Skip to page content
Employee Benefits Security Administration

EBSA (formerly PWBA) Final Rule

Group Health Plans and Health Insurance Issuers Under the Newborns' and Mothers' Health Protection Act; Joint Interim Rule [10/27/1998]

[PDF Version]

Volume 63, Number 207, Page 57545-57564

[[Page 57545]]

_______________________________________________________________________

Part V

Department of the Treasury
Internal Revenue Service



26 CFR Part 54



HIPAA Newborns' and Mothers' Health Protection Act: Temporary 
Regulations Cross-Reference; Proposed Rule

Department of Labor
Pension and Welfare Benefits Administration



29 CFR Part 2590

Department of Health and Human Services
Health Care Financing Administration



45 CFR Parts 144, 146, and 148



_______________________________________________________________________



Group Health Plans and Health Insurance Issuers Under the Newborns' and 
Mothers' Health Protection Act; Joint Interim Rule


[[Page 57546]]


-----------------------------------------------------------------------


DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 54

[TD 8788]
RIN 1545-AV52

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

29 CFR Part 2590

RIN 1210-AA63

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

45 CFR Parts 144, 146, and 148

RIN 0938-AI17

 
Interim Rules for Group Health Plans and Health Insurance Issuers 
Under the Newborns' and Mothers' Health Protection Act

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: Interim rules with request for comments.

-----------------------------------------------------------------------

SUMMARY: This document contains interim rules governing the Newborns' 
and Mothers' Health Protection Act of 1996 (NMHPA). The interim rules 
provide guidance to employers, group health plans, health insurance 
issuers, and participants and beneficiaries relating to new 
requirements for hospital lengths of stay in connection with 
childbirth. The rules contained in this document implement changes to 
the Employee Retirement Income Security Act of 1974 (ERISA) and the 
Public Health Service Act (PHS Act) made by NMHPA, and changes to the 
Internal Revenue Code of 1986 (Code) enacted as part of the Taxpayer 
Relief Act of 1997 (TRA '97). Interested persons are invited to submit 
comments on the interim rules for consideration by the Department of 
the Treasury, the Department of Labor, and the Department of Health and 
Human Services (Departments) in developing final rules.

DATES: Effective Date: The interim rules are effective January 1, 1999.
    Applicability Dates: Group market rules. The interim rules for the 
group market apply to group health plans and group health insurance 
issuers for plan years beginning on or after January 1, 1999.
    Individual market rules. The interim rules for the individual 
market apply with respect to health insurance coverage offered, sold, 
issued, renewed, in effect, or operated in the individual market on or 
after January 1, 1999.
    Comment Date. Written comments on these interim rules are invited 
and must be received by the Departments on or before January 25, 1999.

ADDRESSES: Written comments should be submitted with a signed original 
and three copies (except for electronic submissions to the Internal 
Revenue Service (IRS)) to any of the addresses specified below. For 
convenience, comments may be addressed to any of the Departments, 
except that comments relating primarily to the individual market 
regulations should be addressed to the Department of Health and Human 
Services (HHS). Any comment that is submitted to any Department will be 
shared with the other Departments.
    Comments to the IRS can be addressed to:

CC:DOM:CORP:R (REG-109708-97), Room 5228, Internal Revenue Service, POB 
7604, Ben Franklin Station, Washington, DC 20044

    In the alternative, comments may be hand-delivered between the 
hours of 8 a.m. and 5 p.m. to:

CC:DOM:CORP:R (REG-109708-97), Courier's Desk, Internal Revenue 
Service, 1111 Constitution Avenue, NW., Washington DC 20224

    Alternatively, comments may be transmitted electronically via the 
IRS Internet site at:

http://www.irs.ustreas.gov/prod/tax__regs/comments.html

    Comments to the Department of Labor can be addressed to:

U.S. Department of Labor, Pension and Welfare Benefits Administration, 
200 Constitution Avenue NW., Room N-5669,Washington, DC 20210, 
Attention: NMHPA Comments

    Alternatively, comments may be hand-delivered between the hours of 
9 a.m. and 5 p.m. to the same address.
    Comments to HHS can be addressed to:

Health Care Financing Administration, Department of Health and Human 
Services, Attention: HCFA-2892-IFC, P.O. Box 26688, Baltimore, MD 21207

    In the alternative, comments may be hand-delivered between the 
hours of 8:30 a.m. and 5 p.m. to either:

Room 309-G, Hubert Humphrey Building, 200 Independence Avenue, SW., 
Washington, DC 20201
    or
Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850

    All submissions to the IRS will be open to public inspection and 
copying in room 1621, 1111 Constitution Avenue, NW., Washington, DC 
from 9 a.m. to 4 p.m. All submissions to the Department of Labor will 
be open to public inspection and copying in the Public Documents Room, 
Pension and Welfare Benefits Administration, U.S. Department of Labor, 
Room N-5638, 200 Constitution Avenue, NW., Washington, DC from 8:30 
a.m. to 5:30 p.m. All submissions to HHS will be open to public 
inspection and copying in room 309-G of the Department of Health and 
Human Services, 200 Independence Avenue, SW., Washington, DC from 8:30 
a.m. to 5 p.m.

FOR FURTHER INFORMATION CONTACT: Amy Scheingold Turner, Pension and 
Welfare Benefits Administration, Department of Labor, at (202) 219-
4377; Suzanne Long, Health Care Financing Administration, Department of 
Health and Human Services, at (410) 786-1565; or Russ Weinheimer, 
Internal Revenue Service, Department of the Treasury, at (202) 622-
4695.

SUPPLEMENTARY INFORMATION:

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 NMHPA, may call the 
following toll-free number: 1-800-998-7542. Information on NMHPA and 
other recent health care laws is also available on the Department of 
Labor website (www.dol.gov/dol/pwba) and the Department of Health and 
Human Services' website (www.hcfa.gov).

A. Background

    The Newborns' and Mothers' Health Protection Act of 1996 (NMHPA) 
(Pub. L. 104-204) was enacted on September 26, 1996 to provide 
protections for mothers and their newborn children with regard to 
hospital lengths of stay following childbirth.<SUP>1</SUP> In section 
602 of NMHPA, Congress declared its findings that:

    \1\ NMHPA adds to protections already established under the 
Health Insurance Portability and Accountability Act of 1996 (HIPAA) 
(Pub. L. 104-191). Among other things, HIPAA provides that a group 
health plan and a group health insurance issuer may not impose any 
preexisting condition exclusion relating to pregnancy as a 
preexisting condition.
---------------------------------------------------------------------------

    (1) The length of post-delivery hospital stay should be based on 
the unique

[[Page 57547]]

characteristics of each mother and her newborn child, taking into 
consideration the health of the mother, the health and stability of 
the newborn, the ability and confidence of the mother and the father 
to care for their newborn, the adequacy of support systems at home, 
and the access of the mother and her newborn to appropriate follow-
up health care; and (2) the timing of the discharge of a mother and 
her newborn child from the hospital should be made by the attending 
---------------------------------------------------------------------------
provider in consultation with the mother.

Provisions substantially similar to those in NMHPA were later added to 
the Internal Revenue Code of 1986 (Code) by the Taxpayer Relief Act of 
1997 (TRA '97) (Pub. L. 105-34), which was enacted on August 5, 1997. 
All references hereafter to ``NMHPA'' include the relevant provisions 
of TRA '97.
    NMHPA was incorporated into the administrative framework 
established by Titles I and IV of the Health Insurance Portability and 
Accountability Act of 1996 (HIPAA) (Pub. L. 104-191).<SUP>2</SUP> These 
titles of HIPAA include substantially similar changes to the Internal 
Revenue Code, the Employee Retirement Income Security Act (ERISA), and 
the Public Health Service Act (PHS Act) relating to group health plans 
and issuers of group health insurance coverage.<SUP>3</SUP> Certain 
other provisions in Titles I and IV of HIPAA amended only ERISA or only 
the PHS Act. In particular, the PHS Act, as amended by HIPAA, contains 
provisions governing health insurance issued to small groups and health 
insurance sold in the individual market. The regulations implementing 
these provisions added by HIPAA were made available to the public on 
April 1, 1997 and published in the Federal Register on April 8, 1997. 
The group market regulations were issued jointly by the Secretaries of 
the Treasury, Labor, and Health and Human Services (HHS) (62 FR 16894). 
The individual market regulations were issued only by HHS (62 FR 
16985). See also 62 FR 31669-31670 and 31690-31696 (June 10, 1997) 
(containing technical corrections to both the group market and 
individual market regulations).
---------------------------------------------------------------------------

    \2\ NMHPA amended Chapter 100 of Subtitle K of the Code, Part 7 
of Subtitle B of Title I of the Employee Retirement Income Security 
Act (ERISA), and Title XXVII of the Public Health Service Act (PHS 
Act).
    \3\ The terms group health plan and health insurance issuer are 
defined in Code section 9832(a) and (b)(2), ERISA section 733(a) and 
(b)(2), and PHS Act section 2791(a) and (b)(2). The term group 
health insurance coverage is defined in ERISA section 733(b)(4) and 
PHS Act section 2791(b)(4). Generally, any health insurance coverage 
that does not meet the definition of group health insurance coverage 
is individual coverage even if State law treats the coverage as 
group coverage for other purposes. The terms individual health 
insurance coverage and individual market are defined in PHS Act 
section 2791(b)(5) and (e)(1).
---------------------------------------------------------------------------

NMHPA applies to health coverage in the large and small group markets, 
and in the individual market. The Secretaries of the Treasury, Labor, 
and HHS share jurisdiction over the NMHPA provisions. These provisions 
are substantially similar, except as follows:
    <bullet> The NMHPA provisions in the Code generally apply to all 
group health plans (including church plans) other than governmental 
plans, but they do not apply to health insurance issuers. The NMHPA 
provisions in the Code do not contain the requirement that a plan 
provide the special notice that is required under the NMHPA provisions 
in ERISA and the PHS Act. An employer or plan that fails to comply with 
the NMHPA provisions in the Code may be subject to an excise tax under 
section 4980D of the Code.
    <bullet> The NMHPA provisions in ERISA generally apply to all group 
health plans other than governmental plans and church plans. These 
provisions also apply to health insurance issuers that offer health 
insurance in connection with such group health plans. Generally, the 
Secretary of Labor enforces the provisions of NMHPA in ERISA, except 
that no enforcement action may be taken by the Secretary against 
issuers. However, individuals may generally pursue actions against 
issuers under ERISA and, in some circumstances, under State law.
    <bullet> The NMHPA provisions in the PHS Act generally apply to 
health insurance issuers and to certain State and local governmental 
plans. States, in the first instance, enforce the PHS Act with respect 
to issuers. Only if a State does not substantially enforce any 
provisions under its insurance laws will HHS enforce the provisions, 
through the imposition of civil money penalties. HHS has primary 
enforcement authority with respect to State and local governmental 
plans.
    The interim rules being issued today by the Secretaries of the 
Treasury, Labor, and HHS have been developed on a coordinated basis by 
the Departments. In addition, these interim rules take into account 
comments received by the Departments in response to the request for 
public comments on NMHPA published in the Federal Register on June 26, 
1997 (62 FR 34604). Except to the extent needed to reflect the 
statutory differences described above, the interim rules of each 
Department are substantively identical. However, there are certain 
nonsubstantive differences, including certain stylistic differences in 
language and structure to conform to conventions used by a particular 
Department. These differences have been minimized and any differences 
in wording (other than those reflecting differences in the NMHPA 
statutory provisions described above) are not intended to create any 
substantive difference. Finally, the individual market regulations are 
issued solely by HHS.

B. Overview of NMHPA and the Interim Rules

The General Rule for Hospital Lengths of Stay
    NMHPA and the interim rules provide a general rule under which a 
group health plan and a health insurance issuer may not restrict 
mothers' and newborns' benefits for a hospital length of stay in 
connection with childbirth to less than 48 hours following a vaginal 
delivery or 96 hours following a delivery by cesarean 
section.<SUP>4</SUP> The general rule requires plans and issuers 
providing benefits for hospital lengths of stay in connection with 
childbirth to cover the minimum length of stay for all deliveries. The 
interim rules provide that the determination of whether an admission is 
in connection with childbirth is a medical decision to be made by the 
attending provider. An example clarifies that delivery does not have to 
occur inside a hospital in order for an admission to be ``in connection 
with childbirth.'' NMHPA and the interim rules permit an exception to 
the 48-hour (or 96-hour) general rule if the attending provider 
decides, in consultation with the mother, to discharge the mother or 
her newborn earlier.
---------------------------------------------------------------------------

    \4\ The interim rules use the term ``vaginal delivery'' to 
clarify that all vaginal deliveries, whether with complications or 
without complications, are subject to the 48-hour length-of-stay 
requirement.
---------------------------------------------------------------------------

    Many commenters asked whether the length of stay should be 
calculated from the time of delivery. Under the interim rules, when 
delivery occurs in the hospital, the stay begins at the time of 
delivery (or in the case of multiple births, at the time of the last 
delivery). When delivery occurs outside the hospital, the stay begins 
at the time the mother or newborn is admitted.
    An attending provider is an individual who is licensed under 
applicable State law to provide maternity or pediatric care and who is 
directly responsible for providing such care to a mother or newborn 
child. Therefore, a plan, hospital, managed care organization, or other 
issuer is not an attending provider. However, a nurse midwife or a 
physician assistant may be

[[Page 57548]]

an attending provider if licensed in the State to provide maternity or 
pediatric care in connection with childbirth.

