Crackdown on Fixed Indemnity Health Plans Alters Tax Treatment

The Biden administration is trying to crack down on perceived abuses by employers that offer fixed indemnity coverage with characteristics of comprehensive medical coverage, but its proposal looks headed for a fight with the insurance industry.

The proposed rule—issued by the Internal Revenue Service, and the Departments of Health and Human Services and Labor—would also restrict sales of short-term, limited-duration insurance, and would clarify the tax treatment of fixed benefit payments under employer-provided accident and health plans. Comments are due by Sept. 11.

The proposal is “trying to prohibit employers from trying to cobble together fixed indemnity coverage ...