QUESTION

An agent offered me a policy that pays $100 per day when I’m in the hospital. It’s called a “fixed indemnity plan.” What are the risks and benefits of buying one?

Individuals with no coverage | Comparing Plans: Benefits and Costs
ANSWER

A fixed indemnity plan is not traditional health insurance and enrollment in one does not constitute minimum essential coverage under the Affordable Care Act. These companies are supposed to provide policyholders with a notice that the coverage is not minimum essential coverage. If you have one of these plans and no other coverage, you will be subject to the law’s tax penalty for failing to have health insurance.

Historically, fixed indemnity policies have been income replacement policies, to help compensate people for time out of work. The plan will provide a fixed amount of money per day or over a set period while the policyholder is in the hospital or under medical care. The amount provided is often far below the patient’s actual costs. Thus, consumers can find that they pay more in premiums than they get in return. Consumers who suspect that a fixed indemnity plan is falsely advertising itself as health insurance should report the company to the state department of insurance. (See Other Resources, Where To Go for Help for a list of state Departments of Insurance). (45 C.F.R. § 148.200;  26 U.S.C. § 5000A; CMS, ACA Implementation FAQs-Set 11).

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