Department of Labor; Health Care Fi- certification requirement for events that
nancing Administration, Department of occurred on or after October 1, 1996
Health and Human Services. and before June 1, 1997 may be satis-
fied using an optional notice described
ACTION: Interim rules with request for in this preamble.
comments.
Information collection. Affected parties
SUMMARY: This document contains do not have to comply with the informa-
interim rules governing access, portabil- tion collection requirements in these
ity and renewability requirements for interim rules until the Departments pub-
group health plans and issuers of health lish in the Federal Register the control
insurance coverage offered in connec- numbers assigned by the Office of Man-
tion with a group health plan. The rules agement and Budget (OMB) to these
contained in this document implement information collection requirements.
changes made to certain provisions of Publication of the control numbers noti-
the Internal Revenue Code of 1986 fies the public that OMB has approved
(Code), the Employee Retirement In- these information collection require-
come Security Act of 1974 (ERISA), ments under the Paperwork Reduction
and the Public Health Service Act (PHS Act of 1995. The Departments have
Act) enacted as part of the Health asked for OMB clearance as soon as
Insurance Portability and Accountability possible, and OMB approval is antici-
Act of 1996 (HIPAA). Interested per- pated by the applicable effective date.
sons are invited to submit comments on
the interim rules for consideration by ADDRESSES: Written comments should
the Department of Health and Human be submitted with a signed original and
Services, the Department of Labor, and three copies to any of the addresses
the Department of the Treasury (Depart- specified below. All comments will be
ments) in developing final rules. The available for public inspection and copy-
rules contained in this document are ing in their entirety. Interested persons
being adopted on an interim basis to are invited to submit written comments
accommodate statutorily established on these interim rules to:
time frames intended to ensure that Health Care Financing Administra-
sponsors and administrators of group tion, Department of Health and Human
health plans, participants and beneficia- Services, Attention: [BPD–890–IFC],
ries, States, and issuers of group health P.O. Box 26688, Baltimore, MD 21207
insurance coverage have timely guid- Pension and Welfare Benefits Admin-
Section 9801.—Increased ance concerning compliance with the istration, U.S. Department of Labor,
Portability Through Limitations on recently¬ enacted¬ requirements¬ of Room N–5669, 200 Constitution Av-
Preexisting Condition Exclusions HIPAA. enue, NW, Washington, DC 20210, At-
tention: Interim Portability and Renew-
26 CFR 54.9801–5T: Certification and disclosure DATES: Effective date. These interim
of previous coverage (temporary). ability Rules
rules are effective on June 1, 1997. CC:DOM:CORP:T:R (REG–253578–
T.D. 8716 Comment date. Written comments on 96), Room 5228, Internal Revenue Ser-
these interim rules are invited and must vice, POB 7604, Ben Franklin Station,
DEPARTMENT OF THE TREASURY DC 20044
be received by the Departments on or
Internal Revenue Service Alternatively, comments may be sub-
before July 7, 1997.
26 CFR Part 54 mitted electronically via the Internet by
Applicability dates. For group health selecting the ‘‘Tax Regs’’ option on the
DEPARTMENT OF LABOR plans maintained pursuant to one or IRS Home Page, or by submitting com-
Pension and Welfare Benefits more collective bargaining agreements ments directly to the IRS Internet site at
Administration ratified before August 21, 1996, the http://www.irs.ustreas.gov/tax_regs/
29 CFR Part 2590 rules (other than the certification re- comments.html
quirements) do not apply to plan years In the alternative:
DEPARTMENT OF HEALTH AND beginning before the later of July 1, Written comments for the Department
HUMAN SERVICES 1997 or the date on which the last of Health and Human Services may be
Health Care Financing collective bargaining agreement relating hand delivered from 8:30 a.m. to 5:00
Administration to the plan terminates without regard to p.m. to:
45 CFR subtitle A, Parts 144 and any extension agreed to after August 21, Room 309–G, Hubert Humphrey
146 1996. Building, 200 Independence Avenue,
Interim Rules for Health Insurance The rules implementing the certifica- SW, Washington, DC 20201, or Room
Portability for Group Health Plans tion provisions do not require any action C5–09–26, 7500 Security Boulevard,
to be taken before June 1, 1997, al- Baltimore, MD 21244–1850
AGENCIES: Internal Revenue Service, though certain certification requirements Written comments for the Department
Department of the Treasury; Pension apply to periods of coverage and events of Labor may be hand delivered from
and Welfare Benefits Administration, that occur after June 30, 1996. The 8:15 a.m. to 4:45 p.m. to the above
5
address for the Pension and Welfare the Employee Retirement Income Secu- ing health coverage while minimizing
Benefits Administration, U.S. Depart- rity Act of 1974 (ERISA), and the burdens on employers and insurers.
ment of Labor. Internal Revenue Code of 1986 (Code) Reducing Burdens. The regulations
Written comments for the Internal to provide for, among other things, reduce burdens by:
Revenue Service may be hand delivered improved portability and continuity of • providing for a simple model cer-
between the hours of 8 a.m. and 5 p.m. health insurance coverage in the group tificate that can be used by plans and
to: and individual insurance markets, and issuers;
CC:DOM:CORP:T:R (REG–253578– group health plan coverage provided in • reducing unnecessary duplication in
96), Courier’s Desk, Internal Revenue connection with employment. Sections the issuance of certificates;
Service, room 5228, 1111 Constitution 102(c)(4), 101(g)(4), and 401(c)(4) of • including flexible rules for depen-
Avenue, NW, Washington, DC HIPAA require the Secretaries of Health dents to receive the coverage informa-
All submissions to the Department of and Human Services, Labor, and the tion they need;
Health and Human Services will be Treasury, each to issue regulations nec- • allowing coverage information to be
open to public inspection as they are essary to carry out these provisions.1 provided by telephone if all parties
received, generally beginning three agree;
weeks after publication, in room 309–G B. Overview of HIPAA and the Interim • relieving plans and issuers of the
of the Department of Health and Human Rules need to report the starting date of cover-
Services offices at 200 Independence age and waiting period information
Areas of Guidance. The access, port-
Avenue, SW, Washington, DC, from where a certificate shows 18 months of
ability, and renewability provisions of
8:30 a.m. to 5:00 p.m. All submissions creditable coverage;
HIPAA affect group health plans and
to the Department of Labor will be open • including a transition rule permit-
health insurance issuers. Group health
to public inspection at the Public Docu- ting plans and issuers to give individuals
plans are generally plans sponsored by
ments Room, Pension and Welfare Ben- a notice in lieu of a certificate where
employers or employee organizations or
efits Administration, U.S. Department of coverage ended before June 1, 1997;
both. These HIPAA provisions are de-
Labor, Room N–5638, 200 Constitution and
signed to improve the availability and
Avenue NW, Washington, DC, from • providing for a model notice that
portability of health coverage by:
8:30 a.m. to 5:30 p.m. All submissions may be used to satisfy the transition rule
to the Internal Revenue Service will be • limiting exclusions for preexisting and a model notice for information
open to public inspection and copying in medical conditions; relating to categories of benefits pro-
room 1621, 1111 Constitution Avenue, • providing credit for prior health vided under a plan.
NW, Washington, DC, from 9:00 a.m. to coverage and a process for transmitting Implementing Individual Protections.
4:00 p.m. certificates and other information con- The regulations protect and assist par-
cerning prior coverage to a new group ticipants and their dependents by:
FOR FURTHER INFORMATION CON- health plan or issuer; • ensuring that individuals are noti-
TACT: Julie Walton, Health Care Fi- • providing new rights that allow in- fied of the length of time that a preex-
nancing Administration, at 410–786– dividuals to enroll for health coverage isting condition exclusion clause in any
1565; Mark Connor, Office of Regula- when they lose other health coverage or new health plan may apply to them after
tions and Interpretations, Pension and have a new dependent; taking into account their prior creditable
Welfare Benefits Administration, Depart-
• prohibiting discrimination in enroll- coverage;
ment of Labor, at 202–219–4377; Diane
Pedulla, Plan Benefits Security Division, ment and premiums against employees • ensuring that individuals are noti-
Office of the Solicitor, Department of and their dependents based on health fied of their rights to special enrollment
Labor, at 202–219–4377; or Russ status; under a plan;
Weinheimer, Internal Revenue Service, • guaranteeing availability of health • permitting individuals to obtain a
at 202–622–4695. These are not toll-free insurance coverage for small employers certificate before coverage under a plan
numbers. and renewability of health insurance ceases; and
coverage in both the small and large • creating practical ways for individu-
CUSTOMER SERVICE INFORMA- group markets; and als to demonstrate creditable coverage to
TION: Individuals interested in obtain- • preserving, through narrow preemp- a new plan (where the individual’s prior
ing a copy of the Department of Labor’s tion provisions, the States’ traditional plan fails to provide the certificate).
booklet entitled ‘‘Questions and An- role in regulating health insurance, in-
swers: Recent Changes in Health Care cluding State flexibility to provide C. Overview of Coordination of Group
Law’’ may obtain a copy by calling the greater protections. Market Regulation Among Departments
following toll-free number 1–800–998– The regulations provide guidance with The HIPAA portability provisions re-
7542. respect to these provisions. In imple- lating to group health plans and health
menting these new rules, the regulations insurance coverage offered in connec-
SUPPLEMENTARY INFORMATION:
provide protections for individuals seek- tion with group health plans (referred to
A. Background 1
In addition to the group market regulations in this below as the ‘‘group market’’ provi-
document, the Department of the Treasury is sions) are set forth under a new Part A
The Health Insurance Portability and issuing a proposed Treasury regulation that cross- of Title XXVII of the PHS Act, a new
Accountability Act of 1996 (HIPAA), references these regulations and the Department of Part 7 of Subtitle B of Title I of ERISA,
Labor is issuing an interim regulation relating to
Pub. L. 104–191, was enacted on Au- certain disclosure requirements under HIPAA. and a new Subtitle K of the Internal
gust 21, 1996. HIPAA amended the Each of these regulations appears separately in this Revenue Code. HIPAA also added pro-
Public Health Service Act (PHS Act), issue of the Federal Register. visions governing insurance in the indi-
6
vidual market that are contained only in health plans other than governmental Act regulations, all health insurance
the PHS Act, and thus are not within the plans, church plans, very small plans, coverage in a State generally is sold in
regulatory jurisdiction of the Department and certain other plans. The shared one of two markets: the group market
of Labor or the Department of the group market provisions of ERISA also (see section 146) and the individual
Treasury. (These portability provisions apply to health insurance issuers that market (see section 148). The group
are referred to below as the ‘‘individual offer health insurance in connection market is further divided into the large
market’’ provisions.) with such group health plans. Generally, group market and the small group mar-
In general, the group market provi- the Secretary of Labor enforces the ket. Section 146 of the PHS Act regula-
sions create concurrent jurisdiction for provisions of HIPAA that amend tions applies the group market provi-
the Secretaries of Health and Human ERISA, except that no enforcement ac- sions only to insurance sold to group
Services, Labor, and the Treasury. These tion may be taken by the Secretary health plans (which are generally plans
provisions include similar rules relating against issuers relating to the new sponsored by employers or employee
to preexisting conditions exclusions, shared group market provisions in Part 7 organizations or both), regardless of
special enrollment rights, and prohibi- of ERISA. However, individuals may whether State law provides otherwise.
tion of discrimination against individuals generally pursue actions against issuers State law may expand the definition of
based on health status-related factors. under ERISA and, in some circum- the small group market to include cer-
(These group market provisions are re- stances, under State laws. tain coverage that, under the federal law,
ferred to below as the ‘‘shared group • The shared group market provisions would otherwise be considered coverage
market’’ provisions.) Accordingly, the in the Internal Revenue Code generally in the large group market or the indi-
three Departments share regulatory re- apply to all group health plans other vidual market.
sponsibility for most, but not all, of the than governmental plans and very small The protections provided in the PHS
group market provisions. plans, but not to health insurance issu- Act to particular individuals and em-
The shared group market provisions ers. A taxpayer that fails to comply with ployers are different depending on
are substantially similar, except as fol- these provisions may be subject to an whether the coverage involved is ob-
lows: excise tax under section 4980D of the tained in the small group market, the
• The shared group market provisions Code. (The group market provisions large group market, or the individual
in the PHS Act apply generally to relating to preemption and affiliation market. Small employers are guaranteed
insurance issuers that offer health insur- periods for HMOs are in the PHS Act availability of insurance coverage sold
ance in connection with group health and ERISA, but not in the Internal in the small group market under the
plans (subject to an exception that may Revenue Code.) PHS Act. Small and large employers are
apply for plans with fewer than two The regulations being issued today by guaranteed the right to renew their
participants who are current employees the Secretaries of Health and Human group coverage under the PHS Act,
(‘‘very small plans’’)), and certain State Services, Labor, and the Treasury have subject to certain exceptions. Eligible
and local government plans. Only the been developed on a coordinated basis individuals are guaranteed availability of
PHS Act contains group market provi- by the Departments. Except to the extent coverage sold in the individual market
sions relating to availability and renew- needed to reflect the statutory differ- under the PHS Act, and all coverage in
ability of health insurance.2 In addition, ences described above, the shared group the individual market must be guaran-
the PHS Act imposes certification re- market provisions in these regulations of teed renewable under the PHS Act.
quirements on certain federal entities not each Department are substantively iden- Coverage that is provided to associa-
otherwise subject to the HIPAA portabil- tical. However, there are certain tions, but is not related to employment
ity provisions. Further, the States, in the nonsubstantive differences. The PHS Act (so that the coverage is not in connec-
first instance, will enforce the PHS Act regulations are numbered and organized tion with a group health plan), is not
with respect to issuers. In addition, differently. Also, there are differences in coverage in the group market under
individuals may be able to pursue the regulations that are necessary be- HIPAA. This coverage is instead cover-
claims through State mechanisms. Only cause of statutory provisions that are not age in the individual market under the
if a State does not substantially enforce common to all three Departments (in the PHS Act, regardless of whether it is
any provisions under its insurance laws, definitions sections, for example). Fur- considered group coverage under State
will the Department of Health and Hu- ther, the regulations reflect certain sty- law.
man Services enforce the provisions, listic differences in language and struc-
through the imposition of civil money ture to conform to conventions used by E. Discussion of the Shared Group
penalties. (The group market provisions a particular Department. These differ- Market Provisions in the Regulations
relating to guaranteed renewability for ences have been minimized and any
multiemployer plans and multiple em- differences in wording are not intended The most significant items relating to
ployer welfare arrangements (MEWAs) to create any substantive difference, so the shared group market in these regula-
are in ERISA and the Internal Revenue that these regulations will have the same tions are discussed in detail below.
