SPEAKERS CONTENTS INSERTS
Page 1 TOP OF DOC
46–734 CC
1998
IMPLEMENTATION OF THE HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT
HEARING
before the
SUBCOMMITTEE ON HEALTH
of the
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
FIRST SESSION
SEPTEMBER 25, 1997
Serial 105–29
Page 2 PREV PAGE TOP OF DOC
Printed for the use of the Committee on Ways and Means
COMMITTEE ON WAYS AND MEANS
BILL ARCHER, Texas, Chairman
PHILIP M. CRANE, Illinois
BILL THOMAS, California
E. CLAY SHAW, Jr., Florida
NANCY L. JOHNSON, Connecticut
JIM BUNNING, Kentucky
AMO HOUGHTON, New York
WALLY HERGER, California
JIM McCRERY, Louisiana
DAVE CAMP, Michigan
JIM RAMSTAD, Minnesota
JIM NUSSLE, Iowa
SAM JOHNSON, Texas
JENNIFER DUNN, Washington
MAC COLLINS, Georgia
ROB PORTMAN, Ohio
PHILIP S. ENGLISH, Pennsylvania
JOHN ENSIGN, Nevada
JON CHRISTENSEN, Nebraska
Page 3 PREV PAGE TOP OF DOC
WES WATKINS, Oklahoma
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
CHARLES B. RANGEL, New York
FORTNEY PETE STARK, California
ROBERT T. MATSUI, California
BARBARA B. KENNELLY, Connecticut
WILLIAM J. COYNE, Pennsylvania
SANDER M. LEVIN, Michigan
BENJAMIN L. CARDIN, Maryland
JIM McDERMOTT, Washington
GERALD D. KLECZKA, Wisconsin
JOHN LEWIS, Georgia
RICHARD E. NEAL, Massachusetts
MICHAEL R. McNULTY, New York
WILLIAM J. JEFFERSON, Louisiana
JOHN S. TANNER, Tennessee
XAVIER BECERRA, California
KAREN L. THURMAN, Florida
A.L. Singleton, Chief of Staff
Janice Mays, Minority Chief Counsel
Page 4 PREV PAGE TOP OF DOC
Subcommittee on Health
BILL THOMAS, California, Chairman
NANCY L. JOHNSON, Connecticut
JIM McCRERY, Louisiana
JOHN ENSIGN, Nevada
JON CHRISTENSEN, Nebraska
PHILIP M. CRANE, Illinois
AMO HOUGHTON, New York
SAM JOHNSON, Texas
FORTNEY PETE STARK, California
BENJAMIN L. CARDIN, Maryland
GERALD D. KLECZKA, Wisconsin
JOHN LEWIS, Georgia
XAVIER BECERRA, California
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records of the Committee on Ways and Means are also published in electronic form. The printed hearing record remains the official version. Because electronic submissions are used to prepare both printed and electronic versions of the hearing record, the process of converting between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process is further refined. The electronic version of the hearing record does not include materials which were not submitted in an electronic format. These materials are kept on file in the official Committee records. The electronic version of the hearing record does not include materials which were not submitted in an electronic format. These materials are kept on file in the official Committee records.
Page 5 PREV PAGE TOP OF DOC
C O N T E N T S
Advisories announcing the hearing
WITNESSES
Health Care Financing Administration, Judy D. Moore, Deputy Director, Center for Medicare and State Operations
U.S. Department of Labor, Meredith Miller, Deputy Assistant Secretary for Policy, Pension and Welfare Benefits Administration
U.S. Department of the Treasury, J. Mark Iwry, Chief Benefits Tax Counsel
ERISA Industry Committee, Anthony J. Knettel
Health Insurance Association of America, Hon. Bill Gradison
Kansas, State of, Kathleen Sebelius
Missouri, State of, Department of Insurance, Jay Angoff
National Association of Health Underwriters, Diane L. Mahoney
National Association of Insurance Commissioners, and State of Wisconsin, Josephine W. Musser; as presented by Kathleen Sebelius
Women's Legal Defense Fund, Judith L. Lichtman; as presented by Joanne Hustead
SUBMISSIONS FOR THE RECORD
American Bankers Association, statement
Page 6 PREV PAGE TOP OF DOC
American Council of Life Insurance, Douglas P. Bates, letter and attachment
Association Healthcare Coalition, Irvine, Ca, Donald G. Dressler, statement
Council for Affordable Health Insurance, Alexandria, Va, statement
National Renal Administrators Association, statement and attachment
IMPLEMENTATION OF THE HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT
THURSDAY, SEPTEMBER 25, 1997
House of Representatives,
Committee on Ways and Means,
Subcommittee on Health,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:41 a.m., in room 1310, Longworth House Office Building, Hon. Bill Thomas (Chairman of the Subcommittee) presiding.
[The advisories follow:]
ADVISORY
FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON HEALTH
Page 7 PREV PAGE TOP OF DOC
CONTACT: (202) 225–3943
FOR IMMEDIATE RELEASE
September 11, 1997
No. HL–15
Thomas Announces Hearing on
Implementation of the Health Insurance
Portability and Accountability Act
Congressman Bill Thomas (R–CA), Chairman, Subcommittee on Health of the Committee on Ways and Means, today announced that the Subcommittee will hold a hearing on implementation of the Health Insurance Portability and Accountability Act of 1996, (Public Law 104–191). The hearing will take place on Thursday, September 25, 1997, in 1310 Longworth House Office Building, beginning at 11:00 a.m.
In view of the limited time available to hear witnesses, oral testimony at this hearing will be from invited witnesses only. However, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing.
Page 8 PREV PAGE TOP OF DOC
BACKGROUND:
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) contains several provisions designed to make health coverage more accessible, affordable, and portable. The key tax provisions of HIPAA, including medical savings accounts for small businesses and the self-employed, and increased health insurance deductions for the self-employed and deductions for the cost of long-term care coverage, became effective on January 1, 1997.
In July of this year, additional reforms became effective. Among other things, these provisions: (1) limit the use of preexisting condition exclusions; (2) guarantee access to health insurance for small employers; (3) guarantee renewability of health insurance coverage for groups and individuals; (4) prohibit health plans from discriminating against people based on their health status; (5) effectively end job lock by making health coverage portable; (6) improve COBRA continuation coverage for disabled individuals and newborns; and (7) help people who lose their job, or leave their job to start their own businesses, obtain health coverage in the individual insurance market.
Three Federal agencies—the Department of Health and Human Services, the Department of Labor, and the Department of the Treasury—are charged with overseeing the implementation and enforcement of HIPAA. While the States are given responsibility to enforce HIPAA's small group and individual market insurance reforms, the legislation provides them with considerable flexibility in meeting these requirements.
In announcing the hearing, Chairman Thomas stated: ''After years of wrangling, Congress finally delivered common-sense, market-based health insurance reform to the American people. As the Health Insurance Portability and Accountability Act should be fully phased-in by the end of this year, this is an excellent opportunity to examine how the law is working, how it is being implemented, and whether any modifications should be made.''
Page 9 PREV PAGE TOP OF DOC
FOCUS OF THE HEARING:
The hearing will focus on implementation of the access, portability, preexisting condition, and long-term care provisions of HIPAA. The Subcommittee will examine the response of the States and the private market to HIPAA, and performance of the three Federal agencies charged with drafting regulations and overseeing HIPAA.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Any person or organization wishing to submit a written statement for the printed record of the hearing should submit at least six (6) single-space legal-size copies of their statement, along with an IBM compatible 3.5-inch diskette in ASCII DOS Text or WordPerfect 5.1 format only, with their name, address, and hearing date noted on a label, by the close of business, Thursday, October 9, 1997, to A.L. Singleton, Chief of Staff, Committee on Ways and Means, U.S. House of Representatives, 1102 Longworth House Office Building, Washington, D.C. 20515. If those filing written statements wish to have their statements distributed to the press and interested public at the hearing, they may deliver 200 additional copies for this purpose to the Subcommittee on Health office, room 1136 Longworth House Office Building, at least one hour before the hearing begins.
FORMATTING REQUIREMENTS:
Each statement presented for printing to the Committee by a witness, any written statement or exhibit submitted for the printed record or any written comments in response to a request for written comments must conform to the guidelines listed below. Any statement or exhibit not in compliance with these guidelines will not be printed, but will be maintained in the Committee files for review and use by the Committee.
Page 10 PREV PAGE TOP OF DOC
1. All statements and any accompanying exhibits for printing must be typed in single space on legal-size paper and may not exceed a total of 10 pages including attachments. At the same time written statements are submitted to the Committee, witnesses are now requested to submit their statements on an IBM compatible 3.5-inch diskette in ASCII DOS Text or WordPerfect 5.1 format. Witnesses are advised that the Committee will rely on electronic submissions for printing the official hearing record.
2. Copies of whole documents submitted as exhibit material will not be accepted for printing. Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material not meeting these specifications will be maintained in the Committee files for review and use by the Committee.
3. A witness appearing at a public hearing, or submitting a statement for the record of a public hearing, or submitting written comments in response to a published request for comments by the Committee, must include on his statement or submission a list of all clients, persons, or organizations on whose behalf the witness appears.
4. A supplemental sheet must accompany each statement listing the name, full address, a telephone number where the witness or the designated representative may be reached and a topical outline or summary of the comments and recommendations in the full statement. This supplemental sheet will not be included in the printed record.
The above restrictions and limitations apply only to material being submitted for printing. Statements and exhibits or supplementary material submitted solely for distribution to the Members, the press and the public during the course of a public hearing may be submitted in other forms.
Page 11 PREV PAGE TOP OF DOC
Note: All Committee advisories and news releases are available on the World Wide Web at 'HTTP://WWW.HOUSE.GOV/WAYS_MEANS/'.
The Committee seeks to make its facilities accessible to persons with disabilities. If you are in need of special accommodations, please call 202–225–1721 or 202–226–3411 TTD/TTY in advance of the event (four business days notice is requested). Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above.
—————
NOTICE—CHANGE IN TIME
ADVISORY
FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON HEALTH
CONTACT: (202) 225–3943
Page 12 PREV PAGE TOP OF DOC
FOR IMMEDIATE RELEASE
September 19, 1997
No. HL–15-Revised
Time Change for Subcommittee Hearing on
Thursday, September 25, 1997, on
Implementation of the Health Insurance
Portability and Accountability Act
Congressman Bill Thomas (R–CA), Chairman of the Subcommittee on Health, Committee on Ways and Means, today announced that the Subcommittee hearing on implementation of the Health Insurance Portability and Accountability Act of 1996, previously scheduled for Thursday, September 25, 1997, at 11:00 a.m., in 1310 Longworth House Office Building, will begin instead at 10:00 a.m.
