OVERVIEW
The provisions of the Group Health policy illustrated above, does not take into consideration much of the HIPAA legislation. At the time of this text construction, many companies had not effected many of the required changes, and there were questions that had not been answered by the Federal Government. Therefore, provisions as such are not presented in this text, but a review of the Act will demonstrate the changes and additions in benefits as the result of this legislation.
In addition to the effects on Group Insurance, the legislation also addresses portability of individual policies, the introduction of Medical Savings Accounts (MSA), Medicare and Medicaid Fraud, and Administrative simplification of health insurance products. For this purposes of this discussion, references will be made to the role of individual insurance and MSA’s (which are individual health insurance products) only.
The following is a summary of this Act’s provisions.
Purpose
The purpose of this legislation is "to provide portability and continuity of health insurance coverage in the group and individual markets, to combat waste, fraud and abuse in health insurance and health care delivery, to promote the use of medical savings accounts, to improve access to long-term care services and coverage, to simplify the administration of health insurance."
Portability of Coverage
Group Market
Groups are defined as two or more participants (employees generally). The prime reason for the legislation is portability, which is achieved through limitation on pre-existing condition exclusions. Such limitations are applicable to all group plans and are defined as follows:
· The pre-existing condition must be diagnosed or treated within 6 months of the enrollment date in a plan.
· Exclusion of coverage for the pre-existing condition cannot be for more than 12 months, or 18 months in the case of a late enrollee.
· The time accrued under the pre-existing condition exclusion must be carried from one plan to another (the portability feature), as long as there is not a break in coverage of more than 62 days. The previous coverage can be virtually any coverage, including individual coverage, dependent coverage, etc., A waiting period does not count as a break in coverage.
· Pre-existing condition exclusions may not apply in the case of pregnancies, or for newborns and adopted children who are covered by insurance 30 days from the date of birth or adoption.
Individual Market
Guaranteed Access And Renewability
Group Market
· Insurers who offer coverage in the small group market (2 to 50 employees) in a state cannot exclude a small employer or any of the employer's eligible employees from coverage on the basis of health status. There are certain exceptions, such as lack of financial reserves that causes the insurer not to write any new policies.
· No group health plan, regardless of size, may exclude an employee or other qualified person or dependents from enrollment in the plan on the basis of any of the following health-related factors: health status, medical condition (physical or mental), claims experience, receipt of health care, medical history, genetic information, evidence of insurability, or disability.
· An individual in a group plan cannot be charged, on the basis of any health factor, a premium greater than that charged for a similarly situated individual in the plan. This requirement does not restrict the amount an employer may be charged for coverage under a group plan.
· All group coverage, “large” market or “small" must be renewed. The following exceptions apply: nonpayment of premiums, fraud, violation of participation or contributions rules, discontinuation of market coverage by the insurer, movement outside the service area, or the dropping of association membership.
Individual Market
An insurer providing individual coverage in a state cannot deny coverage to an individual coming off of group coverage. Such an individual, however, must:
a) have had previous coverage for at least 18 months;
b) not be eligible for other group coverage;
c) not have been terminated from previous coverage due to non-payment of premiums, fraud,
etc.; and
etc.; and
d) not be eligible for or have exhausted, COBRA coverage.
An individual insurer is not required to guarantee issue more than two policies. Those two policies can either be the insurer's two most popular plans, based on premium volume, or a package of lower level and higher level coverage plans based on premium volume, or a package of lower level and higher level cover-age plans based on an actuarial average. The latter plans must be covered under a risk adjustment or risk-spreading mechanism.
The guaranteed issue requirement would not apply in a state that has instituted an approved alternative mechanism to provide group-to-individual coverage. Such a mechanism can be, but is not limited to, a risk pool, mandatory group conversion policies, guaranteed issue of one or more individual plans, open enrollment by one or more insurers, or a combination of these or other mechanisms.
The alternative mechanism option can be automatically met through adoption of NAIC models covering high-risk pools, small employers, and/or individual health coverage.