Code, but not the PHS Act.) effect with respect to overlapping statu-
• The ERISA shared group market tory provisions, as required by section Definitions - 26 CFR § 54.9801–2, 29
provisions apply generally to all group 104 of HIPAA. CFR § 2590.701–2, 45 CFR § 144.103
2
The PHS Act does not include requirements on
D. Special Information Concerning This section provides most of the
availability of insurance for employers in the large definitions used in the regulations
group market. Under section 2711(b)(3) of the State Insurance Law
PHS Act, however, the General Accounting Office implementing the provisions of HIPAA
(GAO) is to report to Congress on such availabil- For purposes of the PHS Act and that were added to the PHS Act, ERISA,
ity in 1998. sections 144 through 148 in the PHS and the Code, relating to the group
7
market.3 The definitions in this section is not a condition.5 In order to be taken sion period is reduced by the individu-
of the regulations include both statutory into account, the medical advice, diag- al’s days of creditable coverage6 as of
definitions provided in HIPAA, as well nosis, care, or treatment must have been the enrollment date. Creditable coverage
as certain others used in the regulations. recommended or received from an indi- is defined as coverage of an individual
vidual licensed or similarly authorized from a wide range of specified sources,
Limitation on Preexisting Condition to provide such services under State law including group health plans, health in-
Exclusion Period - 26 CFR and operating within the scope of prac- surance coverage, Medicare, and Medic-
§ 54.9801–3, 29 CFR § 2590.701–3, 45 tice authorized by the State law. Under aid.
CFR § 146.111 the new HIPAA standard, a plan would Definition of Enrollment Date. The
generally determine that an individual limitations on preexisting condition ex-
Definition of Preexisting Condition
has a preexisting condition through clusions are measured from an individu-
Exclusion. A preexisting condition ex-
medical records (such as diagnosis al’s ‘‘enrollment date.’’ The enrollment
clusion is defined broadly to be any
limitation or exclusion of benefits based codes on bills, a physician’s notes of a date is defined as the first day of
visit or telephone call, pharmacy pre- coverage or, if there is a waiting period,
on the fact the condition was present
scription records, HMO encounter data, the first day of the waiting period
before the first day of coverage, whether
or other records indicating that medical (typically the date employment begins).
or not any medical advice, diagnosis,
services were actually recommended or The term ‘‘first day of coverage’’ is
care, or treatment was recommended or
received during the 6-month look-back used in the regulations in place of the
received before that day. HIPAA im-
period). The ‘‘prudent person’’ standard term ‘‘date of enrollment’’ in the statute,
poses certain limitations (described be-
of some State laws (under which a such as in the definitions of the terms
low) on the use of such an exclusion in
condition is taken into account if a ‘‘preexisting condition exclusion’’ and
the group market (and also uses this
prudent person would have sought care ‘‘enrollment date.’’ This is intended to
definition for purposes of the individual
whether or not care is actually received) clarify the difference between the statu-
market rules, under which no preexisting
condition exclusion is permitted to be no longer may be used to determine a tory terms ‘‘date of enrollment’’ and
imposed on an eligible individual). preexisting condition. ‘‘enrollment date’’ (which have no dif-
HIPAA’s broad definition of a preexist- This 6-month ‘‘look-back’’ period is ference in common usage).
based on the 6-month ‘‘anniversary
ing condition exclusion is at variance The term ‘‘waiting period’’ generally
with some State laws and regulations date’’ of the enrollment date. As a result, refers to the period in which there is a
an individual whose enrollment date is
because the relevant National Associa- delay between the first day of employ-
tion of Insurance Commissioners August 1, 1998 has a 6-month look-back ment and the first day of coverage under
period from February 1, 1998 through
(NAIC) models, on which many State the plan. Accordingly, because the pre-
laws are based, have imposed limitations July 31, 1998. existing condition exclusion period runs
2. Length of preexisting condition ex-
on coverage for preexisting conditions from the enrollment date, any waiting
clusion period. The exclusion period
without use of such a definition. period would run concurrently with any
cannot extend for more than 12 months preexisting condition exclusion period.
New Limitations on Preexisting Con-
(18 months for late enrollees) after the Further:
dition Exclusions. Paragraph (a) of this
enrollment date. The 12- or 18-month
section4 of the regulations describes the • The enrollment date for a late en-
‘‘look-forward’’ period is also based on
limitations on the preexisting condition rollee or anyone who enrolls on a
the anniversary date of the enrollment
exclusion period. A group health plan, special enrollment date (see the section
date. A late enrollee is defined as an
and a health insurance issuer offering on special enrollment periods below) is
individual who enrolls in a plan at a
group health insurance coverage, is per- the first date of coverage. Thus, the time
time other than at the first time the
mitted to impose a preexisting condition between the date a late enrollee or
individual is eligible to enroll or during
exclusion with respect to a participant or special enrollee first becomes eligible
a special enrollment period (described
beneficiary only if the following condi- for enrollment under the plan and the
below). If an individual loses eligibility
tions are met: first day of coverage is not treated as a
for coverage as a result of terminating
1. 6-month look-back rule. The pre- waiting period.
employment or a general suspension of
existing condition exclusion must relate • Because the 6-month look-back
coverage under the plan, then upon
to a condition (whether physical or limitation runs from the beginning of
becoming eligible again due to resump-
mental, and regardless of the cause of any applicable waiting period, the cur-
tion of employment or due to resump-
the condition) for which medical advice, rent practice of some plans that require
tion of plan coverage, only the most
diagnosis, care, or treatment was recom- physical examinations prior to com-
recent period of eligibility is considered
mended or received within the 6-month mencement of coverage for the purpose
for purposes of determining whether the
period ending on the enrollment date. of identifying preexisting conditions
individual is a late enrollee.
For these purposes, genetic information may be affected. If the examination is
3. Reduction of preexisting condition
3
The regulations for the PHS Act also contain exclusion period by prior coverage. In conducted during the waiting period
certain definitions relating to those provisions (after employment begins and before
added under the PHS Act regarding the individual
general, the preexisting condition exclu-
market, in order to create a single, comprehensive 5
The definition of genetic information in the
enrollment), rather than before employ-
6
reference for the definitions necessary under the regulations was developed taking into account The phrase ‘‘days of creditable coverage’’ is used
PHS Act regulations. hearing testimony related to genetic information instead of the statutory phrase ‘‘aggregate periods
4
References to paragraphs of a section refer to given in connection with Senate Report 104–156, of creditable coverage’’ for administrative ease in
paragraphs of each regulation section identified in other legislative initiatives, and public comments the calculation of creditable coverage. Use of days
the heading. For example, this reference is to (including those submitted in response to the of creditable coverage also conforms to the prac-
paragraph (a) in each of 45 CFR § 146.111, 29 request for information published by the Depart- tice of many States for crediting prior coverage
CFR § 2590.701–3, and 26 CFR § 54.9801–3. ments on December 30, 1996). under pre-HIPAA small group market reforms.
8
ment begins, a plan may not exclude solely of excepted benefits as defined in a substantially complete application for
coverage for any condition identified in the regulations and described below.8 coverage in the individual market and
the examination (unless, independent of Under paragraph (a)(3) of this section the effective date of such coverage is a
the examination, medical advice, diag- of the regulation, a group health plan or waiting period, so that the period is not
nosis, care, or treatment was in fact health insurance issuer offering group taken into account in determining a
recommended or received for the condi- health insurance coverage may deter- significant break in coverage. In this
tion during the 6-month look-back pe- mine the amount of creditable coverage way, an application processing delay or
riod). The use of such examinations for of an individual for purposes of reduc- omission of details on a form would not
other purposes, such as worker safety, is ing the period of a preexisting condition cause an applicant to incur a significant
not affected.7 exclusion by using either the standard break in coverage, which could ad-
Elimination of Preexisting Condition method described in paragraph (b) or versely affect an individual who seeks
Exclusion for Pregnancy and for Certain the alternative method described in para- coverage under a group health plan after
Children. A preexisting condition exclu- graph (c). purchasing coverage in the individual
sion cannot apply to pregnancy. In addi- Standard Method. market.
tion, a preexisting condition exclusion 1. Counting. Under the standard However, the waiting period for pur-
period cannot be applied to a newborn, method, the plan or issuer determines chase of an individual policy tolls a
an adopted child under age 18, or a the amount of an individual’s creditable break in coverage only if the filing of
child placed for adoption under age 18, coverage by determining all days during the application for the individual market
if the child becomes covered within 30 which the individual had one or more insurance actually results in purchase of
days of birth, adoption, or placement for types of creditable coverage. This deter- the coverage by the individual. (See
adoption. This exception does not apply mination is made without regard to the Examples 7 and 8 in paragraph
after the child has a significant break in specific benefits included in the cover- (b)(2)(iv).) By contrast, days in a wait-
coverage (63 or more consecutive days). age. If creditable coverage is derived ing period for coverage under a group
(An example in paragraph (b)(1) of the from more than one source on a particu- health plan toll a significant break in
regulations illustrates these rules.) lar day, all of the creditable coverage coverage regardless of whether coverage
that the individual had on that day is under the plan is ultimately obtained.
Rules Relating to Creditable Coverage - counted as one day of creditable cover- (See Example 6.) The rule regarding the
26 CFR § 54.9801–4, 29 CFR age. individual market prevents an individual
§ 2590.701–4, 45 CFR § 146.113 2. Significant break in coverage. from avoiding a significant break in
As noted above, a plan or issuer that Days of creditable coverage that occur coverage by repeatedly submitting appli-
imposes a preexisting condition exclu- before a significant break in coverage cations to individual market issuers
sion must reduce the length of the are not required to be counted by the without ever purchasing coverage. This
exclusion by an individual’s creditable plan or issuer in reducing a preexisting rule responds to comments sent to the
coverage. This section defines the term condition exclusion. A significant break Departments in response to the Decem-
‘‘creditable coverage’’ and sets forth the in coverage means a period of 63 con- ber 30, 1996 request for public com-
rules for how creditable coverage is secutive days during all of which the ments. The comments asked for clear
applied to reduce such an exclusion individual did not have any creditable rules on when a significant break is
period. coverage. tolled in the case of an application for
Creditable coverage includes health a. Waiting and affiliation periods. individual market insurance.
insurance coverage and other health Waiting periods and affiliation periods, Issuers of health insurance coverage
coverage, such as coverage under group as defined in the regulation, are not in the individual market are subject to
health plans (whether or not provided taken into account in determining a the same certification requirements that
through an issuer), Medicaid, Medicare, significant break in coverage. This is the apply to plans and issuers in the group
and public health plans, as well as other case regardless of whether the person market. Therefore, issuers in the indi-
types of coverage set forth in HIPAA ultimately fails to obtain coverage under vidual market must provide individuals
and the regulations. Comments are re- the plan (such as, where termination of with certificates that reflect information
quested on whether the definition of a employment occurs before coverage be- regarding the beginning of the waiting
public health plan should include the gins). However, days in a waiting period period (the date of application), the
public health systems of other countries. or affiliation period are not counted as effective date of coverage, and the date
Under the definition of creditable creditable coverage. coverage ends. This will assist people
coverage, all forms of health insurance The regulations specify that the pe- with coverage in the individual market
coverage are included, whether in the riod between the date an individual files who later become covered by a group
individual market or group market, and 8
Howver, if an individual has coverage of ex- health plan in demonstrating their credit-
whether the coverage is short-term, cepted benefits in addition to other forms of able coverage to the plan or issuer in
limited-duration coverage or other cov-
creditable coverage, coverage of excepted benefits the group market.
is creditable coverage. This would make a differ- b. Effect of State insurance law.
erage for benefits for medical care for ence only if a plan or issuer uses the alternative
which no certificate of creditable cover- method of determining creditable coverage (de-
HIPAA provides that the significant
age is required. Creditable coverage scribed below) with respect to a category that break in coverage rule does not preempt
does not include coverage consisting includes excepted benefits. For example, coverage State insurance laws that provide longer
7
of excepted benefits such as limited vision or periods than 63 days for a break in
However, to avoid violating the Americans with limited dental benefits, when offered in combina- coverage. (The preemption provisions
Disabilities Act, Pub. L. 101–336, as amended by tion with other creditable coverage, may be used
Pub. L. 102–166, the examination should generally to offset a preexisting condition exclusion period are described more fully below.) Ac-
be conducted only after the employer has offered for a category that includes those benefits under cordingly, while federal law may allow
employment to the individual. the alternative method in paragraph(c). a plan to disregard prior coverage before
9
a 63-day significant break in coverage, of coverage within the applicable cat- tion (including electronic communica-
an issuer may be required to take such egory that occurred during the determi- tion) should be permitted in future
coverage into account in order to com- nation period (without regard to any guidance.
