Agencies Issue Final and Proposed HIPAA Portability Regulations

The three federal agencies responsible for enforcing HIPAA’s portability rules (IRS, DOL and HHS) have issued final and proposed regulations governing the group health plan portability provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The final regulations replace the interim regulations that were issued in 1997 and apply to health plans and insurers on the first day of the plan year beginning on or after July 1, 2005 (i.e., January 1, 2006 for calendar year plans). While the final regulations are substantially the same as the 1997 interim rules, they do include several changes that will require plan sponsors to review their current administrative practices and documents.

In addition to the final rules, the agencies have issued proposed regulations on the interaction of HIPAA and the Family and Medical Leave Act of 1994 (FMLA) and on possible changes to the break-in-coverage rule. These rules will not take effect until issued in final form.

The following highlights some of the changes and clarifications made by the final regulations:

Special Enrollment Rights

Individuals have HIPAA special enrollment rights under a group health plan in two situations: (1) when an individual who declined coverage when initially offered because he or she had other coverage subsequently loses that coverage, and (2) when an individual acquires a new dependent due to marriage, birth, adoption or placement for adoption. Numerous examples in the final regulations illustrate that these special enrollment rights are even more generous than was previously believed. Situations that would constitute a loss of eligibility and trigger a special enrollment right include:

• Losing dependent status (for example, by attaining a maximum age) under a plan
• Moving outside of an HMO service area if no other benefit option is available
• Reaching a plan’s lifetime limit on benefits

Definition of Dependent. The final regulations add a new definition of dependent for purposes of the special enrollment rules. Whether an individual is a dependent eligible for special enrollment right is determined by the terms of the plan. In other words, a dependent can be any individual (including, e.g., a domestic partner) who is eligible for coverage under the plan because of a relationship to a participant.

Retirees. The final regulations confirm that retirees qualify for HIPAA protections if they are covered under a group health plan that also covers at least two active employees. A stand-alone retiree-only plan is not subject to HIPAA and therefore need not provide special enrollment rights. A retiree plan that is part of an active employee group health plan, however, must provide special enrollment periods for newly acquired dependents of covered retirees.

Notice of Special Enrollment Rights. A description of HIPAA’s special enrollment rights must be provided to an employee at or before the time the employee is initially offered enrollment under a group health plan. The final regulations update and revise the model language for this required notice that was previously provided in the 1997 regulations.

Preexisting Condition Exclusions

Under HIPAA, a plan may not impose a preexisting condition exclusion (“PCE”) period that lasts for more than twelve months from the date of enrollment (eighteen months for late enrollees). Even then, a PCE may be imposed only with respect to a condition for which medical advice, diagnosis, or treatment was recommended or received within the six month period immediately preceding the date of enrollment. In addition, the PCE period must be reduced by an amount corresponding with an individual’s prior creditable coverage under a health plan.

Creditable Coverage. The final regulations add two new categories of health coverage that qualify as creditable coverage for individuals seeking to reduce or eliminate PCE periods. Now included are coverage provided under a state children’s health insurance plan (SCHIP) and coverage received under a foreign national health plan.

Model Certificate. An updated model certificate of creditable coverage is provided in the final regulations for use by plans as they provide required information to employees or dependents leaving the plan. The revised model includes a new required educational statement that informs individuals of their HIPAA portability rights when seeking new coverage. Once the final regulations take effect, use of the 1997 model certificate will no longer be considered good faith compliance with HIPAA. In addition, plans must now maintain written procedures for individuals to request and receive certificates of creditable coverage. Ideally, such procedures will be included in the plan’s summary plan description.

Notice of PCE. A plan may not impose a PCE period unless it provides prior written notice of the existence and terms of the PCE. The final regulations specify that this notice is to be provided with any enrollment materials and include sample language for the notice.

The final and proposed regulations may be found here.

 

 

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- ONGOING COMPLIANCE - SPECIAL SITUATIONS - CURRENT DEVELOPMENTS -