Provided by Brown & Brown of Louisiana, LLC HIPAA Portability Common Questions To help make health plan coverage more portable, the Health Insurance Portability and Accountability Act (HIPAA) included rules for pre-existing condition exclusions, certificates of creditable coverage (HIPAA Certificates), special enrollment and nondiscrimination. The Affordable Care Act (ACA) made extensive changes to HIPAA s portability rules. Due to the ACA: Health plans are prohibited from imposing pre-existing condition exclusions on any enrollees, effective for plan years beginning on or after Jan. 1, 2014. Beginning Dec. 31, 2014, health plans are not required to issue HIPAA Certificates. This Compliance Overview includes common questions regarding HIPAA s nondiscrimination and special enrollment rules. It does not address pre-existing condition exclusions or HIPAA Certificates because these requirements are no longer applicable due to the ACA s reforms. LINKS AND RESOURCES Final regulations from 2004 regarding HIPAA portability Final regulations on HIPAA s nondiscrimination requirements for wellness programs. Department of Labor s Compliance Assistance Guide, which covers HIPAA s portability rules. STATUS OF RULES Due to the ACA, pre-existing condition exclusions are prohibited and HIPAA Certificates are no longer needed. Health plans must still provide special enrollment rights and comply with nondiscrimination rules. SPECIAL ENROLLMENT RIGHTS Group health plans must provide special enrollment rights in these situations: A loss of eligibility for other health coverage; Termination of eligibility for Medicaid or a state CHIP; The acquisition of a new spouse or dependent by marriage, birth, adoption or placement for adoption; and Becoming eligible for a premium assistance subsidy under Medicaid or a state CHIP. This Compliance Overview is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice.
AFFECTED ENTITIES Which health plans are subject to HIPAA s portability rules? Insured and self-funded group health plans and health insurance carriers that offer group health insurance coverage must comply with HIPAA s portability requirements, including HIPAA s special enrollment and nondiscrimination rules. Prior to the ACA, self-funded, non-federal governmental plans were permitted to opt out of HIPAA s portability requirements. The ACA eliminated the opt-out for HIPAA s portability requirements for these plans, effective for plan years beginning on or after Sept. 23, 2010. Generally, stop-loss carriers are not required to comply with HIPAA. Also, HIPAA s portability rules do not apply to the following benefits: Small group health plans A group health plan that has fewer than two participants who are current employees (for example, retiree-only plans) Excepted benefits Certain categories of coverage (for example, stand-alone vision and dental plans, disability plans, life insurance coverage and health flexible spending accounts (FSAs) that meet specific design requirements) Health savings accounts (HSAs) HSAs are not subject to HIPAA because they are not health plans. However, the high deductible health plans (HDHPs) that are offered with HSAs are subject to HIPAA. What are HIPAA excepted benefits? Excepted benefits are benefits that are not subject to HIPAA s portability requirements. There are four general categories of excepted benefits: 1 Benefits that are generally not health coverage 2 Limited excepted benefits 3 Non-coordinated excepted benefits 4 Supplemental excepted benefits The benefits in the first category are excepted in all circumstances. However, the benefits in the second, third and fourth categories are excepted only if certain conditions are met. 2
Excepted benefits that are not health coverage include: Coverage only for accidents (including accidental death and dismemberment) Coverage issued as a supplement to liability insurance Disability income coverage Automobile medical payment insurance Workers compensation or similar coverage Credit-only insurance (for example, mortgage insurance) Liability insurance, including general liability insurance and automobile liability insurance Coverage for on-site medical clinics The second category of excepted benefits is limited excepted benefits, which may include limited-scope vision or dental benefits as well as benefits for long-term care, nursing home care, home health care or community-based care. Benefits provided under a health FSA may also qualify as limited excepted benefits if they satisfy the availability and maximum benefit requirements. Employee assistance programs (EAPs) and limited wraparound coverage may also qualify as limited excepted benefits that are exempt from HIPAA s portability rules. The third category of excepted benefits, referred to as non-coordinated excepted benefits, includes both coverage for only a specified disease or illness (such as cancer-only policies) and hospital indemnity or other fixed indemnity insurance. To qualify as excepted benefits, a hospital indemnity or other fixed indemnity insurance must pay a fixed dollar amount per day (or per other period) of hospitalization or illness regardless of the amount of expense incurred. The fourth category of excepted benefits is supplemental excepted benefits. These benefits must be supplemental to Medicare or CHAMPVA/TRICARE coverage (or similar coverage that is supplemental to coverage provided under a group health plan, known as similar supplemental coverage ) and provided under a separate policy, certificate or contract of insurance. What is a limited-scope dental or vision plan? Limited-scope dental benefits are benefits substantially all of which are for treatment of the mouth (including any organ or structure within the mouth). Limited-scope vision benefits are benefits substantially all of which are for treatment of the eye. 3