ply with State insurance law. As a significant breaks in that category of Information in Certificate. Paragraph
result, application of the break rules can coverage). Those days reduce the preex- (a)(3) of this section of the regulations
vary between issuers located in different isting condition exclusion for coverage sets forth the information that must be
States. Similarly, the break rules may within that category. included in a certificate. The regulations
vary between insured plans and self- allow a plan or issuer in an appropriate
The regulations do not provide de-
insured plans (which are not subject to case simply to state in the certificate
State insurance laws) within a State, as tailed definitions of the benefit catego- that the individual has at least 18
well as between the insured and self- ries. Comments are invited on whether months of creditable coverage that was
insured portions of a single plan. As additional guidance is needed. not interrupted by a significant break in
illustrated by Example 3 in paragraph The regulations under the alternative coverage and to indicate the date cover-
(b)(2)(iv), the laws of the State appli- method of counting creditable coverage age ended. (A certificate would never
cable to the insurance policy that has do not include a category relating to have to reflect coverage in excess of 18
the preexisting condition exclusion are significant differences in deductible months without a 63-day break because
determinative of which break rule ap- amounts. Commentators expressed con- this is the maximum creditable coverage
plies. cerns about adverse selection if indi- that an individual could need under the
Alternative Method. Under the alter- viduals can change from a high deduct- preexisting condition exclusion rules and
native method of counting creditable ible plan when they become ill and the rules for access to the individual
coverage, the plan or issuer determines obtain ‘‘first dollar’’ coverage from an market.) In any other case, the certifi-
the amount of an individual’s creditable HMO or other issuer that provides cate must disclose (1) the date any
coverage for any of five identified cat- broad, comprehensive care with only waiting or affiliation period began,10 (2)
egories of benefits. Those categories are low deductibles or copayments.9 How- the date coverage began, and (3) the
coverage for mental health, substance ever, it is unclear how such a category date coverage ended (or indicate if cov-
abuse treatment, prescription drugs, den- would be defined or applied. Accord- erage is continuing).11 For individuals
tal care, and vision care. The plan or ingly, the Departments solicit comments with fewer than 18 months of coverage
issuer may use the alternative method on this issue. without a significant break in coverage,
for any or all of the categories and may the information about specific dates is
apply a different preexisting condition Certificates and Disclosure of Previous essential in order for a subsequent plan
exclusion period with respect to each Coverage - 26 CFR § 54.9801–5, 29 or issuer in the group or individual
category (as well as to coverage not CFR § 2590.701–5, 45 CFR § 146.115 market to be able to apply the break
within a category). The creditable cover- rules, especially in light of the possibil-
age determined for a category of ben- This section of the regulations sets ity that an individual may have other
efits applies only for purposes of reduc- forth guidance regarding the certification coverage from various sources and the
ing the preexisting condition exclusion requirements and other requirements potential differences among State break
period with respect to that category. The concerning disclosure of information re- rules (described above).
standard method is used to determine an lating to prior creditable coverage. The Certification Events and Timing. Par-
individual’s creditable coverage for ben- provision of a certificate and other dis- agraph (a)(5) describes the rights of
efits that are not within any category for closures of information are intended to participants and dependents to receive
which the alternative method is being enable an individual to establish his or certificates. In general, individuals have
used. Disclosure statements concerning her prior creditable coverage for pur- the right to receive a certificate auto-
the plan must indicate that the alterna- poses of reducing any preexisting condi- matically (an ‘‘automatic certificate’’)
tive method is being used, and this tion exclusion imposed on the individual when they lose coverage under a plan
disclosure must also be given to each by any subsequent group health plan and when they have a right to elect
enrollee at the time of enrollment. These coverage. COBRA continuation coverage. The cer-
statements must include a description of Form of Certificate. In general, the tificate must be furnished within the
the effect of using the alternative certificate must be provided in writing, time periods described below:
method. Any issuer in the group market including any form approved by the • First, for an individual who is a
must provide similar statements to each Secretaries as a writing. In certain cir- qualified beneficiary entitled to elect
employer at the time of offer or sale of cumstances, where the individual re- COBRA continuation coverage, the cer-
the coverage. quests that the certificate be sent to tificate is required to be provided no
For purposes of reducing the preexist- another plan or issuer instead of to the later than when a notice is required to
ing condition exclusion period under the individual, and the other plan or issuer be provided for a qualifying event under
alternative method, the plan or issuer agrees, the certification information may COBRA.
determines under the standard method be provided by other means, such as by • Second, for an individual who loses
the amount of the individual’s creditable telephone. In some States, issuers trans- coverage under a group health plan and
coverage that can be counted, up to a fer coverage information by telephone. 10
Because the ending date for a waiting or affilia-
total of 365 days of the most recent Comments are requested as to whether, tion period will always be the date coverage
creditable coverage of the individual and under what conditions, other meth- begins, the ending date does not have to be
(546 days for a late enrollee). The separately stated in a certificate.
ods of transmitting certification informa- 11
These dates would include any period of CO-
period of this creditable coverage is 9
See also the discussion below under the heading BRA continuation coverage. A COBRA continua-
referred to as the ‘‘determination pe- ‘‘HMO Affiliation as Alternative to Preexisting tion coverage period does not have to be sepa-
riod.’’ The plan or issuer counts all days Condition Exclusion.’’ rately identified.
10
who is not a qualified beneficiary en- age ending within the 24 months prior designated by the plan), so that when
titled to elect COBRA continuation cov- to the Fdate of request.12 the individual leaves the plan, a certifi-
erage, the certificate is required to be Responsibilities of Plans and Is- cate can be provided that includes the
provided within a reasonable time after suers. Paragraph (a)(1) clarifies the period of coverage under the policy of
the coverage ceases. (Typically, this statutory obligation of plans and issuers the first issuer. In this situation, no
would apply to small employers’ plans to provide certificates. The statutory certificate is required to be provided to
that are not subject to COBRA.) This obligation to furnish a written certificate the individual, but the issuer must also
requirement is satisfied if the certificate of information regarding creditable cov- cooperate with the plan by providing
is provided by the time a notice is erage is imposed on both the group any information that may be requested
required to be provided under a State health plan and the health insurance later pursuant to the alternative method.
program similar to COBRA. issuer offering group health insurance (This rule will reduce unnecessary and
• Third, for an individual who is a coverage. This dual obligation was the potentially misleading information from
qualified beneficiary and has elected subject of many of the comments re- being received while the individual’s
COBRA continuation coverage, the cer- ceived by the three Departments in coverage under the plan is uninter-
tificate is required to be provided within response to the December 30, 1996 rupted.) An issuer may presume that it is
a reasonable time after either cessation request for public comments published the final issuer for an individual if the
of COBRA continuation coverage or, if in the Federal Register. Concerns were individual’s coverage under the policy
applicable, after the expiration of any raised about superfluous, duplicate cer- ends at a time other than in connection
grace period for the payment of COBRA tificates being issued and the potential with the plan’s open season.
premiums. responsibility of issuers for reporting on Other Entities Issuing Certificates.
In each of these three events, the regula- an individual’s coverage under the plan Paragraph (a)(6) identifies the various
tions require the certificate to reflect after one issuer has been replaced by statutory authorities that create responsi-
only the most recent period of continu- another. bility for other entities (that are not
ous coverage under the plan. Paragraph (a)(1) addresses these con- subject to a particular Department’s
cerns by providing that the obligation to regulations) to provide certificates. As
Under COBRA, multiemployer plans furnish a certificate is imposed on both described above, there are forms of
may provide notices within such longer the plan and each health insurance is- creditable coverage other than coverage
period of time as is provided for such suer that provides group health insur- provided by group health plans and
notices under the terms of the plan. ance coverage under the plan, subject to health insurance coverage offered in
Under the general certification timing four exceptions. connection with a group health plan.
rule described above, multiemployer Accordingly, individuals who leave cov-
First, paragraph (a)(1)(ii) provides
plans may use the same extended time erage provided by any such other entity
that an entity required to provide a
period for providing certificates. Com- are entitled to have that coverage
certificate is deemed to have satisfied
ments are requested on how this may counted by a group health plan and may
this requirement to the extent that any
affect a multiemployer plan and its in many cases receive certificates for
other party provides the certificate and
participants and their families. their creditable coverage. This informa-
the certificate discloses the creditable
A certificate may be mailed by first coverage (including the waiting period tion is included in the regulations be-
class mail to the participant’s last known information) that was to be provided by cause plans that impose a preexisting
address. A certificate for a participant’s the entity. condition exclusion may find it helpful
spouse with an address different from Second, paragraph (a)(1)(iii) provides to know when creditable coverage will
the participant’s is to be sent to the that a plan is deemed to have satisfied be provable through presentation of a
spouse’s address. A certificate may pro- its obligation if there is an agreement certificate and when other forms of
vide information with respect to both a between an issuer and a plan under documentation or attestation may be
participant and the participant’s depen- which the issuer agrees to provide cer- needed.
dents if the information is identical for In cases where certifications are pro-
tificates for individuals covered under
each individual, or if the information is the plan. vided by entities not subject to ERISA’s
not identical, a certificate may provide requirements, such as Medicaid, the In-
Third, paragraph (a)(1)(iv)(A) pro-
information sufficient to satisfy the re- dian Health Service, and CHAMPUS,
vides that an issuer is not required to
quirements of the regulations with re- certain adjustments in the certification
provide any coverage information re-
spect to each individual on one docu- rules may be appropriate. The regula-
garding coverage periods for which it
ment. tions do not address how the certifica-
was not responsible.
A certificate is also required to be tion process applies to these other pro-
Fourth, paragraph (a)(1)(iv)(B) pro-
provided upon the request of, or on vides that if an individual switches from grams. Comments are requested on how
behalf of, an individual (whether the the certification requirements may be
one issuer to another option allowed
individual is a participant, the partici- adapted to entities responsible for pro-
under the plan, or an issuer is replaced
pant’s spouse, or any other dependent) if by another before an individual’s cover- viding this coverage.
the request is made within 24 months Dependent Coverage Information.
age in the plan ceases, the first issuer is
after the individual loses coverage under Dependents are entitled to a written
required to provide sufficient informa-
the plan. The certificate is required to be tion to the plan (or to another party certificate of creditable coverage. Con-
provided at the earliest time that the 12
cerns were raised in comments received
plan or issuer, acting in a reasonable For example, for a participant who has had a from the public regarding the certifica-
number of interruptions in coverage, a requested
and prompt fashion, can provide the certificate could consist of copies of all of the tion of dependent coverage where infor-
certificate. In this case, the certificate automatic certificates that were previously pro- mation regarding dependents of partici-
reflects each period of continuous cover- vided to the individual for each of these periods. pants in plans was not available. Plans
11
and issuers, the commenters stated, of- tion period to update their data systems Information for Alternative Method of
ten do not know the existence of depen- to include information on dependents. Counting Creditable Coverage. Follow-
dents or their coverage periods until Second, the regulations include a spe- ing receipt of the certificate, an entity
claims are filed. To address these con- cial rule regarding dependent coverage that uses the alternative method of
cerns, the regulations have adopted two that is not limited to the transition counting creditable coverage may re-
special rules. period. Under this rule, a plan or issuer quest that the entity that issued the
First, under a transition rule that lasts must make a reasonable effort to collect certificate disclose additional informa-
through June 30, 1998, a plan or issuer the necessary information for dependents tion in order for the requesting entity to
may satisfy its obligation to provide a and include it on the certificate. How- determine the individual’s creditable
written certificate regarding the coverage ever, under this special rule, an auto- coverage with respect to any category of
of a dependent of a participant by pro- matic certificate is not required to be benefits described in paragraph (b). The
viding the name of the participant cov- issued until the plan or issuer knows (or, requested entity may charge the request-
ered by the plan and specifying the type making reasonable efforts, should know) ing entity the reasonable cost of disclos-
of coverage provided in the certificate of the dependent’s cessation of coverage. ing the information. The requesting en-
(such as family coverage or employee- This information can be collected annu- tity may ask for a copy of the summary
plus-spouse coverage). However, if ally (during open enrollment). plan description (SPD) that applied to
asked to provide a certificate relating to Under the transition rule and the the individual’s coverage or may ask for
a dependent, the plan must make reason- special rule, an individual may use the more specific information. Set forth be-
able efforts to obtain and provide the provisions described below to establish low is a model form that may be used
name of the dependent. This rule will creditable coverage (and waiting and for specific coverage information about
provide plans and issuers with a transi- affiliation period information). the categories of benefits:
INFORMATION ON CATEGORIES OF BENEFITS
1. Date of original certificate:
2. Name of group health plan providing the coverage:
3. Name of participant:
4. Identification number of participant:
5. Name of individual(s) to whom this information applies:
6. The following information applies to the coverage in the certificate that was provided to the individual(s) identified above:
a. MENTAL HEALTH:
b. SUBSTANCE ABUSE TREATMENT:
c. PRESCRIPTION DRUGS:
d. DENTAL CARE:
e. VISION CARE:
For each category above, enter ‘‘N/A’’ if the individual had no coverage within the category and either (i) enter both the date that the individual’s
coverage within the category began and the date that the individual’s coverage within the category ended (or indicate if continuing), or (ii) enter ‘‘same’’ on
the line if the beginning and ending dates for coverage within the category are the same as the beginning and ending dates for the coverage in the
certificate.
