ACLI tells Washington to keep supplemental benefits out of proposed regulations

WASHINGTON – Proposed federal regulations for short-term, limited duration health plans should exclude fixed indemnity and specified disease supplemental benefits which provide consumers important financial protections against high costs associated with medical care, the American Council of Life Insurers (ACLI) said in comments sent today to three federal agencies.

The comments were in response to a notice of proposed rulemaking (NPR) from the departments of Health and Human Services, Labor and Treasury issued on July 7.

Fixed indemnity and specified disease supplemental benefits help consumers when they are sick or injured pay expenses that are not covered by health plans. These include deductibles and co-pays, as well as the costs incurred when a family travels for specialized treatment for cancer or other diseases, and more. Unexpected expenses like these can wipe out a family’s savings and leave them in debilitating debt.

ACLI’s letter emphasizes that the proposed regulation would eliminate many valuable benefits that people rely on to protect their finances. These benefits supplement, but are not a form of, primary medical coverage. They are distinct from short-term, limited duration insurance discussed in the agencies’ proposal and therefore should be excluded from the final regulation.

“The changes proposed in this NPR related to supplemental benefits will harm the very consumers the NPR seeks to protect. For decades, consumers have relied on these products that provide valuable benefits to help pay for out-of-pocket expenses associated with health events. However, the NPR’s proposed changes are unnecessarily destructive to their benefit design and tax treatment, greatly reducing their value to those that rely on these benefits for financial protection.” ACLI’s Cindy Goff, Vice President, Supplemental Products & Group Insurance, said in the comment letter.

ACLI’s letter also makes clear that the proposed regulation’s tax changes “are a drastic departure from current law, resulting in a tax increase on individuals receiving Supplemental Health benefits.” This significant shift in tax policy would impose a new tax on people when they are sick and need the benefits the most. 

Research shows that millions of consumers would be negatively impacted by the proposal. A recent Morning Consult survey found that more than 80% of adults with annual total household incomes between $50,000 and $100,000 view these benefits as valuable for financial protection. And companies in a new survey by AHIP, ACLI and Blue Cross Blue Shield Association found that in 2022, insurers covered nearly 8.2 million people in either group or individual fixed indemnity plans and 17.2 million people with specified disease insurance plans.

ACLI’s letter to the agencies is available here. Also see ACLI’s letter to Treasury and IRS on the proposal’s tax implications here.