This pamphlet is designed to provide an overview of recent changes in the law that may affect your health benefits. The questions and answers address changes made by the Health Insurance Portability and Accountability Act of 1996, the Newborns' and Mothers' Health Protection Act of 1996 and the Mental Health Parity Act of 1996.
On April 1, 1997, the Departments of Labor, Health and Human Services and the Treasury issued interim regulations that interpret many of the provisions of the new laws. The Department of Labor's regulations interpret amendments made to the Employee Retirement Income Security Act (ERISA).
This publication is intended to assist employers who sponsor group health plans in understanding their obligations under the law and to educate workers and their families about their rights under the law. It constitutes a small entity compliance guide for purposes of the Small Business Regulatory Enforcement Fairness Act of 1996.
This pamphlet may not address your specific health care questions and is not intended to be relied upon as the official position of the Department of Labor. If you have additional questions, please contact the PWBA Regional Office nearest you or the PWBA Division of Technical Assistance & Inquiries located in our national office in Washington, DC.
If you are in an HMO or if the benefits under your plan are provided through an insurance policy issued by an insurance company, you may also contact your State Insurance Commissioner's Office. As discussed later in this pamphlet, certain of the new federal rules under HIPAA can be changed by state law for insurance companies and HMOs if that law is more protective of individuals.
Addresses and phone numbers for these contacts are located in the Appendix.
The Health Insurance Portability and Accountability Act of 1996
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) was signed into law on August 21, 1996. This law includes important new protections for millions of working Americans and their families who have preexisting medical conditions or might suffer discrimination in health coverage based on a factor that relates to an individual's health. HIPAA's provisions amend Title I of the Employee Retirement Income Security Act of 1974 (ERISA) as well as the Internal Revenue Code and the Public Health Service Act and place requirements on employer-sponsored group health plans, insurance companies and health maintenance organizations (HMOs). HIPAA includes changes that:
- limit exclusions for preexisting conditions;
- prohibit discrimination against employees and dependents based on their health status;
- guarantee renewability and availability of health coverage to certain employers and individuals; and
- protect many workers who lose health coverage by providing better access to individual health insurance coverage.
The following information provides general guidance on frequently asked questions about HIPAA.
Under HIPAA, a group health plan or a health insurance issuer offering group health insurance coverage may impose a preexisting condition exclusion with respect to a participant or beneficiary only if the following requirements are satisfied:
- a preexisting condition exclusion must relate to a condition for which medical advice, diagnosis, care or treatment was recommended or received during the 6-month period prior to an individual's enrollment date;
- a preexisting condition exclusion may not last for more than 12 months (18 months for late enrollees) after an individual's enrollment date; and
- this 12- (or 18-) month period must be reduced by the number of days of the individual's prior creditable coverage, excluding coverage before any break in coverage of 63 days or more.
How will the new law help people who currently have health coverage and who want to change jobs?
Currently some employer health plans do not cover preexisting medical conditions. HIPAA limits the time period of these restrictions so that most plans must cover an individual's preexisting condition after 12 months. Under HIPAA, your new employer's plan will be required to give you credit for the length of time that you had continuous health coverage that will reduce the 12-month exclusion period.
If, at the time you change jobs, you already have had 12 months of continuous health coverage (without a break in coverage of 63 days or more), you will not have to start over with a new 12- month exclusion for any preexisting conditions.
What is a "preexisting condition"?
A "preexisting condition" is a condition present before your enrollment date in any new health plan.
Under HIPAA, the only preexisting conditions that may be excluded under a preexisting condition exclusion are those for which medical advice, diagnosis, care or treatment was recommended or received within the 6-month period ending on your enrollment date.
If you had a medical condition in the past, but have not received any medical advice, diagnosis, care or treatment within the 6 months prior to your enrollment date in the plan, your old condition is not a "preexisting condition" for which an exclusion can be applied.
Are there "preexisting conditions" that cannot be excluded from coverage?
Yes. Preexisting condition exclusions cannot be applied to pregnancy, regardless of whether the woman had previous coverage. In addition, a preexisting condition exclusion cannot be applied to a newborn, adopted child under age 18 or a child under 18 placed for adoption as long as the child became covered under the health plan within 30 days of birth, adoption or placement for adoption, and provided the child does not incur a subsequent 63-day or longer break in coverage.
Can states modify HIPAA's portability requirements?