Demonstration of Coverage if Certifi- required time period; an entity was not ments, or other means, including tele-
cate is Not Provided. Under HIPAA, in required to provide a certificate; the phone calls by the plan or issuer to a
order to prevent an individual from coverage of the individual was for a third party provider. The plan adminis-
being adversely affected if the indi- period before July 1, 1996; or, the trator is required to take into account all
vidual does not receive a certificate, the individual has an urgent medical condi- information presented in determining
individual has a right to demonstrate tion that necessitates an immediate de- whether to offset any or all of a preex-
creditable coverage through the presen- termination of creditable coverage by isting condition exclusion. A plan or
tation of documentation or other means. the plan or issuer. Under these circum- issuer is required to treat the individual
For example, an individual may not stances, an individual may present evi- as having furnished a certificate pro-
have a certificate because: an entity dence of creditable coverage through vided by a plan or issuer if the indi-
failed to provide a certificate within the documents, records, third party state- vidual attests to the period of creditable
12
coverage, the individual presents rel- the alternative method, or other evi- relied, must be included in the notifica-
evant corroborating evidence of some dence of coverage, a plan or issuer is tion. The notification must also explain
creditable coverage during the period, required to make a determination re- the plan’s appeals procedures and the
and the individual cooperates with the garding the length of any preexisting opportunity of the individual to present
plan’s or issuer’s efforts to verify the condition exclusion period that applies additional evidence.
individual’s coverage. to the individual and notify the indi- The plan or issuer may reconsider and
If an individual needs to demonstrate vidual of its determination. Whether a
modify its initial determination if it
his or her status as a dependent of a determination and notification is made
determines that the individual did not
participant, the plan or issuer is required within a reasonable period of time de-
have the claimed creditable coverage. In
to treat the individual as having fur- pends upon the relevant facts and cir-
nished a certificate if an attestation to cumstances including whether the appli- this circumstance, the plan or issuer
such dependency and the period of such cation of the preexisting condition must notify the individual of such re-
status is provided, and if the individual exclusion period would prevent access consideration and, until a final determi-
cooperates with the plan’s or issuer’s to urgent medical services. The plan or nation is made, must act in accordance
efforts to verify the dependent status. issuer is required to notify the indi- with its initial determination for pur-
Similar rules apply relating to deter- vidual, however, only if, after consider- poses of approving medical services.
mining creditable coverage under the ing the evidence, it has determined that Model Certificate. The following
alternative method. a preexisting condition exclusion period model certificate has been authorized by
Notice to Individual of Period of will still be imposed on the individual. the Secretary of each of the Depart-
Preexisting Condition Exclusion. Within The basis of the determination, includ- ments. Use of the model certificate will
a reasonable time following the receipt ing the source and substance of any satisfy the requirements of paragraph
of the certificate, information relating to information on which the plan or issuer (a)(3)(ii) of the regulations.
CERTIFICATE OF GROUP HEALTH PLAN COVERAGE
* IMPORTANT - This certificate provides evidence of your prior health coverage. You may need to furnish this certificate if you become eligible under a
group health plan that excludes coverage for certain medical conditions that you have before you enroll. This certificate may need to be provided if medical
advice, diagnosis, care, or treatment was recommended or received for the condition within the 6-month period prior to your enrollment in the new plan. If
you become covered under another group health plan, check with the plan administrator to see if you need to provide this certificate. You may also need
this certificate to buy, for yourself or your family, an insurance policy that does not exclude coverage for medical conditions that are present before you
enroll.
1. Date of this certificate:
2. Name of group health plan:
3. Name of participant:
4. Identification number of participant:
5. Name of any dependents to whom this certificate applies:
6. Name, address, and telephone number of plan administrator or issuer responsible for providing this certificate:
7. For further information, call:
8. If the individual(s) identified in line 3 and line 5 has at least 18 months of creditable coverage (disregarding periods of coverage before a 63-day break),
check here and skip lines 9 and 10.
9. Date waiting period or affiliation period (if any) began:
10. Date coverage began:
11. Date coverage ended: (or check if coverage is continuing as of the date of this certificate: ).
Note: Separate certificates will be furnished if information is not identical for the participant and each beneficiary.
Special Enrollment Periods -26 CFR ment rights provided to employees and als who previously declined coverage
§ 54.9801–6, 29 CFR § 2590.701–6, 45 dependents under HIPAA. A group are allowed to enroll (without having to
CFR § 146.117 health plan and a health insurance issuer wait until the plan’s next regular open
offering group health insurance coverage enrollment period). A special enrollment
This section of the regulations pro- are required to provide for special en- period can occur if a person with other
vides guidance regarding the new enroll- rollment periods during which individu- health coverage loses that coverage or if
13
a person becomes a dependent through enrollment. However, an individual does surance through an HMO, or an HMO
marriage, birth, adoption, or placement not have a special enrollment right if the that offers health insurance coverage in
for adoption. individual loses the other coverage as a connection with a group health plan, to
A plan must provide a description of result of the individual’s failure to pay impose an affiliation period, but only if
the special enrollment rights to anyone premiums or for cause (such as making certain other requirements are met. An
who declines coverage. The regulations a fraudulent claim). Coverage under spe- ‘‘affiliation period’’ is defined in the
provide a model of such a description. cial enrollment must be effective no regulations as a period of time that must
A person who enrolls during a special later than the first day of the month expire before health insurance coverage
enrollment period (even if the period after an employee requests the enroll- provided by the HMO becomes effec-
also corresponds to a regular open en- ment for himself or herself or on behalf tive, and during which the HMO is not
rollment period) is not treated as a late of a dependent. required to provide benefits.
enrollee. (Accordingly, the plan or issuer Special Enrollment for New The regulations specify the following
may not impose a preexisting condition Dependents. A special enrollment period requirements for imposing an affiliation
exclusion period longer than 12 months also occurs if a person has a new period:
with respect to the person.) dependent by birth, marriage, adoption, • no preexisting condition exclusion
Special Enrollment for Loss of Other or placement for adoption. The election may be imposed with respect to cover-
Coverage. The special enrollment period to enroll can be made within 30 days age through the HMO;
for loss of other coverage is available to following the birth, marriage, adoption, • no premium may be charged to a
employees and their dependents who or placement for adoption. In the case of participant or beneficiary for the affilia-
meet certain requirements. The employee a plan that does not offer any coverage tion period;
or dependent must otherwise be eligible for dependents and is then modified to • the affiliation period must be ap-
for coverage under the terms of the plan. offer dependent coverage, the election to plied uniformly without regard to any
When the coverage was previously de- enroll can instead be made during the health status-related factors; and
clined, the employee or dependent must 30 days beginning on the date depen- • the affiliation period must begin on
have been covered under another group dent coverage is made available. the enrollment date, cannot exceed two
health plan or must have had other The special enrollment rules allow an months (three months for a late en-
health insurance coverage. The plan can eligible employee to enroll when he or rollee), and must run concurrently with
require that, when coverage in the plan she marries or has a new child (as a any waiting period under the plan.
was previously declined, the employee result of marriage, birth, adoption, or The regulations provide for the affilia-
must have declared in writing that the placement for adoption). A spouse of a tion period to begin on the enrollment
reason was other coverage, in which participant can be enrolled separately at date in the plan, not when coverage with
case the plan must at that time have the time of marriage or when a child is the HMO begins. Accordingly, if a plan
provided notice of this requirement and born, adopted or placed for adoption. offers multiple coverage options simul-
the consequences of the employee’s fail- The spouse can be enrolled together taneously, the HMO cannot impose an
ure to provide the statement. with the employee when they marry or affiliation period on plan participants
The special enrollment rights may when a child is born, adopted, or placed who change to the HMO option. Com-
apply with respect to an employee, a for adoption. A child who becomes a ments are requested on this rule.
dependent of the employee, or both. An dependent of a participant as a result of The regulations permit an HMO to
employee who has not previously en- marriage, birth, adoption, or placement use alternatives in lieu of an affiliation
rolled can enroll under these rules if it for adoption can be enrolled when the period to address adverse selection, as
is the employee who loses other cover- child becomes a dependent. Similarly, a approved by the State insurance com-
age. An employee’s dependent can be child who becomes a dependent of an missioner or other official designated to
enrolled under these rules if it is the eligible employee as a result of mar- regulate HMOs. Because an affiliation
dependent who loses other coverage and riage, birth, adoption, or placement for period may be imposed only if no
the employee is already enrolled. In adoption can be enrolled if the em- preexisting condition exclusion is used,
addition, both the employee and a de- ployee enrolls at the same time. an alternative to an affiliation period
pendent can be enrolled together under In the case of a dependent special may not encompass an arrangement that
these rules if either the employee or the enrollment period, HIPAA provides that is in the nature of such an exclusion.13
dependent loses other coverage. coverage with respect to a marriage is While HMOs usually do not impose
If the other coverage is COBRA con- effective no later than the first day of preexisting condition exclusions, they
tinuation coverage, the special enroll- the month after the date the request for could choose to apply a preexisting
ment can only be requested after ex- enrollment is received and coverage condition exclusion period for all enroll-
hausting COBRA continuation coverage. with respect to a birth, adoption, or ees based on the alternative method of
If the other coverage is not COBRA placement for adoption is effective on counting creditable coverage if the regu-
continuation coverage, special enroll- the date of the birth, adoption, or place- lations were to add a category relating
ment can only be requested after losing ment for adoption. to deductibles. However, as described
eligibility for the other coverage or after above under the heading ‘‘Alternative
cessation of employer contributions for HMO Affiliation Period as Alternative to Method,’’ the regulations currently do
the other coverage. In each case, the Preexisting Condition Exclusion - 29 not include such a category.
employee has 30 days to request special CFR § 2590.701–7 and 45 CFR 13
enrollment. An individual does not have These alternatives that may be used in lieu of an
§ 146.119 affiliation period to address adverse selection
to elect COBRA continuation coverage should not be confused with the use of the
or exercise similar continuation rights in This section of the regulations permits alternative method for counting creditable cover-
order to preserve the right to special a group health plan offering health in- age discussed in the next paragraph.
14
Nondiscrimination In Eligibility and required to provide particular benefits employer for the coverage. In addition,
Premiums in the Group Market - 26 other than those provided under the this limitation does not prevent a plan or
CFR § 54.9802–1, 29 CFR § 2590.702, terms of the plan. Moreover, HIPAA issuer from establishing premium dis-
45 CFR § 146.121 provides that a plan or issuer may counts or rebates or otherwise modify-
establish limitations or restrictions on ing applicable copayments or
The regulations include provisions the amount, level, extent, or nature of deductibles in return for adherence to
implementing the nondiscrimination pro- the benefits or coverage for similarly programs of health promotion and dis-
visions in HIPAA. Comments are wel- situated individuals enrolled in the plan. ease prevention (bona fide wellness pro-
comed on these provisions, and, in par- Comments have been received indicat- grams). Comments are requested regard-
ticular, comments are requested on ing that some plans contain provisions ing the standards for determining bona
whether guidance is needed concerning: that exclude coverage for benefits based fide wellness programs, including
• the extent to which the statute pro- on the source of injury (such as benefits whether such a program may provide a
hibits discrimination against individuals for injuries sustained in a motorcycle discount for non-smokers.
in eligibility for particular benefits; accident, injuries sustained in a motor-
• the extent to which the statute may cycle accident as the result of not Special Rules — Excepted Plans and
permit benefit limitations based on the wearing a helmet, or injuries sustained Excepted Benefits - 26 CFR
source of an injury; in the commission of a felony). Accord- § 54.9804–1, 29 CFR § 2590.732, 45
• the permissible standards for defin- ingly, comments are requested on how CFR § 146.145
ing groups of similarly situated indi- future guidance should treat benefit
viduals; limitations based on the source of an This section of the regulations pro-
• application of the prohibitions on injury. vides special rules for certain plans and
discrimination between groups of simi- The Conference Report also states certain benefits.
larly situated individuals; and that ‘‘[t]he term ‘similarly situated’ Very Small Plans. The group market
• the permissible standards for deter- means that a plan or coverage would be requirements of HIPAA do not apply to
mining bona fide wellness programs. permitted to vary benefits available to a group health plan, or to group health
The Departments intend to issue further different groups of employees, such as insurance coverage offered in connec-
regulations on the nondiscrimination full-time versus part-time employees or tion with a group health plan, for any
rules in the near future. In no event will employees in different geographic loca- plan year if, on the first day of the plan
the period for good faith compliance tions. In addition, a plan or coverage year, the plan has fewer than 2 partici-
(specified in HIPAA sections 102(c)(5), could have different benefit schedules pants who are current employees. How-
101(g)(5), and 401(c)(5)) with respect to for different collective bargaining units.’’ ever, a State may apply the group
section 2702 of the PHS Act, section Accordingly, comments are requested market provisions in the PHS Act to
702 of ERISA, and section 9802 of the concerning the appropriate standards for plans with fewer than two participants
Code end before the additional guidance determining ‘‘similarly situated individu- who are current employees. In this case,
is provided. als,’’ including whether a plan is permit- the State would apply its group market
A plan or issuer may not establish ted to vary benefits based on an em- insurance law requirements to such
rules for eligibility (including continued ployee’s occupation. Because these small group plans (and such plans
eligibility) of an individual to enroll standards could impact on the small would not be subject to the individual
under the terms of the plan based on a group market, the Department of Health market requirements).