All other details for the hearing remain the same. (See Subcommittee press release No. HL–15, dated September 11, 1997.)
Page 13 PREV PAGE TOP OF DOC
—————
Chairman THOMAS. The Subcommittee will come to order.
I apologize if you don't have enough room. This is not the usual impressive Ways and Means Committee room, but apparently the power of the Committee is transportable. We have about 45 minutes before we have another vote and so I would like to, as expeditiously as possible, begin moving through the witnesses' testimony, but I want to make sure we have enough time for everyone.
I want to welcome everyone to today's Subcommittee hearing, the first one on the implementation of the HIPAA, Health Insurance Portability and Accountability Act of 1996. HIPAA does represent consensus health reform, which we have been debating and discussing for some time. Besides increasing the deductibility of health insurance for the self-employed, making medical savings accounts available to small employers, simplifying health claims and billing forms, clarifying the tax treatment of long-term care insurance, and providing significant new tools to combat health care fraud and abuse, HIPAA contains reforms which limit preexisting condition exclusions, guarantee the availability and renewability of health insurance, prohibit health plans from discriminating against people based on their health status, and help to make health coverage more portable.
Within the next few months, most of HIPAA's reforms will be fully implemented. It, therefore, seems appropriate to determine whether the new law is meeting its objectives, how it is being implemented and whether, already at this date, any modifications might be identified and suggested.
Today we are going to hear from consumers, health plans, employers, representatives of States, as well as the three Federal agencies charged with implementing and enforcing HIPAA to help us address these issues. Reforms as major as HIPAA are never perfect, and so during today's hearing, I will ask some of the witnesses to provide the Subcommittee with specific suggestions in terms of how and where they believe HIPAA requires modifications. However, I would like to request that all witnesses, and as a matter of fact, all interested parties who may not have been invited to testify, provide the Subcommittee with any formal set of proposed technical modifications no later than November 1. We do have to begin working with other Committees of jurisdiction so that we can make those adjustments where and if necessary.
Page 14 PREV PAGE TOP OF DOC
I hope today's hearing will mark the beginning of a continuing dialog, not just to harangue what is wrong but to focus on it and try to make the changes to make it better so that we can ensure that these bipartisan reforms are implemented in the most efficient and effective manner possible.
I want to thank all of you for being here, I look forward to your testimony, and I recognize the Ranking Member, the gentleman from California, Mr. Stark.
Mr. STARK. Thank you, Mr. Chairman, and thank you for holding this hearing.
There were two courageous, perspicacious Members of the House who voted against final passage of this bill; the other one is retired. This leaves me the lonely job of reminding some not to oversell this bill. It is a very tiny step forward in what should be our goal of getting health insurance coverage for all Americans. As the Congressional Budget Office said when we passed it, it will help about 400,000 people, but we have 40 million people who have no insurance, and that number is rising.
So, in this boom economy, employers have been cutting back on health insurance coverage and have been eliminating dependent coverage. Workers have been asked to pay more of their share of the bill, and this hearing really doesn't address those trends. I am not sure we can address it. But if this is happening in good economic times, what happens to us if we have a turndown?
I have been calling the various States to get the annual price of health insurance policies under HIPAA guaranteed issue after employment based COBRA are exhausted, and I have handed out a list to Members here, to see what this guaranteed issue individual product is selling for. It is coming in around $6 thousand or more a year. That is a cruel hoax when we could have extended COBRA at a lower cost and where the per capita income of many of these people is $16,000.
Page 15 PREV PAGE TOP OF DOC
For many others, there are abuses by insurers. Missouri Commissioner Angoff will tell us about abuses that make the policies unaffordable, and perhaps a quarter of all State and local governments are opting not to be covered.
I believe that is happening in our State. And with local governments not picking up the challenge that we provided, there are things, as the Chairman suggested, we might do.
I would suggest some small items we might do. I have introduced a bill to phase down the preexisting condition period from 1 year to 1 month, to guarantee issue to all businesses, not just those with under 51 workers. We might look again at COBRA, which costs the government virtually nothing and which has minimal costs, except an inconvenience to some of the businesses. So there are improvements we could make to expand the scope of this law as I know we would all like to.
Again, I look forward to hearing the witnesses and working with the Chair to see what we can do to make a dent in those 40 million who do not have adequate health care because of lack of insurance.
Thank you, Mr. Chairman.
[The opening statement and attachment follow:]
Opening Statement of Congressman Pete Stark
Mr. Chairman:
Thank you for holding this hearing. There were two Members of the House who voted against final passage of this law. One retired. That leaves me to remind people not to oversell this bill—that it is only the tiniest step forward in what should be our goal of getting health insurance for all Americans. As the Congressional Budget Office said when the bill passed, it will help about 400,000 people a year, while 40,000,000—and rising—remain uninsured.
Page 16 PREV PAGE TOP OF DOC
Yet even in this boom economy, employer provided health insurance has been declining, dependent coverage has been dropping, workers have been asked to pay more and more of the health bill. This law does nothing to address these trends. The health insurance situation is worsening in these good economic times ... imagine what they will look like when we have an economic downturn.
My office has been calling the various States to see what the guaranteed issue individual health insurance products are being priced at. As you can see, in many states these policies are coming in above $6,000—a cruel joke in a nation where the per capita median income of a single person household is about $16,000.Page 3 of Missouri Commissioner Angoff's testimony documents continuing abuses by insurers that will make policies unaffordable.
For many others, the law is a failure. Perhaps a quarter of all State and local governments will opt not to be covered. It is a disgrace that local American governments are not providing the kind of health care protection we have mandated on American business.
To repeat, this law is the smallest of down-payments on what we need to do. One new small step forward would be the bill I introduced Tuesday to phase down the pre-existing condition period from a year to a month and to guarantee issue to all businesses, not just those under 51 workers.
I look forward to hearing how we can build on this law.
—————
[The official Committee record contains additional material here.]
Page 17 PREV PAGE TOP OF DOC
—————
Chairman THOMAS. I thank the gentleman.
Any other Members who wish to make statements can place written statements in the record.
I would just tell the gentleman, I looked at his list and it is difficult, on the basis of the sheet I have in front of me, to really determine what the different benefit packages are in terms of premium rates. Obviously, the way in which they are packaged and what they contain makes a significant difference, and we did try to make a number of changes that were opposed which we thought would be a greater outreach.
But overselling HIPAA and opposing it are two different things, and I am thankful there were only two Members and one retired. I don't assume that pretends anything. We are opposed.
I am concerned about overselling as well and what we need to do is find out how we can improve on the product, but I don't understand how you start if you don't start and to me HIPAA was a start.
And with that, we will turn to our first panel. Judy Moore is the Deputy Director, Center for Medicaid and State Operations at HCFA; Meredith Miller is the Deputy Assistant Secretary for Policy, Pension and Welfare Benefits Administration, U.S. Department of Labor; and Mark Iwry is Chief Benefits Tax Counsel, U.S. Department of the Treasury.
I assume we will start in that order. Ms. Moore, Ms. Miller, Mr. Iwry, you have written testimony to be made part of the record without objection, and you can inform us in a relatively efficient way your viewpoints from your perspective.
Page 18 PREV PAGE TOP OF DOC
STATEMENT OF JUDY D. MOORE, DEPUTY DIRECTOR, CENTER FOR MEDICAID AND STATE OPERATIONS, HEALTH CARE FINANCING ADMINISTRATION
Ms. MOORE. Thank you, Mr. Chairman. Good morning to you and Members of the Subcommittee. Thank you for inviting me and my colleagues to speak to you this morning about the Health Insurance Portability and Accountability Act which provides, among other things, improved portability and continuity of health insurance coverage in the group and the individual markets. These provisions allow millions of Americans to enjoy greater security in their health care coverage, and today I would like to talk about the Health Care Financing Administration's role in implementing the portability provisions and the current status of our implementation efforts.
Since HIPAA's portability provisions in the group market implement changes to the Public Health Service Act, ERISA, and the Internal Revenue Code, the law provides for shared responsibilities between the Secretaries of HHS, Health and Human Services, Labor and Treasury, represented by the group this morning. HHS, through HCFA, is working with the other departments in implementing the group market provisions, and the requirements generally become effective for plan years beginning on or after July 1 of this year.
Since HIPAA provisions governing insurance in the individual market are contained only in the Public Health Service Act, they are within the sole regulatory jurisdiction of HHS. Through HCFA, HHS is responsible for working with the States to implement these provisions which will improve access to the individual health insurance market for certain eligible individuals who lose group health insurance coverage.
These Federal statutory provisions became effective as of July 1, 1997, unless a State chose to implement an alternative mechanism. An alternative mechanism offers States more flexibility but eligible individuals still must have access to either health insurance or some comparable coverage. HIPAA required States to submit to HCFA by April 1 of this year a notice of their intention to implement an alternative mechanism or to use the Federal provisions. Forty States have submitted their notices of intent to implement an alternative and that alternative is to be functional by January 1998.
Page 19 PREV PAGE TOP OF DOC
Since HCFA assumed a new role in relation to State regulation of health insurance and health coverage, we have looked to the States and to State groups, such as the National Association of Insurance Commissioners, the National Governors' Association, and some others, for assistance and comments on all of the policy issues in the regulatory processes. We appreciate the time and effort that these groups have spent with us.
HCFA's new organizational structure also reflects the importance that we place on our relationships with the States and our commitments to the implementation of the HIPAA insurance standards requirements. These requirements are implemented through our new center for Medicaid and State operations where we have a special team that is responsible for HIPAA implementation and enforcement.
HCFA has been working closely with our Federal partners to issue the portability regulations. As required under the statute, the comment period for those regulations ended in July and now we are in the process of analyzing the comments that we received. We are also working together with the other departments on issuing regulations to implement the Mental Health Parity Act and the Newborns' and Mothers' Health Protection Act that the President signed into law last September. Both acts are effective for plan years beginning on or after January 1, 1998, and we expect these regulations will be published this fall.
Let me speak briefly about the Federal enforcement of the HIPAA provisions. HIPAA provides for the enforcement of small group and individual market provisions by States. However, if a State fails to enforce the Federal statutory provisions and does not choose to implement an acceptable alternative mechanism, then the statute provides for Federal enforcement of these provisions.
