FAQs

Health Insurance Portability and Accountability Act of 1996 (HIPAA)

The intent of the HIPAA legislation is to improve the availability and portability of health coverage by:

Restricting preexisting condition exclusions and limitations;
Providing credit for prior coverage to reduce or eliminate preexisting condition limitations;
Providing new rights to enroll in plans in situations when other coverage is lost;
Prohibiting discrimination on the basis of health status; and,
Guaranteeing the availability and renewability of health coverage for small employers

Plans Subject to HIPAA Rules:

Health plans, which cover 2 or more employees, are covered by HIPAA portability rules. The HIPAA rules apply to HMO, insured and self-funded plans. The law defines both health insurance coverage and group health plans covered under HIPAA.

Health insurance coverage is defined as "Benefits consisting of medical care (provided directly, through insurance or reimbursement, or otherwise) under and hospital or medical service policy or certificate, hospital or medical service contract, or HMO contract covered by a health insurer."

Group health plan is "A plan (including a self-insured plan) of, or contributed to by, an employer (including a self-employed person) or employee organization to provide health care (directly or otherwise) to employees, former employees, the employer, others associated or formerly associated with the employer in a business relationship, or their families."

There are certain benefits, which are not subject to HIPAA rules. The following benefits are excluded in all circumstances:

Accident only coverage (including AD&D)
Disability insurance
Liability insurance (including medical payment benefits in an automobile policy)
Workers compensation
Credit insurance
On-site medical clinics

Other benefits are excluded if certain conditions are met:

Limited scope dental and vision benefits are not subject to HIPAA if they are provided under a separate policy, or the individual has the right not to receive coverage, or if coverage is elected, or if there is an additional employee premium.
Long term care benefits are not subject to HIPAA if they are subject to state long-term care laws or qualify as long-term care plans as defined by section 7702B(c)(1) of the Internal Revenue Code.
Medicare supplement plans are not subject to HIPAA if they are provided under a separate policy.
Specific disease or illness policies are not subject to HIPAA if they are provided under a separate policy and if the benefits are not coordinated with the group health plan.
Section 125 Medical Flexible Spending Arrangements are not subject to HIPAA if 1) the annual benefit cannot exceed two times the employee contribution (and the employer contribution cannot exceed the employees by $500), and 2) employee has available other group health coverage through the employer, and 3) other group health coverage includes a benefit subject to HIPAA.

Restrictions on Preexisting Limitations:

The HIPAA legislation establishes the maximum preexisting exclusion or limitation period

Initial enrollments…………………………… ……365 days (12 months)
HIPAA Special Enrollments………………………365 days (12months)
Late enrollments.…………………………… ……546 days (18 months)
HMOs may impose an affiliation period as an alternative to a preexisting limitation period

2 months for initial and HIPAA Special Enrollments
3 months for later enrollments
Can't be reduced by prior creditable coverage
Must run concurrently with any waiting period

"A preexisting condition exclusion must relate to a condition (whether physical or mental), regardless of the cause of the condition, for which medical advice, diagnosis, care, or treatment were recommended or received within the 6-month period ending on the enrollment date." Treatment includes prescribed medication.

The hire date is considered the date of enrollment, or the first day of the waiting period. Care received during the waiting period does not constitute a preexisting condition. For late and HIPAA special enrollees, 6-month look-back period operates from date of actual enrollment. Waiting periods must run concurrently with the preexisting limitation period.

Plans may not have a preexisting condition limitation for any condition related to pregnancy. Newborn and adopted children are covered by creditable coverage within 30 days of birth or adoption; the future plan may not impose a preexisting limitation if there is no significant break in coverage.

Credit for Prior Coverage:

Creditable coverage is defined as "the period of any preexisting condition exclusion that would otherwise apply to an individual under a group health Plan is reduced by the number of days creditable coverage the individual has as of the enrollment date." (Interim Regulations sec. 146.11 (a)(iii)). Creditable coverage cannot include any benefits specifically excluded from HIPAA. Prior creditable coverage includes:

Group health plans
Other health insurance coverage including individual
Medicare
Medicaid
Military health plans
Medical care program of the Indian Health Services or of a tribal organization
State risk pools
Federal employee health plan
A public health plan
A health plan under sec. 5(e) of Peace Corps Act.