health status-related factor. HIPAA and and Human Services is particularly in- Excepted Benefits. The group market
the regulations provide a list of health terested in receiving comments from provisions and the related regulations
status-related factors. The Departments States with respect to how varying ben- also do not apply to any group health
are considering interpreting the statutory efits based on occupation could affect plan or group health insurance issuer in
language relating to eligibility to enroll rate setting. relation to its provision of excepted
so that a plan or issuer would be The Departments also request com- benefits. The benefits identified in para-
prohibited from providing lower benefits ments regarding how the prohibitions on graph (b)(2) are generally not health
to certain individuals based on health discrimination should be applied be- insurance coverage and are excepted in
status-related factors. Comments are tween groups of similarly situated indi- all circumstances. In contrast, the ben-
welcomed on this interpretation. viduals. For example, is guidance efits identified in paragraphs (b)(3), (4),
Among the health status-related fac- needed on whether a plan covering and (5) are generally health insurance
tors listed in the statute is ‘‘evidence of employees in two different locations coverage but are excepted if certain
insurability (including conditions arising could have a longer waiting period for conditions are met.
out of acts of domestic violence).’’ The employees at one location because the Limited-scope dental benefits, limited-
Conference Report states that the inclu- health status of those employees results scope vision benefits, and long-term
sion of evidence of insurability in the in higher health costs? care benefits are excepted if they are
list of health status-related factors ‘‘is A plan or issuer may not require any provided under a separate policy, certifi-
intended to ensure, among other things, individual (as a condition of enrollment cate, or contract of insurance, or are
that individuals are not excluded from or continued enrollment) to pay a pre- otherwise not an integral part of the
health care coverage due to their partici- mium or contribution, that is greater plan. For this purpose, limited-scope
pation in activities such as motorcycling, than that for a similarly situated indi- dental coverage typically provides ben-
snowmobiling, all-terrain vehicle riding, vidual enrolled in the plan, based on a efits for non-medical services such as
horseback riding, skiing and other simi- health status-related factor. However, routine dental cleanings, x-rays, and
lar activities.’’ However, HIPAA also this limitation does not restrict the other preventive procedures. Such cover-
provides that a plan or issuer is not amount that an issuer can charge an age may also provide discounts on the
15
cost of common dental procedures such 705(d) of ERISA relating to the treat- State insurance regulation unless it
as fillings, root canals, crowns, full or ment of partnerships (or the application does so explicitly. Section 514(a) of
partial plates, or orthodontic services. of the Code’s group market rules to ERISA preempts State laws relating
Limited-scope dental coverage typically partnerships). Comments are requested to employee benefit plans (including
does not provide benefits for medical on these provisions, including how these group health plans). However, section
services, such as those procedures asso- provisions coordinate with other provi- 514(b)(2) of ERISA saves from preemp-
ciated with oral cancer or with a mouth sions relating to self-employed individu- tion any State law that regulates insur-
injury that results in broken, displaced, als and partnerships. ance. Section 2723 of the PHS Act and
or lost teeth. section 731 of ERISA make clear that
F. Other Group Market Provisions 15
Similarly, limited-scope vision cover- Part A of Title XXVII of the PHS Act
age provides benefits for routine eye Guaranteed Renewability in and Part 7 of Subtitle B of Title I of
examinations or the fitting of eyeglasses Multiemployer Plans and Multiple ERISA do not in any way affect or
or contact lenses. This coverage does Employer Welfare Arrangements - modify section 514 of ERISA.
not include benefits for such ophthalmo- Section 703 of ERISA and Section 9803 In addition, section 2723 of the PHS
logical services as treatment of an eye of the Code Act and section 731(a) of ERISA pre-
disease (e.g., glaucoma or a bacterial Requirements relating to guaranteed empt State insurance laws to the extent
eye infection) or an eye injury. renewability in multiemployer plans and such laws ‘‘prevent the application of’’
Noncoordinated benefits may be ex- multiple employer welfare arrangements Part A of Title XXVII of the PHS Act
cepted benefits. The term ‘‘noncoor- are set forth in section 703 of ERISA and Part 7 of Subtitle B of Title I of
dinated benefits’’ refers to coverage for and section 9803 of the Code (but not in ERISA. (There is no corresponding pro-
a specified disease or illness (such as the PHS Act). These provisions state vision in the Code.) In this regard, the
cancer-only coverage) or hospital in- that a group health plan that is a Conference Report states that the con-
demnity or other fixed dollar indemnity multiemployer plan or that is a multiple ferees intended the narrowest preemp-
insurance (such as insurance that pays employer welfare arrangement may not tion of State laws with regard to health
$100/day for a hospital stay as its only deny an employer whose employees are insurance issuers (not group health
insurance benefit) if three conditions are covered under such a plan continued plans) with respect to all the provisions
met. First, the benefits are provided access to the same or different coverage of Part A of Title XXVII of the PHS
under a separate policy, certificate, or under the terms of such plan, other than Act and Part 7 of Subtitle B of Title I of
contract for insurance. Second, there is for certain specified reasons. The De- ERISA (except for preemption with re-
no coordination between the provision partments are not issuing regulations spect to the provisions of section 2701
of these benefits and another exclusion under section 703 of ERISA or section of the PHS Act and section 701 of
of benefits under a plan maintained by 9803 of the Code at this time, but ERISA). Consequently, the Conference
the same plan sponsor. Third, benefits anticipate issuing regulations under Report states that State laws with regard
are paid without regard to whether ben- these sections and solicit comments re- to health insurance issuers that are
efits are provided with respect to the garding these sections. broader than federal requirements in
same event under a group health plan In these provisions, the terms ‘‘con- certain areas would not ‘‘prevent the
maintained by the same plan sponsor. tinued access’’ and ‘‘same or different
application of’’ the provisions of Part A
Certain supplemental benefits are ex- coverage’’ are not defined. Comments
of Title XXVII of the PHS Act or Part 7
cepted only if they are provided under a are requested on how rules under these
provisions might address variations and of Subtitle B of Title I of ERISA.
separate policy, certificate, or contract of
insurance. This category of excepted changes in a plan’s benefit packages and However, the preemption is broader
benefits includes Medicare supplemental contribution rates, differences in the for the statutory requirements of section
(commonly called ‘‘Medigap’’ or characteristics of multiemployer plans 2701 of the PHS Act and 701 of ERISA
‘‘MedSupp’’) policies, CHAMPUS and multiple employer welfare arrange- that limit the application of preexisting
supplements, and supplements to certain ments, and any possible implications for condition exclusions. State laws cannot
employer group health plans. Such the financial integrity of affected plans. ‘‘differ’’ from the preexisting condition
supplemental coverage cannot duplicate exclusion requirements of section 2701
primary coverage and must be specifi- Preemption of State Laws; State of the PHS Act or section 701 of
cally designed to fill gaps in primary flexibility - 29 CFR § 2590.731 and 45 ERISA, except as specifically permitted
coverage, coinsurance, or deductibles.14 CFR § 146.190 under section 2723(b)(2) of the PHS Act
The regulations do not address section The McCarran-Ferguson Act of 1945 and section 731(b)(2) of ERISA. These
2721(e) of the PHS Act or section (Pub. L. 79–15) exempts the business of specific exceptions permit a State to
14
Note that a group health plan, which provides insurance from federal antitrust regula- impose on health insurance issuers cer-
primary coverage while an individual is an active tion to the extent that it is regulated by tain stricter limitations relating to preex-
employee, is often extended to retirees. When the the States and indicates that no federal isting condition exclusions.
retiree becomes eligible for Medicare, the group
health plan commonly coordinates with Medicare
law should be interpreted as overriding Comments are also solicited on issues
and may serve a supplemental function similar to 15
In this section (‘‘Other Group Market Provi- relating to the coordination of the new
that of a Medigap policy. However, such sions’’), references conform to usage in 45 CFR requirements under HIPAA and State
employer-provided retiree ‘‘wrap around’’ benefits Part 146, which uses ‘‘HCFA’’ in place of ‘‘De- requirements for associations that may
are not excepted benefits (because they are ex- partment of Health and Human Services’’ or
pressly excluded from the definition of a Medicare ‘‘Secretary of Health and Human Services’’ and be multiple employer welfare arrange-
supplement policy in section 1882(g)(1) of the ‘‘HCFA regulations’’ in place of ‘‘PHS Act regula- ments as defined in section 3(40) of
Social Security Act). tions.’’ ERISA.
16
Guaranteed Availability of Coverage for pletely different mechanism for making if it demonstrates that it lacks sufficient
Small Employers under the PHS Act insurance available to individuals guar- financial reserves to underwrite addi-
Group Market Provisions - 45 CFR anteed coverage under the statute.) tional coverage, but is barred for 180
§ 146.150 Various industry groups and persons days from offering coverage in the small
responding to the notice that the three group market in the State. Both of these
Rules relating to guaranteed availabil- Departments published on December 30, exceptions must be applied to all em-
ity of coverage for employers in the 1996 asked that the term ‘‘offer’’ be ployers uniformly without consideration
small group market appear only in the interpreted to mean ‘‘actively mar- of the health status or claims experience
PHS Act (at section 2711). In general, keted,’’ so that issuers would not be
this section requires health insurance of an employer’s employees or depen-
required to reopen closed blocks of dents. Neither of these exceptions re-
issuers that offer coverage in the small business. The regulations make this
group market to offer to any small lieves a network plan of its responsibil-
clear.
employer all of the products they ac- ity to continue servicing its in-force
Section 2711 also requires issuers to
tively market in that market. This is accept for enrollment any individuals business under the guaranteed renew-
generally referred to as an all-products who are eligible to enroll under the ability requirements of the regulations.
guarantee. However, as allowed under terms of the plan, and who satisfy the Finally, § 146.150 provides that if the
applicable State law, the issuer can requirements of the issuer and appli- coverage is only made available to
require that the employer make a mini- cable State law, during the period in members of ‘‘bona fide associations’’ as
mum contribution toward the premium which the individual ‘‘first becomes eli- that term is defined in the regulations, it
charged and have a minimum level of gible’’ to enroll under the terms of the is not subject to the guaranteed avail-
participation by eligible individuals. The group health plan. Thus, the issuer is ability requirements. (Accordingly, the
issuer must also accept for enrollment not required to accept late enrollees. The coverage does not have to be offered to
every eligible individual without regard regulations make it clear that this pro- non-members.) However, employers that
to health status. For purposes of this tection extends to individuals if they obtain coverage through a bona fide
section, an eligible individual is one ‘‘first become eligible’’ to enroll during association are assured of guaranteed
who meets the applicable requirements a special enrollment period. The special access to the association’s coverage op-
of the group health plan, the issuer, and enrollment provisions of the statute evi- tions as long as they remain members of
State law for coverage under the plan. dence the intent that individuals who the association. This is because a bona
Some States have, in recent years, qualify for special enrollment be given fide association cannot condition mem-
made reforms in their small group mar- the same protections given to newly- bership in the association on health
kets that only require guaranteed issue hired employees and their dependents. status-related factors. Moreover, it must
of a basic and a standard policy, rather An issue has also been raised as to offer coverage to all employers who are
than an all-products guarantee. They whether the statutory definitions of pre- members without regard to health status-
have urged that an all-products guaran- mium contribution and group participa- related factors relating to their employ-
tee not be adopted, arguing that the law tion rules, which are repeated in the ees or dependents. Therefore, an asso-
does not specifically require it. How- regulations, relate only to percentages of ciation cannot legally refuse enrollment
ever, sections 2711 and 2741 of the PHS employees or premium dollars or to to members on a selective basis so long
Act, as added by HIPAA, contain virtu- absolute numbers of employees or pre- as they meet the association’s member-
ally identical requirements requiring is- mium amounts. If the latter interpreta- ship criteria.
suers that offer health insurance cover- tion were permitted, the effect would be
age in either the small group or to undermine the all-products guarantee Guaranteed Renewability of Coverage
individual market to make ‘‘such cover- by allowing, for example, some products for Employers under the PHS Act Group
age’’ available to, respectively, small to be available to ‘‘larger’’ small em- Market Provisions - 45 CFR § 146.152
employers or eligible individuals. While ployers, but not to the smallest employ-
section 2741 explicitly permits issuers to ers. The regulations currently leave in- Section 146.152 of the Health Care
limit to two policies the offerings they terpretation of this language to the Financing Administration (HCFA) regu-
are required to make in the individual States, but comments are welcomed on lations implements section 2712 of the
market, the small group market provi- this issue. PHS Act, which requires issuers to re-
sions contain no similar exception. In Section 146.150 also includes rules new or continue in force any coverage
fact, section 2713(b)(1)(D) requires that regarding the circumstances under which in the large or small group market at the
an issuer that offers health insurance to issuers are permitted to deny coverage option of the plan sponsor. The excep-
any small employer must provide infor- to employers. If the product is a net- tions to this requirement include non-
mation concerning ‘‘the benefits and work plan, under which services are payment of premiums, fraud, and viola-
premiums available under all health in- furnished by a defined set of providers, tion of minimum participation or
surance coverage for which the em- the issuer can deny coverage to an contribution rules, as permitted under
ployer is qualified.’’ (Emphasis added.) employer whose eligible individuals do applicable State law. Also, the issuer can
This indicates that Congress intended to not live, work, or reside in the network cease to offer either a particular product
require an all-products guarantee in the plan’s service area. It can also deny or all coverage it offers in the particular
small group market. (However, a State coverage if it has demonstrated to the market, and can refuse to renew if the
that implements an ‘‘alternative mecha- State that its network does not have the group health plan’s participants all leave
nism’’ in the individual market under capacity to deliver services to additional the service area of a network plan, or if
section 2744 of the PHS Act has the groups, but is then barred for 180 days the coverage is provided through a bona
flexibility either to impose an all- from offering coverage in that service fide association and the employer’s
products guarantee or to use a com- area. An issuer may also deny coverage membership ends.