Yes, in certain circumstances. States may impose stricter obligations on health insurance issuers in the seven areas listed below. States may:
- shorten the 6-month "look-back" period prior to the enrollment date to determine what is a preexisting condition;
- shorten the 12- and 18-month maximum preexisting condition exclusion periods;
- increase the 63-day significant break in coverage period;
- increase the 30-day period for newborns, adopted children and children placed for adoption to enroll in the plan so that no preexisting condition exclusion period may be applied thereafter;
- expand the prohibitions on conditions and people to whom a preexisting condition exclusion period may be applied beyond the "exceptions" described in federal law (the "exceptions" under federal law are for certain newborns, adopted children, children placed for adoption and pregnancy);
- require additional special enrollment periods; and
- reduce the maximum HMO affiliation period to less than 2 months (3 months for late enrollees).
Therefore, if your health coverage is offered through an HMO or an insurance policy issued by an insurance company, you should check with your State Insurance Commissioner's Office to find out the rules in your state. (See Appendix.)
I changed employment recently. How do I know if I am subject to any preexisting condition exclusion period?
Many plans do not exclude coverage for preexisting conditions. A plan must tell you if it has a preexisting condition exclusion period (and can only exclude coverage for a preexisting condition after you have been notified). The plan must also notify you of your right to show that you have prior creditable coverage to reduce the preexisting condition exclusion period.
If the plan does apply a preexisting condition exclusion period, the plan must make a determination regarding your creditable coverage and the length of any preexisting condition exclusion period that applies to you. Generally, within a reasonable time after you provide a certificate or other information relating to creditable coverage, a plan is required to make this determination.
You are required to be notified of this determination if, after considering all evidence of creditable coverage, the plan will still impose a preexisting condition exclusion period with respect to any preexisting condition you may have. The notice must also tell you the basis of the determination, including the source and substance of any information on which the plan relied and any appeals procedure that is available to you.
The plan may modify its initial determination if it later determines that you do not have the creditable coverage you claimed. In this circumstance, the plan must notify you of its reconsideration, and until a final determination is made, the plan must act in accordance with its initial determination for purposes of approving medical services.
I changed employment and my new group health plan imposes a preexisting condition exclusion period. How does my new plan determine the length of my preexisting condition exclusion period?
A plan can exclude coverage for a preexisting condition only if it relates to a condition (whether physical or mental, and regardless of the cause of the condition) for which medical advice, diagnosis, care or treatment was recommended or received within the 6-month "look-back" period ending on an individual's "enrollment date." Your "enrollment date" is your first day of coverage, or if there is a waiting period, the first day of your waiting period (typically, your date of hire).
The maximum length of a preexisting condition exclusion period is 12 months after the enrollment date (18 months in the case of a "late enrollee"). A late enrollee is an individual who enrolls in a plan other than on either the earliest date on which coverage can become effective under the terms of the plan or on a special enrollment date.
A plan must reduce an individual's preexisting condition exclusion period by the number of days of an individual's creditable coverage. However, a plan is not required to take into account any days of creditable coverage that precede a break in coverage of 63 days or more ("significant break in coverage"). A plan generally receives information about an individual's creditable coverage from a certificate furnished by a prior plan or issuer (e.g., an insurance company or HMO).
A certificate of creditable coverage must be provided automatically to you by the plan or issuer when you lose coverage under the plan or become entitled to elect COBRA continuation coverage and when your COBRA continuation coverage ceases. You also have a right to receive a certificate when you request one from your previous plan or insurance company within 24 months of when your coverage ceases.
If you do not have a certificate, you may present other evidence of creditable coverage.
I am not changing jobs. How do the HIPAA provisions apply to me?
On the date your plan becomes subject to the HIPAA provisions, the plan may not exclude coverage for any preexisting condition for more than 12 months after your enrollment date (18 months for a late enrollee). This period may have already passed.
If this period has not passed, your plan is required to use any creditable coverage that you had accumulated prior to your enrollment date to reduce your remaining preexisting condition exclusion period.
Finally, your plan must comply with the rules that prohibit discrimination in eligibility and continued eligibility to enroll and remain enrolled under the plan, and in setting premiums and contributions, based on a health status-related factor.
My employer has a waiting period for enrollment in the plan. How does this relate to the preexisting condition exclusion period?
