must now prepare for the effective dates of the various health care
reform provisions. The following HIPAA road map provides a comprehensive
(although not exhaustive) list of actions that should be considered
Rules and Regulations
Qualified Beneficiaries must be notified of HIPAA'S COBRA related
changes by November 1, 1996.
for plan years after June 30, 1997, pre-existing condition limitation
periods cannot last longer than 12 months (18 due to late enrollment),
and must be reduced by prior creditable coverage under another group
health plan. Plans must provide proof of creditable coverage through
a newly required "Certificate of Coverage."
Prior creditable coverage under another plan can be disregarded
if an individual goes without coverage for a period of 63 days or
By October 1, 1996, plans must track coverage for compliance with
the new "Certificate of Coverage" requirements, which
start June 1, 1997.
enrollment periods for individuals and dependents have been created.
An exercise tax has been created for HIPAA violations.
Insurers cannot deny individuals policies as long as the individuals
have exhausted all other insurance coverage, including all COBRA
coverage. The net result: More people will elect COBRA.
Required Prior to January 1, 1997
- Issue Model COBRA
Notice to all qualified beneficiaries as of November 1, 1996;
- Amend all group
health plans to take into account HIPAA COBRA modifications -- e.g.,
relating to disabled individuals, newborn or newly adopted dependents;
- Revise COBRA
Notices and SPDs to take into account HIPAA changes.
Required on or Before June 1, 1997
certification requirements become effective for all plans beginning
June 1, 1997. In addition, in order to take advantage of HIPAA's transitional
relief, HIPAA Notices must be distributed on or before June 1, 1997.
The following steps should be taken to ensure that these requirements
which health plans are subject to HIPAA's certification requirements
(generally all health coverage -- including health FSAs and EAP
plans -- other than limited scope vision or dental benefits, long-term
care benefits; accident or disability benefits, specified disease,
hospital indemnity and Medicare Supplement benefits.)
responsibility for satisfying HIPAA's certification requirements
-plan sponsor, third party administrator, or insurer/HMO;
procedures to track and retain participant coverage information
back to July 1, 1996 necessary to satisfy HIPAA certification requirements,
procedures to track and retain dependent coverage information back
to July 1, 1996 necessary to satisfy HIPAA certification requirements;
all individuals who lost group health coverage on or after October
1, 1996, prepare a mailing list and mail the HIPAA Notice to such
individuals prior to June 1, 1997;
issue HIPAA Certificates to anyone who terminates regular or COBRA
coverage on or after June 1, 1997 (Consider amending COBRA Notices
to include HIPAA information, but keep in mind that some individuals
who voluntarily terminate coverage may not be COBRA qualified beneficiaries);
to written requests for coverage information and issue HIPAA
Certificates to such individuals;
a procedure to respond to requests for coverage information from
other plans -- i.e., plans using the alternative mechanism for determining
creditable coverage -- beginning June 1, 1997.
Required Before Plan's HIPAA Effective Date (First Plan Year On or After
July 1, 1997)
discussed above, several plan design and administrative changes must
be considered and implemented prior to a plan's HIPAA effective date
-- the first plan year on or after July 1, 1997.
These include the following:
sponsors should determine which health plans are subject to HIPAA's
portability and pre-existing condition requirements;
If the plan sponsor is a governmental entity, the costs and benefits
associated with opting out of HIPAA's portability requirements should
be weighed, and if decision is made to opt-out, necessary steps
should be taken;
All plan sponsors should weigh administrative costs associated with
maintaining pre-existing condition exclusions -- notification requirements,
administrative burden of determining reduction in pre-existing condition
limitation for prior creditable coverage, etc. --- and decide whether
additional costs outweigh ongoing benefit of such provision,
All plan sponsors should consider increased potential for adverse
selection due to HIPAA's nondiscrimination requirements and consider
potential plan design changes to limit potential risk -- e.g., limit
open enrollments, impose or extend waiting period;
Plan sponsors should confirm that any insurance coverage, HMO, stop
loss contracts will be revised to take into account HIPAA's requirements
-e.g., in many cases, stop-loss contracts may contain coverage exclusions
that are not permitted in health plans under HIPAA,
sponsors that retain pre-existing condition exclusions should consider
whether to use the standard or alternative method for determining
creditable coverage (remember the regulations limit the potential
benefit of the alternative method, impose additional notice requirements,
and impose the costs associated with determining scope of prior
coverage on requesting entity).