It was generally not anticipated by Congress or by the administration that Federal enforcement would be necessary, but in May and June, Missouri and Rhode Island State legislatures adjourned without enacting any legislation to conform existing law to HIPAA requirements. As a result, HCFA is now responsible for implementing and enforcing both the individual and some group market provisions in both of these States.
Page 20 PREV PAGE TOP OF DOC
In order to implement and enforce HIPAA provisions, HCFA, among other things, has to collect and review documentation regarding policy forums for compliance, regulate certificates of prior creditable coverage, and monitor marketing of individual policies. We are doing our best to implement Federal enforcement so that workers and families in these States can benefit from HIPAA as soon as possible.
Earlier this month, the California legislature also adjourned without enacting the necessary legislation to conform the existing law to HIPAA requirements. As a result, the Federal ''fallback'' enforcement will be triggered in California for these aspects of HIPAA's individual market provisions. Our activity in California will be especially challenging due to the size and structure of the California health insurance market.
We understand that it may be possible that the Federal ''fallback'' provisions may be triggered in yet other States in the coming months. If HCFA's activities in Missouri, Rhode Island, and California become more than a transitional role, and Federal enforcement is triggered in a large number of other States, we will need to assess the implications of HIPAA with respect to HCFA resources. In the interim, we will keep the Subcommittee fully informed as things develop.
Finally, let me mention some areas we think merit monitoring as we are going through the transition to full implementation of this law. The bipartisan intent of HIPAA was to ensure portability and access in the group and individual markets. As we move forward with implementation, we need to monitor the responses of insurers and other entities to the provisions so that the intent of the legislation is achieved.
I would like to mention just a couple of areas we are concerned about. There is a transitional problem resulting from the gap in the effective date for individual market requirements for States that are implementing alternative mechanisms. While individuals moving from a group health plan can receive a certificate of credible coverage, as of June 1, 1997, in some States that are implementing alternative mechanisms, the individual cannot use the certificate to gain access to the individual market until January 1, 1998. The gap in the effective date does put some individuals at risk.
Page 21 PREV PAGE TOP OF DOC
In States that are implementing high-risk pools, we are concerned some insurers who are currently offering coverage in the individual market may tighten their underwriting, making the risk pool the major or potentially exclusive source of coverage for eligible individuals in that State. Such a development would put tremendous pressure on the risk pool mechanism.
Another concern with risk pools is the general lack of reciprocity among States in regard to such coverage. While an eligible individual with a guaranteed issue insurance policy could be able to move out of the State and take that with them, an individual who is receiving coverage through a risk pool in the absence of reciprocity would be subject to a kind of ''State lock,'' that is, moving out of the State would result in their loss of coverage.
In States that don't use risk pools, we are concerned about how insurers will pool risk and rate policies for eligible individuals. There are no provisions in HIPAA that address these issues. The rating of HIPAA mandated, guaranteed issue policies based on a pool of only eligible individuals could result in a policy that is unaffordable.
One final area of concern relates to self-funded, non-Federal governmental plans. The statute does provide that these plans can ''opt out'' of HIPAA group market provisions, except for the certification requirements. To date, over 200 of these non-Federal governmental plans have notified us that they are exercising this option.
In conclusion, I would stress that the HIPAA provisions are not fully in place. It is really too early to assess effectiveness clearly, and many challenges lie ahead for both the States and for HCFA and the other departments. We will continue to consult with the staff of the Subcommittee and representatives from the States, employers, insurance companies, consumer groups, and everyone who is interested in this, as we move forward with enforcement activities.
I would be glad to answer any questions when my colleagues have completed their testimony.
Page 22 PREV PAGE TOP OF DOC
[The prepared statement follows:]
Statement of Judith D. Moore, Deputy Director, Center for Medicaid and State Operations, Health Care Financing Administration
Introduction
Good morning, Mr. Chairman, Members of the Subcommittee. Thank you for inviting me to speak with you this morning.
The Health Insurance Portability and Accountability Act (HIPAA), signed into law on August 21, 1996, provides for, among other things, improved portability and continuity of health insurance coverage in the group and individual insurance markets. These provisions, called the ''portability provisions'' of HIPAA, will allow millions of Americans to enjoy greater security in their health care coverage. Today, I will talk about the Health Care Financing Administration's (HCFA) role in implementing the portability provisions and the current status of our implementation efforts.
HIPAA Provisions
Group Market Provisions
Since HIPAA's portability provisions in the group market, referred to as ''group market'' provisions, implement changes to the Public Health Service Act (PHS Act), the Employee Retirement Income Security Act of 1974 (ERISA), and the Internal Revenue Code of 1986 (Code), the law provides for shared responsibilities for the Secretaries of Health and Human Services (HHS), Labor, and Treasury. HHS, through HCFA, is working with the other Departments in implementing these group market provisions.
Page 23 PREV PAGE TOP OF DOC
The group market provisions of HIPAA affect group health plans (generally, plans sponsored by employers or employee organizations or both). These HIPAA provisions are designed to improve the availability and portability of health coverage by: limiting exclusions for pre-existing conditions; providing credit for prior health coverage; providing new rights that allow individuals to enroll for health coverage when they lose other coverage or have a dependent; prohibiting discrimination in enrollment and premiums; guaranteeing availability of health insurance coverage for small employers and renewability of coverage in both the small and large group markets. These requirements generally become effective for plan years beginning on or after July 1, 1997.
The effectiveness of portability of coverage hinges on the timely transfer of creditable coverage information. Group health plans and health insurance issuers were required to provide certificates of prior creditable coverage to individuals beginning June 1, 1997. The certification provisions are intended to enable an individual to establish prior creditable coverage for purposes of reducing or eliminating any pre-existing condition exclusion.
Individual Market Provisions
Some HIPAA provisions amend only one statute, and therefore are the responsibility of only one Department. This is the case for the HIPAA provisions governing insurance in the individual market. Since these provisions, referred to as the ''individual market'' provisions, are contained only in the PHS Act, they are within the sole regulatory jurisdiction of HHS. HHS, through HCFA, is responsible for working with the States to implement these provisions which will improve access to the individual health insurance market for certain ''eligible individuals'' who lose group health insurance coverage. Under the Federal requirements, these individuals are assured availability of coverage in the individual market. Health insurance issuers that offer health insurance coverage in the individual market are required to offer policies to eligible individuals on a guaranteed issue basis, without pre-existing condition exclusions. In addition, all such individual health insurance coverage must be guaranteed renewable. These Federal statutory provisions became effective as of July 1, 1997.
Page 24 PREV PAGE TOP OF DOC
State Alternative Mechanisms in the Individual Market
HIPAA gives a State two options to assure that '''eligible individuals'' have access to health insurance in the individual market. Under the first option, States may simply enforce the Federal statutory provisions, as described above. Under the second option, States may choose to implement an ''alternative mechanism.'' An alternative mechanism offers States more flexibility, however, eligible individuals must still have access to either health insurance or comparable coverage. HIPAA required States to submit to HCFA by April 1, 1997 a notice of their intention to implement an alternative mechanism. Forty States have submitted their notice of intent to implement an alternative, which must be functional by January 1, 1998. Approximately twenty of the forty States are implementing high risk pools or other risk spreading mechanisms. These States are mostly rural. The more populous States are adopting the Federal requirements that either the State or HCFA will enforce. Therefore, we believe that the majority of the ''eligible individuals'' will be protected under the Federal requirements.
Implementation of HIPAA
Working with the States
As a result of implementation activities in regard to both the group and individual market, HCFA has assumed a new role in relationship to State regulation of health insurance and health coverage. We have been working closely with the States and the National Association of Insurance Commissioners (NAIC) to get their views and comments on the policy issues and regulatory processes. Also, we have met with many other State groups, such as the National Governors' Association and the American Public Welfare Association's National Association of State Medicaid Directors. We are grateful for the time and effort that many State people have spent in educating us and providing their advice and assistance.
Page 25 PREV PAGE TOP OF DOC
HCFA's new organizational structure also reflects the importance we place on our relationship with States and our commitment to the implementation of HIPAA requirements. Under the new structure, one of the three operational centers, the ''Center for Medicaid and State Operations,'' will deal solely with State issues. Within this center, there is a special team that is responsible for HIPAA implementation and enforcement, called the Insurance Standards Team.
Solicitation of Comments
Since HIPAA amends three statutes, the law required the Secretaries of all three Departments to issue regulations to carry out the portability provisions. In preparation for these regulations, the Departments published in the Federal Register last December, a public solicitation of comments on the HIPAA portability provisions. The Departments carefully considered the public comments received on behalf of employees, dependents, and others seeking health coverage, as well as employers, plan administrators, and insurance issuers in developing the interim rules. The comments proved to be very helpful in developing the regulation and especially with regard to the Departments' decision to design a model certificate of coverage that reduces the potential burdens on employers and insurance carriers, while making the certification process more effective for employees and dependents.
Issuance of Notice
Last January, HCFA published in the Federal Register a notice to help States in developing alternative mechanisms for the individual market. This notice generally described the statutory provisions, provided procedural guidance for States implementing alternative mechanisms, and described the statutory provisions that apply in a State that does not implement an acceptable alternative mechanism.
Page 26 PREV PAGE TOP OF DOC
Issuance of Interim Final Portability Regulations
The statute required the three Departments to issue the portability regulations by April 1, 1997. We are pleased to say that the Departments met this time frame, and regulations were released and made available to the public on April 1, and published in the Federal Register on April 8. The comment period for the regulations ended July 8, and we are now in the process of analyzing the comments.
Implementation of Mental Health Parity Act and Newborns' and Mothers' Health Protection Act
On September 26, 1996, the President signed into law the Mental Health Parity Act and the Newborns' and Mothers' Health Protection Act. The Mental Health Parity Act requires that a group health plan's lifetime and annual dollar limits for mental and physical illness at least be equal if the plan provides any mental health benefits. However, the statute exempts plans from the Act's requirements if they result in a cost increase of at least one percent. The Newborns' and Mothers' Health Protection Act establishes standards that will apply to group health plans and health insurance issuers relating to minimum benefits for hospital stays following childbirth. Both acts are effective for plan years beginning on or after January 1, 1998.
On June 26, 1997, a Request for Information was published in the Federal Register so as to obtain specific information to help us in interpreting the above referenced statutes. We explicitly asked for guidance in interpreting the statute's exemption for a plan that could demonstrate that mental health parity provisions would result in an increase in cost under the plan or coverage of more than one percent. We also requested information to help us in interpreting the hospital lengths-of-stay provisions, and analyzing the potential impact of regulatory alternatives on the business community and the public. The comment period ended on July 28 and we received approximately 70 comments. We expect the regulations for these amendments to be published this Fall.