Prohibitions

    As noted above, an exception to the 48-hour (or 96-hour) general 
rule applies if the attending provider decides, in consultation with 
the mother, to discharge the mother or newborn earlier. NMHPA and the 
interim rules prohibit certain practices to ensure that this exception 
will not result in early discharges that could adversely affect the 
health or well-being of the mother or newborn.
    Specifically, with respect to mothers, NMHPA provides that a group 
health plan or health insurance issuer may not deny a mother or her 
newborn child eligibility or continued eligibility to enroll or renew 
coverage under the terms of the plan or policy solely to avoid the 
NMHPA requirements, or provide monetary payments or rebates to a mother 
to encourage her to accept less than the minimum protections available 
under NMHPA. The interim rules clarify that such prohibited payments 
include payments-in-kind. However, an example in the interim rules 
clarifies that a plan or issuer does not violate this prohibition by 
providing after-discharge, follow-up services to a mother and newborn 
discharged early if those services are not more than what the mother 
and newborn would have received if they had stayed in the hospital the 
full 48 hours (or 96 hours).
    In addition, with respect to benefit restrictions, NMHPA and the 
interim rules provide that a plan or issuer may not restrict the 
benefits for any portion of a 48-hour (or 96-hour) hospital length of 
stay in a manner that is less favorable than the benefits provided for 
any preceding portion of the stay. This prohibition includes certain 
types of precertification requirements, discussed below in the 
Authorization and precertification section.
    Finally, with respect to attending providers, NMHPA provides that a 
plan or issuer may not penalize, or otherwise reduce or limit the 
reimbursement of, an attending provider because the provider furnished 
care to a mother or newborn in accordance with NMHPA, or provide 
monetary or other incentives to an attending provider to induce the 
provider to furnish care to a mother or newborn in a manner 
inconsistent with NMHPA. The interim rules clarify this prohibition in 
four ways. First, the prohibition applies to both direct and indirect 
incentives to attending providers. Second, penalties against an 
attending provider include taking disciplinary action against or 
retaliating against the attending provider. Third, the term 
``compensation'' is used in the interim rules rather than the term 
``reimbursement'' to clarify that all forms of remuneration to 
attending providers are included in the prohibition, and to avoid any 
confusion that otherwise could result from the fact that the term 
``reimbursement'' has a narrower meaning in some insurance contexts. 
Fourth, the statutory phrase ``to induce'' is interpreted to include 
providing any incentive that could induce an attending provider to 
furnish care inconsistent with NMHPA and the interim rules (whether or 
not a specific attending provider is actually induced to furnish care 
inconsistent with NMHPA and the interim rules).
Construction
    NMHPA and the interim rules apply only to group health plans and 
health insurance issuers that provide benefits for a hospital stay in 
connection with childbirth. NMHPA and the interim rules do not require 
plans and issuers to provide these benefits.<SUP>5</SUP> In addition, 
NMHPA and the interim rules do not prevent plans or issuers from 
imposing deductibles, coinsurance, or other cost-sharing measures for 
health benefits relating to hospital stays in connection with 
childbirth as long as the cost-sharing for any portion of a hospital 
stay subject to the general rule is not less favorable to mothers and 
newborns than that imposed on any preceding portion of the stay. Thus, 
for example, with respect to a 48-hour hospital stay, the coinsurance 
for the second 24 hours cannot be greater than that for the first 24 
hours.
---------------------------------------------------------------------------

    \5\ While NMHPA and the interim rules do not require plans and 
issuers to provide coverage for hospital stays in connection with 
childbirth, other legal requirements may apply, including Title VII 
of the Civil Rights Act of 1964 (Title VII). Title VII prohibits 
discrimination on the basis of sex, including because of pregnancy, 
childbirth, or related medical conditions. 42 U.S.C. 2000e-(k). The 
Equal Employment Opportunity Commission (EEOC) has commented, by 
letter dated July 28, 1997, that, ``[u]nder Title VII, women 
affected by pregnancy, childbirth, or related medical conditions 
must be treated the same as individuals affected by other medical 
conditions. This applies to all aspects of employment, including 
employer-provided health insurance benefits. * * * Thus, Title VII 
prohibits a plan from excluding hospital stay benefits in connection 
with childbirth if the plan provides hospital stay benefits in 
connection with other medical conditions.'' EEOC is the federal 
agency responsible for enforcing Title VII and other federal equal 
employment opportunity laws. Questions regarding Title VII should be 
directed to the EEOC.
---------------------------------------------------------------------------

    With respect to health insurance coverage offered in the individual 
market, NMHPA and the interim rules apply to all health insurance 
coverage, and are not limited in their application to coverage that is 
provided to eligible individuals, as defined in section 2741(b) of the 
PHS Act.
Authorization and Precertification
    NMHPA and the interim rules contain three provisions that affect 
authorization and precertification for hospital lengths of stay in 
connection with childbirth.
    <bullet> Under paragraph (a) of the interim rules (relating to 
hospital length of stay), a group health plan or a health insurance 
issuer may not require a physician or other health care provider to 
obtain authorization from the plan or issuer to prescribe a hospital 
length of stay that is subject to the general rule.
    <bullet> Under paragraph (b) of the interim rules (relating to 
prohibitions), a plan or issuer may not restrict benefits for part of a 
stay subject to the general rule in a way that is less favorable than a 
prior portion of the stay. Under an example in the interim rules, a 
plan or issuer is precluded from requiring a covered individual to 
obtain precertification for any portion of a hospital stay that is 
subject to the general rule if precertification is not required for any 
preceding portion of the stay. However, the interim rules do not 
prevent a plan or issuer from requiring precertification for any 
portion of a stay after 48 hours (or 96 hours), or from requiring 
precertification for an entire stay.
    <bullet> In addition, under paragraph (c) of the interim rules 
(containing rules of construction), a plan or issuer may not increase 
an individual's coinsurance for any later portion of a 48-hour (or 96-
hour) hospital stay. An example illustrates that plans and issuers may 
vary cost-sharing in certain circumstances, provided the cost-sharing 
rate is consistent throughout the 48-hour (or 96-hour) hospital length 
of stay.
Compensation of Attending Provider
    NMHPA and the interim rules do not prevent a group health plan or a 
health insurance issuer from negotiating with an attending provider the 
level and type of compensation for care furnished in accordance with 
the interim rules (including the prohibitions section).
Applicability in Certain States
    There is an exception to the NMHPA requirements for health 
insurance coverage in certain States.<SUP>6</SUP> Specifically,

[[Page 57549]]

NMHPA and the interim rules do not apply with respect to health 
insurance coverage if there is a State law <SUP>7</SUP> that meets any 
of the following criteria:
---------------------------------------------------------------------------

    \6\ The term State includes the 50 States, the District of 
Columbia, Puerto Rico, the Virgin Islands, American Samoa, Guam, 
Wake Island, the Northern Mariana Islands, and the Canal Zone (i.e., 
the areas and installations in the Republic of Panama made available 
to the United States pursuant to the Panama Canal Treaty of 1977 and 
related agreements, until December 31, 1999.)
    \7\ Generally, under Part 7 of ERISA and Title XXVII of the PHS 
Act, a State law that ``prevents the application of `` those 
provisions is preempted by section 731(a)(1) of ERISA and sections 
2723(a)(1) and 2762(a)(1) of the PHS Act. However, NMHPA specifies 
that State laws that meet the statutory criteria will apply even 
though they might otherwise ``prevent the application of'' the NMHPA 
requirements. See section 711(f) of ERISA and sections 2704(f) and 
2751(c) of the PHS Act.
---------------------------------------------------------------------------

    <bullet> The State law requires health insurance coverage to 
provide at least a 48-hour (or 96-hour) hospital length of stay in 
connection with childbirth,
    <bullet> The State law requires health insurance coverage to 
provide for maternity and pediatric care in accordance with guidelines 
established by the American College of Obstetricians and Gynecologists, 
the American Academy of Pediatrics, or any other established 
professional medical association, or
    <bullet> The State law requires that decisions regarding the 
appropriate hospital length of stay in connection with childbirth be 
left entirely to the attending provider in consultation with the 
mother. The interim rules clarify that State laws that require the 
mother to consent to the decision made by the attending provider 
satisfy this criterion.
    Although this NMHPA exception applies with respect to insured group 
health plans, it does not apply with respect to a group health plan to 
the extent the plan provides benefits for hospital lengths of stay in 
connection with childbirth other than through health insurance 
coverage.<SUP>8</SUP>
---------------------------------------------------------------------------

    \8\ In conducting an economic analysis of the interim rules, the 
Departments of Labor and HHS conducted a preliminary review of State 
laws to determine the applicability of NMHPA's requirements in each 
State. This discussion, in section D of this preamble, includes a 
list of the States in which the Departments of Labor and HHS 
assumed, solely for the purpose of the economic analysis, that 
NMHPA's requirements apply.
---------------------------------------------------------------------------

Notice Requirements Under ERISA and the PHS Act
    ERISA background. ERISA generally requires that participants in, 
and beneficiaries receiving benefits under, a group health plan be 
furnished a summary plan description (SPD) to apprise them of their 
rights and obligations under the plan. ERISA and its implementing 
regulations prescribe what is to be included in the SPD, and the manner 
in which participants and beneficiaries are to be notified of any 
``material modification'' to the terms of the plan or any change in the 
information required to be included in the SPD. A summary description 
of a material modification is generally required to be furnished not 
later than 210 days after the end of the plan year in which the change 
is adopted. A summary of any material reduction in covered services or 
benefits is generally required to be furnished not later than 60 days 
after adoption of the change.
    NMHPA changes to ERISA and the PHS Act. The NMHPA amendments to 
ERISA added section 711(d), which requires that the imposition of the 
NMHPA requirements is to be treated as a material modification to the 
plan, except that the summary description of the modification must be 
provided by not later than 60 days after the first day of the first 
plan year in which the requirements apply. NMHPA also amended both the 
group and individual market provisions of title XXVII of the PHS Act to 
apply the ERISA notice requirement to certain entities not otherwise 
subject to ERISA.
    The Department of Labor published interim regulations implementing 
section 711(d) of ERISA on April 8, 1997 (62 FR 16979), issued 
separately from the HIPAA regulations published on the same date.
    Section 2704(d) of the PHS Act requires nonfederal governmental 
plans to comply with the notice requirement contained in section 711(d) 
of ERISA as if that section applied to the plan. Similarly, section 
2751(b) of the PHS Act requires a health insurance issuer in the 
individual market to comply with the notice requirement in section 
711(d) of ERISA as if that section applied to the issuer and as if the 
issuer were a group health plan.
    The NMHPA interim rules published today include the notice 
provisions applicable under the PHS Act. They are based on the 
requirements contained in the Department of Labor's original notice 
regulations, but have been adapted for two reasons. First, changes were 
made to accommodate the Departments' interpretations of NMHPA's 
substantive requirements as contained in these interim rules. A 
revision of the notice provisions applicable to plans subject to ERISA 
recently was published in the Federal Register in order to accommodate 
these interpretations. 63 FR 48372 (September 9, 1998). Second, the 
statute provides that covered individuals in both the individual and 
group markets (in group health plans subject to either ERISA or the PHS 
Act) be notified of their rights under NMHPA. While there are 
fundamental differences in the types of entities regulated under ERISA 
as compared to the PHS Act, and in the structure of the two Acts, the 
Departments are coordinating their work on these two regulations to 
ensure that affected individuals will receive the same disclosure of 
rights, adapted as appropriate to take into account the different 
contexts.
    Substance of the PHS Act notice requirements--In the group market. 
Section 2704 of the PHS Act applies the NMHPA requirements to group 
health plans that are subject to the group market provisions of Part A 
of Title XXVII of the PHS Act. The only group health plans that are 
subject to the PHS Act are nonfederal governmental plans, which are not 
directly subject to any ERISA requirements. In addition, these plans 
may elect to be exempt from most of the requirements of Title XXVII, 
including the NMHPA requirements, with respect to self-insured 
benefits. Section 2704(d) states that a group health plan subject to 
the PHS Act ``shall comply with the notice requirement under section 
711(d) of [ERISA] with respect to the requirements of this section as 
if such section applied to such plan.''
    These interim rules interpret section 2704(d) of the PHS Act to 
require that nonfederal governmental plans that provide benefits for 
hospital lengths of stay in connection with childbirth, and that are 
subject to the NMHPA requirements, provide participants and 
beneficiaries with a statement describing those requirements. The 
statement must be included in the plan document that provides a 
description of plan benefits to participants and beneficiaries and must 
be furnished to participants and beneficiaries not later than 60 days 
after the first day of the first plan year beginning on or after the 
effective date of these interim rules.<SUP>9</SUP> The interim rules 
set forth the language that must be used by plan administrators to 
satisfy the notice requirement for group health plans subject to the 
PHS Act.
---------------------------------------------------------------------------

    \9\ Although the specific requirements of these interim rules 
therefore apply for plan years beginning on or after January 1, 
1999, the underlying statutory requirement went into effect for plan 
years beginning on or after January 1, 1998, the effective date of 
NMHPA.
---------------------------------------------------------------------------

    In the individual market. Section 2751(a) of the PHS Act applies 
the NMHPA requirements to health insurance issuers in the individual 
market. Section 2751(b) states that a health insurance issuer subject 
to the individual market provisions of the PHS Act ``shall comply with 
the notice requirement under section 711(d) of [ERISA] with respect to 
[the NMHPA requirements] as if such section applied to such issuer and 
such issuer were a group health plan.'' Issuers in the individual 
market are not subject to any

[[Page 57550]]

federal requirements comparable to disclosure of a ``summary plan 
description'' under ERISA, although they may be subject to similar 
State law requirements. In addition, the concept of a ``plan year'' 
does not apply in the individual market, and the effective date of the 
NMHPA requirements is not tied to a plan year. Accordingly, the 
requirements of these interim rules apply to health insurance coverage 
``offered, sold, issued, renewed, in effect, or operated'' in the 
individual market on or after the effective date of these interim 
rules.<SUP>10</SUP>
---------------------------------------------------------------------------

    \10\ Although the specific requirements of these interim rules 
therefore apply on or after January 1, 1999, the underlying 
statutory requirement went into effect January 1, 1998, the 
effective date of NMHPA.
---------------------------------------------------------------------------

    These interim rules interpret section 2751(b) of the PHS Act to 
require that issuers of individual health insurance coverage that 
includes benefits for hospital lengths of stay in connection with 
childbirth must include a statement in the insurance contract 
describing the NMHPA requirements, and, not later than 60 days after 
the effective date of the interim rules, provide covered individuals 
with a rider or equivalent document that gives notice of the NMHPA 
requirements. The interim rules set forth the language that must be 
used in an insurance contract (or rider) to satisfy the notice 
requirement added by NMHPA.
Effective Dates
    Group market. NMHPA applies to group health plans and group health 
insurance issuers for plan years beginning on or after January 1, 1998. 
The interim rules for the group market apply to group health plans and 
group health insurance issuers for plan years beginning on or after 
January 1, 1999.
    Individual market. NMHPA applies to health insurance coverage 
offered, sold, issued, renewed, in effect, or operated in the 
individual market on or after January 1, 1998. The interim rules for 
the individual market apply to health insurance coverage offered, sold, 
issued, renewed, in effect, or operated in the individual market on or 
after January 1, 1999.

C. Interim Rules and Request for Comments

    Section 9833 of the Code (formerly section 9806), section 734 of 
ERISA (formerly section 707), and section 2792 of the PHS Act authorize 
the Secretaries of the Treasury, Labor, and HHS to promulgate any 
interim final rules that they determine are appropriate to carry out 
the provisions of Chapter 100 of Subtitle K of the Code, Part 7 of 
Subtitle B of Title I of ERISA, and Title XXVII of the PHS Act, which 
include the NMHPA provisions. The Departments have determined that 
interim final rules are appropriate because there is a need to define 
the substance of the federal requirements and the scope of their 
applicability in anticipation of the 1999 plan year.
    Many commenters have asked the Departments to clarify certain NMHPA 
provisions. For example, the Departments have been asked when the 48-
hour (or 96-hour) stay begins, and whether the requirements apply only 
after birth in a hospital. In addition, NMHPA does not apply to health 
insurance coverage if there is a State law that meets certain criteria 
outlined in the NMHPA exception. Currently, there are many States that 
have such laws meeting the NMHPA exception. Commenters have asked the 
Departments to clarify the applicability of federal law in these States 
as well as in other States that do not have a law meeting NMHPA's 
criteria.
    On June 26, 1997 the Departments of Labor and HHS issued a Request 
for Information (RFI) inviting comments on the NMHPA provisions. After 
consideration of the many comments received in response to the 
Departments' RFI and in light of the outstanding questions relating to 
the substance and applicability of NMHPA, the Departments have 
determined that it is appropriate to issue interim final rules at this 
time to ensure that group health plans and health insurance issuers 
have timely guidance before they prepare their open season materials in 
anticipation of the 1999 plan year. (More than one half of plans begin 
their fiscal years on January 1.) Written comments on these interim 
rules are invited.

