HIPAA Common Questions: Administration

Transcription

1 Brought to you by Momentous Insurance Brokerage, Inc. HIPAA Common Questions: Administration When were the final HIPAA Nondiscrimination Regulations effective? The final HIPAA Nondiscrimination Regulations issued in December 2006 applied to Group Health Plans on the first day of the plan year beginning on or after July 1, When does HIPAA prohibit a Group Health Plan from discriminating against an individual? HIPAA does not allow a Group Health Plan to deny an individual eligibility for benefits or charge a higher premium than is required of a similarly situated individual, based upon health factors. Health factors include: 1. Health status, 2. Medical condition (physical or mental), 3. Receipt of health care, 4. Claims experience, 5. Medical history, 6. Genetic information, 7. Evidence of insurability, and 8. Disability. HIPAA does not allow a Group Health Plan to treat an individual within a group of similarly situated individuals differently. However, a plan may provide different health benefits for employees in different groups if the distinction between the groups is based on bona fide employment-based classifications. For example, a Group Health Plan may provide different benefits to employees located at different geographic locations, or based upon their employment classification (e.g., full-time versus part-time status). Although Health Insurance Coverage issuers may consider all relevant health factors of individuals within a group in order to establish aggregate rates for coverage provided under a Group Health Plan, the Health Insurance Coverage issuer is required to blend the individual-by-individual rates into an overall group rate and provide a per participant rate to the employer. Even though some Health Care Coverage issuers provide the employer with individual-by-individual rates, HIPAA prohibits employers from using that information to calculate the individual s premium contribution. Can a Group Health Plan require its employees to pass a physical exam in order to be eligible for Health Insurance Coverage under HIPAA? No. The final HIPAA Nondiscrimination Regulations clarified that a Group Health Plan may not require its employees to pass a physical exam in order to be eligible for Health Insurance Coverage, even if the individual is a late enrollee. Under HIPAA, may Group Health Plans delay an individual s effective date for coverage because that individual is confined to a hospital?

2 No. A Group Health Plan may not delay an individual s effective date for coverage because the individual is confined to a hospital. Non-Confinement Clauses are most often used to allocate responsibility for coverage of individuals that are confined to a hospital at the time an employer moves its coverage from one Health Insurance Coverage issuer to another. The final HIPAA Nondiscrimination Regulations make it clear that the Health Insurance Coverage issuer, regardless of state law, must make an individual s coverage effective regardless of whether that individual is confined to a hospital. Many state laws allow the assuming carrier to delay an individual s effective date until the confinement has ended. The final regulations suggest that state laws may be used as a coordination of benefits provision. Under HIPAA, may Group Health Plans delay an individual s effective date for coverage because that individual is not actively at work? A Group Health Plan may not delay enrollment in the health plan until an employee is actively at work, unless individuals who are absent from work due to any health factor are treated, for purposes of Health Insurance Coverage, as if they are actively at work. The final HIPAA Nondiscrimination Regulations clarified the use of actively at work provisions. Do Group Health Plans violate the HIPAA Nondiscrimination Regulations if they contain limitations on specific types of benefits? The final HIPAA Nondiscrimination Regulations confirmed that Group Health Plans may include benefit limitations within their plans so long as the limitations apply uniformly to all similarly situated individuals. For example, coverage may be denied for treatment that is not medically necessary or annual or lifetime maximums may be imposed on specific benefits. Note that the health care reform law eliminates most lifetime limits and restricts the use of annual limits, effective for plan years beginning on or after September 23, While limits or exclusions applicable to all similarly situated employees are permissible under the final HIPAA Nondiscrimination Regulations, Group Health Plans must also determine whether the benefit limitations violate such laws as the Americans with Disabilities Act and the Pregnancy Discrimination Act. In the event a Group Health Plan implements a plan design change effective at the beginning of the plan year, it will not be considered to be directed at any one individual. However, a plan design change implemented in the middle of the plan year will be reviewed under a facts and circumstances test to determine if the changes were made in anticipation of a specific individual s claim for treatment which violates the HIPAA Nondiscrimination Regulations. May Group Health Plans charge employees a higher premium or deny Health Insurance Coverage based upon the employee s participation in a dangerous or hazardous activity? No. A Group Health Plan may not charge an employee a higher premium or deny Health Insurance Coverage based upon an employee s participation in a dangerous or hazardous activity (e.g., skydiving, bungee jumping, etc.). However, a Group Health Plan may exclude coverage for treatment of injuries related to the participation in these activities. Group Health Plans may not exclude benefits because they are related to an act of domestic violence or a medical condition. For example, a Group Health Plan may not exclude coverage for treatment of self-inflicted injuries sustained in connection with an attempted suicide if the injuries were also caused by a medical condition such as depression. Benefits may not be denied if the injuries resulted from a medical condition even if the medical condition was not diagnosed before the injury. Under HIPAA, can a Group Health Plan reward its employees by charging healthy employees less for health insurance?