Page 27 PREV PAGE TOP OF DOC
Federal Enforcement of HIPAA Provisions
HIPAA provides for the enforcement of the small group and individual market provisions by States. However, if a State fails to enforce the Federal statutory provisions and does not choose to implement an acceptable alternative mechanism, then the statute provides for Federal enforcement of these provisions. It was generally not anticipated by Congress or by the Administration that Federal enforcement would be necessary. In May and June, Missouri and Rhode Island State legislatures adjourned without enacting any legislation to conform existing law to HIPAA requirements. As a result, HCFA is now responsible in these States for implementing and enforcing both the individual and some group market provisions.
In order to implement and enforce HIPAA provisions, HCFA, among other things, must collect and review documentation regarding policy forms for compliance, regulate certificates of prior creditable coverage, and monitor marketing of individual policies. Therefore, we have been working closely with State officials and have developed very positive working relationships. We have also apprised the Congressional delegations of the situation and have had several meetings with insurers. We are doing our best to implement Federal enforcement so that workers and their families in these States can benefit from this law as soon as possible.
Earlier this month, the California legislature adjourned without enacting all of the legislation necessary to conform existing law to HIPAA requirements. Early indications are that the legislature addressed the group market requirements and renewability in the individual market but did not address other individual market requirements. As a result, Federal fall back enforcement will be triggered in regard to these aspects of HIPAA's individual market provisions. HCFA's activities in California will be especially challenging due to the size and the structure of California's health insurance market.
Page 28 PREV PAGE TOP OF DOC
Through our informal work with States in reviewing their changes to law and regulations, we believe that it may be possible that the Federal fall back provisions may be triggered in other States in the months ahead. Some states may choose not to enforce specific aspects of the small group or individual market or the mental health parity provisions. If this becomes the case, then HCFA would be responsible for enforcing these provisions, creating a ''patchwork quilt'' of Federal and State enforcement within the State. If HCFA's activities in Missouri, Rhode Island and California becomes more than a transitional role and Federal enforcement is triggered in other States, we will need to assess the implication of the Federal enforcement of HIPAA with respect to HCFA resources. In the interim, we will keep the Committee fully informed of developments.
Areas That Merit Monitoring
The bipartisan intent of HIPAA was to assure portability and access in the group and individual markets. As we move forward with implementation, we will need to closely monitor the response of insurers and other entities to the provisions so as to assure that the intent of the legislation is achieved. I would like to touch on a number of areas that merit careful monitoring.
• You should be aware of a transitional problem resulting from the gap in the effective dates for individual market requirements for States that are implementing alternative mechanisms. While individuals moving from a group health plan can receive a certificate of creditable coverage as of June 1, 1997, the individual cannot use this certificate to gain access to the individual market in some States that are implementing alternative mechanisms until January 1, 1998. The gap in the effective dates puts individuals at risk of losing their creditable coverage if they have a break in coverage for more than 63 days because they cannot find coverage through the interim months. There is no comparable gap in States implementing the Federal fall back requirements since health insurance issuers in those States had to start accepting ''eligible individuals'' as of July 1, 1997. There is also no gap in States that provided for earlier effective dates or included bridge provisions with their alternative mechanisms.
Page 29 PREV PAGE TOP OF DOC
• In States that are implementing high risk pools, we are concerned that some insurers who are currently offering coverage in the individual market may tighten their underwriting with the result of making the risk pool the major or potentially exclusive source of coverage for ''eligible individuals'' in the state. Such a development would put tremendous pressure on the risk pool mechanism and could limit the State's ability to provide coverage to individuals other than ''eligible individuals'' through this mechanism.
• Another concern with regard to State high risk pools stems from the general lack of reciprocity among States in regard to such coverage. Thus, while a ''eligible individual'' with a guaranteed issue insurance policy generally would be able to move out of State and maintain insurance coverage, an individual receiving coverage through a risk pool in the absence of reciprocity would be subject to ''State lock''—that is, moving out of State would result in a loss of coverage.
• In States that do not use risk pools, we are concerned about how insurers will pool risk and rate policies for ''eligible individuals.'' There are no provisions in HIPAA that address these issues. The rating of HIPAA-mandated guaranteed-issue policies based on a pool of only ''eligible individuals'' could result in a policy that is unaffordable. The issue of affordablity is of special concern in States which do not have rate regulation authority.
• One final area of concern relates to self-funded, non-federal governmental plans. The statute provides these plans with the option to opt-out of all HIPAA group market provisions except for the certification requirements. For instance, if a teacher wants to move from one school district to another, the teacher may not have the portability of coverage if the school district that she is moving to has elected the HIPAA opt-out. Thus, this teacher could still be subject to ''job lock,'' which HIPAA generally was supposed to reduce. To date, 200 non-federal governmental plans have notified us that they are exercising this option. By the end of this year we will have a clearer picture of the extent to which this option will be exercised across the country.
Page 30 PREV PAGE TOP OF DOC
Conclusion
Since HIPAA provisions are not fully in place across the country, it is clearly too early to assess HIPAA's effectiveness. Many challenges lie ahead both for the states and for HCFA and the other Departments. HCFA and the other Departments will continue consult with staff from the Subcommittee and with representatives from States, employers, insurance companies and consumer groups as we complete implementation this landmark legislation and move forward with enforcement activities.
I would be happy to answer any questions you might have.
—————
Chairman THOMAS. Thank you, Ms. Moore.
Ms. Miller.
STATEMENT OF MEREDITH MILLER, DEPUTY ASSISTANT SECRETARY FOR POLICY, PENSION AND WELFARE BENEFITS ADMINISTRATION, U.S. DEPARTMENT OF LABOR
Ms. MILLER. Good morning, Mr. Chairman, Members of the Subcommittee. Thank you for inviting me to speak with you this morning about HIPAA.
I am especially pleased to be here with my colleagues from the other departments. As you know, HIPAA provided for shared responsibility for our departments in implementing and enforcing the portability access and renewability provisions of the law. This framework has required that we work closely to ensure consistency in the implementation and application of HIPAA, and I can report to you this morning that we are doing so.
Page 31 PREV PAGE TOP OF DOC
Thus far, the departments issued interim regulations last April on the portability access and renewability provisions. We have coordinated outreach efforts to educate the regulated community and workers about HIPAA. We have coordinated with HHS and the States with regard to State implementation and the group market, and we have been developing guidance on the Mental Health Parity Act and the Newborns' and Mothers' Health Protection Act, and we are keenly aware of the need to get this guidance out as soon as possible. We have also been working toward a Memorandum of Understanding relating to interpretation and enforcement of HIPAA by the departments.
I would like to clarify that at the time of this hearing, we are still in the early stages of implementation of HIPAA in the group market. This is because, although the major provisions of the law went into effect on July 1, 1997, only 25 percent of the private sector group health care plans will be subject to the provisions of the law before the end of this year, because the law is only effective when health plans begin their new year.
Accordingly, 75 percent of private sector group health plans will not be subject to HIPAA until after January 1, 1998. For this reason, the departments' efforts are now devoted in large part to education outreach and assistance in compliance.
As part of the Department of Labor's education initiative, we are conducting an extensive outreach program to educate plan administrators and employers on the new health care reforms under HIPAA. We have presented an indepth seminar in 10 different cities, covering every region of the country, and we have done that along with the International Foundation of Employee Benefit Plans. We have also done 20 extra seminars, and the Department of Labor has issued this book, ''Questions and Answers: Recent Changes in Health Care Law,'' to employees and employers, to help them understand their rights and obligations under HIPAA. We have distributed 120,000 of these booklets thus far and our web site has been accessed almost 13,000 times by members of the public seeking information on the HIPAA regulation.
Page 32 PREV PAGE TOP OF DOC
PWBA's technical assistance office in the department has handled upward of 6,000 phone calls on HIPAA in the last year. The public can also access the same information through the Department's publication hot line, and we are providing public service announcements for the media to alert individuals of the effects of the new law. In fact, Mr. Chairman, today we are releasing another public service announcement for the printed press to alert families and workers about these important protections and how they can get information about them.
Concurrent with these outreach activities has been the rulemaking process. I would like to spend a minute or two on addressing the coordination between the agencies and the implementation of the regulations.
HIPAA requires the departments to execute an MOU, Memorandum of Understanding, to coordinate the regulation and enforcement activities in the shared group market provisions. The most critical aspects of the MOU are those that lay down the road map for the future, for how the departments will interpret and enforce the law. The regulatory process and, frankly, our experiences now as we go through this transition period, will provide us with the insights as to the most appropriate roles for each agency in interpreting HIPAA. Coordinating our enforcement resources and these insights will be incorporated by the departments into the formal MOU.
For the shared group market provisions, HIPAA relies on the current enforcement authority of each department. One of the first initiatives that we took in terms of this shared responsibility was to solicit comments from the public on how best to implement HIPAA, and we frequently used the request for information mechanism.
We issued an RFI, request for information, on the portability access and renewability provisions last December 1996, and we received a significant number of comments and responses from the public. The most useful were those responses that helped us design the model certification and notices. The right to this certificate is one of the most important rights that workers have because it documents credit for previous health care coverage. Plan sponsors and employers have appreciated our efforts to produce these models, since it saved them time and money in creating their own certificates and they can comply with the statute by simply mailing out the notices.
Page 33 PREV PAGE TOP OF DOC
We issued a second RFI on the Mental Health Parity and Newborns' and Mothers' Health Protection Act on June 26, 1997, and again the departments have received close to 70 comments. In response to the comments on the portability access and renewability provisions, we sought to significantly reduce any possible administrative burdens on the plans and the issuers. Examples of our efforts in this area are the rules that reduce unnecessary duplication of certificates by allowing plans and issuers to decide, among themselves, which of them will issue the certificate. We also allowed plan sponsors to have flexibility in tracking dependents, and we allowed them to comply by providing information telephonically, if all parties agree. Most importantly, we extended the HIPAA good faith compliance period beyond the 1998 deadline for certain key provisions; we extended it for the nondiscrimination provisions until the agencies produce further guidance.
The interim rules also achieve the departments' equally important goal of preserving HIPAA's protections for individuals. Individuals may demonstrate their credible coverage in practical ways if plans or issuers don't provide certification when it is required.