D. Executive Order 12866, Effect of the Statute, and Paperwork 
Reduction Act--The Departments of Labor and HHS

Executive Order 12866
    Executive Order 12866 requires agencies to assess all costs and 
benefits of available regulatory alternatives, and when regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects; distributive impacts; and equity). Section 3(f) of Executive 
Order 12866 requires agencies to prepare a regulatory impact analysis 
for any rule that is deemed a ``significant regulatory action'' 
according to specified criteria. This includes whether the rule may 
have an annual effect on the economy of $100 million or more or certain 
other specified effects, or whether the rule raises novel legal or 
policy issues arising out of the President's priorities.
    The Office of Management and Budget (OMB) has determined this to be 
a major rule, as well as an economically significant regulatory action 
under Section 3(f) of Executive Order 12866. The estimated impact of 
NMHPA on insured costs is in the range of $130 million to $200 million. 
The following analysis was conducted by the Departments of Labor and 
Health and Human Services.
    The interim rules, for the most part, mirror the statutory 
provisions, which are largely self-executing. While the interim rules 
make interpretations or clarifications to some of the statutory 
provisions, none of these has a significant economic impact. The effect 
of the statute is addressed below.
Effect of the Statute
    NMHPA was passed in response to a finding by the Congress that 
group health plans and health insurance issuers tend to limit benefits 
for hospital lengths of stay in connection with childbirth. The main 
intent of the law was to ensure that adequate care is provided to 
mothers and their newborns during the first few critical days following 
birth. The Congress was concerned that the decision to discharge the 
mother and newborn was being driven by the financial motivations of 
plans and issuers, rather than the medical interests of the patient.
    NMHPA was modeled after guidelines developed by the American 
College of Obstetricians and Gynecologists (ACOG) and the American 
Academy of Pediatrics (AAP). NMHPA allows the attending provider, in 
consultation with the mother, to make hospital length of stay 
decisions, rather than the plan or issuer. Although mothers and their 
newborns are not obligated to stay in the hospital for any period of 
time following delivery, plans and issuers must now cover at least 48 
hours following a vaginal delivery and at least 96 hours following a 
delivery by cesarean section unless the attending provider, in 
consultation with the mother, decides to discharge earlier.
    Many believe that the minimum length of stay requirements of 48 
hours for a vaginal delivery and 96 hours for a cesarean section will 
have a positive impact on the overall health and well-being of mothers 
and newborns. The longer stays will allow health care providers 
sufficient time to screen for metabolic and genetic disorders in 
newborns. It will also permit time to provide parental education to 
mothers

[[Page 57551]]

and to assess their ability to care for their newborn.
    Although some services performed in an inpatient hospital setting 
may be effectively provided in other settings, such as clinics or 
physicians' offices, not all women have had access to the full range of 
appropriate follow-up care. NMHPA ensures that many women and newborns 
with health coverage will now be provided an acceptable level of 
postpartum care.
    Many States <SUP>11</SUP> have enacted laws that prescribe benefits 
for hospital lengths of stay in connection with childbirth. NMHPA 
provides that the federal NMHPA requirements do not apply with respect 
to health insurance coverage <SUP>12</SUP> if there is a State law that 
satisfies one or more of the following criteria: (1) requires such 
coverage to provide for at least a 48-hour hospital length of stay 
following a vaginal delivery and at least a 96-hour length of stay 
following a delivery by cesarean section, (2) requires such coverage to 
provide for maternity and pediatric care in accordance with guidelines 
established by the American College of Obstetricians and Gynecologists, 
the American Academy of Pediatrics, or other established professional 
medical associations, or (3) requires, in connection with such coverage 
for maternity care, that the hospital length of stay for such care is 
left to the decision of (or is required to be made by) the attending 
provider in consultation with the mother.
---------------------------------------------------------------------------

    \11\ For purposes of Part 7 of ERISA and Title XXVII of the PHS 
Act (including the NMHPA provisions), the term State includes the 50 
States, the District of Columbia, Puerto Rico, the Virgin Islands, 
American Samoa, Guam, Wake Island, the Northern Mariana Islands, and 
the Canal Zone (i.e., the areas and installations in the Republic of 
Panama made available to the United States pursuant to the Panama 
Canal Treaty of 1977 and related agreements, until December 31, 
1999.)
    \12\ The term health insurance coverage means ``benefits 
consisting of medical care (provided directly, through insurance or 
reimbursement, or otherwise and including any items and services 
paid for as medical care) under any hospital or medical service 
policy or certificate, hospital or medical service plan contract, or 
health maintenance organization contract offered by a health 
insurance issuer.'' ERISA section 733(b)(1) and PHS Act section 
2791(b)(1). The term health insurance issuer means ``an insurance 
company, insurance service, or insurance organization * * * which is 
licensed to engage in the business of insurance in a State and which 
is subject to State law which regulates insurance.* * * Such term 
does not include a group health plan.'' ERISA section 733(b)(2) and 
PHS Act section 2791(b)(2).
---------------------------------------------------------------------------

    Accordingly, the federal NMHPA requirements do not apply to insured 
plans (and partially-insured plans, to the extent benefits for hospital 
lengths of stay in connection with childbirth are provided through 
insurance coverage) in States in which a State law meets one or more of 
the above criteria. Moreover, the federal NMHPA requirements do not 
apply to issuers (both in the group market and the individual market) 
in States in which State law meets one or more of the above criteria. 
However, the federal NMHPA requirements apply to self-insured plans 
(and partially-insured plans, to the extent benefits for hospital 
lengths of stay in connection with childbirth are provided other than 
through insurance coverage), regardless of State law.
    According to a chart developed by the National Association of 
Insurance Commissioners for a hearing in September 1997 before the 
House Committee on Ways and Means, Subcommittee on Health, many States 
already had provisions in their laws or regulations prescribing 
benefits for hospital lengths of stay in connection with childbirth 
before the enactment of NMHPA. Subsequently, for purposes of this 
discussion of the Effect of the Statute, the Departments performed a 
preliminary review of State laws as of July 1, 1998.<SUP>13</SUP> As a 
result of this review, it is estimated that 40 States have laws that 
appear to meet the criteria specified in NMHPA. These States are as 
follows: Alabama, Alaska, Arizona, Arkansas, California, Colorado, 
Connecticut, the District of Columbia, Florida, Georgia, Illinois, 
Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, 
Massachusetts, Minnesota, Missouri, Montana, Nevada, New Hampshire, New 
Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, 
Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, 
Tennessee, Texas, Virginia, Washington, and West Virginia.
---------------------------------------------------------------------------

    \13\ In conducting the review, the Departments considered State 
statutes, regulations, rules, bulletins, and case law. However, the 
review did not take into account other State actions that should be 
considered when making a legal determination regarding whether a 
State law meets the criteria specified in NMHPA.
---------------------------------------------------------------------------

    Accordingly, in these 40 States, only church plans, self-insured 
private-sector employer-sponsored group health plans,<SUP>14</SUP> and 
self-insured nonfederal governmental plans <SUP>15</SUP> will be 
affected by NMHPA. Based on data from the March 1996 Current Population 
Survey and other sources, Price Waterhouse has estimated that there are 
approximately 270,000 self-insured ERISA plans covering 53 million 
individuals. In addition, based on data from the March 1996 Current 
Population Survey and other sources, Price Waterhouse estimated that 
there are approximately 30,000 self-insured nonfederal governmental 
plans covering 18 million individuals.<SUP>16</SUP>
---------------------------------------------------------------------------

    \14\ Hereafter, other private-sector employer-sponsored group 
health plans are referred to as ERISA plans.
    \15\ The term nonfederal governmental plan means a governmental 
plan that is not a federal governmental plan. PHS Act section 
2791(d)(8)(C). The term governmental plan generally means a plan 
established or maintained for its employees by the government of the 
United States, by the government of any State or political 
subdivision thereof, or by any agency or instrumentality of any of 
the foregoing. PHS Act section 2791(d)(8)(A). The term federal 
governmental plan means a governmental plan established or 
maintained for its employees by the government of the United States 
or by any agency or instrumentality of such government. PHS Act 
section 2791(d)(8)(B).
    \16\ Sponsors of self-insured nonfederal governmental plans can 
elect to have their plans exempted from most of the requirements of 
Title XXVII of the PHS Act, including the NMHPA requirements, with 
respect to self-insured benefits. To date, fewer than 600 sponsors 
have elected to have their plans exempted in whole or in part, and 
at least some of these plans have chosen to be exempt from NMHPA. 
This means the number of self-insured nonfederal governmental plans 
affected by NMHPA will be less than the 30,000 plans cited above.
---------------------------------------------------------------------------

    NMHPA will also affect insured ERISA plans, insured church plans, 
insured nonfederal governmental plans, and issuers in the individual 
market in States that do not have a law meeting one or more of the 
criteria specified in NMHPA. For purposes of this review of the Effect 
of the Statute, the Departments performed a preliminary review of State 
laws as of July 1, 1998. As a result of this review, it is estimated 
that the federal NMHPA requirements will apply to health insurance 
coverage in 18 States.<SUP>17</SUP> These States are as follows: 
Delaware, Hawaii, Idaho, Michigan, Mississippi, Nebraska, Oregon, Utah, 
Vermont, Wisconsin, Wyoming, Puerto Rico, the Virgin Islands, American 
Samoa, Guam, Wake Island, the Northern Mariana Islands, and the Canal 
Zone (i.e., the areas and installations in the Republic of Panama made 
available to the United States pursuant to the Panama Canal Treaty of 
1977 and related agreements, until December 31, 1999).
---------------------------------------------------------------------------

    \17\ The federal NMHPA provisions appear to apply in these 18 
States because either the State has not enacted any law that meets 
the NMHPA criteria or the State has incorporated the federal NMHPA 
requirements by reference.
---------------------------------------------------------------------------

    Based on data from the March 1996 Current Population Survey and 
other sources, Price Waterhouse estimated that there are approximately 
2.5 million insured ERISA plans, 145,000 insured nonfederal 
governmental plans, and 1,000 issuers in the individual market. For a 
variety of reasons, these totals cannot be broken down by State. These 
reasons include a lack of detailed data at the State level and 
inconsistencies in how data are reported, both within and across 
States. In addition, the

[[Page 57552]]

complexities and volatility of today's health care environment, the 
segmentation of the health care markets, and the rapid increase in 
various forms of managed care arrangements make it difficult to define 
and track such plans.<SUP>18</SUP>
---------------------------------------------------------------------------

    \18\ See, for example, Chollet, D.J., Kirk, A.M. and Ermann, 
R.D. (1997). Mapping Insurance Markets: The Group and Individual 
Insurance Markets in 26 States. Washington: The Alpha Center.
---------------------------------------------------------------------------

    The Congressional Budget Office (CBO) did not estimate costs for 
implementing NMHPA, passed by the Congress in September 1996. However, 
CBO estimated the costs for implementing S.969, the Senate version of 
NMHPA. While there are several differences between S.969 and the final 
joint legislation,<SUP>19</SUP> the CBO estimates for implementing S. 
969 are the only relevant cost data available, and can be used as a 
baseline estimate for the cost impact of NMHPA.
---------------------------------------------------------------------------

    \19\ S. 969 contained provisions for post-delivery follow-up 
care, or home health visits. In addition, the costs provided by CBO 
assumed an implementation date of January 1, 1997, rather than 
January 1, 1998.
---------------------------------------------------------------------------

    After making adjustments to reflect the effects of State laws in 
effect at the time of their estimates, CBO concluded that about 900,000 
insured births a year have shorter hospital lengths of stay than the 
minimum lengths of stay provided under NMHPA. CBO assumed that some of 
these births would result in an additional inpatient day, and some 
would receive a follow-up visit. Some mothers would still choose to go 
home before the full time allowed by NMHPA, while others are already 
receiving a timely follow-up visit and therefore would not incur any 
additional costs. CBO estimated that inpatient hospital days would 
increase by approximately 400,000 days and follow-up care would 
increase by approximately 200,000 visits annually.
    CBO estimated that the additional utilization due to the 
implementation of S. 969 would have resulted in an aggregate increase 
in insured costs of 0.06 percent for all employment-based and 
individually purchased health plans. CBO assumed that, in response to 
the increase in premiums, employers and individuals may choose to 
reduce coverage or drop benefits. Although some plans may make slight 
reductions in overall benefits to offset this minimal increase in cost, 
the Departments believe that virtually no employers will drop health 
coverage entirely or drop coverage for hospital stays in connection 
with childbirth. After taking behavioral responses into account, CBO 
estimated that employer contributions for health insurance would only 
rise by about 0.02 percent and most of that increase likely would be 
passed back to employees in the form of reduced wages.
    Applying the same 0.06 percent increase to the cost of health 
insurance for covered employees of nonfederal governmental plans would 
raise expenditures. However, CBO assumed that most of these costs would 
be passed back to employees.
    Apart from increased benefit costs for their employees, States may 
face additional costs for enforcing NMHPA's requirements on issuers of 
health insurance in the group and individual markets. Because States 
currently regulate the private-sector health insurance market, CBO 
assumed that the increase in costs would be marginal. However, in cases 
where States fail to implement NMHPA or their own laws meeting the 
criteria specified in NMHPA, the federal government assumes enforcement 
authority. Depending on the need for federal enforcement, some of the 
aforementioned costs may be shifted to the federal government.
    Although the CBO estimates for implementing S. 969 can be used as a 
baseline for determining the cost impact of NMHPA, they must be updated 
to reflect the enactment in several additional States of laws or 
regulations meeting the criteria specified in NMHPA and for the 
elimination of post-delivery follow up care. Adjusting the CBO 
estimates for 28 States that had laws that met the criteria specified 
in NMHPA at the time of NMHPA's enactment, reduces the number of people 
directly affected by NMHPA. Approximately 60 percent of people covered 
by insured ERISA plans and therefore subject to State laws, are in the 
28 States that had enacted laws prior to NMHPA.
    With fewer people affected, the assumed increase in utilization is 
also lower, which should translate into a smaller increase in aggregate 
health care costs. However, as discussed previously, S. 969 had a 
provision for follow-up visits in place of an additional inpatient day. 
CBO assumed that about one-third of the additional utilization would be 
follow-up visits, and that the cost of a follow-up visit is only about 
one-fourth the cost of a post-delivery hospital day.
    Based on those assumptions, if all of those who would have chosen a 
follow-up visit under S. 969 elected to remain in the hospital for an 
additional day, the estimated aggregate increase in insured costs would 
be 0.07 percent, slightly higher than the CBO estimate. If, however, 
mothers and physicians determine that some of the follow-up care is 
unnecessary, and that less than the minimum hospital length of stay is 
necessary, some of the additional costs will not be incurred. If none 
of the follow-up visits were converted to additional inpatient days, 
the estimated aggregate increase in insured costs would be 0.04 
percent. Therefore, the impact of NMHPA on insured costs is in the 0.04 
to 0.07 percent range, or $130 million to $200 million (1996 dollars).
    It should be noted that since the enactment of NMHPA, twelve 
additional States have enacted laws or regulations meeting the criteria 
specified in NMHPA. These laws apply to an additional 25 percent of 
those in fully insured health insurance plans. While some of these 
States passed legislation in direct response to the federal law, other 
States had already considered hospital lengths of stay for childbirth, 
but without final passage of legislation. Thus, the estimates of the 
statutory impacts, as of the date of enactment, probably overstate the 
direct impact of NMHPA.
Paperwork Reduction Act
    The interim rules contain no new information collection 
requirements that are subject to review and approval by OMB under the 
Paperwork Reduction Act of 1995 (Pub. L. 104-13, 44 U.S.C. Chapter 35). 
The agencies reported the information collection burdens associated 
with NMHPA in the interim rules (Interim Rules Amending ERISA 
Disclosure Requirements for Group Health Plans) implementing section 
711(d) of ERISA that were published in the Federal Register on April 8, 
1997 (62 FR 16979). OMB approved these information collection 
requirements under OMB control number 1210-0039. Subsequently, the 
agencies published the OMB control number in the Federal Register at 62 
FR 36205 (July 7, 1997).
    In addition, the group and individual market notification 
requirements for group health plans under section 2704(d), and issuers 
under 2751(b) of the PHS Act, are not considered ``information'' as 
defined in 5 CFR 1320.3(c)(2) and are therefore not subject to the 
Paperwork Reduction Act of 1995. In particular, 5 CFR 1320.3(c)(2) 
states that ``the public disclosure of information originally supplied 
by the federal government to the recipient for the purpose of 
disclosure to the public is not included within the definition'' of a 
collection of information.

