The U.S Department of Labor issued a Press release (Release Number 04-2450-NAT) announcing the release of final and proposed HIPAA regulations. These rules were drafted by the U.S. Departments of Labor, Health and Human Services, and Treasury. The final regulations become applicable on the first day of the first plan year starting on or after July 1, 2005.

The Health Insurance Portability and Accountability Act (HIPAA) was enacted by Congress in 1996 to provide greater portability and availability of group health coverage when workers and family members change or lose a job. The law imposed limits on preexisting conditions that could be imposed and allow special enrollment for certain life events.

In 1997, the three agencies issued interim final rules, and these final rules essentially adopt those interim rules except for several significant modifications. Among the modifications and clarifications are:

Certificate of Creditable Coverage (Certificate). The following modifications were made.

• An educational statement must be included in the Certificate explaining individuals’ rights to health coverage portability. Model language is provided.
• The regulations contain changes to clarify the process and timing for issuing automatic certificates.
• Plan must have written procedures to request Certificates.

Notice Requirements. The following modifications were made.

• Additional details are given on the content, timing, and delivery of the special enrollment notice, the initial preexisting condition exclusions (PCE) notice, and the PCE determination notice.
• The regulations clarify that the initial PCE notice must be provided with any written application materials issued by the plan or by the issuer.
• Model language for the special enrollment notice and sample language for the initial PCE notice are included.

Definition of Dependent. Clarification is provided by defining Dependent as someone who, according to the terms of plan, is eligible for coverage because of a relationship with a participant.

Limited-Scope Dental and Vision Benefits. The limited-scope dental or vision coverage (provided under a separate insurance arrangement or not otherwise an integral part of a health plan) that are exempt from HIPAA are defined as benefits substantially all of which are for treatment of the mouth and for treatment of the eye. Clarification is given that medical services such as treatment for oral cancer or glaucoma do not change the characterization of the benefits as limited scope.

Health Savings Accounts (HSAs). The preamble states that HSAs are exempt from the HIPAA portability rules so long as the HSAs are not subject to ERISA. However, the associated high deductible health plan is not exempt if it is a group health plan sponsored by the employer.

Pregnancy Coverage. The final rules warns that a plan provision denying pregnancy coverage during the first year of coverage is a "subterfuge" that violates the HIPAA rules that prohibits group health plans from imposing PCEs relating to pregnancy.

Multiple Benefit Options. Clarification is provided that an individual switching benefit options (such as switching from a PPO to an HMO) can not be subjected to a new PCE. Also, if an insured plan replaces one insurer with another, a new PCE may not be imposed.

Special Enrollment. Under the final rules, special enrollees must be offered all the benefit packages that are available to similarly situated employees at initial eligibility.

PROPOSED REGULATIONS

The agencies also published a proposed regulation modifying the break in coverage and special enrollment rules.

Delay of Special Enrollment Period. The proposal gives workers who have not received a certificate of creditable coverage additional time to exercise their rights by delaying the start of the special enrollment period and the break in coverage period until the certificate is provided, up to 44 days.

Interaction with Family Medical Leave Act (FMLA). The proposed regulations would add a requirement that the Certificate explain the interaction between the HIPAA portability rules and the FMLA. (The preamble contains a model Certificate.) The proposed FMLA provisions would prohibit taking coverage gaps during FMLA leave into account when determining whether or not there has been a significant break in coverage.

Special Enrollment Period. Under the proposed rules, a plan or issuer will be barred from insisting on completion of enrollment requirements within the special enrollment period. An individual would only be required to request special enrollment during the special enrollment period. Completion of the enrollment requirements could be required during a reasonable time, but coverage would have to begin (sometimes retroactively) once the enrollment materials were substantially complete.

REQUESTS FOR COMMENTS

The three agencies also published a request for information to obtain comments on whether benefit-specific waiting periods (such as 12-month waiting period on diabetes benefits) can function as preexisting condition exclusions that must comply with HIPAA's portability provision.

Comments can be addressed to U.S. Department of Labor, Employee Benefits Security Administration, 200 Constitution Avenue, NW., Room C-5331, Washington, D.C. 20210, or by email to e-ohpsca.ebsa@dol.gov. (Comments can also be sent to Health and Human Services and the Treasury Departments

Click here for a copy of the Press Release.
Click here for a copy of the final regulations.
Click here for a copy of the notice of proposed rulemaking and proposed regulations.