Limited benefits qualify as excepted benefits if they are either: Provided under a separate policy, certificate or contract of insurance; or Otherwise not an integral part of a group health plan. While only insured coverage may qualify under the first test, both insured and self-insured coverage may qualify under the second test. Effective for plan years beginning on or after Jan. 1, 2015, to satisfy the criterion that limited-scope vision or dental benefits cannot otherwise be an integral part of the plan, (whether they are provided through the primary plan, separately or as the only coverage offered), either: Participants must be able to decline coverage; or Benefit claims must be administered under a contract separate from claims administration for any other benefits under the plan. When does a health FSA qualify as an excepted benefit? Benefits provided under a health FSA may qualify as limited excepted benefits if they satisfy the availability and maximum benefit requirements. Due to the ACA s market reforms, most health FSAs must satisfy these requirements. Availability Requirement Other non-excepted group health plan coverage (for example, major medical coverage) must be made available for the year to the class of participants by reason of their employment. Maximum Benefit Requirement The maximum benefit payable under the health FSA to any participant for a year cannot exceed the greater of: Two times the participant s salary reduction election under the health FSA for the year; or The amount of the participant s salary reduction election for the health FSA for the year, plus $500. Are health reimbursement arrangements (HRAs) subject to HIPAA? Yes. HRAs are group health plans that are subject to HIPAA s portability rules. What are the penalties for failure to comply with HIPAA s portability rules? The Department of Treasury, the Department of Labor and the Department of Health and Human Services jointly enforce HIPAA. The Department of Labor has the authority under ERISA to audit a group health plan s compliance with HIPAA, and HIPAA violations may result in civil penalties or other 4
corrective action for the group health plan sponsor. Also, under the Internal Revenue Code, HIPAA violations may trigger excise taxes of $100 per day of noncompliance for each affected individual. SPECIAL ENROLLMENT RIGHTS What are HIPAA special enrollment rights? Group health plans often provide eligible employees with two regular opportunities to elect health coverage an initial enrollment period when an employee first becomes eligible for coverage and an annual open enrollment period before the start of each plan year. To make health coverage more portable, HIPAA requires group health plans to provide special enrollment opportunities outside of the plans regular enrollment periods in certain situations. These special enrollment rights apply to employees and their dependents, depending on the circumstance. Special enrollment must be provided in these situations: A loss of eligibility for other health coverage; Termination of eligibility for Medicaid or a state Children s Health Insurance Program (CHIP); The acquisition of a new spouse or dependent by marriage, birth, adoption or placement for adoption; and Becoming eligible for a premium assistance subsidy under Medicaid or a state CHIP. Do health plan sponsors need to notify plan participants about their special enrollment rights? Group health plans are required to provide a notice regarding individuals special enrollment rights. The special enrollment notice must be provided at or before the time the employee is initially offered the opportunity to enroll in the plan. The notice must be provided to all eligible employees, both those who enroll in the plan as well as those who decline coverage. Health plan sponsors often include the notice of special enrollment rights in their plan enrollment forms, or provide it as a separate notice with plan enrollment materials. The HIPAA special enrollment notice must describe the special enrollment rights available under the group health plan. Also, if a group health plan requires employees who decline coverage to indicate whether the reason for declining coverage is the existence of other coverage (as a condition of receiving special enrollment rights for loss of coverage), the notice of special enrollment rights must inform the employee of: The requirement to provide the statement of the reason for declining coverage; and The consequences of a failure to provide the statement. 5
NONDISCRIMINATION When does HIPAA prevent a group health plan from discriminating against an individual? HIPAA does not allow a group health plan to deny an individual eligibility for benefits or charge a higher premium than is required of a similarly situated individual, based upon health factors. Health factors include: Health status Genetic information Medical condition (physical or mental) Evidence of insurability Receipt of health care Disability Claims experience Medical history Any other health status-related factor determined appropriate by the Department of Health and Human Services (HHS) HIPAA does not allow a group health plan to treat an individual within a group of similarly situated individuals differently. However, a plan may provide different health benefits for employees in different groups if the distinction between the groups is based