17
Issuers that decide to discontinue of- Disclosure of Information by Issuers to to be exempted from some or all of the
fering a particular product or all cover- Employers Seeking Coverage in the group market requirements of the HCFA
age in the small or large group market Small Group Market - 45 CFR regulations, although they are subject to
are subject to certain requirements out- § 146.160 the certification and disclosure require-
lined in paragraphs (c) and (d) of this ments of § 146.115. With respect to
Section 146.160 of the HCFA regula-
section of the regulations. Issuers dis- nonfederal governmental plans that are
tions implements section 2713 of the
continuing only a particular product collectively bargained, this section does
PHS Act by setting forth rules relating
must give 90 days’ notice, must offer not preempt State and local collective
to disclosure of information by issuers
the plan sponsor the option to purchase bargaining laws. The regulation estab-
to employers seeking coverage in the
other coverage the issuer offers in that lishes the form and manner of the
small group market. In its solicitation
market, and must discontinue the prod- election, and requires a nonfederal gov-
and sales materials, the issuer must
ernmental plan making this election to
uct uniformly, without regard to claims make a reasonable disclosure that the
notify plan participants, at the time of
experience or health status of partici- specified information is available on
enrollment and on an annual basis, that
pants or dependents under a particular request. The information that must be
it has made the election and what effect
group health plan. If the issuer termi- provided includes the issuer’s right to
the election has. The participant notice
nates all coverage in a market or mar- change premium rates and the factors
and certification and disclosure obliga-
kets, it must provide 180 days’ notice to that may affect changes in premium
tions are integral parts of the election.
each plan sponsor, and it is prohibited rates, renewability of coverage, any pre-
Failure to comply with these obligations
from issuing coverage in the market(s) existing condition exclusion (including
invalidates an election and subjects the
or State involved for five years follow- use of the alternative method of count-
nonfederal governmental plan to the
ing the date of discontinuation. Plans or ing creditable coverage), any affiliation
requirements the election would have
issuers may modify the health insurance periods applied by HMOs, the geo-
permitted the plan to avoid.
coverage at the time of coverage re- graphic areas served by HMOs, and the
benefits and premiums available under Only nonfederal governmental plans
newal, provided the modification is con- that are self-funded (in whole or in part)
all health insurance coverage for which
sistent with State law and, for the small can make the election, and the election
the employer is qualified under mini-
group market, is effective uniformly mum contribution and participation only applies to the self-funded portion.
among group health plans with coverage rules, as permitted by State law. The A health insurance issuer that sells in-
under that product. issuer is exempted from disclosing pro- surance coverage to a nonfederal plan
Some States have asked whether an prietary or trade secret information un- must comply with all the group market
issuer that chooses to stop selling com- der applicable law. requirements.
prehensive products, such as a basic or ‘‘Factors that may affect changes in
premium rates’’ and ‘‘proprietary and Enforcement of PHS Act Requirements -
standard policy, in a particular State’s
trade secret information under applicable 45 CFR § 146.184
group market, must also cease selling
policies consisting of excepted benefits. law’’ have not been defined. Comments Part 146 imposes requirements on
Because Congress permitted these types are requested regarding whether they health insurance issuers that offer cover-
of supplemental policies and limited should be defined. age in the group market in a State, and
benefit plans to be excepted from the The information described in this sec- on nonfederal governmental (i..e., State
requirements of HIPAA in both the tion must be provided in language that and local) group health plans. With
group and individual markets, HCFA is understandable by the average small respect to issuers, the statute makes it
intends to defer to the States’ judgment employer and sufficient to reasonably clear that it is solely within the discre-
on this issue, and solicit comments. inform small employers of their rights tion of the States, in the first instance,
State law may limit the extent to and obligations under the health insur- whether to take on the responsibility for
which an issuer can abandon a product ance coverage. This requirement can be enforcing those requirements or whether
or market, and under what circum- satisfied by using as a model the out- to leave enforcement to the federal
stances. For example, a State may lines of coverage provided under Medi- government. HCFA anticipates that the
choose to require an issuer vacating the care Supplement insurance. (These out- States will choose to enforce the re-
market to transfer its business to another lines are required to provide easy quirements. However, the statute also
issuer through assumption reinsurance, comparison of the coverage and cost of makes clear that if a State does not
or some other means permitted under all available products.) Reasonable in- substantially enforce the requirements,
State law. formation includes rating schedules for HCFA must enforce them. The statute
Paragraph (g) of this section of the each product to which more than one also requires HCFA to enforce the re-
regulations provides that, with respect to rate applies, and, with respect to net- quirements applicable to nonfederal gov-
group coverage offered only through work plans, maps of service areas or ernmental plans.
associations, the option of guaranteed lists of counties served.
Section 146.184(b)(2) sets forth the
renewability extends to include em- Exclusion of Certain Plans from the procedures that HCFA will follow if a
ployer members of an association. This PHS Act Group Market Requirements - question is raised about the State’s en-
provision means that all employers cov- 45 CFR § 146.180 forcement with respect to issuers. Under
ered by an issuer through an association the procedures, State are given every
have the right to renew the coverage Section 146.180 of the HCFA regula- opportunity to demonstrate why federal
they received if the association ceases to tions implements section 2721 of the enforcement is not required. The regula-
serve its members, regardless of the PHS Act, which permits certain tions also make it clear that the proce-
reason. nonfederal governmental plans to elect dures will not be triggered unless HCFA
18
is satisfied that there has first been a Effective Dates - 26 CFR § 54.9806–1, coverage applies to events occurring on
reasonable effort to exhaust any State 29 CFR § 2590.736, 45 CFR § 146.125 or after July 1, 1996, except that in no
remedies. However, if, after giving the case is a certificate required to be
The group market provisions are gen-
State a reasonable opportunity to en- provided before June 1, 1997 or to
erally effective for plan years beginning
force, HCFA makes a final determination reflect coverage before July 1, 1996.
after June 30, 1997.16 In many cases, no
that a State is not substantially enforcing For events occurring on or after July
preexisting condition exclusion may be
these requirements, HCFA will enforce 1, 1996 but before October 1, 1996, a
imposed with respect to an individual on
the requirements using the civil money certificate is required to be provided
the effective date because any permitted
penalties provided for under the statute. only upon a written request by or on
Paragraph (d) describes the process preexisting condition exclusion period is behalf of the individual to whom the
for imposing civil money penalties measured from the individual’s enroll- certificate applies. For events occurring
against issuers or nonfederal plans that ment date in the plan (even if the on or after October 1, 1996 and before
fail to comply with the group market enrollment date is before the statutory June 1, 1997, a certificate must be
requirements in the PHS Act. If HCFA effective date). An individual who has furnished no later than June 1, 1997 (or,
receives a complaint or other informa- not completed the maximum permitted if later, any date that would otherwise
tion that indicates that a right guaran- exclusion period under HIPAA before the apply under the standard rules).
teed by the group market rules is being effective date for his or her plan may use The regulations include an optional
denied, HCFA will first determine which creditable coverage to reduce the remain- transition rule for events before June 1,
entity is potentially responsible for any ing preexisting condition exclusion pe- 1997. (The transition rule applies to
penalty. If the failure is by an issuer, the riod. The regulations contain examples automatic certificate events; it does not
issuer will be responsible. If a illustrating the effect of these rules. apply where a certificate is requested.) A
The requirement that a plan or issuer
nonfederal governmental plan is spon- group health plan or health insurance
provide certificates to show creditable
sored by a single employer, the em- issuer offering group health coverage is
16
ployer will be liable, but if the plan is In these case of a group health plan maintained deemed to satisfy the automatic certifi-
pursuant to one or more collective bargaining
sponsored by two or more employers, agreements between employee representatives and
cate requirements if a special notice is
the plan will be liable. If, after giving one or more employers ratified before August 21, provided no later than June 1, 1997. The
the entity or entities an opportunity to 1996, the group market provisions (other than the notice must be in writing and must
respond, HCFA assesses a penalty, the requirements to provide certifications) do not include information substantially similar
regulation provides appeal rights. The apply to plan years beginning before the later of to the information included in a model
July 1, 1997 or the date on which the last of the
penalty can consist of up to $100 for collective bargaining agreements relating to the notice authorized by the Secretaries. For
each day, for each individual whose plan terminates (determined without regard to any this purpose, the following model notice
rights are violated. extension agreed to after August 21, 1996). is authorized:
IMPORTANT NOTICE OF YOUR RIGHT TO DOCUMENTATION OF HEALTH COVERAGE
Recent changes in Federal law may affect your health coverage if you are enrolled or become eligible to enroll in health coverage that excludes coverage
for preexisting medical conditions.
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) limits the circumstances under which coverage may be excluded for medical
conditions present before you enroll. Under the law, a preexisting condition exclusion generally may not be imposed for more than 12 months (18 months
for a late enrollee). The 12-month (or 18-month) exclusion period is reduced by your prior health coverage. You are entitled to a certificate that will show
evidence of your prior health coverage. If you buy health insurance other than through an employer group health plan, a certificate of prior coverage may
help you obtain coverage without a preexisting condition exclusion. Contact your State insurance department for further information.
For employer group health plans, these changes generally take effect at the beginning of the first plan year starting after June 30, 1997. For example, if
your employer’s plan year begins on January 1, 1998, the plan is not required to give you credit for your prior coverage until January 1, 1998.
You have the right to receive a certificate of prior health coverage since July 1, 1996. You may need to provide other documentation for earlier periods of
health care coverage. Check with your new plan administrator to see if your new plan excludes coverage for preexisting conditions and if you need to
provide a certificate or other documentation of your previous coverage.
To get a certificate, complete the attached form and return it to:
[Insert Name of Entity]:
[Insert Address]:
For additional information contact [Insert Telephone Number]:
The certificate must be provided to you promptly. Keep a copy of this completed form. You may also request certificates for any of your dependents
(including your spouse) who were enrolled under your health coverage.
**************************************************************************************************
REQUEST FOR CERTIFICATE OF HEALTH COVERAGE
Name of Participant: Date:
Address:
Telephone Number:
Name and relationship of any dependents for whom certificates are requested (and their address if different from above):
19
The provisions in the regulations re- Thus, without the Departments’ prompt rules for consideration in the develop-
lating to method of delivery and entities guidance, participants and beneficiaries ment of the final rules relating to
required to provide a certificate apply will not have the benefit of a convenient HIPAA. Such final rules may be issued
with respect to the provision of the certificate of prior coverage to present in advance of January 1, 1998, after
notice. If an individual requests a certifi- upon changing health coverage, and will affording the public an opportunity to
cate following receipt of the notice, the likely have greater difficulty proving review and comment.
certificate must be provided at the time that they are entitled to health coverage For the foregoing reasons, the Depart-
of the request as set forth in the regula- immediately, or soon after joining a new ments find that the publication of a
tions relating to certificates provided health plan. proposed regulation, for the purpose of
upon request. Moreover, HIPAA’s portability re- notice and public comment thereon,
HIPAA provides that no enforcement quirements will affect the regulated would be impracticable, unnecessary,
action is to be taken against a group community in the immediate future. and contrary to the public interest.
health plan or health insurance issuer HIPAA’s certification requirements are
with respect to a violation of the group effective for all group health plans on H. Regulatory Flexibility Act
market rules before January 1, 1998 if June 1, 1997. HIPAA’s underlying re-
quirements concerning establishing peri- The Regulatory Flexibility Act (5
the plan or issuer has sought to comply
ods of prior creditable coverage, pre- U.S.C. 601 et seq.) (RFA) imposes
in good faith with such requirements.
existing condition exclusion provisions, certain requirements with respect to
Compliance with the regulations is
and the special enrollment requirements, rules which would have significant eco-
deemed to be good faith compliance
are generally applicable for group health nomic impact on a substantial number
with the group market rules.
plans for plan years beginning on or of small entities. Section 603 of the
after July 1, 1997. Plan administrators RFA requires an agency publishing a
G. Interim Rules and Request for
and sponsors, and participants and ben- general notice of proposed rulemaking
Comments
eficiaries will need guidance on how to (NPRM) under section 553 of the APA
Section 707 of ERISA (redesignated comply with the new statutory provi- to present at the time of the publication
as section 734 by section 603(a)(3) of sions before these effective dates. These of its NPRM an initial regulatory flex-
the NMHPA), Section 2707 of the PHS rules have been written in order to ibility analysis, describing the impact of
Act, and Section 9806 of the Code ensure that plan sponsors and adminis- the rule on small entities, and seeking
added by HIPAA, provide, in part, that trators of group health plans, as well as public comment on such impact.