[[Page 57553]]

E. Regulatory Flexibility Act, Unfunded Mandates Reform Act of 1995, 
and Small Business Regulatory Enforcement Fairness Act of 1995

Regulatory Flexibility Act
    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq) requires 
that, whenever an agency is required to publish a general notice of 
proposed rulemaking, the agency shall prepare and make available for 
public comment an initial regulatory flexibility analysis. The analysis 
describes the impact of the rule on small entities and identifies any 
significant alternatives to the rule which accomplish the stated 
objectives of the applicable law and which would minimize the impact on 
small entities. For purposes of the RFA, States and individuals are not 
considered small entities. Small employers and small group health plans 
are considered small entities.
    Since these rules are being issued as interim final rules and not 
as a Notice of Proposed Rulemaking (NPRM), the RFA does not apply and a 
regulatory flexibility analysis is not required. Nonetheless, the 
Departments have considered the likely impact of the rules on small 
entities and believe that the rules will not have a significant impact 
on a substantial number of small entities for the following reasons: 
(1) the major provisions of the rules mirror the statutory provisions, 
which are largely self-executing and do not afford the Departments 
substantial discretion to exercise regulatory flexibility; (2) the 
interpretations or clarifications to the statutory provisions that are 
made by these rules are minor and will not have a significant impact; 
and (3) because most States have laws that apply in place of the NMHPA 
standards, in those States the interim rules will not apply to 
insurance issuers, which are subject to State law, and will have no 
impact on group health plans that purchase insurance in those States. 
Therefore the main impact of these rules will be on group health plans 
that self-insure. Because small plans are more likely to purchase 
State-regulated insurance than to self-insure, they will be less likely 
to be affected by these rules.
    Although, for the reasons stated, we believe that these rules will 
not have a significant impact on small entities, specific data that 
would permit a complete evaluation of the impact on small entities is 
not currently available. Therefore, the Departments invite interested 
persons to submit comments on the impact of these rules on small 
entities for consideration in the development of the final rules 
implementing NMHPA. Consistent with the RFA, the Departments also 
encourage the public to submit comments on alternative rules that will 
accomplish the stated purpose of NMHPA and minimize the impact on small 
entities.
Unfunded Mandates Reform Act of 1995
    The Unfunded Mandates Reform Act of 1995 (UMRA, Pub. L. 104-4) 
requires agencies to prepare several analytic statements before 
proposing any rules that may result in annual expenditures of $100 
million by State, local, and Indian tribal governments or the private 
sector. These rules are not subject to the UMRA because they are 
interim rules. However, consistent with the policy embodied in the 
UMRA, the interim rules have been designed to be the least burdensome 
alternative for State, local, tribal governments, and the private 
sector.
Small Business Regulatory Enforcement Fairness Act of 1996
    The Administrator of the Office of Information and Regulatory 
Affairs of OMB has determined that this is a major rule for purposes of 
the Small Business Regulatory Enforcement Fairness Act of 1996 (5 
U.S.C. 801 et seq.) (SBREFA). In general, SBREFA provides, among other 
things, that a federal agency must submit all rules for full 
Congressional review. Pursuant to SBREFA, Congress has 60 session days 
to review and approve or disapprove a major rule. The Secretaries have 
determined that the effective date of these interim rules is January 1, 
1999. Because the effective date of these interim rules is more than 60 
days after publication in the Federal Register and receipt by Congress, 
the requirements of SBREFA have been satisfied with respect to these 
rules.

Statutory Authority

    The Department of the Treasury temporary rule is adopted pursuant 
to the authority contained in section 7805 and in section 9833 of the 
Code (26 U.S.C. 7805, 9833), as added by HIPAA (Pub. L. 104-191, 110 
Stat. 1936) and amended by TRA '97 (Pub. L. 105-34, 111 Stat. 788).
    The Department of Labor interim final rule is adopted pursuant to 
the authority contained in sections 505, 711, 734 of ERISA (29 U.S.C. 
1135, 1181, and 1194), as added by HIPAA (Pub. L. 104-191, 110 Stat. 
1936) and amended by NMHPA (Pub. L. 104-204, 110 Stat. 2935), and 
Secretary of Labor's Order No. 1-87, 52 FR 13139, April 21, 1987.
    The HHS interim final rule is adopted pursuant to the authority 
contained in sections 2701 through 2763, 2791, and 2792 of the PHS Act 
(42 U.S.C.300gg through 300gg-63, 300gg-91, and 300gg-92), as added by 
HIPAA (Pub. L. 104-191, 110 Stat. 1936) and amended by NMHPA (Pub. L. 
104-204, 110 Stat. 2935).

List of Subjects

26 CFR Part 54

    Excise taxes, Health insurance, Pensions, Reporting and 
recordkeeping requirements.

29 CFR Part 2590

    Employee benefit plans, Employee Retirement Income Security Act, 
Health care, Health insurance, Reporting and recordkeeping 
requirements.

45 CFR Parts 144 and 146

    Health care, Health insurance, Reporting and recordkeeping 
requirements, State regulation of health insurance.

45 CFR Part 148

    Administrative practice and procedure, Health care, Health 
insurance, Penalties, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

INTERNAL REVENUE SERVICE 26 CFR CHAPTER I

    Accordingly, 26 CFR Part 54 is amended as follows:

PART 54--PENSION EXCISE TAXES

    Paragraph 1. The authority citation for part 54 is amended by 
adding an entry for Sec. 54.9811-1T in numerical order to read in 
part as follows:

    Authority: 26 U.S.C. 7805 * * *

    Section 54.9811-1T also issued under 26 U.S.C. 9833. * * *

    Par. 2. Section 54.9801-1T is amended by:
    1. Revising paragraph (a).
    2. Revising the first sentence of paragraph (c).
    The revisions read as follows:


Sec. 54.9801-1T  Basis and scope (temporary).

    (a) Statutory basis. Sections 54.9801-1T through 54.9801-6T, 
54.9802-1T, 54.9811-1T, 54.9812-1T, 54.9831-1T, and 54.9833-1T 
(portability sections) implement Chapter 100 of Subtitle K of the 
Internal Revenue Code of 1986.
* * * * *
    (c) Similar Requirements under the Public Health Service Act and 
Employee Retirement Income Security Act. Sections 2701, 2702, 2704, 
2705, 2721, and 2791 of the Public Health Service Act and sections 701, 
702, 703, 711, 712, 732, and 733 of the Employee

[[Page 57554]]

Retirement Income Security Act of 1974 impose requirements similar to 
those imposed under Chapter 100 of Subtitle K with respect to health 
insurance issuers offering group health insurance coverage. * * *
* * * * *
    Par. 3. In Sec. 54.9801-2T, the introductory text is revised to 
read as follows:


Sec. 54.9801-2T  Definitions (temporary).

    Unless otherwise provided, the definitions in this section govern 
in applying the provisions of Secs. 54.9801-1T through 54.9801-6T, 
54.9802-1T, 54.9811-1T, 54.9812-1T, 54.9831-1T, and 54.9833-1T.
* * * * *
    Par. 4. Section 54.9811-1T is added to read as follows:


Sec. 54.9811-1  Standards relating to benefits for mothers and newborns 
(temporary).

    (a) Hospital length of stay--(1) General rule. Except as provided 
in paragraph (a)(5) of this section, a group health plan that provides 
benefits for a hospital length of stay in connection with childbirth 
for a mother or her newborn may not restrict benefits for the stay to 
less than--
    (i) 48 hours following a vaginal delivery; or
    (ii) 96 hours following a delivery by cesarean section.
    (2) When stay begins--(i) Delivery in a hospital. If delivery 
occurs in a hospital, the hospital length of stay for the mother or 
newborn child begins at the time of delivery (or in the case of 
multiple births, at the time of the last delivery).
    (ii) Delivery outside a hospital. If delivery occurs outside a 
hospital, the hospital length of stay begins at the time the mother or 
newborn is admitted as a hospital inpatient in connection with 
childbirth. The determination of whether an admission is in connection 
with childbirth is a medical decision to be made by the attending 
provider.
    (3) Examples. The rules of paragraphs (a)(1) and (2) of this 
section are illustrated by the following examples. In each example, the 
group health plan provides benefits for hospital lengths of stay in 
connection with childbirth and is subject to the requirements of this 
section, as follows:

    Example 1. (i) A pregnant woman covered under a group health 
plan goes into labor and is admitted to the hospital at 10 p.m. on 
June 11. She gives birth by vaginal delivery at 6 a.m. on June 12.
    (ii) In this Example 1, the 48-hour period described in 
paragraph (a)(1)(i) of this section ends at 6 a.m. on June 14.
    Example 2. (i) A woman covered under a group health plan gives 
birth at home by vaginal delivery. After the delivery, the woman 
begins bleeding excessively in connection with the childbirth and is 
admitted to the hospital for treatment of the excessive bleeding at 
7 p.m. on October 1.
    (ii) In this Example 2, the 48-hour period described in 
paragraph (a)(1)(i) of this section ends at 7 p.m. on October 3.
    Example 3. (i) A woman covered under a group health plan gives 
birth by vaginal delivery at home. The child later develops 
pneumonia and is admitted to the hospital. The attending provider 
determines that the admission is not in connection with childbirth.
    (ii) In this Example 3, the hospital length-of-stay requirements 
of this section do not apply to the child's admission to the 
hospital because the admission is not in connection with childbirth.

    (4) Authorization not required--(i) In general. A plan may not 
require that a physician or other health care provider obtain 
authorization from the plan, or from a health insurance issuer offering 
health insurance coverage under the plan, for prescribing the hospital 
length of stay required under paragraph (a)(1) of this section. (See 
also paragraphs (b)(2) and (c)(3) of this section for rules and 
examples regarding other authorization and certain notice 
requirements.)
    (ii) Example. The rule of this paragraph (a)(4) is illustrated by 
the following example:

    Example. (i) In the case of a delivery by cesarean section, a 
group health plan subject to the requirements of this section 
automatically provides benefits for any hospital length of stay of 
up to 72 hours. For any longer stay, the plan requires an attending 
provider to complete a certificate of medical necessity. The plan 
then makes a determination, based on the certificate of medical 
necessity, whether a longer stay is medically necessary.
    (ii) In this Example, the requirement that an attending provider 
complete a certificate of medical necessity to obtain authorization 
for the period between 72 hours and 96 hours following a delivery by 
cesarean section is prohibited by this paragraph (a)(4).

    (5) Exceptions--(i) Discharge of mother. If a decision to discharge 
a mother earlier than the period specified in paragraph (a)(1) of this 
section is made by an attending provider, in consultation with the 
mother, the requirements of paragraph (a)(1) of this section do not 
apply for any period after the discharge.
    (ii) Discharge of newborn. If a decision to discharge a newborn 
child earlier than the period specified in paragraph (a)(1) of this 
section is made by an attending provider, in consultation with the 
mother (or the newborn's authorized representative), the requirements 
of paragraph (a)(1) of this section do not apply for any period after 
the discharge.
    (iii) Attending provider defined. For purposes of this section, 
attending provider means an individual who is licensed under applicable 
State law to provide maternity or pediatric care and who is directly 
responsible for providing maternity or pediatric care to a mother or 
newborn child.
    (iv) Example. The rules of this paragraph (a)(5) are illustrated by 
the following example:

    Example. (i) A pregnant woman covered under a group health plan 
subject to the requirements of this section goes into labor and is 
admitted to a hospital. She gives birth by cesarean section. On the 
third day after the delivery, the attending provider for the mother 
consults with the mother, and the attending provider for the newborn 
consults with the mother regarding the newborn. The attending 
providers authorize the early discharge of both the mother and the 
newborn. Both are discharged approximately 72 hours after the 
delivery. The plan pays for the 72-hour hospital stays.
    (ii) In this Example, the requirements of this paragraph (a) 
have been satisfied with respect to the mother and the newborn. If 
either is readmitted, the hospital stay for the readmission is not 
subject to this section.

    (b) Prohibitions--(1) With respect to mothers--(i) In general. A 
group health plan may not--
    (A) Deny a mother or her newborn child eligibility or continued 
eligibility to enroll or renew coverage under the terms of the plan 
solely to avoid the requirements of this section; or
    (B) Provide payments (including payments-in-kind) or rebates to a 
mother to encourage her to accept less than the minimum protections 
available under this section.
    (ii) Examples. The rules of this paragraph (b)(1) are illustrated 
by the following examples. In each example, the group health plan is 
subject to the requirements of this section; as follows:

    Example 1. (i) A group health plan provides benefits for at 
least a 48-hour hospital length of stay following a vaginal 
delivery. If a mother and newborn covered under the plan are 
discharged within 24 hours after the delivery, the plan will waive 
the copayment and deductible.
    (ii) In this Example 1, because waiver of the copayment and 
deductible is in the nature of a rebate that the mother would not 
receive if she and her newborn remained in the hospital, it is 
prohibited by this paragraph (b)(1). (In addition, the plan violates 
paragraph (b)(2) of this section because, in effect, no copayment or 
deductible is required for the first portion of the stay and a 
double copayment and a deductible are required for the second 
portion of the stay.)
    Example 2. (i) A group health plan provides benefits for at 
least a 48-hour hospital length of stay following a vaginal 
delivery. In the event that a mother and her newborn are discharged 
earlier than 48 hours

[[Page 57555]]

and the discharges occur after consultation with the mother in 
accordance with the requirements of paragraph (a)(5) of this 
section, the plan provides for a follow-up visit by a nurse within 
48 hours after the discharges to provide certain services that the 
mother and her newborn would otherwise receive in the hospital.
    (ii) In this Example 2, because the follow-up visit does not 
provide any services beyond what the mother and her newborn would 
receive in the hospital, coverage for the follow-up visit is not 
prohibited by this paragraph (b)(1).

    (2) With respect to benefit restrictions--(i) In general. Subject 
to paragraph (c)(3) of this section, a group health plan may not 
restrict the benefits for any portion of a hospital length of stay 
required under paragraph (a) of this section in a manner that is less 
favorable than the benefits provided for any preceding portion of the 
stay.
    (ii) Example. The rules of this paragraph (b)(2) are illustrated by 
the following example:

    Example. (i) A group health plan subject to the requirements of 
this section provides benefits for hospital lengths of stay in 
connection with childbirth. In the case of a delivery by cesarean 
section, the plan automatically pays for the first 48 hours. With 
respect to each succeeding 24-hour period, the participant or 
beneficiary must call the plan to obtain precertification from a 
utilization reviewer, who determines if an additional 24-hour period 
is medically necessary. If this approval is not obtained, the plan 
will not provide benefits for any succeeding 24-hour period.
    (ii) In this Example, the requirement to obtain precertification 
for the two 24-hour periods immediately following the initial 48-
hour stay is prohibited by this paragraph (b)(2) because benefits 
for the latter part of the stay are restricted in a manner that is 
less favorable than benefits for a preceding portion of the stay. 
(However, this section does not prohibit a plan from requiring 
precertification for any period after the first 96 hours.) In 
addition, if the plan's utilization reviewer denied any mother or 
her newborn benefits within the 96-hour stay, the plan would also 
violate paragraph (a) of this section.

