Appeals court strikes down Obama administration's rule on fixed indemnity policies

The U.S. Court of Appeals for the District of Columbia has struck down a rule issued by the Obama administration that bars the sale of stand-alone fixed indemnity insurance plans that do not meet the standards of the Affordable Care Act, according to The New York Times.

Fixed indemnity insurance is typically less comprehensive than the minimum coverage required under the ACA. These plans pay a fixed dollar amount regardless of how much a provider is actually owed. For example, a fixed indemnity plan may pay $600 a day for hospital care, even if the patient owed $3,000 per day.

Under a final rule adopted by the Obama administration in 2014, only people with comprehensive coverage that meets the ACA's standards are permitted to purchase fixed indemnity policies. In support of the rule, the administration argued allowing the sale of stand-alone fixed indemnity policies would undermine the goals of the ACA, according to the report.

These policies have been exempt from federal insurance law since 1996. The appeals court held that the ACA did not alter this decade-old exemption, and Congress gave no indication that it wished to do so.

The appeals court upheld a lower court decision by Judge Royce C. Lamberth. He ruled the Obama administration's rule limiting the sale of stand-alone fixed indemnity policies "has no basis in the statutory text it purports to interpret and plainly exceeds the scope of the statute," according to the report.

The plaintiffs in the case sell fixed indemnity insurance plans. They argued the administration's rule would eliminate the market for such policies.

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