A state will be presumed to have in place an acceptable alternative mechanism as of the July 1, 1997 implementation date H.R. 3103 if the governor notifies the Secretary of Health and Human Services of intent to do so, even though the actual mechanism may not be enacted until January 1, 1998. In other words, there is a grace period that will allow the state additional time for enactment without the guaranteed issue requirement becoming effective.
All individual policies, not just the group-to-individual policies, must be renewed (guaranteed renewability), with the exceptions applicable for group coverage also applicable here.
Overview Of HIPAA Mandate Provisions
Pre-Existing Conditions
Effective Date: 7-1-97. Based on date of service, for all fully insured groups in all market segments, and HMOs.
Provisions:
· Pregnancy, treatment related to domestic violence, are not subject to pre-existing condition exclusions.
· Use of Genetic information cannot be used in pre-existing condition determinations.
· Can not apply pre-existing condition exclusion period to newborns, if covered within 30 days of birth.
· Can not apply pre-existing condition exclusion period to adopted children, or children placed for adoption, under age 18, if covered within 30 days of the event.
(Following not applicable to individual policies)
· Eliminated “manifested” clauses and only allows for exclusion of pre-existing conditions based on “date treated.”
· Limits the look-back period to 6 months from enrollment date
· Limits pre-existing condition exclusion period “look forward” to 12 months from enrollment date.
Creditable Coverage
Provisions:
Allows for the reduction of the pre-existing condition exclusion period by the creditable coverage under a prior health insurance plan if there was no break in coverage of more than 62 days.
Certification of Creditable Coverage
Provisions: (Note: The group may elect to furnish the certificates themselves provided they sign a waiver with their carrier).
Health insurers are required to furnish a certificate of creditable coverage to an individual as follows:
· certificate provided automatically when individual cancels.
· provide upon the request of an individual at any time while enrolled
· provide upon the request of an individual within 24 months of losing coverage.
· offer summary of all members, when whole group cancels.
Anti-Discrimination
Provisions:
· Prohibits establishing rules for eligibility and premium payment based on health status related factors.
Guaranteed Issue
Provisions:
· Requires insurers that offer small group coverage to accept every small employer in the state that applied for coverage. (Consistent with many states current law)
Guaranteed Renewability
Provisions:
· Group insurers must renew policies.
· Individual insurers must renew policies except for coverage made available through associations.
· Exceptions to renewing: Fraud, non-payment, noncompliance with participation requirements, market exit, or service area limitations.
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Medical Savings Accounts
A demonstration program testing the viability of medical savings accounts is provided. Under the program, contributions to an MSA, as well as the interest earned, are tax deductible, but only if a catastrophic health insurance policy is also purchased. The key components and parameters of the demonstration program area as follows:
Those eligible are the self-employed, employers with 50 or fewer employees and their employees (however, if a company expands to up to 200 employees, the company's work force would still be eligible), and those without insurance.
Initial eligibility for MSAs under the demonstration program begins January 1, 1997. A cap of 750,000 is placed on the number of MSA policies or plans that can participate, though the actual number of people covered could be twice that amount or more, depending on the amount of family coverage. In addition, those without insurance coverage or access to coverage through the employer for at least six months would not be counted under the cap, but could not obtain MSAs once the cap is reached.
Catastrophic policies accompanying the savings accounts must have deductibles in the range of $1500 to $2250 for individuals, and $3000 to $4500 for families. In addition, out-of-pocket expenses could not exceed $3000 for individuals and $5500 for families. The policies are typical Major Medical individual insurance policies.
Annual contributions to the MSA will be limited to 65% of the deductible for individuals and 75% for families.
A 15% penalty would be applied to all funds withdrawn from the savings account and used for non-medical purposes. through age 65, except in cases of death or disability.
Those participating in the demonstration will be able to keep their MSAs after the four-year period runs out, but for coverage to extend to the rest of the population, Congress would have to vote to do so.
Deductibility For The Self-Employed
Health insurance deductions for the self-employed currently stand at 30%. They will be increased as follows:
1997 - 40%
1998 - 45%
2003 - 50%
2004 - 60%
2005 - 70%
2006 - 80%
C.A.
Mike’s decision to leave the employ of Consolidated and acquire his own health insurance, and the effects of HIPAA are illustrated in the C.A. previously. In addition, there are other provisions of interest to Mike.
