The new Health Insurance Portability and Accountability Act of 1996 (HIPAA) is intended to make it easier for workers to retain health insurance coverage when they switch jobs, by limiting pre-existing medical condition exclusions. Recently, the federal government issued regulations spelling out your obligations under the law.
This month, in Part I of our two-part series, we’ll focus on the new rules covering notices to employees regarding prior health insurance and limitations on coverage for pre-existing health conditions. We will also point out some conflicts with existing California rules that complicate compliance.
Unfortunately, the government didn’t give employers much advance notice-some of the regulations take effect June 1, 1997.
Who Is Responsible
You and your HMO or insurer are jointly responsible for meeting the new HIPAA notice requirements. Check with your carrier as they may handle some of the paperwork. Note that you’ll still need to know the rules and be able to assist employees in understanding their rights.
Different State and Federal Rules
The HIPAA notice requirements apply to all group health plans. However, the pre-existing condition exclusion rules are trickier. California already has a law limiting these exclusions.1 Since it is more generous to employees than HIPAA, California law will generally apply instead of the HIPAA regulations on this point (see below). Note that the California rules do not cover larger employers’ self-insured plans-they must follow the HIPAA limitations on pre-existing condition exclusions described below.
There are other differences between the two sets of rules that still need to be sorted out, and legislation (AB830) has just been introduced in Sacramento to conform the state requirements to the federal standards.
Limits On Excluding Pre-existing Conditions
The current California regulations allow insured plans to exclude coverage for pre-existing conditions for up to six months, or 12 months for someone who doesn’t enroll immediately upon becoming eligible. If you’re self-insured, the HIPAA limit of 12 months, or 18 months for late enrollees, will likely apply instead. Under all plans, pre-existing condition exclusions can’t apply to pregnancy or to a newborn or adopted child as long as the child becomes covered within 30 days of the birth or adoption.
400+ pages of state-specific, easy-read reference materials at your fingertips—fully updated! Check out the Guide to Employment Law for California Employers and get up to speed on everything you need to know.
Credit For Prior Coverage
California law says if someone had 6 months of continuous coverage (or 12 months for late enrollees) before they switched employers, the new plan can’t deny coverage for pre-existing conditions.
If your plan is self-insured, however, HIPAA stipulates 12 months of continuous coverage (referred to as creditable coverage), or 18 months in the case of a late enrollee, in order to eliminate pre-existing condition exclusions.
Under both state and federal regulations, if the person had fewer months of prior coverage, the pre- existing condition exclusion period must be reduced by the same number of days the prior coverage was in force.
Different Break-In-Coverage Rules
If an individual’s prior coverage was not continuous, they may still be entitled to a credit against the pre-existing condition exclusion period. The California rules state that if a person had a break in their prior employer-sponsored coverage of fewer than 180 days, the days of coverage before the break will count toward reducing the exclusion period. The HIPAA rule, which applies to self-insured plans or where prior coverage was not employer-sponsored, is more restrictive. The gap in prior coverage is limited to fewer than 63 days in order for the period before the break to count.
Proof Of Prior Coverage
HIPAA provides that employees and dependents can prove they had prior insurance by obtaining a Certificate of Group Health Plan Coverage from their previous employer or health plan. Other acceptable proof could include pay stubs reflecting health insurance deductions or insurance identification cards.
Notifying Participants Of Exclusions
HIPAA requires that all employee participants be notified of any pre-existing condition exclusions in your plan. The notice must describe the exclusion, participants’ right to show prior coverage, and their right to request a certificate of coverage from their former plan.
The new rules set out guidelines about when you must provide these certificates, without charge, to those who lose coverage under your health program. All plans are subject to the rules as of June 1, 1997. Here’s what is required:
- Automatically issue certificates: You must issue a certificate to individuals covered by your plan within the period indicated below:
- When someone loses coverage under your group health plan and is not entitled to COBRA: within a reasonable time after the coverage lapses.
- When someone is entitled to elect COBRA health coverage: no later than when you send out the COBRA notice.
- After someone has elected COBRA coverage: within a reasonable time after the COBRA coverage ends. Two notices are required-one when the person is eligible for coverage and the second when COBRA ends.
Although the regulations were just issued, retroactive notices are required. By June 1, 1997, you had to mail a notice to anyone who lost their health coverage or began COBRA between October 1, 1996 and May 31, 1997, advising them of their right to request a certificate.
- Issue certificates on request: The certificate must specify each period of continuous coverage for the 24 months before the request.
- Name dependents on certificates. Beginning July 1, 1998, you need to keep track of employees’ dependents in order to provide a certificate of their coverage. Until then, if you don’t have a dependent’s name, you must make reasonable efforts to obtain it. At a minimum, you must list the employee’s name and whether the coverage was individual, family or employee plus spouse.
For Additional Information
For more details, contact the U.S. Department of Labor, (202) 219-8776. To obtain a copy of “Q & A, Recent Changes in Health Care Law Addendum,” which includes sample notices, call (800) 998-7542, or visit the DOLwebsite.
Next month, we’ll look at other new requirements, including notices about hospital stays for childbirth, notices to employees who choose not to enroll in your plan, and shorter time limits to inform employees about health benefit reductions.