Appeals Court Strikes Down Fixed Indemnity Health Insurance Law

Date: July 06, 2016

Ruling Suggests Obama Officials Conducted Regulatory Overreach Under Obamacare

In the latest ruling suggesting the Obama Administration has clearly over-regulated healthcare, the New York Times reports that in the case Central United Life Insurance v. Burwell, the US Court of Appeals for the District of Columbia Circuit “has ruled that consumers must be allowed to buy certain types of health insurance that do not meet the stringent standards” set by Obamacare. The court found that the Obama Administration, in particular the Department of Health and Human Services, “has gone beyond the terms of Federal law” in its mandate to bar the sale of so-called “fixed indemnity” insurance “as a separate stand-alone product.” This type of insurance, which typically pays a fixed amount per day for medical expenses, like $500 per day for a hospital stay or $50 per doctor’s visit, regardless of what “is actually owed to the provider,” is generally sold to consumers for less than what Obamacare determined the “minimum essential coverage” costs should be. This insurance also often covers less than Obamacare standards. Currently, insurers and state officials believe around four million Americans may have such “fixed indemnity policies without major medical coverage.” When the Obama Administration barred the sale of this type of coverage in 2014, despite rules dating to 1996 that “generally exempt” such insurance from Federal standards, Administration officials used the reasoning that enabling the purchase of such coverage “would undermine the goal of ‘maximizing the number of individuals who have comprehensive, major medical coverage.’” However, in its new ruling, the appeals court wrote, “Disagreeing with Congress’s expressly codified policy choices isn’t a luxury administrative agencies enjoy.” By issuing this ruling, the appeals court upheld a previous decision by Federal District Court Judge Royce C. Lamberth that found that the Obama Administration’s rule “has no basis in the statutory text it purports to interpret and plainly exceeds the scope of the statute.”

What This Means For Small Businesses

Small businesses have suffered the brunt of labor cost increases under Obamacare. Consumers should have the freedom to purchase the health coverage they believe works best for them, and some may desire fixed indemnity coverage due to its greater affordability. This appeals court ruling places more control of healthcare back in the hands of consumers, rather than Federal bureaucracies. However, Obamacare remains largely intact, continuing to negatively effect small businesses.

Additional Reading

The Washington Post and the National Law Review also covered the ruling.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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