on bona fide employment-based classifications. For example, a group health plan may provide different benefits to employees located at different geographic locations, or based upon their employment classification (for example, full-time versus parttime status). Although health insurance issuers may consider all relevant health factors of individuals within a group in order to establish aggregate rates for coverage provided under a group health plan, issuers cannot engage in list billing based on health factors. Thus, an issuer cannot charge an employer different premiums for similarly situated individuals based on health factors. In addition, effective for plan years beginning on or after Jan. 1, 2014, issuers may vary the premium rate charged to a non-grandfathered plan in the individual or small group market from the rate established for that particular plan based only on the following factors age, geography, family size and tobacco use. Can a group health plan require employees to pass a physical exam in order to be eligible for health plan coverage? No. The final HIPAA nondiscrimination regulations clarify that a group health plan may not require individuals to pass a physical exam in order to be eligible for health insurance coverage. 6
Under HIPAA, may group health plans delay an individual s effective date for coverage because that individual is confined to a hospital? No. A group health plan may not delay an individual s effective date for coverage because the individual is confined to a hospital. Non-confinement clauses are most often used to allocate responsibility for coverage of individuals that are confined to a hospital at the time an employer moves its coverage from one health insurance coverage issuer to another. The final HIPAA nondiscrimination regulations make it clear that the health insurance coverage issuer, irrespective of state law, must make an individual s coverage effective regardless of whether that individual is confined to a hospital. Many state laws allow the assuming carrier to delay an individual s effective date until the confinement has ended. The final regulations suggest that state laws may be used as a coordination of benefits provision. Under HIPAA, may group health plans delay an individual s effective date for coverage because that individual is not actively at work? A group health plan may not delay enrollment in the health plan until an employee is actively at work, unless individuals who are absent from work due to any health factor are treated, for purposes of health insurance coverage, as if they are actively at work. Do group health plans violate the HIPAA nondiscrimination regulations if they contain limitations on specific types of benefits? The final HIPAA nondiscrimination regulations confirmed that group health plans may include benefit limitations within their plans so long as the limitations apply uniformly to all similarly situated individuals. For example, coverage may be denied for treatment that is not medically necessary or a health plan may exclude all coverage for a specific condition. In the event a group health plan implements a plan design change effective at the beginning of the plan year, it will not be considered to be directed at any one individual. However, a plan design change implemented in the middle of the plan year would be reviewed under a facts and circumstances test to determine if the changes were made in anticipation of a specific individual s claim for treatment which violates the HIPAA nondiscrimination regulations. In addition, while limits or exclusions applicable to all similarly situated employees are permissible under the final HIPAA nondiscrimination regulations, group health plans must also determine whether the benefit limitations violate other laws, such as the Americans with Disabilities Act, the Pregnancy Discrimination Act and the ACA. May group health plans charge employees a higher premium or deny health insurance coverage based upon the employee s participation in a dangerous or hazardous activity? No. A group health plan may not charge an employee a higher premium or deny health insurance coverage based upon an employee s participation in a dangerous or hazardous activity (for example, skydiving or bungee jumping). However, a group health plan may exclude coverage for treatment of injuries related to the participation in these activities. 7
Group health plans may not exclude benefits because they are related to an act of domestic violence or a medical condition. For example, a group health plan may not exclude coverage for treatment of selfinflicted injuries sustained in connection with an attempted suicide if the injuries were also caused by a medical condition such as depression. Benefits may not be denied if the injuries resulted from a medical condition even if the medical condition was not diagnosed before the injury. Under HIPAA, can a group health plan reward its employees by charging healthy employees less for health plan coverage? Although HIPAA generally prohibits group health plans from charging an individual within a group of similarly situated individuals a different premium or contribution for coverage based upon that individual s health factors, group health plans still have many opportunities to offer financial incentives in order to promote health and prevent disease. Participatory Wellness Programs Participatory wellness programs either do not require an individual to meet a health-related standard to obtain a reward or do not offer a reward at all. This type of wellness program is not subject to the nondiscrimination