Application of HIPAA Group Market Rules to Individuals Who Were
Denied Coverage Due to a Health Status-Related Factor [12/29/1997]
Volume 62, Number 248, Page 67689-67690-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 54
DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
29 CFR Part 2590
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
45 CFR Subtitle A, Parts 144 and 146
Application of HIPAA Group Market Rules to Individuals Who Were
Denied Coverage Due to a Health Status-Related Factor
AGENCIES: Internal Revenue Service, Department of the Treasury; Pension
and Welfare Benefits Administration, Department of Labor; Health Care
Financing Administration, Department of Health and Human Services.
ACTION: Clarification of regulations.
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SUMMARY: This document addresses certain issues arising under the group
market portability provisions added by the Health Insurance Portability
and Accountability Act of 1996 (HIPAA) with respect to employees (or
their dependents) who, until the effective date of the HIPAA
nondiscrimination provisions, were denied coverage under a group health
plan, including group health insurance coverage, because of a health
status-related factor.
FOR FURTHER INFORMATION CONTACT: Russ Weinheimer, Internal Revenue
Service, Department of the Treasury, at (202) 622-4695; Amy Scheingold,
Pension and Welfare Benefits Administration, Department of Labor, at
(202) 219-4377; or Joan Kral, Health Care Financing Administration,
Department of Health and Human Services, at (410) 786-9539.
Customer service information. Individuals interested in obtaining a
copy of the Department of Labor's booklet entitled ``Questions and
Answers: Recent Changes in Health Care Law,'' which includes
information on the nondiscrimination provisions of HIPAA, may call the
following toll-free number: 1-800-998-7542. This information is also
available on the Department's website at: http://www.dol.gov/dol/pwba.
SUPPLEMENTARY INFORMATION:
I. Purpose
This document addresses certain issues arising under the group
market portability provisions added by the Health Insurance Portability
and Accountability Act of 1996, Public Law 104-191 (HIPAA), with
respect to employees (or their dependents) who, until the effective
date of the HIPAA nondiscrimination provisions, were denied coverage
under a group health plan, including health insurance coverage offered
in connection with a group health plan, because of a health status-
related factor. Under those provisions and the implementing
regulations, neither a group health plan nor group health insurance
coverage can continue to exclude such individuals from enrolling in the
plan or coverage. This document clarifies certain rights of these
individuals.
II. Background
HIPAA contains provisions designed to improve portability and
continuity with respect to group health plan coverage provided in
connection with employment. These provisions include limitations on
preexisting condition exclusions, rules prohibiting discrimination on
the basis of any health status-related factor, and rules requiring
special enrollment. These provisions are generally effective for group
health plans and group health insurance coverage for plan years
beginning on or after July 1, 1997. The Departments of the Treasury,
Labor, and Health and Human Services (the Departments) issued interim
final regulations implementing these group market provisions at 26 CFR
54.9801-1T through 54.9801-6T, 54.9802-1T, 54.9831-1T (formerly
54.9804-1T), 54.9833-1T (formerly 54.9806-1T); 29 CFR part 2590; and 45
CFR parts 144 and 146 (made available to the public on April 1, 1997
and published in the Federal Register on April 8, 1997, 62 FR 16893).
The HIPAA portability provisions in section 9801 of the Internal
Revenue Code of 1986 (Code), section 701 of the Employee Retirement
Income Security Act of 1974 (ERISA), and section 2701 of the Public
Health Service Act (PHS Act), and the implementing regulations impose
limits on the maximum preexisting condition exclusion period that may
be imposed by a group health plan or group health insurance issuer. In
general, neither a group health plan nor a group health insurance
issuer may impose more than a 12-month preexisting condition exclusion
for individuals enrolling in the plan or
[[Page 67690]]
coverage, although the plan or issuer can impose an 18-month
preexisting condition exclusion for late enrollees. In either case, the
exclusion period must be reduced by the amount of an individual's prior
``creditable coverage.'' Most, but not all, types of health coverage
are creditable coverage.
The nondiscrimination provisions in section 9802 of the Code,
section 702 of ERISA, and section 2702 of the PHS Act and the
implementing regulations provide that neither a group health plan nor a
health insurance issuer offering group health insurance coverage may
establish rules for eligibility (including continued eligibility) of
any individual to enroll under the terms of the plan based on any
health status-related factor. Health status-related factors include
health status, medical condition, claims experience, receipt of health
care, medical history, genetic information, evidence of insurability
(including conditions arising out of acts of domestic violence), and
disability.