Waiting periods in a group health plan do not count as creditable coverage.

The prior coverage is not counted as creditable coverage, if there was a significant break in coverage of 63 or more consecutive days. Waiting periods in a plan are not considered a break in coverage.

Notification Requirements:

At the time of enrollment the plan must notify a participant, in writing, of the terms of the preexisting limitations of the plan. If the notice is not sent, the plan cannot impose a preexisting condition exclusion.

The plan must, in a reasonable time period, make a determination regarding credit for prior coverage and whether the plan will impose a preexisting condition limitation. The plan must notify the individual in writing of the decision. It this notice is not sent, the plan cannot impose preexisting condition exclusion. The "reasonable" time period is dependent on the individual facts and circumstances. Employers will typically collect the HIPAA certificate upon initial eligibility.

Certificate of Coverage:

"Automatic" certificates of creditable coverage must be provided when a qualified beneficiary, as defined by COBRA, would lose coverage, or within a reasonable time after coverage ceases for individuals not eligible for COBRA, or when COBRA coverage ceases.

"On request" certificates of creditable coverage must be provided when requested within at least 24 months after coverage ceased for the individual.

The form and content of the certificate must include:

Date certificate was issued
Name of the group health plan that provided coverage listed in the certificate
Names and identification numbers of participants in the plan
Name, address and telephone number of the administrator responsible fro the certificate
A statement that the individual has at least 18 months of creditable coverage under the plan, or the date any waiting period began and the date coverage began
The date coverage ended

One single certificate may include information for the employee and all dependents. Automatic certificates must only include the last period of continuous coverage. The requested certificates must included information on every period of coverage ending in the 24 months prior to the request.

Employees have the right to demonstrate coverage without a certificate. A plan must consider reasonable evidence of coverage in the absence of a certificate. Examples of "reasonable evidence" include:

Explanation of benefit forms
Correspondence from a plan indication coverage
Prior coverage I.D. (identification) cards.
Certificate of coverage or insurance contract that indicates prior coverage.

Certificates should be mailed by at least first class mail to the participant's last known address. One certificate to a family is sufficient for everyone living at that address. If a dependent lives elsewhere, a separate certificate should be sent.

Special Enrollment Periods:

Special enrollment for loss of coverage applies to employees and dependents who had other coverage when the other coverage is lost. Special enrollment must be offered when 1) COBRA is exhausted; 2) the individual loses eligibility for the other coverage due to divorce or legal separation, death, termination of employment or reduction in hours of employment; 3) Employer contributions for other coverage are terminated.

Conditions for special enrollment due to loss of coverage are as follows:
Individuals must have been covered by another health plan when enrollment was previously offered.
Employee must have originally declined coverage with employer because he/she was covered by another plan.
Employer must have:

Required the employee to notify employer of the above in writing when coverage was initially declined
Notified the employee of consequences of failure to provide such notice to employer.

Special enrollment must be offered for marriage, birth or adoption. "Eligible dependents" include the new dependents acquired because of marriage, or newborn/adopted children who triggered the event, but not other siblings. The dependent must be "otherwise eligible" in order to have special enrollment rights.

Individuals must request enrollment within 30 days of the loss of other coverage, marriage, birth or adoption. The plan can require that the request be made in writing. The coverage effective date for special enrollments is as follows:

Loss of coverage or marriage - coverage is effective no later than the first of the month after request for enrollment is made.
Birth or adoption - coverage effective on date of birth or adoption.

The plan must notify employees of their special enrollment rights on or before the date they war given opportunity to enroll in plan.

Nondiscrimination Rules:

A group health plan may not establish rules for eligibility on any individual to enroll under the terms of the plan based on health status related factors. Plans cannot decline coverage due to medical underwriting. Plans can request medical information, but can only use this information to determine rates and existence of a preexisting condition.