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Posted on: Friday, April 22, 2005

The Department of the Treasury, Department of Labor (DOL) and Department of Health and Human Services (HHS) issued final HIPAA Portability regulations on February 28, 2005. The regulations clarify some provisions of the 1997 Interim rules and make material changes to others. The final regulations become applicable to group health plans on the first day of their first Plan Year starting on or after July 1, 2005.

Specifically, the regulations set forth minimum requirements for group health plans as they relate to the following portability provisions:

1. Limitations on pre-existing condition exclusion (PCE) period
2. Certificates and disclosure of previous coverage
3. Rules relating to creditable coverage
4. Special enrollment periods
5. Prohibition against discrimination on the basis of health factors

Following are examples of some of the more material changes and required actions Plan Sponsors must take by their respective compliance date:

1. A “Statement of HIPAA Portability Rights” must be added to the Certificate of Creditable Coverage. This educational statement is required to inform former plan participants of their HIPAA rights. A model Certificate containing such language is included within the regulations. Use of the model Certificate would be deemed good faith compliance.
a. Obtaining a Certificate of Creditable Coverage: The final
    regulations clarify that the procedures need to be in writing,
    helping to ensure that individuals are aware of their right to
    request a certificate and how to do so.

2. A Plan’s Pre-existing Condition Exclusions (PCE) must be disclosed to participants within the enrollment materials or by the earliest possible date following the request to enroll. The regulations contain numerous examples illustrating what does and does not constitute a PCE. For example, a Plan provides coverage for cosmetic surgery in cases of accidental injury, but only if the injury occurred while the individual was covered under the Plan. This is a PCE and would therefore be limited to the PCE limits defined in the regulations, i.e. not more than 12 months if enrolled when first eligible or 18 months for late enrollees. Plan Sponsors will need to carefully review their Plan Documents and enrollment materials to ensure compliance.

3. Special Enrollment rules have been reorganized and clarified. Several examples are provided within the regulations to help clarify, some of which include:
a. A plan may not limit an employee enrolling a new dependent to
    only the employee’s current coverage option. The regulations require
    that special enrollees must be offered all options to which similarly
    situated employees are given at initial eligibility. For example,
    Employer X offers Plans A and Plan B. An employee enrolls in Plan
    A, but upon a mid-year special enrollment event, could add the
    dependent(s) and together they could remain in Plan A or switch and
    enroll in Plan B if under the terms of the Plans they are eligible for
    either.
b. Retiree coverage may be subject to Hippie’s special enrollment
    provisions if the retiree plan is considered part of the active group
    health plan. This means that special enrollment rights must be
    offered to dependents of retirees in appropriate circumstances.
    However, if retiree coverage is provided by a stand-alone plan, it
    appears to not be subject to such provisions.
c. An individual who reaches a plan’s lifetime maximum limit or an
    individual who no longer resides or works in a HMO’s service area
    should be provided special enrollment

4. Group Health Plans are required to recognize as creditable coverage health plans maintained by foreign governments and by the US government, i.e. VA, State Child Health Insurance Program (SCHIP), etc. Such creditable coverage would then be used to reduce the length of or eliminate a PCE just as any other qualified creditable coverage

Proposed Regulations to the “Final Regulations”

Additionally, the Treasury, DOL and HHS have issued proposed regulations and are soliciting comments on other aspects of the Portability rules. For example, should there be an extension of time for individuals to extend certain HIPAA portability rights if the individual is not promptly notified by Certificate that he/she has lost coverage? Can a Plan deny special enrollment if an individual does not submit completed enrollment forms within the 30-day special enrollment period or should the Plan be required to allow a reasonable period of time after the 30-day period for submission of completed forms and supporting documentation, if any, if the individual is making reasonable efforts to obtain and submit the documents, but is unable to do so by the deadline? These examples and others remain under consideration. For more information, please click on the links below.

Your DGCO team is prepared to address all aspects of the final regulations at your convenience and will be contacting you with appropriate suggested actions as your Plan nears its required compliance date.

Links for more information:
Federal Register 29 CFR Part 2590
HIPAA Portability FAQs

Should you have any additional employee benefit questions or would like to discuss this material in detail, please don’t hesitate to call the Denman Team.

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