The U.S. Labor Department's Employee Benefits Security Administration developed the regulations together with the U.S. Department of Health and Human Services' Centers for Medicare and Medicaid Services and the U.S. Treasury Department's Internal Revenue Service.

The fixed-indemnity health insurance provisions would have required marketers to include a standard notice telling consumers that a fixed-indemnity product, such as a critical illness insurance policy, was not subject to the same Affordable Care Act benefits requirements that apply to major medical insurance. In December 2024, a federal court issued an order vacating the notice requirement, saying the requirement exceeded the issuing departments' statutory authority.

The bill would also nullify the short-term health insurance provisions in the regulations. That would increase the maximum duration of a short-term health insurance arrangement to 36 months, from four months.

President Donald Trump started the process of bringing fixed-indemnity health insurance products and short-term health insurance Monday, by rescinding an executive order issued by former President Joe Biden. While Biden was in office, departments used the executive order to justify imposing new requirements on issuers and marketers of critical illness insurance, short-term health insurance and other products that the departments classified as "junk insurance."

Related: Trump rescinds Biden-era supplemental health benefits notice requirement foundation

Drafters of the two statutes that make up the Affordable Care Act package included a provision excepting the products that had been excluded from Health Insurance Portability and Accountability Act major medical insurance requirements from the ACA major medical insurance underwriting and benefits design requirements.

Supporters of the excepted benefits products argue that they help consumers cope with gaps in major medical insurance, such as bills for deductibles and coinsurance amounts, and periods when getting major medical insurance is difficult or impossible.

Critics of excepted benefits products contend that consumers often buy the products without understanding the coverage limitations and that some consumers may use the products to try to create an alternative to major medical coverage.

If loose rules let enough relatively young, healthy consumers shift to major medical insurance alternatives, that could increase the riskiness of the people who still have major medical coverage and destabilize the individual and small-group major medical insurance markets, according to analysts at the American Academy of Actuaries.

The rules on fixed-indemnity health and short-term health products tightened while Barack Obama was president, loosened during Trump's first term and tightened during the Biden administration, and now appear to be returning to where they were during Trump's first term as president.

For employers, the new pendulum shift could make the idea of offering critical illness and hospital indemnity options more attractive over the next four years.

The shift could also increase employers' interest in seeing policymakers come up with a more stable regulatory framework for employee benefits products.