We also sought ways in which we could provide special notices to individuals about the special enrollment period and about whether their plan sponsors were going to be imposing a preexisting exclusion, and my testimony documents many more of the protections for workers and the flexibility for plan sponsors.
In conclusion, Mr. Chairman, with the passage of HIPAA, Congress gave workers and their families important health care coverage protections that allow workers to change jobs without fear of losing coverage. We knew that Congress recognized that many individuals would want these protections as soon as possible and the departments have sought to meet that challenge and to give them those protective rights.
We appreciate having this opportunity to testify about the interim rules. You have made a valuable contribution to our efforts by providing a forum in which the views and comments of so many can be shared, and we intend to make the public record of this hearing a part of the record of our rulemaking process.
Page 34 PREV PAGE TOP OF DOC
Thank you.
[The prepared statement and attachments follow:]
Statement of Meredith Miller, Deputy Assistant Secretary for Policy, Pension and Welfare Benefits Administration, U.S. Department of Labor
Introduction
Good morning, Mr. Chairman, Members of the Committee. Thank you for inviting me to speak with you this morning about the Department's role in the implementation of the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
I would like to thank this Committee for its efforts and commitment in overseeing the passage and implementation of this important legislation. Together, HIPAA and these interim rules provide America's workers and their families with important protections in their health coverage, and through the work of the members of this Committee and many others, millions of Americans will be able to enjoy greater security in their health care coverage.
The Departments of Labor, Treasury and Health and Humans Services (''the Departments'') have:
• issued interim regulations on HIPAA's health insurance portability, access and renewability provisions;
• coordinated outreach efforts to educate group health plans and plan administrators on their responsibilities under the HIPAA and the Departments' regulations;
• coordinated with HHS and the states with regard to state implementation in the group market; and
Page 35 PREV PAGE TOP OF DOC
• made progress and worked diligently to complete guidance on the Mental Health Parity Act of 1996 (Mental Health Parity Act) and the Newborns' and Mothers'Health Protection Act of 1996 (Newborns'and Mothers'Act) that should be issued this fall.
We are pleased to say that the DOL, HHS and the Treasury made public the portability, access and renewability regulations implementing HIPAA on April 1, 1997, in keeping with Congress's desire that these protections be put in place as soon as possible. These rules give workers and their families added security when they change jobs or otherwise lose their health coverage, and assist employers, plans and insurance companies in complying with HIPAA. Moreover, the guidance and transition relief we have provided in connection with the automatic provision of certificates were designed to make compliance easy. We requested comments from the public on the interim rules, and over 100 comments were received by the Departments by the close of the comment period on July 7, 1997. We are taking these comments into consideration as we develop our final guidance in the future.
The interim rules became effective for all plans with respect to the certification requirements of HIPAA on June 1, 1997. The remaining HIPAA provisions regarding crediting of prior coverage, nondiscrimination and renewability are generally effective for plan years beginning after June 30, 1997. By the end of 1997, nearly 25% of all plans will be obliged to comply with HIPAA's core provisions. After January 1, 1998, the remaining 75% of plans will be subject to HIPAA's provisions. As more plans come under the law's portability, access and renewability requirements, the Departments will glean more information on the impact of the law and our regulations on employees and their families, as well as plans and employers.
In addition, the Departments have been working in earnest towards completion this fall of guidance implementing the Mentalrtments are further obligated to provide additional guidance on HIPAA's nondiscrimination provisions, now codified in ERISA as Section 702 (2702 of the Public Health Service Act, and 9802 of the Internal Revenue Code).
Page 36 PREV PAGE TOP OF DOC
Summary on Outreach
The Department of Labor is conducting an extensive Educational Outreach Program to educate plan administrators and employers on the new health care reforms under HIPAA and the new interim rules. We presented in-depth seminars in 10 different cities covering every region of the country on the new HIPAA guidelines. These events are jointly sponsored with the International Foundation of Employee Benefit Plans. In addition, DOL conducted more than 20 other presentations to employer and health plan associations on the Department's efforts to implement HIPAA.
In December, 1996, the Department of Labor published a reference booklet, entitled ''Questions and Answers: Recent Changes in Health Care Law,'' to help employees and employers understand their rights and obligations under HIPAA. The booklet gives an overview of the new law and provides answers to the most commonly asked questions. When the interim rules were issued to the public on April 1, 1997, the Department of Labor released an addendum to this booklet, containing additional questions and answers that address the issues raised by the new rules. Since last fall, the Department has received thousands of calls from participants and plan administrators asking about the effect of the new laws. An updated version of this booklet was published on May 2, 1997. We have distributed nearly 120,000 booklets to the public, and roughly 13,000 members of the public have accessed our Website seeking information on the HIPAA regulations.
The Department's Q&A booklet, as well as a complete summary of HIPAA and a review of the interim rules, are all readily available to the public on PWBA's Website on the Internet at http://www.dol.gov/dol/pwba. The public also can access the same information through the Department's Publications Hotline at 1–800–998–7542. In addition, the Department has set up two additional telephone lines to field questions from the regulated community. Finally, we are providing public service announcements for the media to alert individuals of the effects of the new law.
Page 37 PREV PAGE TOP OF DOC
Overview of the ERISA Universe
Before I address the Department's role in implementing HIPAA, let me provide a brief overview of our role in regulating health benefits. Through its Pension and Welfare Benefits Administration, the Department enforces and administers the Employee Retirement Income Security Act of 1974 (ERISA). Under ERISA, the Department has regulatory authority over 2.5 million private sector, employment-based health benefit plans covering 125 million workers and their family members. Seventy-five percent of the entire workforce and 64 percent of the non-elderly population receive health coverage through employment-based plans. Payments by ERISA plans for benefits and other expenses constitute one dollar of every four spent on health care.
ERISA imposes federal standards concerning the disclosure of information to plan participants and beneficiaries, reporting of information to the federal government, fiduciary responsibilities concerning the management of health benefit plans, and guidelines for continuation of group health coverage requirements under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). HIPAA amended ERISA by modifying the disclosure provisions, revising the COBRA continuation of group health coverage requirements, and adding further federal requirements regarding portability, renewability, and nondiscrimination. Later in 1996, Congress added the Mental Health Parity and Newborns' and Mothers' provisions to ERISA, and to the Public Health Service Act, and in August 1997 added them to the Internal Revenue Code (the Code).
HIPAA's new portability provisions make it much easier for workers to change jobs and maintain health care coverage. The General Accounting Office estimated that about 25 million people will benefit from these protections. Nearly 21 million people, primarily those who change jobs and their dependents, will benefit from the provisions limiting preexisting condition exclusions. And millions more who have been unwilling to leave their job for a better one out of concern that they would lose their health coverage would also benefit. Additionally, we have estimated that over 100,000 individuals who have been turned down by their employer's plan due to their health will benefit from the nondiscrimination provisions in HIPAA and the Departments' regulations.
Page 38 PREV PAGE TOP OF DOC
Rulemaking Process
Coordination between the agencies
HIPAA sets forth federal requirements relating to portability, access, and renewability of group health plan and group health insurance coverage. (These HIPAA provisions are generally reility provisions relating to group health plans are set forth in ERISA, the Internal Revenue Code, and the Public Health Service Act. (These portability provisions are referred to below as the ''group market'' provisions.) HIPAA also added provisions governing insurance in the individual market(see footnote 1) which are contained only in the Public Health Service Act, and thus are not within the regulatory jurisdiction of the Department of Labor or the Department of the Treasury.
In general, the group market provisions create shared jurisdiction for the Secretaries of Labor, the Treasury, and Health and Human Services. The statute provides for the three Departments to share regulatory responsibility for most of the group market provisions,(see footnote 2) and as described below in more detail, the Departments have worked together in developing regulations in this area.
The shared group market provisions under the three statutes are substantially similar. Under ERISA, the shared group market provisions generally apply to all group health plans (other than government plans, church plans, very small plans and certain other plans), and to health insurance issuers that offer health insurance in connection with group health plans.(see footnote 3)
Page 39 PREV PAGE TOP OF DOC
HIPAA also requires the Departments to execute a Memorandum of Understanding (MOU). We have been working towards a formal MOU. We are well aware of the job that faces us in the interpretation and enforcement of the regulations that we recently published. We found that the regulation process has been very valuable in familiarizing ourselves with the other agencies' practices and protocols. The Departments have maintained a close dialogue on implementation and enforcement issues that have come up through HHS' involvement in Rhode Island, Missouri and California in the wake of these states' choice not to enact legislation necessary to implement HIPAA's insurance standards. Moreover, the Departments have continued their collaboration on regulations by drafting guidance on the Mental Health Parity Act and the Newborns' and Mothers' Act. We expect to publish this guidance in the fall.
Many more issues are likely to arise as the majority of plans become subject to the portability, mental health, and newborns; and mothers' provisions on January 1, 1998 and thereafter. We have tried to anticipate and effectively address these in advance, and the Departments will likely rely on our existing cooperative and professional working relationship to manage these issues until we can identify the most critical ones and formalize a rational division of responsibilities under an MOU.
Implementation of HIPAA Portability Regulations
COBRA Guidance.
On October 15, 1996, the Department of Labor issued a technical bulletin in conjunction with the other Departments describing changes that HIPAA made to the continuation coverage requirements under COBRA, and provided a model notice which employers and plan administrators could use to comply with HIPAA's requirements. Plan sponsors and employers generally have been very appreciative of our efforts to produce this model notice since it saves them the expense of creating their own notice.
Page 40 PREV PAGE TOP OF DOC
Publication of Request for Information
Last December, the Departments published in the Federal Register a public solicitation of comments on the HIPAA portability provisions. The Departments carefully considered the public comments received on behalf of employees, dependents and others seeking health coverage, as well as employers, plan administrators, and insurance issuers in developing the interim rules. In particular, the comments received supporting preparation of a model certificate proved to be very helpful in encouraging us to design a model that significantly reduces the potential burdens on employers and insurance carriers, while making the certification process more effective for employees and dependents.
More recently, the Departments sought public input on the Mental Health Parity and the Newborns' and Mothers' provisions through a Request for Information published on June 26, 1997. We sought specific information to help us design guidance on the Mental Health Parity Act's exemption for any plan or health insurance issuer that could demonstrate that the mental health parity provisions would result in an increase in cost under the plan or coverage of more than one percent. We also sought input regarding the newborns' and mothers' provisions, and solicited estimates that would assist the Departments in assessing the economic impact of these regulations on the business community and the public. The Departments received over 100 comments by the close of the comment period on July 28, 1997, and will take these comments into account as we develop our guidance this fall.