    (3) With respect to attending providers. A group health plan may 
not directly or indirectly
    (i) Penalize (for example, take disciplinary action against or 
retaliate against), or otherwise reduce or limit the compensation of, 
an attending provider because the provider furnished care to a 
participant or beneficiary in accordance with this section; or
    (ii) Provide monetary or other incentives to an attending provider 
to induce the provider to furnish care to a participant or beneficiary 
in a manner inconsistent with this section, including providing any 
incentive that could induce an attending provider to discharge a mother 
or newborn earlier than 48 hours (or 96 hours) after delivery.
    (c) Construction. With respect to this section, the following rules 
of construction apply:
    (1) Hospital stays not mandatory. This section does not require a 
mother to--
    (i) Give birth in a hospital; or
    (ii) Stay in the hospital for a fixed period of time following the 
birth of her child.
    (2) Hospital stay benefits not mandated. This section does not 
apply to any group health plan that does not provide benefits for 
hospital lengths of stay in connection with childbirth for a mother or 
her newborn child.
    (3) Cost-sharing rules--(i) In general. This section does not 
prevent a group health plan from imposing deductibles, coinsurance, or 
other cost-sharing in relation to benefits for hospital lengths of stay 
in connection with childbirth for a mother or a newborn under the plan 
or coverage, except that the coinsurance or other cost-sharing for any 
portion of the hospital length of stay required under paragraph (a) of 
this section may not be greater than that for any preceding portion of 
the stay.
    (ii) Examples. The rules of this paragraph (c)(3) are illustrated 
by the following examples. In each example, the group health plan is 
subject to the requirements of this section, as follows:

    Example 1. (i) A group health plan provides benefits for at 
least a 48-hour hospital length of stay in connection with vaginal 
deliveries. The plan covers 80 percent of the cost of the stay for 
the first 24-hour period and 50 percent of the cost of the stay for 
the second 24-hour period. Thus, the coinsurance paid by the patient 
increases from 20 percent to 50 percent after 24 hours.
    (ii) In this Example 1, the plan violates the rules of this 
paragraph (c)(3) because coinsurance for the second 24-hour period 
of the 48-hour stay is greater than that for the preceding portion 
of the stay. (In addition, the plan also violates the similar rule 
in paragraph (b)(2) of this section.)
    Example 2. (i) A group health plan generally covers 70 percent 
of the cost of a hospital length of stay in connection with 
childbirth. However, the plan will cover 80 percent of the cost of 
the stay if the participant or beneficiary notifies the plan of the 
pregnancy in advance of admission and uses whatever hospital the 
plan may designate.
    (ii) In this Example 2, the plan does not violate the rules of 
this paragraph (c)(3) because the level of benefits provided (70 
percent or 80 percent) is consistent throughout the 48-hour (or 96-
hour) hospital length of stay required under paragraph (a) of this 
section. (In addition, the plan does not violate the rules in 
paragraph (a)(4) or (b)(2) of this section.)

    (4) Compensation of attending provider. This section does not 
prevent a group health plan from negotiating with an attending provider 
the level and type of compensation for care furnished in accordance 
with this section (including paragraph (b) of this section).
    (d) Notice requirement. See 29 CFR 2520.102-3(u) and (v)(2) for 
rules relating to a notice requirement imposed under section 711 of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1181) on 
certain group health plans that provide benefits for hospital lengths 
of stay in connection with childbirth.
    (e) Applicability in certain States--(1) Health insurance coverage. 
The requirements of section 9811 and this section do not apply with 
respect to health insurance coverage offered in connection with a group 
health plan if there is a State law regulating the coverage that meets 
any of the following criteria:
    (i) The State law requires the coverage to provide for at least a 
48-hour hospital length of stay following a vaginal delivery and at 
least a 96-hour hospital length of stay following a delivery by 
cesarean section.
    (ii) The State law requires the coverage to provide for maternity 
and pediatric care in accordance with guidelines established by the 
American College of Obstetricians and Gynecologists, the American 
Academy of Pediatrics, or any other established professional medical 
association.
    (iii) The State law requires, in connection with the coverage for 
maternity care, that the hospital length of stay for such care is left 
to the decision of (or is required to be made by) the attending 
provider in consultation with the mother. State laws that require the 
decision to be made by the attending provider with the consent of the 
mother satisfy the criterion of this paragraph (e)(1)(iii).
    (2) Group health plans--(i) Fully-insured plans. For a group health 
plan that provides benefits solely through health insurance coverage, 
if the State law regulating the health insurance coverage meets any of 
the criteria in paragraph (e)(1) of this section, then the requirements 
of section 9811 and this section do not apply.
    (ii) Self-insured plans. For a group health plan that provides all 
benefits for hospital lengths of stay in connection with childbirth 
other than through health insurance coverage, the requirements of 
section 9811 and this section apply.
    (iii) Partially-insured plans. For a group health plan that 
provides some benefits through health insurance coverage, if the State 
law regulating the health insurance coverage meets any of

[[Page 57556]]

the criteria in paragraph (e)(1) of this section, then the requirements 
of section 9811 and this section apply only to the extent the plan 
provides benefits for hospital lengths of stay in connection with 
childbirth other than through health insurance coverage.
    (3) Preemption provisions under ERISA. See 29 CFR 2590.711(e)(3) 
regarding how rules parallel to those under paragraph (e)(1) of this 
section relate to other preemption provisions under the Employee 
Retirement Income Security Act of 1974.
    (4) Examples. The rules of this paragraph (e) are illustrated by 
the following examples:

    Example 1. (i) A group health plan buys group health insurance 
coverage in a State that requires that the coverage provide for at 
least a 48-hour hospital length of stay following a vaginal delivery 
and at least a 96-hour hospital length of stay following a delivery by 
cesarean section.
    (ii) In this Example 1, the coverage is subject to State law, 
and the requirements of section 9811 and this section do not apply.
    Example 2. (i) A self-insured group health plan covers hospital 
lengths of stay in connection with childbirth in a State that 
requires health insurance coverage to provide for maternity care in 
accordance with guidelines established by the American College of 
Obstetricians and Gynecologists and to provide for pediatric care in 
accordance with guidelines established by the American Academy of 
Pediatrics.
    (ii) In this Example 2, even though the State law satisfies the 
criterion of paragraph (e)(1)(ii) of this section, because the plan 
provides benefits for hospital lengths of stay in connection with 
childbirth other than through health insurance coverage, the plan is 
subject to the requirements of section 9811 and this section.

    (f) Effective date. Section 9811 applies to group health plans for 
plan years beginning on or after January 1, 1998. This section applies 
to group health plans for plan years beginning on or after January 1, 
1999.
    Par. 5. In Sec. 54.9831-1T, paragraph (b)(1) is revised to read as 
follows:


Sec. 54.9831-1T  Special rules relating to group health plans 
(temporary).

* * * * *
    (b) Excepted benefits--(1) In general. The requirements of 
Secs. 54.9801-1T through 54.9801-6T, 54.9802-1T, 54.9811-1T, and 
54.9812-1T do not apply to any group health plan in relation to its 
provision of the benefits described in paragraph (b)(2), (3), (4), or 
(5) of this section (or any combination of these benefits).
* * * * *
    Approved: August 14, 1998.
Michael P. Dolan,
Deputy Commissioner of Internal Revenue.

Donald C. Lubick,
Assistant Secretary of the Treasury.

PENSION AND WELFARE BENEFITS ADMINISTRATION 29 CFR CHAPTER XXV

    29 CFR Part 2590--is amended as follows:

PART 2590--RULES AND REGULATIONS FOR HEALTH INSURANCE PORTABILITY 
AND RENEWABILITY FOR GROUP HEALTH PLANS

    1. The authority citation for Part 2590 is revised to read as 
follows:

    Authority: Secs. 107, 209, 505, 701-703, 711, 712, and 731-734 
of ERISA (29 U.S.C. 1027, 1059, 1135, 1171-1173, 1181, 1182, and 
1191-1194), as amended by HIPAA (Pub. L. 104-191, 110 Stat. 1936) 
and NMHPA (Pub. L. 104-204, 110 Stat. 2935), and Secretary of 
Labor's Order No. 1-87, 52 FR 13139, April 21, 1987.

Subpart B--Other Requirements

    2. Section 2590.711 is revised to read as follows:


Sec. 2590.711  Standards relating to benefits for mothers and newborns.

    (a) Hospital length of stay--(1) General rule. Except as provided 
in paragraph (a)(5) of this section, a group health plan, or a health 
insurance issuer offering group health insurance coverage, that 
provides benefits for a hospital length of stay in connection with 
childbirth for a mother or her newborn may not restrict benefits for 
the stay to less than--
    (i) 48 hours following a vaginal delivery; or
    (ii) 96 hours following a delivery by cesarean section.
    (2) When stay begins--(i) Delivery in a hospital. If delivery 
occurs in a hospital, the hospital length of stay for the mother or 
newborn child begins at the time of delivery (or in the case of 
multiple births, at the time of the last delivery).
    (ii) Delivery outside a hospital. If delivery occurs outside a 
hospital, the hospital length of stay begins at the time the mother or 
newborn is admitted as a hospital inpatient in connection with 
childbirth. The determination of whether an admission is in connection 
with childbirth is a medical decision to be made by the attending 
provider.
    (3) Examples. The rules of paragraphs (a)(1) and (2) of this 
section are illustrated by the following examples. In each example, the 
group health plan provides benefits for hospital lengths of stay in 
connection with childbirth and is subject to the requirements of this 
section, as follows:

    Example 1. (i) A pregnant woman covered under a group health 
plan goes into labor and is admitted to the hospital at 10 p.m. on 
June 11. She gives birth by vaginal delivery at 6 a.m. on June 12.
    (ii) In this Example 1, the 48-hour period described in 
paragraph (a)(1)(i) of this section ends at 6 a.m. on June 14.
    Example 2. (i) A woman covered under a group health plan gives 
birth at home by vaginal delivery. After the delivery, the woman 
begins bleeding excessively in connection with the childbirth and is 
admitted to the hospital for treatment of the excessive bleeding at 
7 p.m. on October 1.
    (ii) In this Example 2, the 48-hour period described in 
paragraph (a)(1)(i) of this section ends at 7 p.m. on October 3.
    Example 3. (i) A woman covered under a group health plan gives 
birth by vaginal delivery at home. The child later develops 
pneumonia and is admitted to the hospital. The attending provider 
determines that the admission is not in connection with childbirth.
    (ii) In this Example 3, the hospital length-of-stay requirements 
of this section do not apply to the child's admission to the 
hospital because the admission is not in connection with childbirth.

    (4) Authorization not required--(i) In general. A plan or issuer 
may not require that a physician or other health care provider obtain 
authorization from the plan or issuer for prescribing the hospital 
length of stay required under paragraph (a)(1) of this section. (See 
also paragraphs (b)(2) and (c)(3) of this section for rules and 
examples regarding other authorization and certain notice 
requirements.)
    (ii) Example. The rule of this paragraph (a)(4) is illustrated by 
the following example:

    Example. (i) In the case of a delivery by caesarean section, a 
group health plan subject to the requirements of this section 
automatically provides benefits for any hospital length of stay of 
up to 72 hours. For any longer stay, the plan requires an attending 
provider to complete a certificate of medical necessity. The plan 
then makes a determination, based on the certificate of medical 
necessity, whether a longer stay is medically necessary.
    (ii) In this Example, the requirement that an attending provider 
complete a certificate of medical necessity to obtain authorization 
for the period between 72 hours and 96 hours following a delivery by 
caesarean section is prohibited by this paragraph (a)(4).

    (5) Exceptions--(i) Discharge of mother. If a decision to discharge 
a mother earlier than the period specified in paragraph (a)(1) of this 
section is made by an attending provider, in consultation with the 
mother, the requirements of paragraph (a)(1) of this section do not 
apply for any period after the discharge.

[[Page 57557]]

    (ii) Discharge of newborn. If a decision to discharge a newborn 
child earlier than the period specified in paragraph (a)(1) of this 
section is made by an attending provider, in consultation with the 
mother (or the newborn's authorized representative), the requirements 
of paragraph (a)(1) of this section do not apply for any period after 
the discharge.
    (iii) Attending provider defined. For purposes of this section, 
attending provider means an individual who is licensed under applicable 
State law to provide maternity or pediatric care and who is directly 
responsible for providing maternity or pediatric care to a mother or 
newborn child.
    (iv) Example. The rules of this paragraph (a)(5) are illustrated by 
the following example:

    Example. (i) A pregnant woman covered under a group health plan 
subject to the requirements of this section goes into labor and is 
admitted to a hospital. She gives birth by caesarean section. On the 
third day after the delivery, the attending provider for the mother 
consults with the mother, and the attending provider for the newborn 
consults with the mother regarding the newborn. The attending 
providers authorize the early discharge of both the mother and the 
newborn. Both are discharged approximately 72 hours after the 
delivery. The plan pays for the 72-hour hospital stays.
    (ii) In this Example, the requirements of this paragraph (a) 
have been satisfied with respect to the mother and the newborn. If 
either is readmitted, the hospital stay for the readmission is not 
subject to this section.

    (b) Prohibitions--(1) With respect to mothers--(i) In general. A 
group health plan, and a health insurance issuer offering group health 
insurance coverage, may not--
    (A) Deny a mother or her newborn child eligibility or continued 
eligibility to enroll or renew coverage under the terms of the plan 
solely to avoid the requirements of this section; or
    (B) Provide payments (including payments-in-kind) or rebates to a 
mother to encourage her to accept less than the minimum protections 
available under this section.
    (ii) Examples. The rules of this paragraph (b)(1) are illustrated 
by the following examples. In each example, the group health plan is 
subject to the requirements of this section, as follows:

    Example 1. (i) A group health plan provides benefits for at 
least a 48-hour hospital length of stay following a vaginal 
delivery. If a mother and newborn covered under the plan are 
discharged within 24 hours after the delivery, the plan will waive 
the copayment and deductible.
    (ii) In this Example 1, because waiver of the copayment and 
deductible is in the nature of a rebate that the mother would not 
receive if she and her newborn remained in the hospital, it is 
prohibited by this paragraph (b)(1). (In addition, the plan violates 
paragraph (b)(2) of this section because, in effect, no copayment or 
deductible is required for the first portion of the stay and a 
double copayment and a deductible are required for the second 
portion of the stay.)
    Example 2. (i) A group health plan provides benefits for at 
least a 48-hour hospital length of stay following a vaginal 
delivery. In the event that a mother and her newborn are discharged 
earlier than 48 hours and the discharges occur after consultation 
with the mother in accordance with the requirements of paragraph 
(a)(5) of this section, the plan provides for a follow-up visit by a 
nurse within 48 hours after the discharges to provide certain 
services that the mother and her newborn would otherwise receive in 
the hospital.
    (ii) In this Example 2, because the follow-up visit does not 
provide any services beyond what the mother and her newborn would 
receive in the hospital, coverage for the follow-up visit is not 
prohibited by this paragraph (b)(1).