the Secretaries of Labor, Treasury and participants and beneficiaries, are pro- Small entities include small busi-
HHS may promulgate any interim final vided timely guidance concerning com- nesses, non-profit organizations, and
rules as they determine are appropriate pliance with these recently enacted governmental agencies. A ‘‘rule’’ under
to carry out the portability provisions of amendments to ERISA, the PHS Act the Regulatory Flexibility Act is one for
HIPAA. and the Code. These rules provide guid- which a general notice of proposed
Under Section 553(b) of the Adminis- ance on these statutory changes, and are rulemaking is required under section
trative Procedure Act (5 U.S.C. 551 et being adopted on an interim basis be- 553(b) of the APA.
seq.) a general notice of proposed cause the Departments find that issuance Since these rules are issued as interim
rulemaking is not required when the of such regulations in interim final form rules, and not as a general notice of
agency, for good cause, finds that notice with a request for comments is appropri- proposed rulemaking, for the reasons
and public comment thereon are imprac- ate to carry out the new regulatory stated above, an Initial Regulatory Flex-
ticable, unnecessary or contrary to the structure imposed by HIPAA on group ibility analysis has not been prepared.
public interest. health plans and health insurance issu- While these rules are being promul-
These rules are being adopted on an ers. In addition, these rules are neces- gated as interim final rules, the Depart-
interim basis because the Secretaries sary to ensure that plan sponsors and ments nevertheless invite interested per-
have determined that without prompt administrators of group health plans, as sons to submit comments for
guidance, some members of the regu- well as participants and beneficiaries, consideration in the development of the
lated community will have difficulty are provided timely guidance concerning final rules regulating to HIPAA. Consis-
complying with the HIPAA’s certifica- compliance with new and important dis- tent with the policy of the Regulatory
tion requirements, and will be in viola- closure obligations imposed by HIPAA. Flexibility Act, the public is encouraged
tion of the statute. Congress expressly Sections 101(g)(4), 102(c)(4), AND to submit comments that suggest alter-
intended that the certification and prior 401(c)(4) of HIPAA also mandate that native rules that accomplish the stated
creditable coverage provisions serve as the Secretaries issue regulations neces- purpose of the statute and minimize the
the mechanism for increasing the port- sary to carry out the portability amend- impact on small entities. Specifically,
ability of health coverage for plan par- ments by April 1, 1997. Issuance of a the public is encouraged to address:
ticipants and their beneficiaries. Without notice of proposed rule making with • What information relating to prior
the Departments’ guidance, plans would public comment thereon prior to issuing coverage, preexisting condition exclu-
likely be unable to produce the neces- a final rule could delay significantly the sions, health status, waiting periods and
sary amendments to plan documents issuance of essential guidance and pre- similar issues do employers, plans and
reflecting HIPAA’s new requirements, as vent the Departments from complying issuers currently rely on in maintaining
well as the appropriate certifications of with their statutory rule making dead- health care coverage systems?
prior coverage that would help partici- line. Furthermore, these rules are being • What are the estimated costs of
pants and beneficiaries reduce any appli- adopted on an interim basis and the complying with the statute’s require-
cable preexisting condition exclusion pe- Departments are inviting interested per- ments on certification of periods of prior
riods imposed by a new health plan. sons to submit written comments on the creditable coverage?
20
• How many small issuers offer prod- and continuing their traditional role as 9-month exclusions, and 1 percent in
ucts that may be subject to the regula- regulators of insurance. plans with exclusions that last more than
tions? Is there an anticipated effect on After serious consideration of these 12 months.
these small companies’ competitiveness concerns, HHS narrowly interpreted the HIPAA’s portability provisions re-
due to the regulations? preemption of state law, taking the least semble provisions of many current state
• To what extent do group health burdensome alternatives provided states laws. Importantly, however, HIPAA ex-
plans currently use service providers to considerable flexibility in complying tends these provisions to self-insured
fulfill the administrative obligations, in- ERISA plans which federal law shields
with the statute, and recognized the
cluding reporting and disclosure, previ- from state regulation. In addition, it sets
limited authority of federal agencies in
ously imposed by ERISA? To what a minimum uniform threshold for in-
the regulation of health insurance.
extent would group health plans also use sured group plans and individual mar-
The Administrator of the Office of kets across all states.
service providers to comply with this Information and Regulatory Affairs of
regulation’s certification requirements? HIPAA’s portability provisions will
the Office of Management and Budget result in both direct and social costs and
has determined that this is a major rule benefits.
I. Executive Order 12866, the Unfunded for purposes of the Small Business
Mandates Reform Act and the Small In general, direct costs and benefits
Regulatory Enforcement Fairness Act of arise directly from the application of
Business Regulatory Enforcement 1996 (5 U.S.C. Section 801 et seq.).
Fairness Act of 1995 HIPAA’s insurance portability and ac-
Set forth below is a discussion re- cess provisions. Direct costs and ben-
These rules have been determined to garding the impact of the statute and a efits are often best understood as trans-
be a significant regulatory action under discussion of the costs and benefits of fers of resources among economic
Section 3(f) of Executive Order 12866. the regulations implementing the statute. agents, which do not necessarily repre-
The following analysis is consistent with sent changes in overall social welfare.
Section 6(a)(3)(C) of the Order. J. Extensions of Coverage Under the Stated differently, they represent
These rules are not subject to the Statute changes in how the economic pie is
Unfunded Mandates Reform Act of divided (in this case, mainly with re-
These regulations implement certain spect to health care), and not changes in
1995 (Pub. L. 104–4), because they are provisions of HIPAA. The statute was
interim final rules. However, consistent the size of the pie. Direct costs and
enacted to, among other things, ‘‘im- benefits are often easier to quantify than
with the policy embodied in the Un- prove portability and continuity of
funded Mandates Reform Act, the regu- social costs, as they are often directly
health care coverage in the group and observable as transactions in the market-
lation has been designed to be the least individual markets,’’ as stated in the
burdensome alternative for state, local place.
Conference Report. The statute accom- With respect to HIPAA’s portability
and tribal governments and the private plishes these goals by instituting reforms
sector, while achieving the objectives of and access provisions, direct costs and
in the group and individual insurance benefits arise from the extension of
HIPAA. In addition, the following markets, including provisions limiting
analysis provides information concern- insurance coverage to individuals and
the use of pre-existing condition exclu- conditions not otherwise covered. Direct
ing the effects of the regulation on state, sions, and requiring guaranteed access to
local, and tribal governments and the benefits to individuals include the pay-
health care coverage and guaranteed ment of individuals’ claims for those
private sector. renewability for certain groups and indi-
Throughout the regulatory process, services and conditions. Direct costs to
viduals. There are also non- individuals include the premiums associ-
HHS met and consulted with representa- discrimination provisions and special en-
tives of affected state, local and tribal ated with that coverage. Some available
rollment rights in the statute. estimates of these direct costs and ben-
governments. These groups include the The pre-existing condition exclusion
National Association of Insurance Com- efits are presented below.
periods that HIPAA restricts are wide- Social costs and benefits, in contrast,
missioners, the National Governors’ As- spread. According to the Bureau of
sociation, the National Council for State do result in net changes in overall social
Labor Statistics (BLS), 46 percent of welfare. Social benefits generally reflect
Legislatures, the Indian Health Service, participants in private-sector, employer-
and the American Public Welfare Asso- social welfare gains that arise in connec-
sponsored health plans are in plans with tion with statutory or regulatory inter-
ciation. HHS also provided technical pre-existing condition exclusions (1993–
advice regarding its interpretation of the ventions that remedy market failures.
1994 data). The same is true of 41 Likewise, social costs generally reflect
statute to state insurance commissioners percent of participants in state and local
and state legislatures at their request. welfare losses arising from interventions
government employer-sponsored plans in otherwise efficient markets. Social
Generally, these groups have concerns (1994 data).
regarding: welfare changes often play out through
The duration of exclusion periods a complex set of behavioral responses to
• The statute’s preemption of state varies from plan to plan. Based on Peat interventions. They are more difficult to
laws that would prevent the implementa- Marwick’s 1995 employer survey, an quantify than direct costs and benefits.
tion of statutory provisions; estimated 57 percent of participants in With respect to HIPAA, social welfare
• The burden on issuers and plans to plans with exclusions are in plans with changes generally arise indirectly from
implement the statutory provisions, es- exclusions that last 12 months. The HIPAA’s portability and access provi-
pecially with regard to certification of remainder are distributed as follows: 13 sions. They reflect dynamic behavioral
prior creditable coverage; and percent in plans with 3-month exclu- responses to HIPAA’s portability and
• States’ desires to have considerable sions, 22 percent in plans with 6-month access provisions. Expected social ben-
flexibility in complying with the statute, exclusions, 7 percent in plans with efits, primarily improved access to
21
health insurance and also improved job will alleviate disruptions that might oth- seeking coverage in the individual mar-
mobility, cannot be meaningfully quanti- erwise arise when ‘‘riskier’’ groups and ket without a preexisting condition ex-
fied. Expected social costs, which could individuals are denied or dropped from clusion. Consequently, we expect more
include erosions in coverage arising coverage. individuals to elect COBRA continua-
from direct premium costs, are expected • To the extent that HIPAA results, tion coverage.
to be small. Since no measures of on net, in more insurance payment for Absent HIPAA’s group-to-group port-
HIPAA’s many social welfare effects are otherwise uncompensated care, cost- ability standards, individuals with
available, a mostly qualitative discussion shifting and associated inefficiencies in employer-sponsored health coverage
of major effects is offered below. A health care markets could be reduced. who have preexisting medical conditions
more quantitative discussion of direct HIPAA’s group-to-individual portabil- and who change health plans could be
costs and benefits follows later. ity provisions may provide a benefit for denied coverage for their conditions. In
1. Social Welfare Effects of HIPAA’s employees who move to jobs without that case, individuals would have to pay
Portability and Access Provisions health coverage. Some small employers out of pocket for necessary medical
The primary direct benefits of the law that do not currently offer health care services, or forgo some services, thereby
are improved access to insurance cover- coverage may be able to do so more risking adverse health consequences and
age, and more comprehensive coverage, easily under HIPAA’s guaranteed issue higher future costs. Other individuals
through employers and in the individual provisions. This may help level the with preexisting medical conditions who
insurance market. Increased access and playing for small employers to compete change health plans and face preexisting
comprehensiveness helps protect indi- with larger ones in recruiting employees. condition exclusions may pay for CO-
viduals from catastrophic expenses. While premium increases resulting from BRA continuation coverage in addition
There are a number of social benefits HIPAA may reduce the affordability of to paying for their new health plan to
associated with improved access coverage for some employers, this effect ensure coverage for the preexisting con-
• It reduces individuals’ risk of incur- is expected to be small, as noted below. dition. Other workers who are concerned
ring large out-of-pocket costs; HIPAA also requires that issuers of- about losing health care coverage would
• It is often more cost effective to fering health insurance coverage in the stay in their jobs or turn down job
provide timely preventive and remedial individual market renew coverage for all offers.
care than to delay care until conditions individuals purchasing health insurance According to the U.S. General Ac-
worsen. Therefore, to the extent that coverage in the individual market, not counting Office, over 20 million indi-
individuals receive more timely and ap- only eligible individuals. However, viduals changed jobs in 1993 (General
propriate care as a result of HIPAA, when an eligible individual elects family Accounting Office, Report HEHS–95–
over time, the long-term, cumulative coverage, the issuer may apply a pre- 257, ‘‘Health Insurance Portability: Re-
cost of their care may be lower. This existing condition exclusion, under ap- form Could Ensure Continued Coverage
has the potential to reduce premiums for plicable State law, to any of the indi- for up to 25 Million Americans,’’ Sep-
all individuals within a risk pool, not vidual’s family members who are not tember 1995, pg. 7). Approximately 12
just the individuals directly affected by eligible individuals under the statute. million of these workers had employer-
HIPAA. Similarly, the Medicare pro- The group-to-group portability regula- sponsored health care coverage. Addi-
gram may benefit from reduced expen- tion is likely to benefit individuals who tionally, nearly 7 million non-working
ditures because more individuals who maintain employer-sponsored health dependents received employer-sponsored
become newly entitled to Medicare will benefit coverage and change jobs or health care coverage through these job
have had insurance coverage during the health plans, the dependents of such changers. According to GAO, many of
course of their working life or through individuals, and workers who face ‘‘job these 20 million could benefit from the
the individual insurance market. lock’’ due to health coverage concerns. regulation’s requirement that prior health
• To the extent that more timely care Under HIPAA, health insurance cov- care coverage be credited against a new
results in improved health, worker atten- erage provided under a COBRA con- health plan’s preexisting condition ex-
dance and productivity might improve. tinuation policy qualifies as group health clusion period. GAO concludes that the
• HIPAA’s portability provisions like- coverage. This distinction is particularly statute will allow approximately 9 mil-
wise help individuals transitioning from important for individuals moving from lion job changers (who have at least 12
state and federal welfare programs to the group to the individual market, or months of prior creditable coverage),
paid work. Individuals with health con- from one group health plan to another, with 5 million dependents, to change
ditions can offset their new health plan’s since electing this coverage would en- jobs without the risk of facing any
preexisting condition exclusions against able these individuals to maintain con- preexisting condition exclusions. An-
prior coverage from any source, includ- tinuous creditable coverage. In addition, other 3 million workers who change
ing Medicaid. individuals seeking coverage in the indi- jobs (who have some smaller amount of
• Reductions in job lock benefit both vidual market must elect and exhaust prior coverage), with 2 million depen-
individuals and the economy at large. COBRA continuation coverage in order dents, would face reduced waiting peri-
Increased mobility can boost individual to qualify as an ‘‘eligible individual’’ in ods before receiving full coverage.
workers’ career opportunities. Increased the individual market. The number of workers and depen-
mobility also strengthens U.S. economic Thus, the statute provides an addi- dents actually gaining coverage for a
efficiency and competitiveness; tional incentive for those individuals preexisting condition due to credit for
• HIPAA’s federal minimum stan- who lose coverage when they change prior coverage following a job change
dards for small group and individual jobs to elect COBRA continuation cov- under HIPAA will be smaller than this,
access to insurance coverage may im- erage in order to avoid a break in however. GAO’s estimates of people
prove the functioning of small group coverage. The statute also provides an who could benefit include all job chang-
and individual markets. The standards incentive for those individuals who are ers with prior coverage and their depen-
22
dents, irrespective of whether their new where no coverage is offered. Eligible CBO does not quantify potential relief
employer offers a plan, whether their individuals might benefit in this case from ‘‘job lock,’’ which is a social,
new plan imposed a preexisting condi- from HIPAA’s group-to-individual port- rather than a direct, benefit of HIPAA.
tion exclusion period, and whether they ability provisions, but would have to Because people freed from job lock are
actually suffer from a preexisting condi- pay the premium themselves. Therefore, going from one type of insurance to
tion. Accounting for these narrower cri- many individuals who report job lock another (moving to a different group
teria, as discussed below, CBO estimates will not necessarily change jobs as a health plan or to an individual insurance
that 100,000 will actually receive addi- result of HIPAA. policy under HIPAA portability), CBO
tional coverage under HIPAA’s credit for also views freedom from job lock as
prior coverage at any point in time. There also appears to be a difference
consisting of ‘‘insured expenses . . .
