HIPAA "creditable coverage" rules affect group health plans, insurers.
Among the most significant issues addressed by the interim rules is the requirement that any preexisting condition exclusion period of a group health plan (whether self-insured or insured) must be reduced by an individual's "creditable coverage," i.e., by certain periods of prior coverage. HIPAA's creditable coverage rules raised employer concerns about certifying periods of prior coverage, crediting of periods and plan recordkeeping obligations. If a plan fails to comply with HIPAA's requirements, including those for crediting coverage, a $100-a-day penalty may be imposed under Sec. 4980D. In addition, plan participants may sue to enforce compliance with the HIPAA. In order to avoid potential penalties and lawsuits, an employer must immediately decide how responsibility for compliance with certification requirements is to be allocated between it and service providers.
Temp. Regs. Sec. 54.9806-4T clarifies many of the issues involving creditable coverage. Certificates generally must be provided automatically when an individual loses coverage under a plan and when the individual has the right to elect Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) coverage. Certificates also must be provided on request if made within 24 months after loss of coverage (and must reflect each period of continuous coverage within the 24-month period).
The certificate may indicate, when appropriate, simply that an individual has at least 18 months of coverage uninterrupted by a significant break in coverage, stating the date coverage began. In other cases, the certificate must indicate the date any waiting or affiliation period began and the dates coverage began and ended (or whether it is continuing, as in the case of COBRA coverage).
The interim rules provide three model certifications that can be used by plans to meet these obligations. Model 1 applies to employees who lost health coverage between Oct. 1, 1996 and June 1, 1997, and contains a transition rule that would allow the reporting of generic, rather than individualized, information. Model 2 is a standard certification indicating the first and last day of coverage, and whether an individual had at least 18 months of coverage. Model 3 is an alternative form of certification providing information on specified categories of benefits.
During a transition period ending July 1, 1998, a plan may simply indicate whether the primary insured maintained family coverage, rather than provide a separate certification for dependent coverage. After the transition period, while reasonable efforts to collect dependent information must be made, certificates of coverage need not be issued automatically until the plan knows (or should know) dependent coverage has ceased.
The interim rules also clarify that a certificate, with respect to an individual, need be issued only by one party (e.g., the plan, an insurer or a third-party administrator). In the case of insured plans (when the insurance reform law required issuance of a certificate by both the plan and the insurer), the plan may contract with the insurer for the insurer to provide the certification. Certificates of coverage may be provided telephonically (and perhaps electronically), as long as all parties (including the individual and both the old and new health plans) agree.
Creditable coverage, for HIPAA purposes, generally means an individual's coverage under a group health plan and certain other public and governmental health plans, while excepting certain other limited or income-replacement benefits (such as accident coverage, disability insurance and workers' compensation). The amount of an individual's creditable coverage is determined under one of two methods:
* Under the standard method, aggregate days of coverage are counted, without regard to the specific type of coverage.
* Under the alternative method, the plan separately determines an individual's creditable coverage for any of the five following categories of benefits: mental health, substance abuse treatment, prescription drugs, dental care and vision care. If the alternative method is used, different preexisting condition exclusion periods may be applied to different benefits.
Days of creditable coverage before a significant break in coverage are not required to be counted in reducing the preexisting condition exclusion under the standard method, but are counted under the alternative method. A significant break in coverage generally occurs if the individual did not have creditable coverage for a period of 63 consecutive days. Use of the alternative method, including its effects, must be disclosed in relevant plan disclosure materials, as well as at enrollment. If a plan using the alternative method receives a certificate of coverage, it may request further stratification of information into the five benefit categories. A plan may charge the requesting entity the reasonable cost of providing such information.
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|Title Annotation:||Health Insurance Portability and Accountability Act|
|Publication:||The Tax Adviser|
|Date:||Jul 1, 1997|
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