    (2) With respect to benefit restrictions--(i) In general. Subject 
to paragraph (c)(3) of this section, a group health plan, and a health 
insurance issuer offering group health insurance coverage, may not 
restrict the benefits for any portion of a hospital length of stay 
required under paragraph (a) of this section in a manner that is less 
favorable than the benefits provided for any preceding portion of the 
stay.
    (ii) Example. The rules of this paragraph (b)(2) are illustrated by 
the following example:

    Example. (i) A group health plan subject to the requirements of 
this section provides benefits for hospital lengths of stay in 
connection with childbirth. In the case of a delivery by caesarean 
section, the plan automatically pays for the first 48 hours. With 
respect to each succeeding 24-hour period, the participant or 
beneficiary must call the plan to obtain precertification from a 
utilization reviewer, who determines if an additional 24-hour period 
is medically necessary. If this approval is not obtained, the plan 
will not provide benefits for any succeeding 24-hour period.
    (ii) In this Example, the requirement to obtain precertification 
for the two 24-hour periods immediately following the initial 48-
hour stay is prohibited by this paragraph (b)(2) because benefits 
for the latter part of the stay are restricted in a manner that is 
less favorable than benefits for a preceding portion of the stay. 
(However, this section does not prohibit a plan from requiring 
precertification for any period after the first 96 hours.) In 
addition, if the plan's utilization reviewer denied any mother or 
her newborn benefits within the 96-hour stay, the plan would also 
violate paragraph (a) of this section.

    (3) With respect to attending providers. A group health plan, and a 
health insurance issuer offering group health insurance coverage, may 
not directly or indirectly--
    (i) Penalize (for example, take disciplinary action against or 
retaliate against), or otherwise reduce or limit the compensation of, 
an attending provider because the provider furnished care to a 
participant or beneficiary in accordance with this section; or
    (ii) Provide monetary or other incentives to an attending provider 
to induce the provider to furnish care to a participant or beneficiary 
in a manner inconsistent with this section, including providing any 
incentive that could induce an attending provider to discharge a mother 
or newborn earlier than 48 hours (or 96 hours) after delivery.
    (c) Construction. With respect to this section, the following rules 
of construction apply:
    (1) Hospital stays not mandatory. This section does not require a 
mother to--
    (i) Give birth in a hospital; or
    (ii) Stay in the hospital for a fixed period of time following the 
birth of her child.
    (2) Hospital stay benefits not mandated. This section does not 
apply to any group health plan, or any group health insurance coverage, 
that does not provide benefits for hospital lengths of stay in 
connection with childbirth for a mother or her newborn child.
    (3) Cost-sharing rules--(i) In general. This section does not 
prevent a group health plan or a health insurance issuer offering group 
health insurance coverage from imposing deductibles, coinsurance, or 
other cost-sharing in relation to benefits for hospital lengths of stay 
in connection with childbirth for a mother or a newborn under the plan 
or coverage, except that the coinsurance or other cost-sharing for any 
portion of the hospital length of stay required under paragraph (a) of 
this section may not be greater than that for any preceding portion of 
the stay.
    (ii) Examples. The rules of this paragraph (c)(3) are illustrated 
by the following examples. In each example, the group health plan is 
subject to the requirements of this section, as follows:

    Example 1. (i) A group health plan provides benefits for at 
least a 48-hour hospital length of stay in connection with vaginal 
deliveries. The plan covers 80 percent of the cost of the stay for 
the first 24-hour period and 50 percent of the cost of the stay for 
the second 24-hour period. Thus, the coinsurance paid by the patient 
increases from 20 percent to 50 percent after 24 hours.
    (ii) In this Example 1, the plan violates the rules of this 
paragraph (c)(3) because coinsurance for the second 24-hour period 
of the 48-hour stay is greater than that for the preceding portion 
of the stay. (In addition,

[[Page 57558]]

the plan also violates the similar rule in paragraph (b)(2) of this 
section.)
    Example 2. (i) A group health plan generally covers 70 percent 
of the cost of a hospital length of stay in connection with 
childbirth. However, the plan will cover 80 percent of the cost of 
the stay if the participant or beneficiary notifies the plan of the 
pregnancy in advance of admission and uses whatever hospital the 
plan may designate.
    (ii) In this Example 2, the plan does not violate the rules of 
this paragraph (c)(3) because the level of benefits provided (70 
percent or 80 percent) is consistent throughout the 48-hour (or 96-
hour) hospital length of stay required under paragraph (a) of this 
section. (In addition, the plan does not violate the rules in 
paragraph (a)(4) or (b)(2) of this section.)

    (4) Compensation of attending provider. This section does not 
prevent a group health plan or a health insurance issuer offering group 
health insurance coverage from negotiating with an attending provider 
the level and type of compensation for care furnished in accordance 
with this section (including paragraph (b) of this section).
    (d) Notice requirement. See 29 CFR 2520.102-3 (u) and (v)(2) 
(relating to the disclosure requirement under section 711(d) of the 
Act).
    (e) Applicability in certain States--(1) Health insurance coverage. 
The requirements of section 711 of the Act and this section do not 
apply with respect to health insurance coverage offered in connection 
with a group health plan if there is a State law regulating the 
coverage that meets any of the following criteria:
    (i) The State law requires the coverage to provide for at least a 
48-hour hospital length of stay following a vaginal delivery and at 
least a 96-hour hospital length of stay following a delivery by 
caesarean section.
    (ii) The State law requires the coverage to provide for maternity 
and pediatric care in accordance with guidelines established by the 
American College of Obstetricians and Gynecologists, the American 
Academy of Pediatrics, or any other established professional medical 
association.
    (iii) The State law requires, in connection with the coverage for 
maternity care, that the hospital length of stay for such care is left 
to the decision of (or is required to be made by) the attending 
provider in consultation with the mother. State laws that require the 
decision to be made by the attending provider with the consent of the 
mother satisfy the criterion of this paragraph (e)(1)(iii).
    (2) Group health plans--(i) Fully-insured plans. For a group health 
plan that provides benefits solely through health insurance coverage, 
if the State law regulating the health insurance coverage meets any of 
the criteria in paragraph (e)(1) of this section, then the requirements 
of section 711 of the Act and this section do not apply.
    (ii) Self-insured plans. For a group health plan that provides all 
benefits for hospital lengths of stay in connection with childbirth 
other than through health insurance coverage, the requirements of 
section 711 of the Act and this section apply.
    (iii) Partially-insured plans. For a group health plan that 
provides some benefits through health insurance coverage, if the State 
law regulating the health insurance coverage meets any of the criteria 
in paragraph (e)(1) of this section, then the requirements of section 
711 of the Act and this section apply only to the extent the plan 
provides benefits for hospital lengths of stay in connection with 
childbirth other than through health insurance coverage.
    (3) Relation to section 731(a) of the Act. The preemption 
provisions contained in section 731(a)(1) of the Act and 
Sec. 2590.731(a) do not supersede a State law described in paragraph 
(e)(1) of this section.
    (4) Examples. The rules of this paragraph (e) are illustrated by 
the following examples:

    Example 1. (i) A group health plan buys group health insurance 
coverage in a State that requires that the coverage provide for at 
least a 48-hour hospital length of stay following a vaginal delivery 
and at least a 96-hour hospital length of stay following a delivery 
by caesarean section.
    (ii) In this Example 1, the coverage is subject to State law, 
and the requirements of section 711 of the Act and this section do 
not apply.
    Example 2. (i) A self-insured group health plan covers hospital 
lengths of stay in connection with childbirth in a State that 
requires health insurance coverage to provide for maternity care in 
accordance with guidelines established by the American College of 
Obstetricians and Gynecologists and to provide for pediatric care in 
accordance with guidelines established by the American Academy of 
Pediatrics.
    (ii) In this Example 2, even though the State law satisfies the 
criterion of paragraph (e)(1)(ii) of this section, because the plan 
provides benefits for hospital lengths of stay in connection with 
childbirth other than through health insurance coverage, the plan is 
subject to the requirements of section 711 of the Act and this 
section.

    (f) Effective date. Section 711 of the Act applies to group health 
plans, and health insurance issuers offering group health insurance 
coverage, for plan years beginning on or after January 1, 1998. This 
section applies to group health plans, and health insurance issuers 
offering group health insurance coverage, for plan years beginning on 
or after January 1, 1999.

    Signed at Washington, DC this 19th day of October, 1998.
Meredith Miller,
Deputy Assistant Secretary for Policy, Pension and Welfare Benefits 
Administration, Department of Labor.

HEALTH CARE FINANCING ADMINISTRATION

45 CFR SUBTITLE A, SUBCHAPTER B

    45 CFR subtitle A, subchapter B, 45 CFR subtitle A, subchapter B, 
is amended as set forth below:
    A. Part 144 is amended as follows:

PART 144--REQUIREMENTS RELATING TO HEALTH INSURANCE COVERAGE

    1. The authority citation for part 144 continues to read as 
follows:

    Authority: Secs. 2701 through 2763, 2791, and 2792 of the Public 
Health Service Act, 42 U.S.C. 300gg through 300gg-63, 300gg-91, and 
300gg-92.

    2. Section 144.101 is revised to read as follows:


Sec. 144.101  Basis and purpose.

    Part 146 of this subchapter implements sections 2701 through 2723 
of the Public Health Service Act (PHS Act, 42 U.S.C. 300gg, et seq.). 
Its purpose is to improve access to group health insurance coverage, to 
guarantee the renewability of all coverage in the group market, and to 
provide certain protections for mothers and newborns with respect to 
coverage for hospital stays in connection with childbirth. Part 148 of 
this subchapter implements sections 2741 through 2763 of the PHS Act. 
Its purpose is to improve access to individual health insurance 
coverage for certain eligible individuals who previously had group 
coverage, to guarantee the renewability of all coverage in the 
individual market, and to provide protections for mothers and newborns 
with respect to coverage for hospital stays in connection with 
childbirth. Sections 2791 and 2792 of the PHS Act define terms used in 
the regulations in this subchapter and provide the basis for issuing 
these regulations, respectively.
    3. In Sec. 144.102, paragraph (b) is revised to read as follows:


Sec. 144.102  Scope and applicability.

* * * * *
    (b) The protections afforded under 45 CFR parts 144 through 148 to 
individuals and employers (and other sponsors of health insurance 
offered in connection with a group health plan) are determined by 
whether the coverage

[[Page 57559]]

involved is obtained in the small group market, the large group market, 
or the individual market. Small employers, and individuals who are 
eligible to enroll under the employer's plan, are guaranteed 
availability of insurance coverage sold in the small group market. 
Small and large employers are guaranteed the right to renew their group 
coverage, subject to certain exceptions. Eligible individuals are 
guaranteed availability of coverage sold in the individual market, and 
all coverage in the individual market must be guaranteed renewable. All 
coverage issued in the small or large group market, and in the 
individual market, must provide certain protections for mothers and 
newborns with respect to coverage for hospital stays in connection with 
childbirth.
* * * * *
    B. Part 146 is amended as follows:

PART 146--REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET

    1. The authority citation for part 146 continues to read as 
follows:

    Authority: Secs. 2701 through 2763, 2791, and 2792 of the PHS 
Act (42 U.S.C. 300gg through 300gg-63, 300gg-91, and 300gg-92).

    2. In Sec. 146.101, paragraph (a) is revised, paragraphs (b)(2) 
through (b)(4) are redesignated as paragraphs (b)(3) through (b)(5), 
respectively, and a new paragraph (b)(2) is added to read as follows:


Sec. 146.101  Basis and scope.

    (a) Statutory basis. This part implements sections 2701 through 
2723 of the PHS Act. Its purpose is to improve access to group health 
insurance coverage, to guarantee the renewability of all coverage in 
the group market, and to provide certain protections for mothers and 
newborns with respect to coverage for hospital stays in connection with 
childbirth. Sections 2791 and 2792 of the PHS Act define terms used in 
the regulations in this subchapter and provide the basis for issuing 
these regulations, respectively.
    (b) * * *
    (2) Subpart C. Subpart C of this part sets forth the requirements 
that apply to plans and issuers with respect to coverage for hospital 
stays in connection with childbirth. It also sets forth the regulations 
governing parity between medical/surgical benefits and mental health 
benefits in group health plans and health insurance coverage offered by 
issuers in connection with a group health plan.
* * * * *

Subpart C--Requirements Relating to Benefits

    3. Section 146.130 is added to Subpart C to read as follows:


Sec. 146.130  Standards relating to benefits for mothers and newborns.

    (a) Hospital length of stay--(1) General rule. Except as provided 
in paragraph (a)(5) of this section, a group health plan, or a health 
insurance issuer offering group health insurance coverage, that 
provides benefits for a hospital length of stay in connection with 
childbirth for a mother or her newborn may not restrict benefits for 
the stay to less than--
    (i) 48 hours following a vaginal delivery; or
    (ii) 96 hours following a delivery by cesarean section.
    (2) When stay begins--(i) Delivery in a hospital. If delivery 
occurs in a hospital, the hospital length of stay for the mother or 
newborn child begins at the time of delivery (or in the case of 
multiple births, at the time of the last delivery).
    (ii) Delivery outside a hospital. If delivery occurs outside a 
hospital, the hospital length of stay begins at the time the mother or 
newborn is admitted as a hospital inpatient in connection with 
childbirth. The determination of whether an admission is in connection 
with childbirth is a medical decision to be made by the attending 
provider.
    (3) Examples. The rules of paragraphs (a)(1) and (a)(2) of this 
section are illustrated by the following examples. In each example, the 
group health plan provides benefits for hospital lengths of stay in 
connection with childbirth and is subject to the requirements of this 
section, as follows:

    Example 1. (i) A pregnant woman covered under a group health 
plan goes into labor and is admitted to the hospital at 10 p.m. on 
June 11. She gives birth by vaginal delivery at 6 a.m. on June 12.
    (ii) In this Example 1, the 48-hour period described in 
paragraph (a)(1)(i) of this section ends at 6 a.m. on June 14.
    Example 2. (i) A woman covered under a group health plan gives 
birth at home by vaginal delivery. After the delivery, the woman 
begins bleeding excessively in connection with the childbirth and is 
admitted to the hospital for treatment of the excessive bleeding at 
7 p.m. on October 1.
    (ii) In this Example 2, the 48-hour period described in 
paragraph (a)(1)(i) of this section ends at 7 p.m. on October 3.
    Example 3. (i) A woman covered under a group health plan gives 
birth by vaginal delivery at home. The child later develops 
pneumonia and is admitted to the hospital. The attending provider 
determines that the admission is not in connection with childbirth.
    (ii) In this Example 3, the hospital length-of-stay requirements 
of this section do not apply to the child's admission to the 
hospital because the admission is not in connection with childbirth.

    (4) Authorization not required--(i) In general. A plan or issuer 
may not require that a physician or other health care provider obtain 
authorization from the plan or issuer for prescribing the hospital 
length of stay required under paragraph (a)(1) of this section. (See 
also paragraphs (b)(2) and (c)(3) of this section for rules and 
examples regarding other authorization and certain notice 
requirements.)
    (ii) Example. The rule of this paragraph (a)(4) is illustrated by 
the following example:

    Example. (i) In the case of a delivery by cesarean section, a 
group health plan subject to the requirements of this section 
automatically provides benefits for any hospital length of stay of 
up to 72 hours. For any longer stay, the plan requires an attending 
provider to complete a certificate of medical necessity. The plan 
then makes a determination, based on the certificate of medical 
necessity, whether a longer stay is medically necessary.
    (ii) In this Example, the requirement that an attending provider 
complete a certificate of medical necessity to obtain authorization 
for the period between 72 hours and 96 hours following a delivery by 
cesarean section is prohibited by this paragraph (a)(4).

