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This topic presents common questions and answers about Health Insurance Reform provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) from an employer's perspective.
You can read through the topic in sequence, or jump directly to questions in one of the sections listed below:
· Questions Specific to Small Employers
· Changes in Applying a Preexisting Condition Exclusion
· Providing and Receiving Certificates of Creditable Coverage
1) Who is covered by HIPAA's provisions?
HIPAA provisions are imposed upon group health plans and issuers. Eligibility for an individual's enrollment in a group health plan is determined according to the terms of the health plan and the rules of the issuer, but not according to an individual's health status or that of an individual's dependent. These rules and terms must comply with all applicable State laws.
2) When are HIPAA's provisions effective for plans and issuers?
HIPAA protections generally are effective with new plan years (i.e., the renewal date of your plan) beginning on or after July 1, 1997. (For plans maintained under collective bargaining agreements, the law does not apply before the last of the collective bargaining agreements relating to when the plan terminates, or July 1, 1997, whichever is later.)
On the date the plan or issuer becomes subject to the HIPAA provisions, the plan or issuer may not exclude coverage for any preexisting condition for more than 12 months after an individual's enrollment date (18 months for a late enrollee) regardless of whether this date occurred before the HIPAA effective date for the plan. This period may have already passed.
If this period has not passed, the plan or issuer is required to count the time individuals have already served under the plan toward satisfaction of the preexisting condition exclusion period. In addition, the plan must use any creditable coverage that individuals accumulated prior to their enrollment date to reduce their remaining preexisting condition exclusion period.
See below for examples of exclusions in several situations.
Jane Doe has been working for Right Market and has been covered under Right Market's plan since August 1, 1996. Before having to meet HIPAA's requirements, Right Market's plan did not cover any preexisting condition. Right Market's plan year begins on January 1, 1998. As of that date, Right Market may no longer exclude coverage for Doe's preexisting condition because she has already satisfied more than the maximum 12 month preexisting exclusion period.
John Doe worked for Great Carpets and was covered under its plan from July 1, 1997 to October 1, 1997 (three months). Doe then changed jobs and began being covered by Excellent Carpets on November 1, 1997. Before having to meet HIPAA's requirements, Excellent Carpets' plan did not cover any preexisting condition. Excellent Carpet's plan year begins on January 1, 1998. As of that date, Excellent Carpets' plan must use Doe's three months of creditable coverage from Great Carpets and the two months(November and December 1997) he has already been subjected to the preexisting condition exclusion to reduce Doe's remaining preexisting condition exclusion period. Doe's remaining preexisting condition exclusion period is seven months.
3) Do I have to provide health benefits to my employees?
No, employers are not required to offer or pay for health insurance for employees or family coverage for their spouses and dependents.
4) I hear that HIPAA makes health insurance portable. How does that work?
Portability in HIPAA means that once an individual has health coverage, this coverage may be used to reduce or eliminate any preexisting condition exclusion that might be applied to an individual who moves to another employer's group health plan.
The concept of portability is really one of an individual receiving credit for maintaining health coverage, even though it may be under different health plans or policies.
"Portability" does not mean that individuals can carry current health benefits or their current plan or policy with them when moving from one health plan or policy to another (such as when changing or losing jobs).
5) Can employees get the same health insurance benefits in their new job as they had in their old job?
No, HIPAA does not require you to offer specific benefits. Also, premiums, copayments, and deductibles may differ.
6) Is the health coverage I have for my employees renewable? Can it be terminated?
If you purchase health insurance coverage for your employees, the issuer must renew or continue in force that coverage at your option except as provided below.
Your employer group health insurance coverage may be nonrenewed or discontinued by the insurer because you failed to pay premiums, committed fraud, violated participation or contribution rules, terminated coverage, moved outside the service area, or ended membership in an association.
7) Does HIPAA apply to me as a small employer?
HIPAA's group market rules apply to every employer group health plan that has at least two participants who are current employees. Further, States have the option of applying the group market rules to groups of one. Some States have elected to do this.