HIPAA does not prohibit a plan or issuer from establishing a waiting period. However, if a plan has a waiting period and a preexisting condition exclusion period, the preexisting condition exclusion period begins when the waiting period begins.
For group health plans, a waiting period is the period that must pass before an employee or a dependent is eligible to enroll under the terms of a group health plan. However, if the employee or dependent is a late enrollee or a special enrollee, any period before such late or special enrollment is not a waiting period.
If an individual seeks and obtains coverage by purchasing an individual insurance policy, the period between the date the individual files a substantially complete application for coverage and the first day of coverage is a waiting period.
I have an ongoing medical condition and have been subject to a preexisting condition exclusion period under my current employer's health plan. I have been continuously enrolled in the plan for more than 12 months. Will HIPAA help me obtain coverage for this condition?
Yes. As long as benefits for the condition are otherwise covered under the terms of the plan, a preexisting condition exclusion period may generally not last longer than 12 months. Because you have been covered by your current plan for at least 12 months without a 63-day break in coverage, your employer will no longer be able to impose the preexisting condition exclusion period when HIPAA becomes effective for your plan.
I recently changed jobs. Seven months ago I received my last treatment for carpal tunnel syndrome. I have not received any medical advice, diagnosis, care or treatment regarding this condition since that time. Can my employer impose a preexisting condition exclusion period for this illness?
No. Your employer may not impose a preexisting condition exclusion period with respect to any condition for which no medical advice, diagnosis, care or treatment was recommended or received more than 6 months prior to your enrollment date.
I have had coverage under my new employer's health plan for 6 months, and I have no prior creditable coverage. My new plan has no waiting period but applies a 12-month exclusion period for preexisting conditions. I have asthma and received treatment for it several times during the 6-month period prior to my enrollment date in my new employer's health plan. I was recently hospitalized as a result of my asthma. Is my new plan required to cover this hospitalization?
No. You are subject to the remaining 6 months of the 12-month preexisting condition exclusion period applied by your plan because you did not have any previous creditable coverage and because you had received treatment for the condition within the 6-month period prior to your enrollment date in the new plan.
Reducing A Preexisting Condition Exclusion Period
A preexisting condition exclusion period is not permitted to extend for more than 12 months (or 18 months for late enrollees) after an individual's enrollment date in the plan. The period of any preexisting condition exclusion that would apply under a group health plan is generally reduced by the number of days of creditable coverage.
What is "creditable coverage"?
Most health coverage is creditable coverage, such as coverage under a group health plan (including COBRA continuation coverage), HMO, individual health insurance policy, Medicaid or Medicare.
Creditable coverage does not include coverage consisting solely of "excepted benefits," such as coverage solely for dental or vision benefits.
Days in a waiting period during which you have no other coverage are not creditable coverage under the plan, nor are these days taken into account when determining a significant break in coverage (a break of 63 days or more).
How does "crediting" for prior coverage work under HIPAA?
Most plans will use the "standard method" of crediting coverage.
Under the standard method, you will receive credit for your previous coverage that occurred without a break in coverage of 63 days or more. Any coverage occurring prior to a break in coverage of 63 days or more will not be credited against a preexisting condition exclusion period.
To illustrate, suppose an individual had coverage for 2 years followed by a break in coverage of 70 days and then resumed coverage for 8 months. That individual would only receive credit for 8 months of coverage; no credit would be given for the 2 years of coverage prior to the break in coverage of 70 days.
It is also important to remember that during any preexisting condition exclusion period under a new plan you may be entitled to COBRA continuation coverage under your former plan. "COBRA" is the name for a federal law that provides workers and their families the opportunity to purchase group health coverage through their employer's health plan for a limited period of time (generally 18, 29 or 36 months) if they lose coverage due to specified events including, termination of employment, divorce or death. Workers in companies with 20 or more employees generally qualify for COBRA. Some states have laws similar to COBRA that may apply to smaller companies.
Is there another way that a group health plan or issuer can "credit" coverage under HIPAA?
Yes, a plan or issuer may elect the "alternative method" for crediting coverage for all employees.
Under the alternative method of counting creditable coverage, the plan or issuer determines the amount of an individual's creditable coverage for any of the five specified categories of benefits. Those categories are mental health, substance abuse treatment, prescription drugs, dental care and vision care. The standard method (described above) is used to determine an individual's creditable coverage for benefits that are not within any of the five categories that a plan or issuer may use. (The plan or issuer may use some or all of these categories.)