    (5) Exceptions--(i) Discharge of mother. If a decision to discharge 
a mother earlier than the period specified in paragraph (a)(1) of this 
section is made by an attending provider, in consultation with the 
mother, the requirements of paragraph (a)(1) of this section do not 
apply for any period after the discharge.
    (ii) Discharge of newborn. If a decision to discharge a newborn 
child earlier than the period specified in paragraph (a)(1) of this 
section is made by an attending provider, in consultation with the 
mother (or the newborn's authorized representative), the requirements 
of paragraph (a)(1) of this section do not apply for any period after 
the discharge.
    (iii) Attending provider defined. For purposes of this section, 
attending provider means an individual who is licensed under applicable 
State law to provide maternity or pediatric care and who is directly 
responsible for providing maternity or pediatric care to a mother or 
newborn child.
    (iv) Example. The rules of this paragraph (a)(5) are illustrated by 
the following example:

    Example. (i) A pregnant woman covered under a group health plan 
subject to the requirements of this section goes into labor and is 
admitted to a hospital. She gives birth

[[Page 57560]]

by cesarean section. On the third day after the delivery, the 
attending provider for the mother consults with the mother, and the 
attending provider for the newborn consults with the mother 
regarding the newborn. The attending providers authorize the early 
discharge of both the mother and the newborn. Both are discharged 
approximately 72 hours after the delivery. The plan pays for the 72-
hour hospital stays.
    (ii) In this Example, the requirements of this paragraph (a) 
have been satisfied with respect to the mother and the newborn. If 
either is readmitted, the hospital stay for the readmission is not 
subject to this section.

    (b) Prohibitions--(1) With respect to mothers--(i) In general. A 
group health plan, and a health insurance issuer offering group health 
insurance coverage, may not--
    (A) Deny a mother or her newborn child eligibility or continued 
eligibility to enroll or renew coverage under the terms of the plan 
solely to avoid the requirements of this section; or
    (B) Provide payments (including payments-in-kind) or rebates to a 
mother to encourage her to accept less than the minimum protections 
available under this section.
    (ii) Examples. The rules of this paragraph (b)(1) are illustrated 
by the following examples. In each example, the group health plan is 
subject to the requirements of this section, as follows:

    Example 1. (i) A group health plan provides benefits for at 
least a 48-hour hospital length of stay following a vaginal 
delivery. If a mother and newborn covered under the plan are 
discharged within 24 hours after the delivery, the plan will waive 
the copayment and deductible.
    (ii) In this Example 1, because waiver of the copayment and 
deductible is in the nature of a rebate that the mother would not 
receive if she and her newborn remained in the hospital, it is 
prohibited by this paragraph (b)(1). (In addition, the plan violates 
paragraph (b)(2) of this section because, in effect, no copayment or 
deductible is required for the first portion of the stay and a 
double copayment and a deductible are required for the second 
portion of the stay.)
    Example 2. (i) A group health plan provides benefits for at 
least a 48-hour hospital length of stay following a vaginal 
delivery. In the event that a mother and her newborn are discharged 
earlier than 48 hours and the discharges occur after consultation 
with the mother in accordance with the requirements of paragraph 
(a)(5) of this section, the plan provides for a follow-up visit by a 
nurse within 48 hours after the discharges to provide certain 
services that the mother and her newborn would otherwise receive in 
the hospital.
    (ii) In this Example 2, because the follow-up visit does not 
provide any services beyond what the mother and her newborn would 
receive in the hospital, coverage for the follow-up visit is not 
prohibited by this paragraph (b)(1).

    (2) With respect to benefit restrictions--(i) In general. Subject 
to paragraph (c)(3) of this section, a group health plan, and a health 
insurance issuer offering group health insurance coverage, may not 
restrict the benefits for any portion of a hospital length of stay 
required under paragraph (a) of this section in a manner that is less 
favorable than the benefits provided for any preceding portion of the 
stay.
    (ii) Example. The rules of this paragraph (b)(2) are illustrated by 
the following example:

    Example. (i) A group health plan subject to the requirements of 
this section provides benefits for hospital lengths of stay in 
connection with childbirth. In the case of a delivery by cesarean 
section, the plan automatically pays for the first 48 hours. With 
respect to each succeeding 24-hour period, the participant or 
beneficiary must call the plan to obtain precertification from a 
utilization reviewer, who determines if an additional 24-hour period 
is medically necessary. If this approval is not obtained, the plan 
will not provide benefits for any succeeding 24-hour period.
    (ii) In this Example, the requirement to obtain precertification 
for the two 24-hour periods immediately following the initial 48-
hour stay is prohibited by this paragraph (b)(2) because benefits 
for the latter part of the stay are restricted in a manner that is 
less favorable than benefits for a preceding portion of the stay. 
(However, this section does not prohibit a plan from requiring 
precertification for any period after the first 96 hours.) In 
addition, if the plan's utilization reviewer denied any mother or 
her newborn benefits within the 96-hour stay, the plan would also 
violate paragraph (a) of this section.

    (3) With respect to attending providers. A group health plan, and a 
health insurance issuer offering group health insurance coverage, may 
not directly or indirectly--
    (i) Penalize (for example, take disciplinary action against or 
retaliate against), or otherwise reduce or limit the compensation of, 
an attending provider because the provider furnished care to a 
participant or beneficiary in accordance with this section; or
    (ii) Provide monetary or other incentives to an attending provider 
to induce the provider to furnish care to a participant or beneficiary 
in a manner inconsistent with this section, including providing any 
incentive that could induce an attending provider to discharge a mother 
or newborn earlier than 48 hours (or 96 hours) after delivery.
    (c) Construction. With respect to this section, the following rules 
of construction apply:
    (1) Hospital stays not mandatory. This section does not require a 
mother to--
    (i) Give birth in a hospital; or
    (ii) Stay in the hospital for a fixed period of time following the 
birth of her child.
    (2) Hospital stay benefits not mandated. This section does not 
apply to any group health plan, or any group health insurance coverage, 
that does not provide benefits for hospital lengths of stay in 
connection with childbirth for a mother or her newborn child.
    (3) Cost-sharing rules--(i) In general. This section does not 
prevent a group health plan or a health insurance issuer offering group 
health insurance coverage from imposing deductibles, coinsurance, or 
other cost-sharing in relation to benefits for hospital lengths of stay 
in connection with childbirth for a mother or a newborn under the plan 
or coverage, except that the coinsurance or other cost-sharing for any 
portion of the hospital length of stay required under paragraph (a) of 
this section may not be greater than that for any preceding portion of 
the stay.
    (ii) Examples. The rules of this paragraph (c)(3) are illustrated 
by the following examples. In each example, the group health plan is 
subject to the requirements of this section, as follows:

    Example 1. (i) A group health plan provides benefits for at 
least a 48-hour hospital length of stay in connection with vaginal 
deliveries. The plan covers 80 percent of the cost of the stay for 
the first 24-hour period and 50 percent of the cost of the stay for 
the second 24-hour period. Thus, the coinsurance paid by the patient 
increases from 20 percent to 50 percent after 24 hours.
    (ii) In this Example 1, the plan violates the rules of this 
paragraph (c)(3) because coinsurance for the second 24-hour period 
of the 48-hour stay is greater than that for the preceding portion 
of the stay. (In addition, the plan also violates the similar rule 
in paragraph (b)(2) of this section.)
    Example 2. (i) A group health plan generally covers 70 percent 
of the cost of a hospital length of stay in connection with 
childbirth. However, the plan will cover 80 percent of the cost of 
the stay if the participant or beneficiary notifies the plan of the 
pregnancy in advance of admission and uses whatever hospital the 
plan may designate.
    (ii) In this Example 2, the plan does not violate the rules of 
this paragraph (c)(3) because the level of benefits provided (70 
percent or 80 percent) is consistent throughout the 48-hour (or 96-
hour) hospital length of stay required under paragraph (a) of this 
section. (In addition, the plan does not violate the rules in 
paragraph (a)(4) or paragraph (b)(2) of this section.)

    (4) Compensation of attending provider. This section does not 
prevent a group health plan or a health insurance issuer offering group 
health insurance coverage from negotiating with an attending provider 
the level and type of compensation for care furnished

[[Page 57561]]

in accordance with this section (including paragraph (b) of this 
section).
    (d) Notice requirement. Except as provided in paragraph (d)(4)of 
this section, a group health plan that provides benefits for hospital 
lengths of stay in connection with childbirth must meet the following 
requirements:
    (1) Required statement. The plan document that provides a 
description of plan benefits to participants and beneficiaries must 
disclose information that notifies participants and beneficiaries of 
their rights under this section.
    (2) Disclosure notice. To meet the disclosure requirement set forth 
in paragraph (d)(1) of this section, the following disclosure notice 
must be used:

Statement of Rights Under the Newborns' and Mothers' Health Protection 
Act

    Under federal law, group health plans and health insurance 
issuers offering group health insurance coverage generally may not 
restrict benefits for any hospital length of stay in connection with 
childbirth for the mother or newborn child to less than 48 hours 
following a vaginal delivery, or less than 96 hours following a 
delivery by cesarean section. However, the plan or issuer may pay 
for a shorter stay if the attending provider (e.g., your physician, 
nurse midwife, or physician assistant), after consultation with the 
mother, discharges the mother or newborn earlier.
    Also, under federal law, plans and issuers may not set the level 
of benefits or out-of-pocket costs so that any later portion of the 
48-hour (or 96-hour) stay is treated in a manner less favorable to 
the mother or newborn than any earlier portion of the stay.
    In addition, a plan or issuer may not, under federal law, 
require that a physician or other health care provider obtain 
authorization for prescribing a length of stay of up to 48 hours (or 
96 hours). However, to use certain providers or facilities, or to 
reduce your out-of-pocket costs, you may be required to obtain 
precertification. For information on precertification, contact your 
plan administrator.

    (3) Timing of disclosure. The disclosure notice in paragraph (d)(2) 
of this section shall be furnished to each participant covered under a 
group health plan, and each beneficiary receiving benefits under a 
group health plan, not later than 60 days after the first day of the 
first plan year beginning on or after January 1, 1999.
    (4) Exceptions. The requirements of this paragraph (d) do not apply 
in the following situations:
    (i) Self-insured plans. The benefits for hospital lengths of stay 
in connection with childbirth are not provided through health insurance 
coverage, and the group health plan has made the election described in 
Sec. 146.180 to be exempted from the requirements of this section.
    (ii) Insured plans. The benefits for hospital lengths of stay in 
connection with childbirth are provided through health insurance 
coverage, and the coverage is regulated under a State law described in 
paragraph (e) of this section.
    (e) Applicability in certain States--(1) Health insurance coverage. 
The requirements of section 2704 of the PHS Act and this section do not 
apply with respect to health insurance coverage offered in connection 
with a group health plan if there is a State law regulating the 
coverage that meets any of the following criteria:
    (i) The State law requires the coverage to provide for at least a 
48-hour hospital length of stay following a vaginal delivery and at 
least a 96-hour hospital length of stay following a delivery by 
cesarean section.
    (ii) The State law requires the coverage to provide for maternity 
and pediatric care in accordance with guidelines established by the 
American College of Obstetricians and Gynecologists, the American 
Academy of Pediatrics, or any other established professional medical 
association.
    (iii) The State law requires, in connection with the coverage for 
maternity care, that the hospital length of stay for such care is left 
to the decision of (or is required to be made by) the attending 
provider in consultation with the mother. State laws that require the 
decision to be made by the attending provider with the consent of the 
mother satisfy the criterion of this paragraph (e)(1)(iii).
    (2) Group health plans--(i) Fully-insured plans. For a group health 
plan that provides benefits solely through health insurance coverage, 
if the State law regulating the health insurance coverage meets any of 
the criteria in paragraph (e)(1) of this section, then the requirements 
of section 2704 of the PHS Act and this section do not apply.
    (ii) Self-insured plans. For a group health plan that provides all 
benefits for hospital lengths of stay in connection with childbirth 
other than through health insurance coverage, the requirements of 
section 2704 of the PHS Act and this section apply.
    (iii) Partially-insured plans. For a group health plan that 
provides some benefits through health insurance coverage, if the State 
law regulating the health insurance coverage meets any of the criteria 
in paragraph (e)(1) of this section, then the requirements of section 
2704 of the PHS Act and this section apply only to the extent the plan 
provides benefits for hospital lengths of stay in connection with 
childbirth other than through health insurance coverage.
    (3) Relation to section 2723(a) of the PHS Act. The preemption 
provisions contained in section 2723(a)(1) of the PHS Act and 
Sec. 146.143(a) do not supersede a State law described in paragraph 
(e)(1) of this section.
    (4) Examples. The rules of this paragraph (e) are illustrated by 
the following examples:

    Example 1. (i) A group health plan buys group health insurance 
coverage in a State that requires that the coverage provide for at 
least a 48-hour hospital length of stay following a vaginal delivery 
and at least a 96-hour hospital length of stay following a delivery 
by cesarean section.
    (ii) In this Example 1, the coverage is subject to State law, 
and the requirements of section 2704 of the PHS Act and this section 
do not apply.
    Example 2. (i) A self-insured group health plan covers hospital 
lengths of stay in connection with childbirth in a State that 
requires health insurance coverage to provide for maternity care in 
accordance with guidelines established by the American College of 
Obstetricians and Gynecologists and to provide for pediatric care in 
accordance with guidelines established by the American Academy of 
Pediatrics.
    (ii) In this Example 2, even though the State law satisfies the 
criterion of paragraph (e)(1)(ii) of this section, because the plan 
provides benefits for hospital lengths of stay in connection with 
childbirth other than through health insurance coverage, the plan is 
subject to the requirements of section 2704 of the PHS Act and this 
section.

    (f) Effective date. Section 2704 of the PHS Act applies to group 
health plans, and health insurance issuers offering group health 
insurance coverage, for plan years beginning on or after January 1, 
1998. This section applies to group health plans, and health insurance 
issuers offering group health insurance coverage, for plan years 
beginning on or after January 1, 1999.
    C. Part 148 is amended as follows:

PART 148--REQUIREMENTS FOR THE INDIVIDUAL HEALTH INSURANCE MARKET

    1. The authority citation for part 148 continues to read as 
follows:

    Authority: Secs. 2741 through 2763, 2791, and 2792 of the Public 
Health Service Act (42 U.S.C. 300gg-41 through 300gg-63, 300gg-91, 
and 300gg-92).

    2. Section 148.101 is revised to read as follows:


Sec. 148.101  Basis and purpose.

    This part implements sections 2741 through 2763 and 2791 and 2792 
of the PHS Act. Its purpose is to improve access to individual health 
insurance coverage for certain eligible individuals

[[Page 57562]]

who previously had group coverage, and to guarantee the renewability of 
all coverage in the individual market. It also provides certain 
protections for mothers and newborns with respect to coverage for 
hospital stays in connection with childbirth.
    3. In Sec. 148.102, paragraphs (a) heading, (a)(2), and (b) are 
revised to read as follows:


Sec. 148.102  Scope, applicability, and effective dates.