8) How will HIPAA benefit me as a small employer?
HIPAA guarantees access to health coverage for small employers. Small firms (50 or fewer employees) are guaranteed access to health insurance, and generally, no insurer can exclude a worker or family member from employer-sponsored coverage based on health status. Insurers are required to renew coverage to all groups, regardless of the health status of any member. This is effective July 1, 1997.
9) As a small employer, how am I going to make this work?
If you purchase group health insurance coverage, your insurer should be able to handle HIPAA information collection activities and certificate issuance for you. Talk to your insurer to find out how you can work out the process-related issues together.
Alternatively, you can contract out these new certification responsibilities. Benefits consulting firms and companies that help employers with COBRA are examples of businesses that can help you.
If you have a small business and are self insured, you already have assumed a high level of management competency and the necessary systems to take on the responsibilities of self insurance. Handling HIPAA responsibilities should be an extension of what you are already doing.
10) HIPAA changes how plans and issuers may apply preexisting condition exclusions. What does that mean?
A "preexisting condition exclusion" is a limitation or exclusion of health benefits based on the fact that a physical or mental condition was present before the first day of coverage. However, HIPAA limits the extent to which a plan or issuer can apply a preexisting condition exclusion.
A preexisting condition exclusion is limited to a physical or mental condition for which medical advice, diagnosis, care, or treatment was recommended or received within the 6 month period ending on the enrollment date in a plan or policy.
During the preexisting condition exclusion period, the plan or issuer may opt not to cover or pay for treatment of a medical condition based on the fact that the condition was present prior to an individual's enrollment date under the new plan or policy. (The plan or issuer must, however, pay for any unrelated covered services or conditions that arise once coverage has begun.) The enrollment date is the first day of coverage, or if there is a waiting period before coverage takes effect, the first day of the waiting period.
A group health plan can apply a preexisting condition exclusion for no more than 12 months (18 months for a late enrollee) after an individual's enrollment date. Any preexisting condition exclusion must be reduced by an individual's prior creditable coverage. No preexisting condition may be applied to an individual who maintains continuous creditable coverage (without a break of 63 or more days) for 12 months (18 months for a late enrollee).
11) Does previous health coverage count for coverage under HIPAA?
Yes. In HIPAA terminology, this is called creditable coverage. This is one of the law's main benefits.
The concept of creditable coverage is that an individual should be given credit for previous health coverage against the application of a preexisting condition exclusion period when moving from one group health plan to another, from a group health plan to an individual policy, or from an individual policy to a group health plan.
An individual will receive credit for previous coverage that occurred without a break of 63 days or more. However, any coverage occurring prior to a break in coverage of 63 days or more would not have to be credited against a preexisting condition exclusion period. (However, some States' laws may provide greater protections.)
John Doe had coverage for two years followed by a break in coverage for 70 days, and then resumed coverage for eight months. He would receive credit against any preexisting condition exclusion only for eight months of coverage; no credit would have to be given for the two years of coverage prior to the break of 63 days or more.
Most health coverage is creditable coverage, including prior coverage under a group health plan (including a governmental or church plan), health insurance coverage (either group or individual), Medicare, Medicaid, a military-sponsored health care program such as CHAMPUS, a program of the Indian Health Service, a State high risk pool, the Federal Employees Health Benefit Program, a public health plan established or maintained by a State or local government, and a health benefit plan provided for Peace Corps members.
12) Do I need to provide my employees with certificates of creditable coverage?
A certificate of creditable coverage is a written document specifying the period of an employee's creditable coverage. In certain circumstances, the certification information may be provided by telephone if that is acceptable to the new plan or issuer, the individual, and the source of prior coverage.
Jane Doe gets a new job a week after quitting her old job. Her previous health plan has not yet issued a certificate of creditable coverage and her new plan wonders if it's OK to call and verify her creditable coverage in order to speed up the paperwork. This is fine with Doe and the previous plan, which has the capability of providing the necessary information over the telephone.
All employees must be given a "certificate of creditable coverage" by you, if you are self insured, or through the issuer offering health coverage.
