Publications

May and June of 1997 were busy months for human resources personnel charged with implementing the initial data collection and notification requirements of HIPAA. Now that the initial flurry of activity has passed, many employers are getting a better sense of what HIPAA will mean for the design and administration of their health plans.

In trying to understand and implement the new rules, it may be helpful to keep in mind what Congress was trying to accomplish. Congress wanted to improve the portability and continuity of existing health insurance coverage and wanted to enhance opportunities for initial access to health insurance coverage. The new law is designed to achieve these goals by, among other things, imposing new substantive design requirements on group health plans and revising the plan disclosure rules so that employees and their dependents will be better informed about their rights under employer group health plans.

The new plan design requirements include:

• Limitations on Pre-Existing Condition Exclusions.
  Congress identified pre-existing condition exclusions as a significant impediment to accessibility of coverage. The new rules limit the length of permissible exclusion periods, but also create new administrative burdens, in the form of Certificates of Coverage. A copy of the model Certificate of Coverage that was published in the proposed HIPAA regulations, along with instructions for its use, is enclosed with this issue of the Employment Advisory.

• Special Enrollment Rules for Individuals Who Lose Other Coverage or Who Have A Change in Family Circumstances.
  Congress recognized that people’s lives are not static, and sometimes changes in family circumstances do not coordinate neatly with company health plan annual enrollment periods. The new rules create rights to enroll in employer group health plans at any time during a plan year, provided enrollment is timely sought after a loss of coverage or other permitted change in circumstances.

• Prohibitions on Discrimination Based on Health Status.
  Under HIPAA, discrimination in eligibility provisions or in premiums is prohibited if the disparate treatment is based on a health status related factor of the employee or the employee’s dependents.

• Mental Health Benefit Parity Provisions.
  Annual and lifetime dollar limits on mental health benefits must be the same as the plan’s annual and lifetime dollar limits on medical benefits.

On the administrative side, new Summary Plan Descriptions (“SPDs”) and other employee communications will have to be prepared to reflect the new legal requirements. Employers will also need to establish appropriate administrative procedures for collecting enrollment and data coverage so they can issue certificates of coverage, track special enrollment periods, and, if applicable, impose pre-existing condition exclusion periods correctly.

Open Issues
The recently issued proposed HIPAA regulations, although extensive, leave several unresolved issues. For example, it is still not clear to what extent HIPAA applies to medical flexible spending accounts and retiree medical plans. Another area of uncertainty is the interface of the HIPAA enrollment provisions with the enrollment rules applicable to cafeteria plans.