    (a) Scope and applicability. * * *
    (2) The requirements of this part that pertain to guaranteed 
availability of individual health insurance coverage for certain 
eligible individuals apply to all issuers of individual health 
insurance coverage in a State, unless the State implements an 
acceptable alternative mechanism as described in Sec. 148.128. The 
requirements that pertain to guaranteed renewability for all 
individuals, and to protections for mothers and newborns with respect 
to hospital stays in connection with childbirth, apply to all issuers 
of individual health insurance coverage in the State, regardless of 
whether a State implements an alternative mechanism.
    (b) Effective date. Except as provided in Secs. 148.124 
(certificate of coverage), 148.128 (alternative State mechanisms), and 
148.170 (standards relating to benefits for mothers and newborns), the 
requirements of this part apply to health insurance coverage offered, 
sold, issued, renewed, in effect, or operated in the individual market 
after June 30, 1997, regardless of when a period of creditable coverage 
occurs.
    4. A new subpart C is added to read as follows:

Subpart C--Requirements Related to Benefits


Sec. 148.170  Standards relating to benefits for mothers and newborns.

    (a) Hospital length of stay--(1) General rule. Except as provided 
in paragraph (a)(5) of this section, an issuer offering health 
insurance coverage in the individual market that provides benefits for 
a hospital length of stay in connection with childbirth for a mother or 
her newborn may not restrict benefits for the stay to less than--
    (i) 48 hours following a vaginal delivery; or
    (ii) 96 hours following a delivery by cesarean section.
    (2) When stay begins--(i) Delivery in a hospital. If delivery 
occurs in a hospital, the hospital length of stay for the mother or 
newborn child begins at the time of delivery (or in the case of 
multiple births, at the time of the last delivery).
    (ii) Delivery outside a hospital. If delivery occurs outside a 
hospital, the hospital length of stay begins at the time the mother or 
newborn is admitted as a hospital inpatient in connection with 
childbirth. The determination of whether an admission is in connection 
with childbirth is a medical decision to be made by the attending 
provider.
    (3) Examples. The rules of paragraphs (a)(1) and (a)(2) of this 
section are illustrated by the following examples. In each example, the 
issuer provides benefits for hospital lengths of stay in connection 
with childbirth and is subject to the requirements of this section, as 
follows:

    Example 1. (i) A pregnant woman covered under a policy issued in 
the individual market goes into labor and is admitted to the 
hospital at 10 p.m. on June 11. She gives birth by vaginal delivery 
at 6 a.m. on June 12.
    (ii) In this Example 1, the 48-hour period described in 
paragraph (a)(1)(i) of this section ends at 6 a.m. on June 14.
    Example 2. (i) A woman covered under a policy issued in the 
individual market gives birth at home by vaginal delivery. After the 
delivery, the woman begins bleeding excessively in connection with 
the childbirth and is admitted to the hospital for treatment of the 
excessive bleeding at 7 p.m. on October 1.
    (ii) In this Example 2, the 48-hour period described in 
paragraph (a)(1)(i) of this section ends at 7 p.m. on October 3.
    Example 3. (i) A woman covered under a policy issued in the 
individual market gives birth by vaginal delivery at home. The child 
later develops pneumonia and is admitted to the hospital. The 
attending provider determines that the admission is not in 
connection with childbirth.
    (ii) In this Example 3, the hospital length-of-stay requirements 
of this section do not apply to the child's admission to the 
hospital because the admission is not in connection with childbirth.

    (4) Authorization not required--(i) In general. An issuer may not 
require that a physician or other health care provider obtain 
authorization from the issuer for prescribing the hospital length of 
stay required under paragraph (a)(1) of this section. (See also 
paragraphs (b)(2) and (c)(3) of this section for rules and examples 
regarding other authorization and certain notice requirements.)
    (ii) Example. The rule of this paragraph (a)(4) is illustrated by 
the following example:

    Example. (i) In the case of a delivery by cesarean section, an 
issuer subject to the requirements of this section automatically 
provides benefits for any hospital length of stay of up to 72 hours. 
For any longer stay, the issuer requires an attending provider to 
complete a certificate of medical necessity. The issuer then makes a 
determination, based on the certificate of medical necessity, 
whether a longer stay is medically necessary.
    (ii) In this Example, the requirement that an attending provider 
complete a certificate of medical necessity to obtain authorization 
for the period between 72 hours and 96 hours following a delivery by 
cesarean section is prohibited by this paragraph (a)(4).

    (5) Exceptions--(i) Discharge of mother. If a decision to discharge 
a mother earlier than the period specified in paragraph (a)(1) of this 
section is made by an attending provider, in consultation with the 
mother, the requirements of paragraph (a)(1) of this section do not 
apply for any period after the discharge.
    (ii) Discharge of newborn. If a decision to discharge a newborn 
child earlier than the period specified in paragraph (a)(1) of this 
section is made by an attending provider, in consultation with the 
mother (or the newborn's authorized representative), the requirements 
of paragraph (a)(1) of this section do not apply for any period after 
the discharge.
    (iii) Attending provider defined. For purposes of this section, 
attending provider means an individual who is licensed under applicable 
State law to provide maternity or pediatric care and who is directly 
responsible for providing maternity or pediatric care to a mother or 
newborn child.
    (iv) Example. The rules of this paragraph (a)(5) are illustrated by 
the following example:

    Example. (i) A pregnant woman covered under a policy offered by 
an issuer subject to the requirements of this section goes into 
labor and is admitted to a hospital. She gives birth by cesarean 
section. On the third day after the delivery, the attending provider 
for the mother consults with the mother, and the attending provider 
for the newborn consults with the mother regarding the newborn. The 
attending providers authorize the early discharge of both the mother 
and the newborn. Both are discharged approximately 72 hours after 
the delivery. The issuer pays for the 72-hour hospital stays.
    (ii) In this Example, the requirements of this paragraph (a) 
have been satisfied with respect to the mother and the newborn. If 
either is readmitted, the hospital stay for the readmission is not 
subject to this section.

    (b) Prohibitions--(1) With respect to mothers--(i) In general. An 
issuer may not--
    (A) Deny a mother or her newborn child eligibility or continued 
eligibility to enroll in or renew coverage solely to avoid the 
requirements of this section; or
    (B) Provide payments (including payments-in-kind) or rebates to a 
mother to encourage her to accept less than the minimum protections 
available under this section.
    (ii) Examples. The rules of this paragraph (b)(1) are illustrated 
by the

[[Page 57563]]

following examples. In each example, the issuer is subject to the 
requirements of this section, as follows:

    Example 1. (i) An issuer provides benefits for at least a 48-
hour hospital length of stay following a vaginal delivery. If a 
mother and newborn covered under a policy issued in the individual 
market are discharged within 24 hours after the delivery, the issuer 
will waive the copayment and deductible.
    (ii) In this Example 1, because waiver of the copayment and 
deductible is in the nature of a rebate that the mother would not 
receive if she and her newborn remained in the hospital, it is 
prohibited by this paragraph (b)(1). (In addition, the issuer 
violates paragraph (b)(2) of this section because, in effect, no 
copayment or deductible is required for the first portion of the 
stay and a double copayment and a deductible are required for the 
second portion of the stay.)
    Example 2. (i) An issuer provides benefits for at least a 48-
hour hospital length of stay following a vaginal delivery. In the 
event that a mother and her newborn are discharged earlier than 48 
hours and the discharges occur after consultation with the mother in 
accordance with the requirements of paragraph (a)(5) of this 
section, the issuer provides for a follow-up visit by a nurse within 
48 hours after the discharges to provide certain services that the 
mother and her newborn would otherwise receive in the hospital.
    (ii) In this Example 2, because the follow-up visit does not 
provide any services beyond what the mother and her newborn would 
receive in the hospital, coverage for the follow-up visit is not 
prohibited by this paragraph (b)(1).

    (2) With respect to benefit restrictions--(i) In general. Subject 
to paragraph (c)(3) of this section, an issuer may not restrict the 
benefits for any portion of a hospital length of stay required under 
paragraph (a) of this section in a manner that is less favorable than 
the benefits provided for any preceding portion of the stay.
    (ii) Example. The rules of this paragraph (b)(2) are illustrated by 
the following example:

    Example. (i) An issuer subject to the requirements of this 
section provides benefits for hospital lengths of stay in connection 
with childbirth. In the case of a delivery by cesarean section, the 
issuer automatically pays for the first 48 hours. With respect to 
each succeeding 24-hour period, the covered individual must call the 
issuer to obtain precertification from a utilization reviewer, who 
determines if an additional 24-hour period is medically necessary. 
If this approval is not obtained, the issuer will not provide 
benefits for any succeeding 24-hour period.
    (ii) In this Example, the requirement to obtain precertification 
for the two 24-hour periods immediately following the initial 48-
hour stay is prohibited by this paragraph (b)(2) because benefits 
for the latter part of the stay are restricted in a manner that is 
less favorable than benefits for a preceding portion of the stay. 
(However, this section does not prohibit an issuer from requiring 
precertification for any period after the first 96 hours.) In 
addition, if the issuer's utilization reviewer denied any mother or 
her newborn benefits within the 96-hour stay, the issuer would also 
violate paragraph (a) of this section.

    (3) With respect to attending providers. An issuer may not directly 
or indirectly ``
    (i) Penalize (for example, take disciplinary action against or 
retaliate against), or otherwise reduce or limit the compensation of, 
an attending provider because the provider furnished care to a covered 
individual in accordance with this section; or
    (ii) Provide monetary or other incentives to an attending provider 
to induce the provider to furnish care to a covered individual in a 
manner inconsistent with this section, including providing any 
incentive that could induce an attending provider to discharge a mother 
or newborn earlier than 48 hours (or 96 hours) after delivery.
    (c) Construction. With respect to this section, the following rules 
of construction apply:
    (1) Hospital stays not mandatory. This section does not require a 
mother to
    (i) Give birth in a hospital; or
    (ii) Stay in the hospital for a fixed period of time following the 
birth of her child.
    (2) Hospital stay benefits not mandated. This section does not 
apply to any issuer that does not provide benefits for hospital lengths 
of stay in connection with childbirth for a mother or her newborn 
child.
    (3) Cost-sharing rules--(i) In general. This section does not 
prevent an issuer from imposing deductibles, coinsurance, or other 
cost-sharing in relation to benefits for hospital lengths of stay in 
connection with childbirth for a mother or a newborn under the 
coverage, except that the coinsurance or other cost-sharing for any 
portion of the hospital length of stay required under paragraph (a) of 
this section may not be greater than that for any preceding portion of 
the stay.
    (ii) Examples. The rules of this paragraph (c)(3) are illustrated 
by the following examples. In each example, the issuer is subject to 
the requirements of this section, as follows:

    Example 1. (i) An issuer provides benefits for at least a 48-
hour hospital length of stay in connection with vaginal deliveries. 
The issuer covers 80 percent of the cost of the stay for the first 
24-hour period and 50 percent of the cost of the stay for the second 
24-hour period. Thus, the coinsurance paid by the patient increases 
from 20 percent to 50 percent after 24 hours.
    (ii) In this Example 1, the issuer violates the rules of this 
paragraph (c)(3) because coinsurance for the second 24-hour period 
of the 48-hour stay is greater than that for the preceding portion 
of the stay. (In addition, the issuer also violates the similar rule 
in paragraph (b)(2) of this section.)

    Example 2. (i) An issuer generally covers 70 percent of the cost 
of a hospital length of stay in connection with childbirth. However, 
the issuer will cover 80 percent of the cost of the stay if the 
covered individual notifies the issuer of the pregnancy in advance 
of admission and uses whatever hospital the issuer may designate.
    (ii) In this Example 2, the issuer does not violate the rules of 
this paragraph (c)(3) because the level of benefits provided (70 
percent or 80 percent) is consistent throughout the 48-hour (or 96-
hour) hospital length of stay required under paragraph (a) of this 
section. (In addition, the issuer does not violate the rules in 
paragraph (a)(4) or paragraph (b)(2) of this section.)

    (4) Compensation of attending provider. This section does not 
prevent an issuer from negotiating with an attending provider the level 
and type of compensation for care furnished in accordance with this 
section (including paragraph (b) of this section).
    (5) Applicability. This section applies to all health insurance 
coverage issued in the individual market, and is not limited in its 
application to coverage that is provided to eligible individuals as 
defined in section 2741(b) of the PHS Act.
    (d) Notice requirement. Except as provided in paragraph (d)(4) of 
this section, an issuer offering health insurance in the individual 
market must meet the following requirements with respect to benefits 
for hospital lengths of stay in connection with childbirth:
    (1) Required statement. The insurance contract must disclose 
information that notifies covered individuals of their rights under 
this section.
    (2) Disclosure notice. To meet the disclosure requirement set forth 
in paragraph (d)(1) of this section, the following disclosure notice 
must be used:

Statement of Rights Under the Newborns' and Mothers' Health Protection 
Act

    Under federal law, health insurance issuers generally may not 
restrict benefits for any hospital length of stay in connection with 
childbirth for the mother or newborn child to less than 48 hours 
following a vaginal delivery, or less than 96 hours following a 
delivery by cesarean section. However, the issuer may pay for a 
shorter stay if the attending provider (e.g., your physician, nurse 
midwife, or physician assistant), after consultation with the 
mother, discharges the mother or newborn earlier.
    Also, under federal law, issuers may not set the level of 
benefits or out-of-pocket costs

[[Page 57564]]

so that any later portion of the 48-hour (or 96-hour) stay is 
treated in a manner less favorable to the mother or newborn than any 
earlier portion of the stay.
    In addition, an issuer may not, under federal law, require that 
a physician or other health care provider obtain authorization for 
prescribing a length of stay of up to 48 hours (or 96 hours). 
However, to use certain providers or facilities, or to reduce your 
out-of-pocket costs, you may be required to obtain precertification. 
For information on precertification, contact your issuer.

    (3) Timing of disclosure. The disclosure notice in paragraph (d)(2) 
of this section shall be furnished to the covered individuals in the 
form of a copy of the contract, or a rider (or equivalent amendment to 
the contract), not later than March 1, 1999.
    (4) Exception. The requirements of this paragraph (d) do not apply 
with respect to coverage regulated under a State law described in 
paragraph (e) of this section.
    (e) Applicability in certain States--(1) Health insurance coverage. 
The requirements of section 2751 of the PHS Act and this section do not 
apply with respect to health insurance coverage in the individual 
market if there is a State law regulating the coverage that meets any 
of the following criteria:
    (i) The State law requires the coverage to provide for at least a 
48-hour hospital length of stay following a vaginal delivery and at 
least a 96-hour hospital length of stay following a delivery by 
cesarean section.
    (ii) The State law requires the coverage to provide for maternity 
and pediatric care in accordance with guidelines established by the 
American College of Obstetricians and Gynecologists, the American 
Academy of Pediatrics, or any other established professional medical 
association.
    (iii) The State law requires, in connection with the coverage for 
maternity care, that the hospital length of stay for such care is left 
to the decision of (or is required to be made by) the attending 
provider in consultation with the mother. State laws that require the 
decision to be made by the attending provider with the consent of the 
mother satisfy the criterion of this paragraph (e)(1)(iii).
    (2) Relation to section 2762(a) of the PHS Act. The preemption 
provisions contained in section 2762(a) of the PHS Act and 
Sec. 148.210(b) do not supersede a State law described in paragraph 
(e)(1) of this section.
    (f) Effective date. Section 2751 of the PHS Act applies to health 
insurance coverage offered, sold, issued, renewed, in effect, or 
operated in the individual market on or after January 1, 1998. This 
section applies to health insurance coverage offered, sold, issued, 
renewed, in effect, or operated in the individual market on or after 
January 1, 1999.

    Dated: August 27, 1998.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.

    Dated: September 21, 1998.
Donna E. Shalala,
Secretary, Department of Health and Human Services.
[FR Doc. 98-28442 Filed 10-26-98; 8:45 am]
BILLING CODE 4120-01-P; 4830-01-P; 4510-29-P