choose this coverage as a substitute for traditional health insurance.

What Employers Need to Know About Fixed Indemnity Coverage in 2025

Employers offering fixed indemnity policies should ensure that all enrollment, application, and marketing materials for the 2025 plan year prominently feature the new notice. This step is crucial to help employees make informed decisions about their health coverage options.

What is Fixed Indemnity Coverage?

Fixed indemnity coverage is classified as an "excepted benefit" and is not subject to certain Affordable Care Act (ACA) requirements. Unlike traditional health insurance, fixed indemnity coverage is primarily designed to provide financial benefits rather than comprehensive healthcare. These policies pay a predetermined amount per day or other time frames after the occurrence of a health-related event, such as hospitalization or illness.

For example, a fixed indemnity policy might pay $100 per day for hospitalization, regardless of the actual medical costs incurred. This structure differs significantly from traditional health coverage, where payouts are based on healthcare expenses.

How Fixed Indemnity Benefits Work

The benefits under a fixed indemnity policy are typically paid directly to the policyholder, who can decide how to use the funds. The payments can be applied to nonmedical expenses, such as childcare or transportation, that arise during the period of illness or hospitalization. This flexibility allows policyholders to manage various costs during health-related events, even those unrelated to healthcare.

Key Points to Keep in Mind

• New Rule Implementation: A final rule was issued on April 3, 2024, that outlines the notice requirement for fixed indemnity coverage.
• Purpose of the Notice: This notice informs employees about the differences between fixed indemnity policies and traditional health insurance.
• Action Required for Employers: Employers with fixed indemnity plans must ensure that the required notice is included in all relevant materials—such as enrollment and application forms—starting in 2025.

The 2025 Notice Requirement

The U.S. Departments of Labor, Health and Human Services, and the Treasury have implemented a new rule that requires a consumer notice for fixed indemnity coverage offered in the group market. This requirement ensures that individuals can clearly differentiate fixed indemnity benefits from traditional health insurance plans.

Starting with plan years beginning on or after January 1, 2025, the notice must be displayed prominently on the first page of any marketing, application, or enrollment materials. This applies to both new and existing fixed indemnity coverage policies. The notice must be written in at least 14-point font and should be easily noticeable, whether in printed documents or online materials.

Ensuring Prominent Notice Placement

To comply with the notice requirements, employers must ensure that the notice stands out from other content on the page. For printed materials, using a font color that contrasts with the background can make the notice more visible. Similarly, the notice should be clearly visible on digital platforms without requiring users to click additional links.

Required Text for the Notice

The official text for the notice, which must be included in all marketing and enrollment materials for fixed indemnity coverage, is as follows:

IMPORTANT: This is a fixed indemnity policy, NOT health insurance.

• This fixed indemnity policy may provide a limited dollar amount if you're sick or hospitalized. You remain responsible for covering the full cost of your care.
• The payment you receive is not based on your medical bills.
• There may be an annual limit on how much this policy will pay.
• This policy is not a substitute for comprehensive health insurance.
• As this policy is not health insurance, it does not have to include most Federal consumer protections that apply to health insurance.

Have Questions About This Policy?

For any questions or complaints regarding this policy, contact your State Department of Insurance. You can find contact information for your state's department on the National Association of Insurance Commissioners' website at naic.org under "Insurance Departments."

If you have this policy through your employer or a family member’s employer, contact them directly for assistance.

Conclusion

Employers offering fixed indemnity coverage must take steps to comply with the new 2025 notice requirement. Ensuring that employees fully understand the limitations of these policies and how they differ from traditional health coverage is essential for promoting informed decision-making. By incorporating this notice into all marketing, application, and enrollment materials, employers can help prevent misunderstandings and ensure compliance with the latest regulatory standards.

Find out more about next year's updates and compliance by calling one of our TPG Payroll & HR Specialists at 909.466.7876!

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