What is fixed indemnity insurance, and how does it pay?
A fixed indemnity plan pays a set amount each time a covered event happens, for example $100 for each day in the hospital or $50 for each doctor visit. Federal rules use those same examples.
To count as a limited benefit instead of comprehensive coverage, federal rules for individual market plans say the benefits must be paid as a fixed dollar amount per period of hospitalization or illness, or per service, regardless of the amount of expenses incurred. The payment also cannot depend on what any other coverage pays, and the plan cannot coordinate its benefits with exclusions under other coverage.
CMS says hospital and other fixed indemnity insurance has traditionally been used as income replacement and is not a substitute for comprehensive coverage. You can use the money as you wish. If the bill is larger than the benefit, you pay the rest.
How does it differ from an ACA plan?
The U.S. Government Accountability Office (GAO) reviewed two fixed indemnity plans in 2023. Its findings describe those two plans, not every plan on the market, so read the terms of any plan you are offered.
| Question | Fixed indemnity plan | ACA plan |
|---|---|---|
| How does it pay? | A set cash amount for each covered day, visit or service, whatever the bill | Pays or limits what you owe for covered care under the plan's deductible, copayments and coinsurance |
| Can it deny you for your health history? | GAO says documentation for both plans it reviewed said they may deny applicants based on health history | ACA plans must cover preexisting conditions, according to GAO |
| Is there a waiting period for preexisting conditions? | Both plans GAO reviewed had 12 month waiting periods | ACA plans cannot impose waiting periods for benefits related to preexisting conditions |
| Are there dollar limits? | GAO found one plan with both an annual and a lifetime benefit limit | ACA plans cannot set annual or lifetime dollar limits on essential health benefits |
| Is it minimum essential coverage? | A disclosure GAO reviewed said the plan is not a substitute for minimum essential coverage | Marketplace plans are minimum essential coverage, according to HealthCare.gov |
The federal penalty for not having minimum essential coverage no longer applies starting with the 2019 plan year. Not having comprehensive coverage can still leave you responsible for a large bill, and a fixed indemnity benefit may cover only part of it.
GAO also noted that stakeholders it interviewed said written disclosures may not be an adequate way to explain the limits of these plans to consumers.
What did the federal government and the courts do about the notice?
A notice is how consumers are warned that a fixed indemnity plan is not major medical coverage. A 2024 federal rule changed the notice, and a court threw out that change.
- 2014 rulesIndividual market fixed indemnity plans must carry a notice that the coverage is not a substitute for major medical coverage. The court calls this the 2014 notice.
- April 3, 2024The Departments of Health and Human Services, Labor and the Treasury publish final rules with a new notice for plan years beginning in 2025. CMS says 2023 proposals on payment standards and noncoordination were not finalized and may be taken up in future rulemaking.
- December 4, 2024A federal court in the Eastern District of Texas vacates the new notice requirement and the rule's change to the 2014 individual market notice, in ManhattanLife v. HHS.
- February 2025The agencies appeal to the Fifth Circuit.
- June 10, 2025The Fifth Circuit dismisses the appeal at the agencies' unopposed request, so the vacatur stands.
Source: CMS fact sheet; final judgment in ManhattanLife v. HHS; Fifth Circuit order of June 10, 2025; Haynes Boone
The court said the new notice rule exceeded the agencies' legal authority and that its wording was not a logical outgrowth of what the agencies proposed. Haynes Boone, a law firm, says the group market notice requirement therefore remains vacated. Because the court also set aside the rule's change to the 2014 individual market notice, the 2014 notice remains. We did not find a newer federal rule on fixed indemnity insurance when we checked on October 29, 2026.
States regulate these plans too, so check your state insurance department's rules and that the seller is licensed where you live.
What should I ask before I buy one?
If you need coverage that starts January 1, 2027, marketplace open enrollment begins November 1, and a plan picked by December 15, 2026 starts January 1. Compare a marketplace plan first, because a fixed indemnity plan does not replace one.
- What does it pay per day, visit or service, and what are the yearly and lifetime maximums?
- How long is each waiting period, especially for preexisting conditions and wellness services?
- Can the company deny me because of my health history?
- Does the application show the notice that the plan is not a substitute for major medical coverage? Read it before you sign.
- Is the company licensed in my state?
- Do I already qualify for a marketplace plan, Medicaid or a special enrollment period?
A fixed indemnity plan can make sense on top of real coverage, for example to help with a deductible or time away from work. Whether it fits depends on the benefit amounts, the waiting periods and what you already have.
How can an agent help with fixed indemnity coverage?
An agent can first check whether a marketplace plan or a special enrollment period would protect you better, then go through what a fixed indemnity plan pays per day and per service, the waiting periods and the limits before you apply. Have your income, your household size and any plan you now have ready.
Health Insurance Solutions agents are licensed in 22 states and help by phone and online. Marketplace plans cost the same with or without an agent, so the comparison does not add to your premium.
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