A certificate of creditable coverage must be provided without charge and generally within a reasonable time period.
The certificate must be furnished automatically to:
· an individual whose group coverage has ended, such as when they leave or quit a job. The certificate then must be provided within a reasonable length of time.
· an individual who loses health coverage and who is not entitled to elect COBRA continuation coverage. Then, the certificate must be provided within a reasonable time after coverage ceases. (Typically, this would happen in small-employer plans that are not subject to COBRA.) The certificate must be provided no later than when a notice would be provided under an applicable State program that is similar to COBRA. A certificate also must be provided promptly in States that do not have such a law.
· an individual who is qualified for COBRA and has elected COBRA continuation coverage or after the expiration of any grace period for the payment of COBRA premiums.
Employees and their dependents also can ask for a certificate, which can be done any time within the 24 months following loss of coverage. The plan or issuer must provide certificates at the earliest feasible time after they are requested.
13) What period of time does a certificate cover?
It depends on whether the certificate is issued automatically or upon request.
For a certificate that is issued automatically, the certificate may reflect only the most recent period of continuous coverage under a coverage option offered by the plan.
For a certificate that is issued upon request, it should reflect each period of continuous coverage under the plan or policy, that ended within the 24 months prior to the date of request.
John Doe worked for the Multi-Large Corporation, which offers its employees a choice of three different plans: a health maintenance organization (HMO), a fee-for-service indemnity plan, and a preferred provider organization (PPO). During the open season, Doe switched from the HMO to the PPO. Six months later, he left the Multi-Large Corporation, and the issuer of the PPO provided a certificate for the six months during which it covered Doe.
If Doe wants to demonstrate that he had 12 months of creditable coverage, he needs to ask the Multi-Large Corporation to give him a certificate for the entire time he was covered under its plan. (The plan should already have made arrangements that assured this result.) This certificate would reflect all periods of creditable coverage that ended within 24 months of Doe's request.
14) Is there a model certificate available?
Yes. You may view a sample certificate indicating the requisite information, but its use is not mandatory.
15) When do plans and issuers need to start providing certificates of creditable coverage?
Plans or issuers do not need to provide certificates before June 1, 1997. However, certain certification requirements apply to periods of coverage and events that occur after June 30, 1996.
By June 1, 1997, plans or issuers must arrange to have certificates delivered to ALL individuals who lost coverage, or who began or ended COBRA between October 1, 1996, and May 31, 1997. Plans or issuers have an option of providing a notice instead of an actual complete certificate, provided that the plan or issuer furnishes a certificate on request.
After June 1, 1997, plans or issuers must arrange to provide certificates in a timely manner to individuals as they lose coverage, or begin or end COBRA.
By July 1, 1998, plans or issuers must also provide certificates with the names and individual dates of coverage of all dependents (until they may simply indicate that you had family or spousal coverage).
16) What if the number and names of an employee's dependents are unknown?
During the transition period (through June 30, 1998), a written certificate regarding dependent coverage need only specify the name of the participant covered by the plan and the type of coverage provided (such as family coverage or employee-plus-spouse coverage). However, if requested to provide a certificate relating to a dependent, the plan or issuer must make reasonable efforts to obtain and provide the name of the dependent.
Beginning July 1, 1998, a plan or issuer must make reasonable efforts to collect the necessary information for dependents and include it on the certificate. However, an automatic certificate is not required to be issued until the plan or issuer reasonably knows that the dependent ceased coverage. This information can be collected annually, such as during an annual open enrollment.
17) Do I need to do anything with certificates presented by new hires?
You will only need to ask for a certificate of creditable coverage and credit prior coverage if your plan imposes preexisting condition exclusions. The same thing is true if you're self insured. If you buy insurance, ask your insurer whether the policy imposes a preexisting condition exclusion and how certificates should be passed along to them.
Otherwise, you don't have to do anything. Employees should retain their certificates.
18) If my plan or issuer imposes preexisting condition exclusions, how can new hires show they have creditable coverage?
