This alert serves as a reminder of the new notice requirement for hospital indemnity plans and other similar indemnity plans that we discussed in a previous IMA article earlier this year.
Background: Regulators raised concerns about certain fixed indemnity plans being perceived by consumers as comprehensive health insurance. In response, new notice requirements have been mandated to ensure that consumers understand the limitations of these plans.
What is the New Notice Requirement?
The new notice is a standardized statement issued by regulatory agencies to clarify that certain fixed indemnity plans are not health insurance. These notices are designed to ensure that consumers are fully informed and do not mistake these plans for comprehensive health coverage.
Importantly, the notice cannot be altered or customized by carriers or employers. It must be presented exactly as issued by the regulators. The language in the notice is straightforward and direct, aiming to avoid any consumer confusion.
Which Plans are Affected?
The notice requirement specifically applies to hospital fixed indemnity plans and other similar indemnity plans that pay a benefit per day as opposed to lump sum for services or diagnosis.
For example, the plans below are not subject to the new notice requirement:
- Accident indemnity plans
- Critical illness or specified disease plans that pay a lump sum per diagnosis or per service
- Cancer indemnity policies that pay a lump sum per diagnosis or per service
- Any other indemnity policy that pays a lump sum per diagnosis or per service
What If an Employer Does Not Offer a Hospital Indemnity Policy or any other similar plan?
If a group health plan does not offer a hospital indemnity policy or other plans that pay a fixed amount per day, the new notice requirements do not apply to them.
When Must the Notice Be Distributed?
It must be included in any enrollment or marketing materials for Plan Years starting on or after January 1, 2025. This means that, contrary to some carriers’ interpretations, notices must be included in materials for the 2024 open enrollment (OE) for plans beginning in 2025.
Should It Be Included in New Hire Materials for Groups Renewing After January 1, 2025?
No, the rules make it clear the notice requirement starts with Plan Years on or after 1/1/25.
Who is Responsible for the Notice Distribution?
The carrier/issuer or the group health plan/employer are responsible for ensuring the notice is distributed in all marketing or enrollment materials.
Where can an employer/plan get a copy of the notice? The best source is the carrier issuing the applicable policy. Although, you can access the notice by viewing our FAQs.
Where Should the Notice Be Displayed?
The notice must be prominently displayed on the first page of any marketing, application, or enrollment materials provided to participants at the time they are considering enrollment. The font size must be at least 14-point, and the notice should be clearly visible.
The notice needs to be included at key stages in the enrollment process.
- For groups with electronic enrollment: The notice should appear as a pop-up or be prominently displayed during the online enrollment process.
IMA tip: it would not be compliant to add the notice in the document section of the system. The notice should be displayed prior to the employee electing the applicable hospital indemnity policy without the employee having to discover the notice on their own.
- For groups with paper enrollments: The notice must be printed on the first page of any marketing or enrollment materials for the relevant indemnity products. For example, if a carrier provides a folder of materials during open enrollment, the notice must be placed at the front of the folder. If the only material being distributed is a benefits guide/brochure, then the notice must appear in the guide just before the page describing the hospital indemnity policy.
Next Steps
Employers/plan administrators should ensure their carrier includes the notice in their marketing, application or enrollment materials for Plan Years starting/renewing on 1/1/25 and after.
Employers using electronic enrollment should work with their benefits administration system representative to include the notice is displayed during the enrollment process as noted above.
IMA will continue to monitor regulator guidance and offer meaningful, practical, timely information. This material should not be considered as a substitute for legal, tax and/or actuarial advice. Contact the appropriate professional counsel for such matters. These materials are not exhaustive and are subject to possible changes in applicable laws, rules, and regulations and their interpretations.