If a plan retains its pre-existing condition exclusion, the plan
document and SPD
must be amended as follows:
definitions must be revised to take into account the HIPAA definitions
of pre-existing condition (including the six month look back limitation
and prohibition on applying pre-existing condition exclusions to:
newborn or newly adopted children who are enrolled within 30 days
of the adoption or birth; pregnancy; or genetic information in absence
of treatment or diagnosis); enrollment date (necessary to determine
look back and look forward rules); waiting period; late enrollee-,
and creditable coverage (including the break in coverage rules)
pre-existing condition exclusion must comply with HIPAA's duration
limitations (12 months generally or 18 months for late enrollee);
- Provisions must
be added to implement reductions in the pre-existing condition exclusion
for a plan's waiting period and prior periods of creditable coverage.
If the alternative method of determining creditable coverage is utilized,
additional provisions must be included specifying how the reduction
- Regardless of
whether a plan retains its pre-existing condition limitation, the
following changes must be made:
evidence of insurability (EOI), actively at work and non-confinement
provisions must be examined and (in most cases) deleted -even
for late enrollees;
incentives and/or penalties should be reviewed and revised to
ensure compliance with HIPAA's nondiscrimination requirements;
(and penalties) relating to dangerous activities should be reviewed
to ensure compliance with HIPAA's nondiscrimination requirements;
- If a plan
has limited enrollment periods, plan provisions must be added
to allow for special enrollments for newly acquired dependents
and employees and dependents who waived coverage because they
were covered elsewhere, but subsequently lost the other coverage;
Administration and Disclosure Requirements
If a plan retains
its pre-existing condition exclusion, the following additional
administration and disclosure obligations will arise:
the time of enrollment the participant must be made aware of the
plan's pre-existing condition exclusion limitations, how prior
creditable coverage offsets the pre-existing condition period,
and the right to demonstrate prior creditable coverage (including
notification of the right to obtain a certificate of prior coverage).
This notice may be separate, or could possibly be combined with
an initial COBRA rights notification or SPD benefits summary.
Failure to provide this notice may result in forfeiture by the
plan of the pre-existing condition exclusion.
mechanism must be put in place to receive prior HIPAA Certificates,
reduce any pre-existing condition exclusion period, and notify
the participant of the reduction in the pre-existing condition
exclusion. If the alternative mechanism is selected, the mechanism
must be prominently displayed.
of whether a plan retains its pre-existing condition limitation, the
following administrative and disclosure obligations may arise:
If a plan has limited enrollment periods, notice must be provided
at the time of enrollment describing the special enrollment rights.
Presumably this notice can be included as part of the enrollment
The Plan SPD must be modified to include the new required information
in the ERISA rights statement and the information relating to
insurers or insurance service providers.
Required By First Plan Year Beginning On or After January 1, 1998
The following changes are required as a result of NMHPA and the Mental
Health Parity Act:
Plan Design/Administrative Decisions
redesigning mental health benefits to limit potential exposure
-e.g., by placing limits on the number of days of care, imposing
managed care limitations, etc.
and revise plan language to comply with new maternity stay requirements
and verify compliance by third parties -- e.g., utilization review
that Mental Health Parity requirements are satisfied -- e.g.,
by using uniform cap for mental health and comprehensive health
benefits (remember substance abuse treatments are not subject
to the mental health parity requirements).