Under these nondiscrimination provisions, an employee (and any
dependent of the employee) cannot be denied coverage under a group
health plan or group health insurance coverage based on a health
status-related factor on or after the effective date of HIPAA. The
interim final regulations clarify that an employee or dependent cannot
be required to pass a physical examination as a condition of
enrollment, even if the individual is a late enrollee.\1\
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\1\ Note, however, that under section 1532 of the Taxpayer
Relief Act of 1997, Pub. L. 105-34 (enacted after interim final
regulations were published), certain church plans may require
evidence of good health of certain individuals without violating the
nondiscrimination requirements of HIPAA. This document does not
apply to those church plans under those circumstances.
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III. Clarification
Although the interim final regulations make clear that group health
plans and group health insurance issuers cannot continue to exclude
employees (and their dependents) from coverage based on a health
status-related factor, questions have arisen concerning the application
of the HIPAA group market portability rules to individuals who
previously were denied coverage based on a health status-related
factor. This document clarifies the circumstances under which these
individuals cannot be treated as late enrollees for purposes of
applying a preexisting condition exclusion period.
Any individual to whom coverage has not been made available before
the effective date of HIPAA because of a health status-related factor,
and who enrolls when first eligible on or after the effective date of
the HIPAA nondiscrimination provisions (which are generally effective
on the first day of the first plan year beginning on or after July 1,
1997), may not be treated as a late enrollee for purposes of section
9801(a) of the Code, section 701(a) of ERISA, or section 2701(a) of the
PHS Act or the implementing regulations.\2\ This includes any
individual who failed to apply for coverage before the effective date
of the HIPAA nondiscrimination provisions because it was reasonable to
believe that an application for coverage would have been futile due to
a plan provision that discriminated on the basis of a health status-
related factor. These rules apply whether or not the plan offers late
enrollment.\3\ These rules do not change the special enrollment rules
that prohibit treating a special enrollee as a late enrollee.
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\2\ For related rules to determine the individual's enrollment
date, see the interim final regulations at 26 CFR 54.9806-1T(a)(3),
29 CFR 2590.736(a)(3), and 45 CFR 146.125(a)(3).
\3\ For a definition of late enrollment, see the interim final
regulations at 26 CFR 54.9801-3(a)(2)(iv), 29 CFR 2590.701-
3(a)(2)(iv), 45 CFR 146.111(a)(2)(iv).
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These rules are illustrated by the following example:
Example: (i) Employee A is an active employee of Employer X. A
was hired on May 3, 1992. X maintains a group health plan with a
plan year beginning on January 1. Under the terms of the plan,
employees and their dependents are allowed to enroll when the
employee is first hired and on each January 1, but only if they can
pass a physical examination. A's application to enroll in May of
1992 was denied because A had diabetes and could not pass a physical
examination. A has not applied since then because A has reasonably
believed that the application would be denied because A has
diabetes.
(ii) In this Example, effective January 1, 1998, X's plan cannot
deny coverage to A based on a health status-related factor. If A
enrolls effective January 1, 1998, A may not be treated as a late
enrollee for the purpose of determining the maximum period of any
preexisting condition exclusion that may be imposed by the plan with
respect to A (or for the purpose of determining A's enrollment
date).
HIPAA provides that no enforcement action can be taken against a
plan or issuer with respect to a violation of the group market rules
before January 1, 1998 if the plan or issuer has sought to comply in
good faith with such rules. The preamble to the interim final
regulations extended this good faith period with respect to the
nondiscrimination provisions until further regulations are issued by
the Departments. Compliance with the terms of this document is
considered good faith for this purpose.
Dated: December 18, 1997.
Michael P. Dolan,
Deputy Commissioner of Internal Revenue.
Signed at Washington, DC, this 19th day of December 1997.
Olena Berg,
Assistant Secretary, Pension and Welfare Benefits Administration, U.S.
Department of Labor.
Dated: December 18, 1997.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.
[FR Doc. 97-33603 Filed 12-24-97; 8:45 am]
BILLING CODE 4830-01-P; 4510-29-P; 4120-01-P
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