Limiting burdens on business while ensuring adequate protections for individuals
The interim rules demonstrate DOL's continuing commitment to reduce HIPAA's burdens on the regulated community, while ensuring that workers and their families receive the protections Congress has given them.
Page 41 PREV PAGE TOP OF DOC
The rules help minimize the administrativl ways. The guidance and transition relief we have provided in connection with the automatic provision of certificates were designed to limit compliance burdens. The rules also reduce unnecessary duplication of certificates by allowing plans in certain cases to contract with issuers or third party administrators to provide the required certificates. The rules further allow flexibility in certification of dependents enrolled in the plan to reduce the potential burdens on plans and issuers who are not yet tracking the dependents enrolled under the plan. In addition, in certain circumstances, it is possible to comply by providing the information telephonically, if all parties agree. Each of these innovations serves to reduce the final cost of compliance, making it easier for regulated entities to implement HIPAA's requirements. Moreover, as reduced by the regulation, the notification requirements imposed on the plans in connection with their application of preexisting condition exclusions will cost less than $3 million annually, once fully implemented. The requirement that all plans notify new enrollees of special enrollment rights, once fully implemented, will cost less than $2 million annually. Other measures facilitating compliance are outlined in more detail in the interim rules.
The interim rules also achieve DOL's equally important goal of ensuring that the protections provided to individuals under HIPAA remain intact. The rules allow individuals to obtain certification of prior creditable coverage before they leave their job or up to 24 months after they depart. In addition, the rules enable individuals to demonstrate their creditable coverage in practical ways if their plan or issuer fails to provide certification when it is required. For individuals who decline plan coverage when they are first eligible to enroll in the plan, the rules require that the plan or issuer provide a description of special enrollment rights so that the individual will know that they can end pre-existing condition exclusion period) if they lose other coverage or become a dependent through marriage, birth, adoption or placement for adoption. The rules ensure that individuals are notified of the maximum length of any pre-existing exclusion clause imposed by a health plan. In addition, the rules ensure that an individual is notified of a pre-existing condition exclusion period that will apply to them after taking into account their prior creditable coverage. All of these provisions make it easier for regulated entities to put HIPAA's requirements into practice.
Page 42 PREV PAGE TOP OF DOC
Major Regulatory Provisions Relating to Portability
The interim rules provide the following guidance to enable health plans and issuers to prepare for compliance.
Limits on Pre-Existing Condition Exclusions: Pre-existing condition exclusions may only be imposed if they relate to a condition for which medical advice, diagnosis, care, or treatment was recommended or received during the 6 month ''look back'' period before the enrollment date. In addition, the maximum pre-existing condition exclusion period that can be imposed is 12 months after the enrollment date, or 18 months for late enrollees, and must be reduced by the number of days of the individual's creditable coverage, determined without regard to any creditable coverage that preceded a break in coverage of 63 days or more. Plans may not impose pre-existing condition exclusions for pregnancy and such exclusion periods generally can not be applied for newborns or adopted children.
Certificates of Creditable Coverage: ''Creditable coverage'' includes prior coverage under a group health plan, COBRA, Medicaid, Medicare, the Federal Employee Health Benefits Program, CHAMPUS, the Indian Health Service, state health benefits risk pool, a health benefit plan under the Peace Corp Act, a public health plan, or an individual health insurance policy. Certificates of creditable coverage must be provided automatically by the plan when an individual loses coverage under the plan, and when the individual exhausts COBRA continuation coverage. An automatic certification must also be provided on the request of the individual in certain other instances.
Special Enrollment Periods: Health plans and issuers must provide special enrollment periods during which individuals who had previously declined coverage can enroll without waiting until the plan's next regular enrollment period or being subject to the longer 18 month pre-existing condition exclusion period that can apply to a late enrollee. Individuals entitled to special enrollment under the rules include individuals who have lost other health insurance coverage and individuals who become dependants through marriage, birth, adoption, or placement for adoption.
Page 43 PREV PAGE TOP OF DOC
Nondiscrimination: HIPAA's nondiscrimination provisions provide that individuals must not be excluded from coverage or charged more for benefits offered by a plan or issuer based on health status-related factors. Although discrimination in premiums or contributions is prohibited, plans and issuers may give discounts or rebates to reward individuals who participate in bona fide wellness programs. The Departments received input from the public during the comment period following publication of the interim rules, and plan to issue additional guidance shortly. The plans have been given a good faith compliance period with respect to the nondiscrimination provisions until the Departments issue additional regulations.
Information Disclosure: The interim rules further outline new disclosure requirements under ERISA for private employer-sponsored health plans. Plans must provide summaries of any material reductions in plan benefits to covered workers within 60 days after the change has been adopted. Plans must also provide information about the role that an insurance company may play in plan operations, including the extent to which plan benefits are guaranteed under a contract or insurance policy. In addition, plans must inform covered workers about the new rules prohibiting certain limitations on maternity hospital stays and must provide information on the Labor Department office where individuals can obtain assistance or information about their rights under federal law in general or HIPAA in particular. The rules further permit plan administrators to use electronic media to satisfy the plan's disclosure obligations with respect to the delivery of summary plan descriptions, summaries of material reductions in covered services or benefits and other summaries of plan modifications.
State Flexibility: The States' traditional role in regulating health insurance is preserved by providing States flexibility to provide greater protections for individuals relating to portability of coverage.
Guaranteed Availability and Renewability: Finally, small employers are ensured the guaranteed availability of health insurance coverage, and the renewability of health insurance coverage is ensured for both the small and large group markets. Specifically, the rules cover guaranteed renewability for multi-employer plans and multiple employer welfare arrangements (MEWAs).
Page 44 PREV PAGE TOP OF DOC
In general, the interim rules have been well received by the regulated community. Public comments and press coverage on the rules acknowledge the substantial efforts made by the agencies to limit the potential burdens of the rules' certification and notice requirements, while maintaining adequate protections for health care consumers through greater access, portability and renewability of health care coverage.
Implementing the Mental Health Parity Act and the Newborns' and Mothers' Act
As noted earlier, the Departments are working to issue guidance on the Mental Health Parity Act and the Newborns' and Mothers' Act this fall. The Mental Health Parity Act provides that a group health plan or a health insurance issuer offering both mental health and medical and surgical benefits or coverage may not apply lower aggregate dollar lifetime limits and annual dollar limits to its mental health benefits than those which it applies to its medical and surgical benefits, if it applies such limits at all.
The Newborns' and Mothers' Act prohibits a group health plan or health insurance issuer from restricting benefits for hospital lengths of stay in connection with childbirth for the mother or her newborn, to less than 48 hours after a normal vaginal delivery, or 96 hours following a Caesarean section, unless the attending health care provider, in consultation with the mother, opts for a shorter hospital stay. In addition, the Newborns' and Mothers' Act prohibits group health plans and issuers from providing compensation arrangements for health care providers, or monetary incentives for mothers, which would encourage the attending provider to discharge the mother or her newborn early. These two health reform laws are generally effective for plan years beginning January 1, 1998. DOL and HHS sought public input on the Mental Health Parity and Newborns' and Mothers' provision through a Request for Information published on June 26, 1997.
Page 45 PREV PAGE TOP OF DOC
Conclusion
With the passage of HIPAA, Congress gave workers and their families important health coverage protections that allow workers to change jobs without fear of losing coverage.
Congress recognized that individuals would want these protections as soon as possible. The Departments have successfully implemented the portability provisions of the law in a manner that is fair, efficient and manageable. Our regulatory framework allows us to get additional public comments on the interim rules before issuing final rules. The framework also gives plan sponsors and others the protection of a good faith compliance period for their efforts to meet HIPAA's portability requirements. In addition, the framework protects individuals by allowing them to use their own records to establish prior health coverage if they are unable to obtain a certificate from their last employer or health plan.
We appreciate having this opportunity to testify about these rules. You have made a valuable contribution to our efforts by providing a forum in which the views and comments of so many can be shared, and we intend to make the public record of this hearing a part of the record of our rulemaking process.
—————
DISCLAIMER—This document does not represent the official position of the Department of Labor.
Page 46 PREV PAGE TOP OF DOC
Recent Changes in Health Care Law
Three major pieces of health care legislation were passed during the 104th Congress:
• The Health Insurance Portability and Accountability Act of 1996;
• The Newborns' and Mothers' Health Protection Act of 1996; and
• The Mental Health Parity Act of 1996.
The Departments of Labor, the Treasury, and Health and Human Services issued interim rules implementing many of these new statutory provisions. 62 Federal Register 16894, April 8, 1997 (HIPAA).
—————
I. Signed into law on August 21, 1996, the portability provisions of the law:
A. Provide new protections for approximately 25 million workers who:
1. Are currently employed and have health coverage;
2. Move from one job to another; and
3. Have preexisting medical conditions.
B. Include changes that:
Page 47 PREV PAGE TOP OF DOC
1. Limit exclusions for preexisting conditions;
2. Prohibit discrimination against employees and dependents based on their health status; and
3. Guarantee renewability and availability of health coverage to certain employers and individuals.
II. Preexisting condition exclusion periods under HIPAA.
A. Under HIPAA a preexisting condition exclusion period can only be applied to a condition if medical advice, diagnosis, care or treatment was recommended or received for the condition within the 6-month look-back period from the enrollment date.
Enrollment date is defined as the first day of coverage, or if there is a waiting period, the first day of the waiting period.
B. HIPAA imposes a 12-month (18-month for late enrollees) maximum preexisting condition exclusion period looking forward from the enrollment date.
C. If the plan has a waiting period, it runs concurrently with the maximum 12-or 18-month preexisting condition exclusion period.
D. Plans must reduce any preexisting condition exclusion period by the number of days of an individual's prior creditable coverage that is not succeeded by a significant break in coverage (generally, 63 days or more).
Page 48 PREV PAGE TOP OF DOC
E. In general, individuals demonstrate periods of creditable coverage through certifications that must be issued by plans and issuers upon cessation of an individual's coverage.
F. Preexisting condition exclusions cannot be applied to pregnancy.
G. Preexisting condition exclusions cannot be applied to newborns, adopted children under age 18, or children under age 18 placed for adoption as long as the child obtains creditable coverage within 30 days of birth, adoption or placement for adoption.
III. When do HIPAA's changes take effect?
A. There are two separate effective date time lines:
1. A general time line for the substantive provisions, which include:
• Limitations on preexisting condition exclusion periods;
• Special enrollment periods; and
• Prohibiting discrimination based on factors relating to health status.
