The Obama administration has overreached its legal authority in setting strict standards for health insurance plans, a federal appeals court ruled last week.

The court struck down a rule that limited to whom insurers could sell “fixed indemnity” insurance plans, which give policyholders pre-determined lump sums to pay for certain medical expenses, such as a night in a hospital or a visit to a specialist, regardless of how much the provider charges.

A fixed indemnity plan turns a conventional insurance plan on its head, since it is the consumer, rather than the insurer, that is responsible for all expenses beyond a pre-set copay for certain medical services.

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Although the rule issued by the administration in 2014, during the first year of the implementation of the Affordable Care Act, did not bar such policies entirely, it restricted sales of such plans to those who already had a conventional health plan. Those who lacked one could not buy a fixed indemnity plan as a substitute.

The Department of Health and Human Services was not authorized by any legislation to take such a dramatic step, the U.S. Court of Appeals for the District of Columbia Circuit said in its ruling. The ACA, it noted, did not make any mention of fixed indemnity plans.

“Disagreeing with Congress’s expressly codified policy choices isn’t a luxury administrative agencies enjoy,” said the decision.

Those who sell fixed indemnity policies sued the administration over the rule. While their arguments to the court were based in law, their case to the public is economic and moral, arguing that fixed indemnity plans help the poor.

“Even after the Affordable Care Act, lower-income consumers may not be able to afford major medical coverage,” Quin Sorenson, an attorney for the plaintiffs, told The New York Times.

A brief submitted by 11 Republican state attorneys general also praised fixed indemnity plans as expanding health care to the poor.

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Court strikes down Obama rule on fixed indemnity health plans

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