WASHINGTON, DC – The African American Mayors Association (AAMA) last week formally expressed its deep concern regarding the proposed federal regulation on voluntary health benefits. In a letter addressed to the Secretaries of the U.S. Department of Health and Human Services, Department of Labor, and Department of Treasury, AAMA outlined critical issues with the Notice of Proposed Rulemaking issued on July 12, 2023, which mandates that benefits from certain indemnity policies, if purchased on a pre-tax basis, be taxed as income.

The proposed regulation aimed at curbing “junk insurance”, while admirable, inadvertently impacts supplemental benefits like Accident and Hospital Indemnity Insurance policies. These policies are crucial for bridging financial gaps during medical crises, offering support beyond what is covered by comprehensive health insurance.

“In solidarity with our member-mayors, we are committed to safeguarding dedicated city employees from undue financial hardship during health crises,” said AAMA CEO Phyllis Dickerson. “We acknowledge the intentions behind this regulation but are concerned about the potential financial impact on those it intends to assist. It’s crucial to find a balance that maintains the well-being of our municipal workforce nationwide, ensuring they continue to have access to essential supplemental benefits without additional financial burdens.”

AAMA urges a reevaluation of the proposed rule to ensure that supplemental insurance products remain accessible and not subjected to additional taxation. The Association seeks a balanced approach that maintains transparency and consumer protection without compromising the financial well-being of municipal employees who rely on these benefits.