2. A separate effective date time line for the certification provisions.
B. Substantive provisions
1. Are effective for plan years beginning on or after July 1, 1997.
2. Expected timetable for plans to come on board:
Page 49 PREV PAGE TOP OF DOC
• July 1, 1997–December 31, 1997 (approximately 25% of all plans).
• On January 1, 1998 (approximately 50% of all plans).
• After January 1, 1998 (approximately 25% of all plans).
Note: Once a plan is subject to HIPAA's substantive provisions, the provisions apply to all current employees in the plan as well as to individuals who change employment and enroll in the plan.
C. Collectively bargained plans.
1. These plans have a different effective date for the substantive provisions.
• For plans maintained pursuant to CBAs ratified before August 21, 1996, HIPAA's substantive provisions apply to plan years beginning on the later of July 1, 1997 or the date on which the last of the collective bargaining agreements relating to the plan terminates (determined without regard to any extension agreed to after August 21, 1996).
2. There is no special effective date for collectively bargained plans for the certification provisions under HIPAA. (See below.)
D. Certification provisions.
1. The certification provisions are linked to the effective date for the substantive provisions in order to give individuals evidence of 12 (or 18) months of creditable coverage prior to the July, 1, 1997 effective date for the substantive provisions.
2. No certificate is required to reflect periods of coverage before July 1, 1996. Starting on July 1, 1996 group health plans and health insurance issuers are required to maintain coverage information.
Page 50 PREV PAGE TOP OF DOC
3. For individuals who cease coverage from July 1, 1996 through September 30, 1996 plans and issuers are only required to provide certificates upon written request.
4. For individuals who cease coverage beginning October 1, 1996 the statute requires plans and issuers to provide certificates automatically as follows:
• From October 1, 1996 through May 31, 1997, the regulations give plans and issuers the flexibility to issue a certificate or to provide individuals with a ''notice in lieu'' of a certificate (see the attached model notice); and
• From June 1, 1997 onward plans and issuers must provide certificates for individuals within the time periods prescribed in the regulations (to be discussed).
IV. Demonstrating creditable coverage.
A. When must certificates be provided?
1. Plans and issuers must furnish a certificate automatically to:
• An individual who is entitled to elect COBRA, at a time no later than when a notice is required to be provided for a qualifying event under COBRA;
• An individual who loses coverage under the plan and who is not entitled to elect COBRA, within a reasonable time after coverage ceases; and
• An individual who ceases COBRA, within a reasonable time after the plan learns that COBRA has ceased.
2. Plans and issuers must also generally provide a certificate upon request, at the earliest time that a plan or issuer, acting in a reasonable and prompt fashion, can provide the certificate.
Page 51 PREV PAGE TOP OF DOC
• A certificate may be requested until 24 months after the time an individual's coverage ended. For example, a certificate can be requested by an individual before their coverage ends.
B. Certificates.
1. Key elements of the model certificate include:
• Indicating whether an individual has at least 18 months of creditable coverage;
• For individuals with less than 18 months of creditable coverage, indicating the date coverage began and ended and the date any waiting or affiliation period began; and
• Applicable dependent information.
2. HIPAA requires both group health plans and health insurance issuers to provide certificates to individuals. The regulation reduces duplication in the provision of certificates by providing that:
• If any entity (including a third-party administrator) provides a certificate to an individual, no other party is required to provide the certificate;
• If there is an agreement between the plan and an issuer under which the issuer agrees to provide certificates, the plan does not have to provide the certificates;
• An issuer is not required to provide any coverage information for coverage periods for which it was not responsible;
• If an individual switches from one issuer to another option under the plan, or an issuer is replaced by another before an individual's coverage under the plan ceases, the issuer is required to provide sufficient information to the plan (or party designated by the plan) to use later in providing a certificate to individual; and
Page 52 PREV PAGE TOP OF DOC
• Coverage information for an automatic certificate may be sent telephonically if all parties (including the individual) agree. Of course, an individual also can request a written certificate within 24 months of ceasing coverage under the plan (including requesting a certificate before coverage ends).
3. Rules relating to dependents.
• Each dependent is entitled to his or her own certificate;
• If a dependent has the same period of creditable coverage as the participant only one certificate is required to be issued;
• The regulation creates a transitional rule that runs through June 30, 1998. Under the transitional rule if a plan or issuer cannot provide names of dependents it can provide the name of the participant and the type of coverage in the certificate (e.g., family coverage, individual-plus-spouse coverage); and
• When a certificate for dependent coverage is requested, a plan or issuer must make reasonable efforts to obtain names of any dependents covered by the certificate.
C. Demonstrating creditable coverage through means other than a certificate.
1. A plan or issuer must treat an individual as providing a certificate demonstrating creditable coverage if:
• The individual attests to the period of creditable coverage;
• The individual presents corroborating evidence of some creditable coverage for the period (such as pay stubs that reflect a deduction for health insurance, explanations of benefits forms (EOBs), or verification by a doctor or former health care benefits provider that the individual had prior health coverage); and
Page 53 PREV PAGE TOP OF DOC
• The individual cooperates in verifying the information provided.
2. An individual is treated as having furnished a certificate showing dependent status if:
• The individual attests to such dependency and the period of such status as a dependent; and
• The individual cooperates with the verification of dependent status.
V. Crediting coverage for reducing preexisting condition exclusion periods.
A. What is creditable coverage?
• Almost all types of health coverage (e.g., group health plan coverage, COBRA, Medicare, Medicaid, government plans, church plans)
B. What is not creditable coverage?
• Solely excepted benefits such as dental or vision only coverage.
C. Why is creditable coverage important?
• It is used to reduce any preexisting condition exclusion period that a plan may impose under HIPAA. (Note: The maximum preexisting condition exclusion period is 12 months (18 months for late enrollees).)
Page 54 PREV PAGE TOP OF DOC
VI. Counting Creditable Coverage: Standard Method.
A. Under the standard method plans and issuers count days of creditable coverage regardless of classes or levels in benefits of the previous health coverage.
B. A plan or issuer is not required to count days of coverage that occur before a significant break in coverage (63 days, longer in certain States).
C. Waiting periods:
1. Generally do not count as creditable coverage, unless an individual has other coverage during a waiting period (e.g., COBRA continuation coverage, individual coverage);
2. Are not taken into account in determining whether a significant break in coverage has occurred; and
3. Run concurrently with any preexisting condition exclusion period.
VII. Counting Creditable Coverage: Alternative Method for Certain Categories of Benefits.
A. A plan or issuer may use the alternative method of crediting coverage for any or all of the following five categories of benefits:
1. Mental health;
2. Substance abuse treatment;
3. Prescription drugs;
Page 55 PREV PAGE TOP OF DOC
4. Dental care; and
5. Vision care.
B. A plan or issuer may use the alternative method for some or all of these categories but it must be uniformly applied to all individuals within the plan or policy and the plan or issuer must notify individuals if the alternative method is being used.
C. When using the alternative method, the plan or issuer looks to see if an individual has coverage within a category of benefits, regardless of the specific level of benefits provided within that category.
D. The standard method of counting creditable coverage is used to determine an individual's creditable coverage for any benefits where the alternative method is not used.
VIII. Special Enrollment Periods.
A. A special enrollment allows an individual who previously declined coverage to enroll (without having to wait until the plan's next regular enrollment period).
B. An individual may qualify for a special enrollment in two cases:
1. If the individual loses other coverage and requests enrollment within 30 days after the prior coverage ends.
• However, if the individual's other coverage is COBRA continuation coverage, the individual must exhaust the COBRA continuation coverage to qualify for a special enrollment.
Page 56 PREV PAGE TOP OF DOC
2. If the individual has or becomes a new dependent through marriage, birth, adoption, or placement for adoption.
C. An individual who enrolls during a special enrollment period (even if the period corresponds to a regular enrollment period) is not treated as a late enrollee. (Accordingly, the plan or issuer may not impose a preexisting condition exclusion period longer than 12 months with respect to the person.)
D. Plans must provide a description of special enrollment rights to anyone who declines coverage. The regulations provide a model of such description.
IX. Enforcement.
A. Agency jurisdiction:
1. The Secretary of Labor enforces the health portability requirements on group health plans under ERISA.
• The Secretary may require that plans comply with the health portability requirements through existing ERISA enforcement procedures.
• The Secretary may not enforce the requirements against issuers.
2. The Secretary of the Treasury enforces the health portability requirements on employers through excise taxes under the Internal Revenue Code.
3. States enforce the group and individual market requirements imposed on health insurance issuers.
Page 57 PREV PAGE TOP OF DOC
4. If States do not act in the areas of their responsibility, the Secretary of Health and Human Services may make a determination that the State has failed ''to substantially enforce'' the law against issuers, assert federal authority to enforce the requirements against issuers, and can impose sanctions on issuers, as specified in the statute, including civil monetary penalties.
5. Participants and beneficiaries may enforce their rights under State law or ERISA.
B. Under the statute, until January 1, 1998, no enforcement action may be taken by the Secretaries against a plan or issuer that has sought to comply with HIPAA's requirements in good faith.
X. Preemption.
A. In general, section 514 of ERISA is unaffected by the HIPAA portability provisions and ERISA continues to preempt State laws that relate to group health plans.
B. There are two new preemption provisions relating to issuers for purposes of Part 7 of ERISA:
1. Under the first preemption provision for Part 7, State laws relating to health insurance issuers generally continue to apply except to the extent that such State law ''prevents the application of'' Part 7 of Subtitle B of Title I of ERISA (and Part A of Title XXVII of the PHS Act). (There is no corresponding provision in the Code.)
2. In addition, under the second and more specific preemption section, State laws with respect to issuers cannot ''differ'' from the statutory preexisting condition exclusion requirements of section 701, except as specifically permitted by the statute. These specific exceptions allow a State to:
Page 58 PREV PAGE TOP OF DOC
• Shorten the 6-month ''look-back'' period prior to the enrollment date to determine what is a preexisting condition;
• Shorten the 12-and 18-month maximum preexisting condition exclusion periods;
• Increase the 63-day significant break in coverage period;
• Increase the 30-day period for newborns, adopted children, and children placed for adoption to enroll in the plan so that no preexisting condition exclusion period may be applied;
• Expand the prohibitions on conditions and people to whom a preexisting condition exclusion period may be applied beyond the ''exceptions'' described in federal law. (The ''exceptions'' under federal law are for certain newborns, adopted children, children placed for adoption, and pregnancy);
• Require additional special enrollment periods; and
• Reduce the maximum HMO affiliation period to less than 2 months (3 months for late enrollees).