3 Although HIPAA generally prohibits Group Health Plans from charging an individual within a group of similarly situated individuals a different premium or contribution for coverage based upon that individual s health factors, Group Health Plans still have many opportunities to offer financial incentives in order to promote health and prevent disease. Reward Given Regardless of Outcome Employers may offer wellness programs that provide a reward to all individuals that participate in the program, regardless of the outcome. This type of wellness program is NOT subject to HIPAA. Examples of this type of wellness program include: 1. Encouraging preventive care through the waiver of a copayment or deductible for the cost of well-baby visits, 2. Reimbursing employees for the cost of health club memberships, without regard to any health factors, and 3. Reimbursing employees for the cost of smoking cessation programs, without regard to whether the employee quits smoking. Reward Conditioned Upon Outcome Where a wellness program conditions receipt of the reward on an outcome, the program must comply with the additional requirements contained within the HIPAA Wellness Program Regulations. Do the HIPAA Nondiscrimination Regulations prohibit a Group Health Plan from treating individuals with adverse health factors more favorably? No. Group Health Plans may establish more favorable rules for eligibility for individuals with an adverse health factor, such as a disability, than for individuals without an adverse health factor. For example, some Group Health Plans contain provisions that allow disabled dependent children to continue to be eligible for coverage beyond the limiting age applied to dependent children that are not disabled. Do Health Reimbursement Arrangements (HRAs) that allow unused funds to be carried over from year to year violate the HIPAA Nondiscrimination Regulations? In response to inquiries requesting clarification on the application of the HIPAA Nondiscrimination Regulations to HRAs that allow unused funds to be carried over from year to year, the final regulations included an example of an HRA plan that is not a violation: Example: The Health Insurance Coverage is made available to all current employees. Under the plan, the medical care expenses of each employee (and the employee s dependents) are reimbursed up to an annual maximum amount. The maximum reimbursement amount with respect to an employee for a year is $1500 multiplied by the number of years the employee has participated in the plan, reduced by the total reimbursements for prior years. This example clarifies that even though unused employer-provided medical care reimbursement amounts carried forward from year to year varies among employees within the same group of similarly situated individuals based upon prior claims experience, the HRA does not violate the HIPAA Nondiscrimination Regulations. Employees who have participated in the plan for the same length of time eligible for the same total benefit over that length of time and the restriction on the maximum reimbursement amount is not directed any individual participants or beneficiaries based on any health factor. When the final HIPAA Wellness Program Regulations effective? The final HIPAA Wellness Program Regulations applied to Group Health Plans on the first day of the plan year beginning on or after July 1, 2007.

