Court: Feds 'overreached' in substandard plan regs

Barack Obama looking thoughtful

A federal appeals court ruled the Obama administration overstepped its authority by placing additional restrictions on less comprehensive plans sold outside of the Affordable Care Act marketplace.

The U.S. Court of Appeals for the District of Columbia upheld a district court’s ruling that the Department of Health and Human Services “colored outside the lines of its authority” by restricting low-cost fixed indemnity plans that did not adhere to the minimum coverage requirements outlined in the ACA. Fixed indemnity plans, which have been exempt from federal insurance standards since 1996, pay out a predetermined amount for a medical event regardless of the actual cost.

An ACA loophole allowed the less comprehensive plans to thrive for years, often catering to those that were ineligible for both Medicaid and ACA subsidies. The court’s ruling focused on a 2014 regulation change which stipulated that fixed indemnity plans could only be sold to beneficiaries with minimum essential coverage. In doing so, the court ruled that HHS overstepped its authority by attempting to amend the law.

“Disagreeing with Congress’s expressly codified policy choices isn’t a luxury administrative agencies enjoy,” the three-judge panel wrote.

Although consumer groups and the government have warned fixed indemnity plans can be misleading, Quin M. Sorenson, a lawyer at Sidley Austin who represented Central United Life Insurance, the plaintiff in the case, told the New York Times that fixed indemnity plans offer a viable coverage option for the three million people stuck in the coverage gap between Medicaid and ACA subsidies.

For more:

- read the appellate court’s opinion

- here’s the New York Times story