XI. Prohibiting discrimination against participants and beneficiaries based on any health status-related factor.
A. A plan and issuer may not establish rules for eligibility (including continued eligibility) of any individual to enroll under the terms of the plan based on any health status-related factor.
1. The health status-related factors are:
• Health status;
Page 59 PREV PAGE TOP OF DOC
• Medical condition;
• Claims experience;
• Receipt of health care;
• Medical history;
• Genetic information;
• Evidence of insurability; and
• Disability.
2. However, this provision does not require a plan or issuer to provide particular benefits other than those provided under terms of plan or coverage.
3. Neither does this provision prevent limitations or restrictions on the amount, level, extent, or nature of benefits or coverage for similarly situated individuals enrolled in the plan or coverage.
B. A plan and issuer may not require any individual to pay a premium or contributions which is greater than that for a similarly situated individual enrolled in the plan based on any health status-related factor.
1. This provision does not restrict the amount an employer may be charged by an issuer.
2. Neither does this provision prevent plans and issuers from establishing premium discounts or rebates or modifying copayments or deductibles in return for adherence to a bona fide wellness program.
Page 60 PREV PAGE TOP OF DOC
—————
The Newborns' and Mothers' Health Protection Act of 1996
I. Signed into law on September 26, 1996, this law provides new protection for mothers and their newborn children with regard to the length of hospital stays following the birth of a child.
II. Minimum Hospital Stay.
A. General Rule.
1. A plan and issuer may not restrict benefits for any hospital length of stay for childbirth for the mother or the newborn child after a normal vaginal delivery to less than 48 hours, or after a caesarean section to less than 96 hours.
2. A plan or issuer also may not require that a provider obtain authorization from the plan or issuer for prescribing any length of stay for childbirth.
B. Exception. An attending provider, in consultation with the mother, may choose to shorten this required length of hospital stay.
III. Prohibitions.
A. A plan and issuer may not deny a mother or her newborn eligibility or continued eligibility to enroll or to renew coverage under the terms of the plan solely to avoid the requirements of this law.
Page 61 PREV PAGE TOP OF DOC
B. Plans and issuers may not offer payments or rebates to mothers to encourage mothers to accept less than the minimum hospital stay required by this law.
C. Plans and issuers may not penalize or otherwise reduce or limit the reimbursement of an attending provider for providing care to a participant or beneficiary in accordance with this law.
D. Plans and issuers may not provide monetary or other incentives to providers to induce them to provide care in a manner which is inconsistent with this law.
E. A plan may not restrict benefits for any portion of a period within a hospital length of stay required under this law in a manner which is less favorable than the benefits provided for any preceding portion of the stay.
IV. Construction.
A. This law does not require a mother to give birth in a hospital or to stay in a hospital for any fixed period of time following her childbirth.
B. This law does not apply to any plan or issuer which does not provide benefits for hospital lengths of stay in connection with childbirth for a mother or her newborn.
C. This law does not prevent a plan or issuer from imposing deductibles, coinsurance, or other cost-sharing for hospital stays in connection with childbirth for mothers or newborns except that such coinsurance or other cost-sharing for hospital stays required by this law may not exceed any coinsurance or cost-sharing provided by the plan before childbirth.
Page 62 PREV PAGE TOP OF DOC
V. Preemption.
• The requirements of the new law do not apply with respect to health insurance coverage if there is a State law that requires any of the following:
• At least 48-hour hospital stays for normal vaginal delivery and 96 hours for caesarean delivery;
• Maternity and pediatric care in accordance with guidelines established by the American College of Obstetricians and Gynecologists, the American Academy of Pediatrics, or other established professional medical associations; or
• In connection with coverage for maternity care, that the hospital length of stay is left to the decision of (or required to be made by) the attending provider in consultation with the mother.
VI. Effective date.
A. These provisions apply to group health plans for plan years beginning on or after January 1, 1998.
B. There is no separate effective date for collectively bargained plans.
—————
Page 63 PREV PAGE TOP OF DOC
Mental Health Parity Act of 1996 (MHPA)
I. Signed into law on September 26, 1996, this law provides parity in the application of limits for certain mental health benefits.
II. Aggregate Lifetime Limits: Where a group health plan (or health insurance offered in connection with such a plan) provides both medical and surgical benefits, and mental health benefits:
A. No Lifetime Limits. Such plan or coverage may not impose any aggregate lifetime limits on mental health benefits if it does not include such an aggregate lifetime limit on substantially all of its medical and surgical benefits.
B. Lifetime Limits. If such a plan or coverage does include an aggregate lifetime limit on substantially all of its medical and surgical benefits, the plan or coverage shall either:
1. Apply its applicable lifetime limits both to medical and surgical benefits, and to mental health benefits without distinction in the application of the limits between these categories of benefits; or
2. Not include any aggregate lifetime limit on mental health benefits that is less than the plan's applicable lifetime limit for substantially all of its medical and surgical benefits.
C. Different Limits. In the case of a plan or coverage that is not described in paragraph (A) or (B) and that includes no or different aggregate lifetime limits for different categories of medical and surgical benefits, regulations shall establish rules that calculate an average aggregate lifetime limit for mental health benefits.
Page 64 PREV PAGE TOP OF DOC
III. Annual Limits:
A. No Limits. Similarly, in the case of a group health plan providing both medical and surgical benefits and mental health benefits, a plan which does not include annual limits on all of its medical and surgical benefits may not impose any annual limit on mental health benefits.
B. Annual Limits. A plan which imposes annual limits on its medical and surgical benefits may either:
1. Apply the applicable annual limit without distinction to both its medical and surgical benefits and its mental health benefits; or
2. Not include any annual limit on mental health benefits that is less than the applicable annual limit for any other benefits.
C. Different Limits. In the case of plans which have no or different annual limits on different categories of medical and surgical benefits, regulations shall establish rules that calculate an average annual limit for mental health benefits.
—————
Questions & Answers: Recent Changes in Health Care Law
Page 65 PREV PAGE TOP OF DOC
Contents
Introduction
The Health Insurance Portability and Accountability Act of 1996
Preexisting Condition Exclusions
Crediting Prior Health Coverage for Purposes of Reducing a Preexisting
Condition Exclusion Period
Certification of Creditable Coverage
Nondiscrimination Requirements
Special Enrollment
Coverage: Additional Information to Help Participants Make Informed Decisions Relating to Their Health Care Coverage
Additional Information for Group Health Plans and Health Insurance Issuers
Disclosure Requirements
Implementation Timetable
Enforcement
The Newborns' and Mothers' Health Protection Act of 1996
The Mental Health Parity Act of 1996
Appendix
Introduction
This pamphlet is designed to provide an overview of recent changes in the law that may affect your health benefits. The questions and answers address changes made by the Health Insurance Portability and Accountability Act of 1996, the Newborns' and Mothers' Health Protection Act of 1996 and the Mental Health Parity Act of 1996.
Page 66 PREV PAGE TOP OF DOC
On April 1, 1997, the Departments of Labor, Health and Human Services and the Treasury issued interim regulations that interpret many of the provisions of the new laws. The Department of Labor's regulations interpret amendments made to the Employee Retirement Income Security Act (ERISA).
This publication is intended to assist employers who sponsor group health plans in understanding their obligations under the law and to educate workers and their families about their rights under the law. It constitutes a small entity compliance guide for purposes of the Small Business Regulatory Enforcement Fairness Act of 1996.
This pamphlet may not address your specific health care questions and is not intended to be relied upon as the official position of the Department of Labor. If you have additional questions, please contact the PWBA Regional Office nearest you or the PWBA Division of Technical Assistance & Inquiries located in our national office in Washington, DC.
If you are in an HMO or if the benefits under your plan are provided through an insurance policy issued by an insurance company, you may also contact your State Insurance Commissioner's Office. As discussed later in this pamphlet, certain of the new federal rules under HIPAA can be changed by state law for insurance companies and HMOs if that law is more protective of individuals.
Addresses and phone numbers for these contacts are located in the Appendix.
—————
The Health Insurance Portability and Accountability Act of 1996
Page 67 PREV PAGE TOP OF DOC
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) was signed into law on August 21, 1996. This law includes important new protections for millions of working Americans and their families who have preexisting medical conditions or might suffer discrimination in health coverage based on a factor that relates to an individual's health. HIPAA's provisions amend Title I of the Employee Retirement Income Security Act of 1974 (ERISA) as well as the Internal Revenue Code and the Public Health Service Act and place requirements on employer-sponsored group health plans, insurance companies and health maintenance organizations (HMOs). HIPAA includes changes that:
• limit exclusions for preexisting conditions;
• prohibit discrimination against employees and dependents based on their health status;
• guarantee renewability and availability of health coverage to certain employers and individuals; and
• protect many workers who lose health coverage by providing better access to individual health insurance coverage.
The following information provides general guidance on frequently asked questions about HIPAA.
Preexisting Condition Exclusions
Under HIPAA, a group health plan or a health insurance issuer offering group health insurance coverage may impose a preexisting condition exclusion with respect to a participant or beneficiary only if the following requirements are satisfied:
• a preexisting condition exclusion must relate to a condition for which medical advice, diagnosis, care or treatment was recommended or received during the 6-month period prior to an individual's enrollment date;
Page 68 PREV PAGE TOP OF DOC
• a preexisting condition exclusion may not last for more than 12 months (18 months for late enrollees) after an individual's enrollment date; and
• this 12-(or 18-) month period must be reduced by the number of days of the individual's prior creditable coverage, excluding coverage before any break in coverage of 63 days or more.
How will the new law help people who currently have health coverage and who want to change jobs?
Currently some employer health plans do not cover preexisting medical conditions. HIPAA limits the time period of these restrictions so that most plans must cover an individual's preexisting condition after 12 months. Under HIPAA, your new employer's plan will be required to give you credit for the length of time that you had continuous health coverage that will reduce the 12-month exclusion period.
If, at the time you change jobs, you already have had 12 months of continuous health coverage (without a break in coverage of 63 days or more), you will not have to start over with a new 12-month exclusion for any preexisting conditions.
What is a ''preexisting condition''?
A ''preexisting condition'' is a condition present before your enrollment date in any new health plan.
Under HIPAA, the only preexisting conditions that may be excluded under a preexisting condition exclusion are