4 What do the final HIPAA Wellness Program Regulations require Group Health Plans to do when receipt of a reward is conditioned upon outcome? Where a wellness program conditions receipt of a reward on an outcome, the following conditions must be met: - Limit on Reward. Where the wellness program allows the employee to participate, the reward must not exceed 20% of the cost of employee-only coverage (e.g., total amount of employer and employee contributions for the cost of employee-only coverage). Where dependents may participate in the wellness program, the reward must not exceed 20% of the cost of the coverage category in which the employee and dependents are enrolled (e.g., total amount of employer and employee contribution for the cost of family coverage). - Reasonably Designed To Promote Good Health or Prevent Disease. Wellness programs must be designed to promote good health or prevent disease. If a wellness program has a reasonable chance of improving the health of participants and is not overly burdensome, is not a subterfuge for discriminating based upon a health factor, and is not highly suspect in the method chosen to promote health and prevent disease, the wellness program will satisfy this requirement. - Annual Opportunity to Qualify for Reward. Wellness programs must give individuals an opportunity to qualify for the reward at least once a year. - Reasonable Alternative Standard. The wellness program must provide a reasonable alternative standard for obtaining the reward for certain individuals. This alternative standard must be available for individuals for whom it is unreasonably difficult due to a medical condition to satisfy the otherwise applicable standard. The final regulations include an example that demonstrates that a reasonable alternative standard could include following the recommendations of an individual s physician regarding the health factor at issue. - Disclosure Requirements. All wellness program materials must include a description of the general standard and disclose the availability of a reasonable alternative standard. Example of Compliant Wellness Program: In conjunction with an annual open enrollment period, an Employer distributes a form to all individuals that if signed certifies that they have not used tobacco products in the preceding twelve months. Individuals who do not provide this certification are assessed a surcharge that is 20% of the total cost of employee-only coverage. Individuals that are unable to reasonably meet this standard due to a medical condition (e.g., addiction to nicotine) are not assessed the surcharge so long as these individuals participate in a smoking cessation program. The materials used to describe the wellness program include the following disclosure: If it is unreasonably difficult due to a medical condition for you to achieve the standard for the reward under this program, or if it is medically inadvisable for you to attempt to achieve the standards for the reward under this program, call us at ( ) and we will work with you to develop another way to qualify for the reward. Note: This example was taken from the regulations. When are the final HIPAA Portability Regulations effective? The final HIPAA Portability Regulations issued in December 2004 applied to Group Health Plans and Health Insurance Coverage issuers on the first day of the first plan year beginning on or after July 1, What are the penalties for failure to comply with the HIPAA Regulations? Each State has the authority to enforce HIPAA s requirements. If a State fails to enforce HIPAA, any of the following federal agencies may also enforce HIPAA s requirements: the Department of Treasury, the Department of Labor, and the Department of Health and Human Services.

5 Under HIPAA, when does Creditable Coverage reduce a Pre-Existing Condition Exclusion? HIPAA requires that Group Health Plans reduce any Pre-Existing Condition Exclusion period by the aggregate number of days that the participant was covered under Creditable Coverage prior to the Enrollment Date. Where a participant has experienced a significant break in coverage (a period of more than 63 days), the prior Creditable Coverage shall not reduce the Pre-Existing Condition Exclusion period. For purposes of determining whether a break in coverage has occurred, time spent within a Waiting Period or an affiliation period may not be taken into account. The final HIPAA Portability Regulations released in 2004 clarified that, for purposes of determining whether a significant break in coverage exists, an individual seeking coverage in the individual market is considered to be within his or her Waiting Period, beginning on the day a substantially completed application for coverage is submitted. In the event coverage is denied or the offer of coverage lapses, the Waiting Period ends. Note that health care reform provides for the complete elimination of pre-existing condition exclusions by The exclusions may not be applied to children under age 19, effective on the first day of the first plan year beginning on or after September 23, However, the HIPAA rules have not been revised. Under HIPAA, what are the two methods of determining the amount of Creditable Coverage? The Standard Method HIPAA requires that a Group Health Plan reduce its Pre-Existing Condition Exclusion period by the amount of Creditable Coverage, without regard to the specific benefits for which coverage was offered during the period. This method of determining the amount of Creditable Coverage is referred to as the Standard Method. The Alternative Method HIPAA also allows a Group Health Plan to reduce its Pre-Existing Condition Exclusion period by the amount of Creditable Coverage in a way that considers the type of benefits provided under the prior coverage. Group Health Plans may elect to use the Alternative Method for determining Creditable Coverage. If a Group Health Plan elects to use the Alternative Method, it must do so uniformly among all participants. It must also prominently State in any disclosure that it has elected to use the Alternative Method. Under the Alternative Method, the Group Health Plan may count a period of Creditable Coverage with respect to any class or category of benefits if any level of benefits is covered within such class or category. Benefit categories that may be considered include: 1. Mental health, 2. Substance abuse treatment, 3. Prescription drugs, 4. Dental care, and 5. Vision care. For example, the IRS may assess an excise tax penalty against Group Health Plans in the amount of $100 per day for failure to comply with HIPAA s requirements. Under HIPAA, when are Health Insurance Coverage issuers required to issue a group health insurance plan? Generally, all Health Insurance Coverage issuers that offer Health Insurance Coverage in the small group market in a State must:

6 1. Offer to any Small Employer in the State all products that are approved for sale in the small group market and that the issuer is actively marketing, and must accept any employer that applies for any of those products, and 2. Accept for enrollment under the coverage every eligible individual who applies for enrollment during the first period in which the individual becomes eligible to enroll under the terms of the Group Health Plan, or during a Special Enrollment Period, and may not impose any restriction on an eligible individual s being a participant, which is inconsistent with HIPAA s nondiscrimination provisions. HIPAA does include limited exceptions to this rule. For example, the Health Insurance Coverage issuer may decline to offer coverage where the employer fails to meet minimum participation or contribution rules. Under HIPAA, when are Health Insurance Coverage issuers required to renew a Group Health Plan? If a Health Insurance Coverage issuer offers Health Insurance Coverage in the small or large market in connection with a Group Health Plan, the issuer must renew or continue in force such coverage at the option of the plan sponsor. However, a Health Insurance Coverage issuer may discontinue Health Insurance Coverage if: 1. The plan sponsor fails to pay premiums when due or within the allowable grace period, 2. The plan sponsor commits fraud or intentional misrepresentation of a material fact used to issue coverage, 3. The plan sponsor fails to comply with a material plan provision relating to employer contribution or group market participation requirements, 4. The Health Insurance Coverage issuer discontinues offering a particular type of Group Health Plan or ceases to offer Group Health Plans in the State. In each case, the issuer is required to provide advance notice to the employer. In some cases, the issuer is required to offer another product if appropriate. 5. The plan no longer has a covered employee who resides, lives, or works in the insurer s service area (e.g., the plan offered is a network plan), and 6. When the Group Health Plan is offered exclusively to association members, termination of an employer s membership in the association will allow the issuer to cancel the Group Health Plan. Do the HIPAA Portability Regulations govern health flexible spending accounts (health FSAs)? The HIPAA Portability Regulations do not apply to benefits provided under a health flexible spending account when they satisfy the following conditions: 1. Other Group Health Plan coverage, not limited to Excepted Benefits, is made available for the year to the class of participants by reason of their employment, and 2. The arrangement is structured so that the maximum benefit payable to any participant in the class for a year cannot exceed two times the participant s salary reduction election under the arrangement for the year (or, if greater, cannot exceed $500 plus the amount of the participant s salary reduction election). For this purpose, any amount that an employee can elect to receive as taxable income but elects to apply to the health flexible spending arrangement is considered a salary reduction election (regardless of whether the amount is characterized as salary or as a credit under the arrangement). Do the HIPAA Portability Regulations govern health savings accounts (HSAs)? No. Health savings accounts are not subject to HIPAA because they are not employee welfare benefit plans. However, the high deductible health plan that is offered together with a health savings account is governed by the HIPAA Portability Regulations.

7 Do the HIPAA Portability Regulations govern individual health insurance policies? Yes. The HIPAA Portability Regulations contain provisions which regulate individual health insurance policies. HIPAA requires that Health Insurance Coverage issuers offering individual health insurance policies offer coverage, on a guarantee issue basis, to any individual that meets the following criteria: 1. The individual was most recently covered under a Group Health Plan for a period of at least 18 months, 2. The coverage ended no more than 63 days prior to the date of application, 3. The coverage did not terminate because of fraud or nonpayment of premiums, and 4. The individual is ineligible for COBRA or if offered COBRA continuation coverage (or continuation coverage under a similar state law) has both elected and exhausted their continuation coverage. A policy issued to an individual meeting these criteria may not contain Pre-Existing Conditions and must be guaranteed renewable. As with group policies, the insurer must also provide a Certificate of Creditable Coverage if the policyholder cancels. An insurer may comply with HIPAA by offering individuals the following: 1. All of its individual health insurance products offered in the market, 2. Two policies determined to be the insurer's most popular individual policies measured by premium volume, or 3. Two policies a high deductible and a low deductible plan, with average benefits. Acceptable State Alternative However, if a State has an acceptable state alternative mechanism for assuring access to individual health coverage, insurers in that State will not have to comply with the individual health insurance provisions in their entirety. Health risk pools or mandatory conversion policies are two examples of acceptable state alternatives. In order for this exception to apply, the State must have applied to the Secretary of Health and Human Services by April 1, If an acceptable state alternative is available, insurers are not required to guarantee issue their individual policies. Instead, they are only required to offer policies that are guaranteed renewable and must issue Certificates of Creditable Coverage if the individual terminates the policy. Under HIPAA, are Group Health Plans and Health Insurance Coverage issuers required to establish a written procedure to explain how participants may request a Certificate of Creditable Coverage? Group Health Plans and Health Insurance Coverage issuers are required to establish a written procedure for individuals to request and receive a copy of a Certificate of Creditable Coverage. The written procedures must include all contact information necessary to request a Certificate of Creditable Coverage (such as name, phone number, and address). This Momentous Insurance Brokerage, Inc. Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice Zywave, Inc. All rights reserved.