Health Insurance Portability and Accountability Act

Overview
To ensure portability and availability of health care coverage, the Health Reform Act limits the extent to which pre-existing condition exclusions may apply under health care plans, requires special enrollment periods, and provides strict standards for eligibility rules, all of which affect employer-provided health benefits plans and require employers to take action. The Health Reform Act includes changes to ERISA, the Internal Revenue Code, and the Public Health Service Act, to make insurers and HMOs subject to the new rules.

Specific Provisions

1. Plans Affected. The new rules apply to employer-sponsored welfare plans that provide medical care for employees or dependents through insurance, reimbursement or otherwise, if the plan covers at least 2 current employees or partners. Medical care is broadly defined to include not only the payment of amounts for diagnosis, cure, treatment prevention of disease, but also payments for insurance covering medical care and for transportation essential to medical care. The rules do not apply to specified types of special purpose programs, such as workers' compensation, accident or disability income insurance, liability insurance, or on-site medical clinics. In addition, exceptions apply for (a) limited scope dental and vision, long-term care, and similar limited coverage, and supplemental Medicare coverage, if that coverage is provided under a separate policy or arrangement; and (b) coverage for a specific illness or hospital indemnity coverage, if that coverage is not coordinated with basic coverage.
   
   
2. Maximum Pre-existing Conditions. Under a plan, a pre-existing condition exclusion can be applied to a condition only if the condition was diagnosed, treated or recommended for treatment within the 6 month period ending on the earlier of the date the individual enrolls or the first day of the waiting period for enrollment in the plan. A pre-existing condition exclusion is defined as any limit on, or exclusion of, benefits for a condition because an individual had a condition before enrollment. Thus, for example, if an individual has a condition that was not diagnosed or that was last treated more than 6 months before his or her waiting period began, no exclusion may apply to that condition. The maximum period during which a pre-existing condition exclusion can be applied can not exceed 12 months for an individual who enrolls either when first eligible or during a special enrollment period, or 18 months for an individual who enrolls late.
   
   
3. Impermissible Exclusions. A pre-existing condition exclusion can not be imposed on a newborn or an adoptee under 18, if the child is enrolled within 30 days after birth, adoption or placement for adoption, whichever is applicable. Also, a plan can not apply any exclusion relating to pregnancy.
   
   
4. Credit for Prior Coverage. The 12 or 18 month maximum exclusion period is reduced by the amount of an individual's prior "creditable coverage", which includes coverage under an employer-sponsored health plan (including COBRA coverage), an individual health policy or arrangement, Medicare, Medicaid, or a government plan. The exclusion period is reduced by the aggregate period(s) of creditable coverage, except that an individual loses credit for all prior coverage if he or she has a break in creditable coverage for a period of 63 days or more. Furthermore, employers may elect to recognize prior coverage based on benefits in certain classes or categories, which are to be specified in regulations.
   
   
5. Certifications of Creditable Coverage. Plans must provide Certifications of Creditable coverage to covered individuals at three times: (a) when the individual loses coverage under the plan or begins COBRA coverage; (b) when the individual loses COBRA coverage; and (c) on request by the individual made within 24 months after loss of coverage under (a) or (b), whichever is later. The Certification from a plan must state the period of the individual's creditable coverage under the plan and/or COBRA, as well as any waiting period applied to the individual under the plan. While the plan is considered to satisfy the certification requirement if an insurer or HMO provides the certification, it does not appear that plan administrators can relieve themselves of responsibility for providing the certification by delegating the duty to the insurer, as is possible for COBRA notices.
   
   
6. Special Enrollment Periods. A plan must provide two Special Enrollment Periods for employees and, if dependents are generally eligible, for the plan dependents. The first period is available to any employee or dependent who has other coverage that is lost, if he or she meets four conditions: (a) the individual had the other coverage at time he or she became eligible for the plan; (b) if required by the plan or employer, the individual stated he or she was declining to enroll in the plan because he or she had the other coverage; (c) the coverage being lost was COBRA coverage that was exhausted, or other coverage for which the individual is no longer eligible (including, divorce from, or termination of employment by, his or her spouse), or the employer providing the other coverage ceases to pay for it; and (d) the individual requests enrollment under the plan within 30 days after losing the other coverage or the employer contribution for the other coverage ceases, if applicable.
   
   
7. The second Special Enrollment Period applies to an employee who is a participant in the plan or eligible to enroll (including having met any waiting period) when the employee marries, has a child or adopts a child. The Special Enrollment Period must extend for at least 30 days beginning on the date of marriage, birth, adoption or placement for adoption. During this period, not only the new dependent, but also the employee and the employee's spouse may enroll (though apparently other children may not). If the new dependent is enrolled within 30 days of the start of the enrollment period the coverage is to become effective as of the birth, adoption or placement for adoption or, for marriage, the first of the month after the request for enrollment.
   
   
8. Conditions on Eligibility. A plan may not restrict eligibility based on health status, medical condition, claims experience, medical history, genetic information, evidence of insurability, disability, or receipt of health care. This rule does not preclude a plan from limiting the amount, level or type of benefits that will be offered or require the plan to provide certain benefits. If any individual or his or her dependents have one of the health status-related factors described above, that individual cannot be charged a higher premium or contribution than similarly situated individuals. There is no limit, however, on the amount an insurer or HMO may charge the employer. Also, this rule does not preclude a plan, an insurer or an HMO from offering incentives such as premium discounts for participation in wellness, fitness or similar programs.
   
   
9. Enforcement. Plan participants and the Department of Labor may bring suit to enforce the access rules against plans. In addition, the Health Reform Act creates a new scheme of excise taxes similar to the COBRA sanctions. Generally, the tax is imposed on the employer and is $100 per day per individual for any failure to comply with the access rules, with a cap for unintentional failures. Exceptions apply for: (a) unintentional failures corrected within 30 days; (b) failures resulting from reasonable cause; and (c) failures relating to small, fully insured plans, that are caused by an insurer.

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