HIPAA Compliance

Health Insurance Act - Employee Benefits

HIPAA Compliance

The federal Health Insurance Portability and Accountability Act (HIPAA) affects many aspects of health insurance, including privacy of patient information, security of medical information and electronic exchange of medical information between physicians and health insurance plans.

This section discusses the protections of HIPAA's Title I, which protects health insurance coverage for employees and their families when employees change or lose their jobs. In general, HIPAA:

  • Limits the extent to which a plan can subject new employees to pre-existing condition restrictions.
  • Requires that certain late enrollees be offered special enrollment opportunities.
  • Prohibits discrimination against employees and their dependents either in eligibility or cost based on any health factors they may have, including prior medical conditions, claims experience and genetic information (Includes any request for or receipt of genetic services, by any individual or any family member of that individual).

Employers Covered by HIPAA

All employer-sponsored plans became covered by HIPAA for plan years beginning after June 30, 1997. The exceptions are governmental plans, plans that have fewer than two participants who are current employees on the first day of a plan year and certain collectively bargained plans. HIPAA also covers most group health plans. Exceptions are accident insurance, disability insurance (A voluntary plan that provides short-term benefits for employees disabled by a non-work-related illness or injury. A voluntary plan is separate from the State Disability Insurance program), workers' compensation insurance, automobile insurance, medical payment insurance and other plans where medical benefits are incidental, secondary, limited or supplemental.

Special Enrollment Periods for Health Coverage

HIPAA requires a group health plan to establish special enrollment periods for certain employees and dependents. A plan must provide 30-day, special enrollment periods for employees and dependents who have other health coverage but lose that coverage either because their COBRA coverage terminates or because they no longer are eligible for the other coverage. Additionally, a plan that offers dependent coverage must provide a special, 30-day enrollment period for individuals who become dependents by reason of marriage, birth, adoption or placement for adoption.

Changes to Medical Plans

HIPAA imposes six mandated changes for employer-sponsored medical plans:

  • Pre-existing condition limitations
  • Crediting previous coverage
  • Previous coverage certification
  • Special enrollment periods
  • Health status nondiscrimination
  • Disclosure of benefit reductions and other summary plan description requirements

HIPAA and Pre-existing Conditions

HIPAA broadly defines “pre-existing condition” exclusions as any limitation or exclusion of benefits based on the fact that the condition was present before the first day of coverage, if any medical advice, diagnosis, care or treatment was recommended or received before that date. HIPAA permits a group health plan to impose a pre-existing condition exclusion only under the following conditions:

  • Six-month look-back rule: The pre-existing condition exclusion must relate to a condition (whether physical or mental and regardless of the cause of the condition) for which medical advice, diagnosis, care or treatment was recommended or received within the six-month period prior to the enrollment date.
  • Length of pre-existing condition exclusion period: The exclusion period under federal law cannot extend for more than 12 months after the enrollment date (18 months for late enrollees). However, California law allows no more than a six-month exclusion period after the enrollment date. As a result, you must comply with the shorter six-month exclusion period. HIPAA defines the enrollment date as the first date of coverage or, if there is a waiting period, the first day of the waiting period (typically the date employment begins). The look-forward period is based on the anniversary date of the enrollment date.
  • Reduction of pre-existing condition exclusion period by previous coverage: In general, the individual's days of coverage under a previous medical plan (either individual or group) reduces the pre-existing condition exclusion period.

No pre-existing condition exclusion can be applied in cases involving pregnancy, newborns or newly adopted children (under the age of 18) who must become covered by the plan within 30 days of birth or the placement for adoption. HIPAA allows HMOs to substitute a 60-day waiting period (90 days for late enrollees) instead of the pre-existing condition limit.

Previous Health Care Coverage

HIPAA requires a group health plan to account for an individual's previous creditable coverage when applying any existing condition limit. A plan must reduce the duration of its existing condition limit by one month for each month of previous creditable coverage, if the individual did not have a break in coverage exceeding 63 days. This means when you hire a new employee, the new employee will not be covered by your medical plan's existing condition limitation if he/she has maintained his/her previous medical plan coverage. Waiting periods are not counted as a break in coverage. Previous medical plan coverage is creditable (i.e., it applies) if an individual was covered previously under one of the following:

  • Another employer's group health plan
  • An individual health insurance policy
  • Medicare or Medicaid
  • Tri-Care
  • The Federal Employees Health Benefits Program
  • The Indian Health Service
  • State programs (for example, Medi-Cal).

Plans insured in California must give participants credit for prior coverage if covered by succeeding plans within 30 days of termination or within 180 days of termination of employer-sponsored prior coverage (not including waiting periods).

You have two responsibilities when sponsoring a group health plan in connection with crediting previous group health plan coverage:

  • When a new employee satisfies the eligibility rules for your group health plan, your plan administrator must determine the extent of prior group health plan creditable coverage available to the new employee.
  • When an employee loses his/her right to group health plan coverage, your plan administrator must provide the employee and his/her dependents with written certification of the coverage available under your plan.

Certification of Health Care Coverage

You must provide certification of coverage:

  • At the time an individual ceases to be covered by the plan and is not eligible for COBRA (small-employer plans)
  • When an individual becomes eligible for COBRA
  • If the individual requests a certification within 24 months following either coverage ending

An individual has a right to demonstrate creditable coverage through documentation or other means, such as an employee's health plan card or other evidence of coverage, if an employer fails to provide a certificate of coverage through a plan sponsor or insurance company.

Communicating Coverage Between Plans

HIPAA's Certificate of Group Health Plan Coverage is the core legal requirement under HIPAA. All employees who lose their right to employer-sponsored health plan coverage must receive a completed copy of the certificate.

Provide the Certificate of Group Health Plan Coverage to the employee and any dependents covered by the organization's group health plan as of the COBRA qualifying event. Each of the 11 sections should be completed before sending. A copy should be retained with a copy of the COBRA notice.

The plan administrator has two alternatives when he/she receives a Certificate of Group Health Plan Coverage from a new participant. The plan administrator can either globally credit the coverage from the prior health plan for purposes of its own existing condition exclusion or can choose an alternate method for crediting. The alternate method allows the new plan not to credit certain categories of previous coverage (for existing condition purposes) if no previous plan coverage existed for these categories:

  • Dental
  • Vision
  • Mental health
  • Substance abuse
  • Prescription drugs

If the plan sponsor chooses the alternate method, this choice must be prominently stated in any disclosure statement about the plan and must explain the effect of the alternate method to the participants. The new plan can ask the previous plan issuing the certificate for additional information to determine if certain categories of previous group health plan coverage should be credited. IRS regulations indicate that the plan receiving the request for additional information can charge the requesting party the reasonable cost of disclosing the information.

Provide the HIPAA Questionnaire to a new employee who seeks credit for prior coverage and presents the new employer with a certificate if the new employer's policy is to give credit only where there was actual existing coverage for a type of coverage also offered by the new employer's plan.