In general, employees should receive a certificate from their prior plan or issuer when they cease coverage. This certificate contains information that will demonstrate creditable coverage.
If employees do not have a certificate available, they can use a variety of evidence to prove creditable coverage. Acceptable documentation includes: pay stubs that reflect a coinsurance deduction, explanation of benefit forms (EOBs), verification by a doctor or former health care benefits provider that the employee had prior health coverage, and a benefit termination notice from Medicare or Medicaid.
19) Can my employees be denied health insurance based on their health status?
No. A plan or issuer may not establish eligibility for enrollment based on an individual's or a dependent's health status, physical or mental medical condition, claims experience, receipt of health care, medical history, genetic information, evidence of insurability, or disability.
This does not prohibit employers from establishing limits or restrictions on benefits or coverage for similarly situated individuals under a group health plan, or a higher premium or contribution for similarly situated individuals. Employers may change plan benefits or covered services if proper notification is given to employees.
20) How does HIPAA affect COBRA continuation coverage?
HIPAA is different than COBRA.
HIPAA responsibilities do not eliminate or replace small employers' responsibilities under COBRA, but there are some places where they can be coordinated.
HIPAA makes three changes to COBRA's continuation coverage, as described below. These changes were effective on January 1, 1997, regardless of when the event occurs that entitles the individual to continuation coverage.
A disabled individual (as determined under the Social Security Act) is entitled to 29 months of COBRA continuation coverage. Under prior law, the individual had to be disabled at the time of termination of employment or reduction in hours. Under HIPAA, an individual is entitled to 29 months of COBRA coverage if he or she becomes disabled at any time during the first 60 days of COBRA coverage. The extension of continuation coverage to 29 months also is available to any non-disabled family members of the disabled individual who are entitled to COBRA continuation coverage.
COBRA continuation coverage generally can be terminated when an individual becomes covered under another group health plan. COBRA cannot be terminated because of other coverage where the plan limits or excludes coverage for any preexisting condition of the individual. HIPAA limits the circumstances under which a plan may impose a preexisting condition exclusion period on individuals. If a plan is precluded under HIPAA from imposing an exclusion period on an individual, i.e., it must cover the individual's preexisting condition, COBRA continuation coverage may be terminated.
COBRA rules also are modified to provide that children who are born, adopted, or placed for adoption with the covered employee during the continuation coverage period are treated as "qualified beneficiaries." (Under prior law, to be a "qualified beneficiary" the child would have to have been covered under a group health plan on the day before the COBRA qualifying event.)
21) Who will enforce HIPAA?
States have the primary enforcement responsibility for group and individual requirements imposed on health insurance issuers, using sanctions available under State law.
If the States do not act in the areas of their responsibility, the Secretary of HHS may make a determination that the State has failed "to substantially enforce" the law, assert Federal authority to enforce, and can impose sanctions on insurers as specified in the statute, including civil monetary penalties.
The Secretary of HHS has enforcement responsibility for nonfederal governmental plans, self-funded and insured, and can impose sanctions on plans or plan sponsors as specified in the statute, to include civil money penalties.
The Secretary of Labor enforces requirements on employment-based group health plans including self-insured arrangements under ERISA. In addition, individual employees can file suit to enforce ERISA.
The Secretary of the Treasury can impose tax penalties on employers or plans who are found to be out of compliance with HIPAA. The tax code creates an obligation to pay the excise tax whether or not Treasury has taken any enforcement action.
The HIPAA Insurance Reform Consumer FAQ topic provides information in a question and answer format, similar to this topic, from a consumer's perspective.
See the HIPAA Insurance Reform Overview topic for additional information about the Insurance Reform provisions of HIPAA.
See the HIPAA - Insurance Reform Model Certificate topic for an example of the type of information that should be included on a certificate.
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) - Overview
Information in this topic was drawn from pages of the Centers for Medicare & Medicaid Services' Health Insurance Portability and Accountability Act of 1996 (HIPAA) website at:
http://www.cms.hhs.gov/HIPAAGenInfo/
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