rules, as long as participation in the program is made available to all similarly-situated individuals. Examples of this type of wellness program include: Rewarding employees for attending a free health education seminar; Reimbursing employees for the cost of health club memberships, without regard to any health factors; and Reimbursing employees for the cost of smoking cessation programs, without regard to whether the employee quits smoking. There is no limit on financial incentives or rewards for participatory wellness programs under HIPAA. Health-contingent Wellness Programs Where a wellness program requires individuals to satisfy a standard related to a health factor in order to obtain a reward, the program must comply with certain nondiscrimination requirements. Effective for plan years beginning on or after Jan. 1, 2014, the ACA adopted the HIPAA nondiscrimination requirements for health-contingent wellness programs, while also increasing the maximum reward that can be offered under these programs. Under the ACA s final regulations, there are two types of healthcontingent wellness programs: Activity-only wellness programs require an individual to perform or complete an activity related to a health factor in order to obtain a reward (for example, walking, diet or exercise programs). Activity-only wellness programs do not require an individual to attain or maintain a specific health outcome. 8
Outcome-based wellness programs require an individual to attain or maintain a certain health outcome in order to obtain a reward (for example, not smoking, attaining certain results on biometric screenings or meeting exercise targets). Generally, these programs have two tiers: (1) a measurement, test or screening as part of an initial standard; and (2) a larger program that then targets individuals who do not meet the initial standard with wellness activities. Outcomebased programs allow plans and issuers to target specific individuals (for example, those with high cholesterol for participation in cholesterol reduction programs, or individuals who use tobacco for participation in tobacco cessation programs), rather than the entire population of participants and beneficiaries, with the reward based on health outcomes or participation in reasonable alternatives. The total reward offered to an individual under an employer s health-contingent wellness programs (both activity-only and outcome-based) cannot exceed a specified percentage of the total cost of employee-only coverage under the plan. The total cost includes both employer and employee contributions towards the cost of coverage. If, in addition to employees, any class of dependents (such as spouses and dependent children) may participate in the health-contingent wellness program, the reward cannot exceed the specified percentage of the total cost of the coverage in which the employee and any dependents are enrolled (such as family coverage or employee-plus-one coverage). Effective for 2014 plan years, the ACA increased the maximum permissible reward from 20 percent to 30 percent of the cost of health coverage for health-contingent wellness programs. In addition, the final regulations increased the maximum permissible reward to 50 percent of the cost of health coverage for health-contingent wellness programs designed to prevent or reduce tobacco use. Rewards offered under participatory wellness programs do not count toward the limit for healthcontingent wellness programs. Thus, any rewards provided for participatory programs, such as attending health education seminars, would not be included in the applicable percentage for health-contingent programs. Do the HIPAA nondiscrimination regulations prohibit a group health plan from treating individuals with adverse health factors more favorably? No. Group health plans may establish more favorable rules for eligibility for individuals with an adverse health factor, such as a disability, than for individuals without an adverse health factor. For example, some group health plans contain provisions that allow disabled dependent children to continue to be eligible for coverage beyond the limiting age applied to dependent children that are not disabled. Do HRAs that allow unused funds to be carried over from year to year violate the HIPAA nondiscrimination regulations? In response to inquiries requesting clarification on the application of the HIPAA nondiscrimination regulations to HRAs that allow unused funds to be carried over from year to year, the final regulations included an example of an HRA plan that is not a violation: 9
Example: The health insurance coverage is made available to all current employees. Under the plan, the medical care expenses of each employee (and the employee s dependents) are reimbursed up to an annual maximum amount. The maximum reimbursement amount with respect to an employee for a year is $1500 multiplied by the number of years the employee has participated in the plan, reduced by the total reimbursements for prior years. This example clarifies that even though unused employer-provided medical care reimbursement amounts carried forward from year to year vary among employees within the same group of similarly situated individuals based upon prior claims experience, the HRA does not violate the HIPAA nondiscrimination regulations. Employees who have participated in the plan for the same length of time are eligible for the same total benefit over that length of time, and the restriction on the maximum reimbursement amount is not directed toward any individual participants or beneficiaries based on any health factor. 10