Now that Mike is self employed and in good health, he may elect to participate in a Medical Savings Account. He would purchase”catastrophe” coverage, defined as a Major Medical Insurance policy with a deductible of $1500 to $2250, or combined family deductible of $3000 to $4500. (New proposed legislation will reduce the deductible to $1,000 and combined accordingly). He would set aside 65% of the individual deductible or 75% of the deductible for the family coverage, into a Medical Savings Account. Funds in the MSA that are not used for medical purposes may accumulate tax-free.
In addition, he can deduct 45% of his insurance premium from his taxes as business expense.
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MENTAL HEALTH PARITY ACT OF 1996
(Included as Title VII of the VA-HUD Appropriations Bill)
Please refer to provisions regarding group health insurance coverage of mental health above. For groups of 50 or more employees, the Mental Health Parity Act of 1996 was enacted. Many of the large group policies will have Endorsements reflecting this legislation, or will have it as part of their Mental Health Care provisions. Following is a Summary of Final Provisions
· If a group health plan does not have lifetime or annual caps, it cannot impose such caps on mental health benefits.
· If a group health plan includes a Lifetime or annual cap on substantially all medical and surgical benefits, mental health benefits under the plan cannot be subject to a lower cap.
· If different caps are applied to different categories of medical and surgical benefits, the cap applied to mental health benefits must be a weighted average of the aggregate caps.
· The provisions apply only to group plans (ERISA and non-ERISA) for employers with more than 50 employees.
· A plan is not required to offer mental health benefits.
· No standards are imposed on the terms and conditions of mental health coverage, such as the amount, duration, or scope of coverage, the level of cost-sharing, limits on the numbers of visits or days of coverage, or requirements relating to medical necessity.
· Mental health benefits are not defined in this legislation. The definition is left up to the plan. However, the legislation states that mental health does not include treatment of substance abuse or chemical dependency.
· The lifetime or annual cap provisions do not apply if they result in an increase of one percent or more in the cost of the plan.
· The legislation applies to group plans for plan years beginning on or after January 1, 1998. Congress is in essence given a one-year grace period in which to change its mind about the mental health parity requirements or to make modifications.
· The mental health parity requirements sunset after September 30, 2001, For them to continue, Congress would have to pass new legislation.
C.A.
Consolidated’s health insurance plan has a limitation on Mental Health benefits (as indicated in prior text). Since their health insurance plan was in force prior to January 1, 1998, this Endorsement would not apply to their plan. However, if they change plans, the new plans must allow Mental Health benefits to be treated the same as any other benefit under the plan, with the exception of alcohol and drug rehabilitation in most jurisdictions.
If, however, by adding this provision to a new health insurance plan, the premium would increase by more than one percent (and it can be actuarially proven), they could resort back to an annual cap.
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THE NEWBORNS’ AND MOTHERS’ HEALTH PROTECTION ACT OF 1996 (NMHPA)
Another Federal Act was enacted in 1996 as a political response to highly publicized early discharges of mothers of newborn children. Signed into law on September 26, 1996, NMHPA provides new protection for mothers and their newborn children with regards to the length of hospital stays following the birth of the child.
This legislation prohibits any insurer/HMO from:
1) Denying to a mother or her newborn infant eligibility, or continued eligibility, to enroll or to renew coverage under the terms of the contract for purpose of avoiding the requirements of the NMHPA;
2) Providing monetary payments or rebates to a mother to encourage the mother to accept less than the minimum protections available under the law;
3) Penalize or otherwise reduce or limit the reimbursement of an attending Provider solely because the attending Provider provided care to an individual participant or beneficiary in accordance with the law;
4) Providing incentives, monetary or otherwise, to an attending Provider solely to induce the Provider to provide care to an individual participant or beneficiary in a manner inconsistent with the law; or
5) Restricting benefits for any portion of a period within a hospital length of stay required under the law in a manner that is less favorable than the benefits provided for any preceding portion of such stay.
These amendments do not require a mother who is a participant or beneficiary to give birth in a hospital or stay in a hospital for a fixed period of time following the birth of her infant.
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