- The Good, the Bad, and the Ugly of the Final HIPAA Portability Regulations
- September 14, 2005
- Law Firm: Miller Nash LLP - Portland Office
The Good: No new notices are required
The Bad: Changes are required to existing notices
The Ugly: Does your plan have hidden preexisting condition exclusions?
The final HIPAA portability regulations replace the 1997 interim regulations and provide certain changes and clarifications to the rules regarding special enrollment rights, creditable coverage, preexisting condition exclusions ("PCEs"), and excepted benefits. The regulations apply to calendar year plans on January 1, 2006.
Special Enrollment Rights
- Notice of Special Enrollment. The final regulations revise the model language that is used to notify employees of their special enrollment rights. You will find the revised model language on page 78778 at www.dol.gov/ebsa/regs/fedreg/final/2004028112.htm. The notice should be included in the enrollment package. (Including this notice in the SPD is not sufficient because the notice must be provided at or before the time the employee is initially offered enrollment.) Make sure to revise your notice to comply with the model language.
- Loss of Other Coverage. The final regulations made some modifications to the special enrollment event of loss of other coverage.
If your plan requires a written statement that coverage is being declined because the employee or dependent has other coverage, the plan cannot require anything more from the employee. For example, the plan cannot require the employee to name the coverage or provide proof of the coverage, nor can the plan require that the statement be notarized.
The list of loss of coverage events that trigger special enrollment rights was expanded to include the following:
- An individual no longer lives or works in the HMO service area (and, in the case of group HMO coverage, no other coverage under the plan is available).
- A plan no longer offers coverage to a group of similarly situated individuals (e.g., a plan ceases to offer coverage to part-time employees).
- Loss of dependent status under the plan (e.g., a dependent is no longer a full-time student or reaches the plan's maximum age).
- Termination of a benefit package option without offering a substitute option.
- Reaching the maximum lifetime benefit limit. (In this case the special enrollment period runs from the date on which the claim reaching the lifetime limit was incurred to 30 days after the date on which the claim is denied.)
An individual's COBRA coverage is also exhausted if the individual reaches a lifetime limit on all benefits (and no other COBRA coverage is available). The special enrollment period in this case ends 30 days after the date on which the claim is incurred, regardless of the date on which the claim is denied.
The regulations clarify that the initial opportunity for enrollment is not the only time when an individual with other coverage may decline coverage for purposes of satisfying the requirements for special enrollment. An individual may also decline enrollment during an open or special enrollment period.
The regulations clarify that an employee who is enrolled in a benefit package may enroll in a different benefit package if a dependent has a special enrollment right due to loss of eligibility for other coverage. In addition, the regulations clarify that electing COBRA is treated as declining coverage due to other coverage and thus a second special enrollment period occurs when COBRA is exhausted.
- Special Enrollees. The final regulations provide a definition of dependent. A dependent is an individual who is or may become eligible for coverage under the plan because of a relationship to the employee. Thus, if your plan covers domestic partners, domestic partners have special enrollment rights.
The final regulations also make it clear that if an individual is eligible for special enrollment and that period coincides with a late enrollment period, the individual is not treated as a late enrollee. Remember that special enrollees must generally be treated the same as individuals who enroll when first eligible. They must be offered the same benefit package options, cannot be required to pay higher premiums, and cannot have a longer PCE period.
Certificate of Creditable Coverage
The final regulations include a new model certificate of creditable coverage. A certificate now must include educational material about HIPAA. A model certificate can be found on www.dol.gov/ebsa/hipaamodelnotice.doc. The new language must be used by the plan's compliance deadline. After that date, use of the old model certificate is no longer permitted. The final regulations also make it clear that plans need to have written procedures for individuals to request and receive certificates of creditable coverage.
- Hidden PCEs. Many plans eliminated PCEs with the advent of HIPAA. Your plan may, however, contain "hidden" PCEs that are subject to HIPAA. Before you decide that you do not need to read this section, compare the list of hidden exclusions below against your plan provisions.
- Exclusions for congenital conditions.
- Provisions that provide coverage for a condition only if it began or was diagnosed while covered under the plan.
- Coverage of a certain condition only if the individual was covered under the plan from the date of birth.
- Provisions with benefit specific lifetime limits that reduce the lifetime limit by counting benefits paid under prior health coverage.
- Provisions that deny benefits for pregnancy during the first 12 months of coverage.
If your plan has a hidden PCE, it must either be removed or comply with the HIPAA rules that apply to PCEs. (Any waiting period for pregnancy coverage must be eliminated.) If you find that your plan has no PCEs (hidden or otherwise), you may skip the rest of this section.
- Definitions. The final regulations make some changes to the definitions used in the PCE rules. Under the final regulations, whether an exclusion is a PCE is determined by whether the plan restricts benefits for a condition because it existed before the effective date of coverage under a group health plan or group health insurance. (The interim regulations had said that the condition existed before the first day of coverage.) The final regulations clarify that the enrollment date (which is used to determine the look-back and PCE periods) does not change if the individual changes benefit package options or the plan changes insurers. In addition, the waiting period includes only the time when an employee is in an eligible classification. Finally, the final regulations provide that coverage under the State Children's Health Insurance Program, a self-insured public health plan, a foreign public health plan, and a U.S. government plan is creditable coverage.
- General Notice of PCE. The general notice must now include a person to contact for additional information. The final regulations include sample language that plans can use to prepare their own notices (third column of page 78768 at www.dol.gov/ebsa/regs/fedreg/final/2004028112.htm). Caution: the sample language describes the maximum periods for the look-back and PCE periods. Your notice must describe the periods applicable to your plan. You should compare your general notice with the sample language.
Not finding your general notice? Some plans conveyed this information in the SPD rather than a separate notice. The final regulations are clear that the notice must be provided with any written application materials distributed by the plan or, if no such materials are distributed, the notice must be provided at the earliest possible date following a request for enrollment. This is earlier than the due date for distribution of the SPD, and it appears that the regulations intend for this notice to be independent of the SPD.
- Determination of Creditable Coverage. The final regulations clarify that a plan cannot impose a time limit for the individual to provide evidence of prior creditable coverage.
- Individual Notice of PCE. The individual notice of PCE must now include the last date on which the PCE will apply. You must revise your individual notice of PCE to include this information. The notice is not required to identify any medical conditions specific to the individual that could be subject to the PCE.
You may already be providing a notice to individuals whose exclusion period is eliminated by creditable coverage. The final regulations clarify that a notice is not required if the exclusion period is eliminated, but as a practical matter, such a notice provides good news and may eliminate individual inquiries as to the determination of the exclusion period.
The final regulations define limited scope dental benefits and limited scope vision benefits as benefits substantially all of which are for the treatment of the mouth or eye, respectively. (The preamble to the interim regulations had said that dental benefits and vision benefits would be subject to HIPAA's portability provisions if they included medical services such as treatment of oral cancer or a mouth injury or an eye disease or eye injury, respectively.) In addition, supplemental coverage is an excepted benefit only if it is designed to fill in gaps in primary coverage, such as coinsurance and deductibles. It does not include coverage that becomes supplemental because of a coordination of benefits provision.
The obligation to comply with HIPAA falls on both the plan sponsor and, if fully insured, the carrier or HMO. Make sure that you and the carrier are clear about who is responsible for revising certificates, notices, and plan documents by the compliance deadline.