In addition, employers, especially by age categories of the extent of job transferred among different insurers . . .
smaller employers, that offer health care lock. The Health and Retirement Study [that] . . . are not . . . direct costs.’’
benefits to their employees often change (HRS), conducted by the University of
The majority of evidence indicates
health insurance issuers, exposing work- Michigan’s Institute for Social Research, that job lock is a concern for many
ers or their dependents with preexisting which provides an emerging portrait of workers. HIPAA will address this con-
medical conditions to gaps in coverage. Americans age 51 through 61 and their cern, though the number of workers who
Small employers generally change insur- spouses, found that job flexibility is a will gain an advantage is unclear and
ance issuers every 3 to 4 years (Senate key issue for this age group. ‘‘Almost how the value of the benefit can be
Committee on Labor and Human Re- three-quarters of HRS respondents measured is also unclear.
sources, Report 104–156, Oct. 12, 1995, would prefer to phase down from full-
As the forgoing discussion illustrates,
pg. 4). The provisions of the statute that time work to part-time work when they
HIPAA’s social benefits are expected to
allow crediting of prior coverage should retire, in sharp contrast to actual behav-
be far ranging, but they cannot be
reduce the likelihood of gaps in cover- ior, where most people who retire leave
meaningfully quantified.
age. the workforce entirely. About one-third
of the people who would not look for HIPAA might also pose social costs.
One of the benefits of HIPAA to
another job are victims of ‘job lock,’ In particular, increases in premiums un-
individuals is that it alleviates ‘‘job
unable to leave because they might give der HIPAA’s portability and access pro-
lock.’’ That is, employees who have
up valuable pensions or health insurance visions could erode coverage. These
stayed in a particular job in order to
benefits if they switched employers’’ costs are expected to be small, however,
continue health care coverage can now
(HRS National Institute on Aging Press particularly in the group market where
change to a job that the person might
Release, June 17, 1993). premium increases are estimated to be
not otherwise have taken because he or
very small relative to the overall market.
she (or a dependent) would have been Empirical evidence for job lock is
subject to a pre-existing condition exclu- mixed. Buchmueller and Valletta found In summary, HIPAA’s portability and
sion; or the person can seek coverage in strong evidence of job lock among access provisions are expected to result
the individual insurance market as a women but weak evidence among men in a number of largely unquantifiable
result of HIPAA’s provisions requiring (‘‘The Effects of Employer-provided social benefits. These include greater
guaranteed issue for individuals coming Health Insurance on Worker Mobility,’’ continuity of coverage, improved access
from the group market. According to the Industrial and Labor Relations Review, to health care and possible corollary
GAO, there are one to four million volume 49, number 3, April 1996). improvements in health and productivity,
Americans ‘‘who at some time have Monheit and Cooper conclude that the improved stability and efficiency in in-
been unwilling to leave their jobs be- magnitude and importance of job lock, surance health care markets, eased
cause of concerns about losing their which some studies report as causing a movement from public assistance to
health care coverage’’ (Health Insurance 20 to 40 percent reduction in mobility, work, and gains in job mobility that are
Portability: Reform Could Ensure Con- is not as great as generally thought favorable to individual careers and to
tinued Coverage for Up to 25 Million (‘‘Health Insurance and Job Mobility: U.S. competitiveness.
Americans, HEHS–95–257, September Theory and Evidence,’’ Industrial and 2. Direct Costs and Benefits of
1995). The GAO notes that ‘‘surveys Labor Relations Review, volume 48, HIPAA’s Portability and Access Provi-
have found that between 11 and 30 number 1, October 1994). Kapur found sions
percent of individuals report that they or that job lock does not have a significant HIPAA’s portability and access provi-
a family member have remained in a job effect on job mobility (‘‘The Impact of sions impose direct costs and provide
at some time because they did not want Pre-existing Health Conditions on Job direct benefits to a broad range of
to lose health care coverage.’’ Among Mobility: A Measure of Job Lock,’’ entities, as well as to individual citizens.
those individuals, twenty percent stated WP–95–25, Institute for Policy Re- Costs will be incurred by employers,
that pre-existing conditions exclusions search), while Gruber and Madrian group plans, insurance companies and
constituted the basis for their reluctance found that COBRA continuation provi- managed care plans (‘‘issuers’’); states,
to change jobs. sions, and similar state laws (allowing in their capacity as regulators, and states
These figures, reflecting individuals individuals to continue coverage through and localities as entities providing health
stated intentions, may not accurately their employer group health plan for a care coverage for their employees, retir-
predict their behavior under different specified period), have led to a signifi- ees and dependents; the federal govern-
circumstances, however. Moreover, cant increase in job mobility (‘‘Health ment as regulator and as the source of
HIPAA’s portability provisions will alle- Insurance and Job Mobility: the Effects health care coverage for employees, an-
viate only some causes of ‘‘job lock’’— of Public Policy on Job-lock,’’ Industrial nuitants and dependents, and for others
for example, employees might still be and Labor Relations Review, volume 48, through programs such as Medicaid and
somewhat impeded from taking jobs number 1, October 1994). Medicare. Benefits will accrue to indi-
23
viduals and to small employers whose table for some people, [but] it would not penses that individuals would pay out of
access to comprehensive insurance is dramatically increase the availability of pocket absent HIPAA will be paid by
improved. insurance in general.’’ The controversial insurance programs under HIPAA. In
A number of studies have evaluated question of the extent to which there CBO’s estimates, this is reflected as a
the direct economic impact of the law. will be increases in issuer premiums is similar transfer in responsibility for pay-
The CBO found that ‘‘to the extent that discussed more extensively below. ment from individuals to insurance pro-
states have not already implemented CBO prepared estimates of the direct grams. However, the actual transfer
similar rules, these changes would effects of the provisions of the legisla- would be more complex. For example,
clarify the insurance situation and possi- tion included in these regulations (Letter to pay the additional claims, insurers
bly reduce gaps in coverage for many to the Honorable Bill Archer, August 1, must collect additional premiums, which
people.’’ 1996; notes are also from earlier CBO in turn will be paid by the individuals
The CBO notes that because HIPAA cost estimates; see table below). The gaining greater coverage and (in most
does not impose limits on premiums direct cost estimates can reasonably be cases) by other covered individuals, or
issuers may charge, insurance coverage, read as representing direct benefits as by their employers. CBO’s estimates
though available, may be expensive. well, since they generally reflect trans- represent gross costs to plans and gross
Consequently, CBO observes that the fers from a pre-HIPAA payer to a benefits to individuals, and do not ac-
law would ‘‘make insurance more por- post-HIPAA payer. Certain medical ex- count for these complexities.
CBO Cost Estimates and Number of People Affected
Provision Yearly Cost (Direct Number of People Affected Other Effects;
Cost to Private Comments
Sector)
GROUP: Limiting Length of Pre- $50 million in first 300,000 people ‘‘would gain coverage’’ Assumes ‘‘surge’’
Existing Condition Exclusions to 12 year (1997); $200 at any point in time, or 0.3% of people in claims costs;
Months million per year in with private employment-based coverage state laws taken
subsequent years into account
GROUP: Creditable Coverage Reducing $25 million in first 100,000 people ‘‘would receive added small # of people
Pre-Ex year; $100 million coverage’’ at any point in time affected reflects
per year thereafter ‘‘restrictive eligibil-
ity criteria’’
GROUP: ABOVE TWO COMBINED $300 million Comments: about .2% of total premiums in group and
employer-sponsored market; but may be overstated because
HMOs, now the dominant option, often do not use pre-ex ex-
clusions
INDIVIDUAL (group-to-individual port- $50 million 45,000 people covered by end of first provisions would
ability, no pre-existing condition exclu- year apply in states that
sion, no denial because of health condi- currently have 5.4
tion, guaranteed renewal) million of esti-
mated 13.4 million
First year estimates: people in indiv.
market (but see
analyses below)
INDIVIDUAL: subsequent years $200 million by ‘‘in about four years, the number of level of premiums
fifth year people covered . . . would plateau at to be charged is
around 150,000’’ unknown; states
may limit allow-
able premiums, but
such limits may
impose indirect
costs
Virtually all of the insurance market permissible pre-existing condition exclu- tracts, but which would be covered
reform provisions of HIPAA that are sions. CBO has estimated the total costs under HIPAA due to HIPAA’s 12-
implemented through these regulations of these two provisions at $300 million months cap on exclusions and its provi-
have the potential to increase premiums annually after full implementation, or sions requiring credit for prior coverage.
in the group market. Group plans may 0.2% of total premiums in the group CBO’s $300 million cost figure re-
have to bear higher costs because of the market. This reflects coverage for ser- flects only the costs of the statute’s
statutory limits on pre-existing condition vices which would have been excluded limits on pre-existing conditions exclu-
exclusions and the creditable coverage under current law due to pre-existing sion, and its prior creditable coverage
provisions reducing the application of condition exclusions in insurance con- provisions. It does not include the ad-
24
ministrative costs to plans and issuers of medical costs or the growth of managed (Such issues relating to the individual
the HIPAA’s certification requirement, care plans, could raise or lower the market are discussed in more detail
which the Department of Labor has direct costs of the law. Increases in below.)
measured in its Paperwork Reduction medical costs would obviously raise the Assuming that the CBO is correct in
Act analysis below. Similarly, CBO’s costs, while the expansion of HMO projecting that the premium effect trans-
$300 million figure does not include any penetration in the market would tend to lates into 0.2 percent of total premiums
other increased premium costs that reduce the law’s effect, since HMOs in the group market, a minimal premium
might be associated with the statute’s generally do not use preexisting condi- effect is likely.
health status nondiscrimination or guar- tion exclusions. CBO did not quantify the cost of
anteed renewability provisions. CBO’s nondiscrimination or special enrollment
figure does try to estimate (a) how CBO also reports that in particular, provisions.
many people would benefit from the distribution of the costs these provisions With respect to nondiscrimination, ap-
statute’s limits on preexisting condition would be uneven across health plans. proximately 135,000 workers reported in
exclusions, and its prior creditable cov- CBO notes that ‘‘[o]nly plans that cur- 1993 that they were excluded from their
erage provision, and (b) the average cost rently use pre-existing condition exclu- employer’s health plan because of their
to insurers of the extension of coverage sions of more than 12 months would health, according to DOL tabulations of
to those individuals. face the $200 million direct costs of the the April 1993 Current Population Sur-
Preexisting condition exclusion limita- statute’s exclusion limitation.’’ Data vey. In general, HIPAA would require
tion: CBO derived its $300 million from a Peat Marwick survey used by plans to offer benefits to such individu-
figure by estimating that approximately CBO indicate that 2.5% of employees als.
300,000 people with private em- are in such plans. Consequently, ‘‘the With respect to special enrollments,
ployment-based coverage would gain costs to health plans that use long HIPAA provides that individuals, under
coverage under the statute’s preexisting preexisting condition exclusions would certain conditions, are permitted to en-
condition exclusion limitation provision, be about 4.5% of their premium costs.’’ roll for health coverage on the same
at a direct private sector cost of $200 Likewise, only those plans that use terms as new participants, rather than as
million per year. CBO adjusted this preexisting condition exclusions would late enrollees. The conditions triggering
estimate to exclude people who reported face the $100 million direct cost of the eligibility for special enrollment gener-
being limited by a preexisting condition mandate to credit prior coverage against ally include events in which an indi-
restriction, but who also had secondary the preexisting condition exclusion. vidual loses coverage (such as when a
health coverage to pick up the cost of CBO reports that ‘‘almost half of em- spouse changes jobs when couples le-
their preexisting condition. CBO rea- ployees are in such plans — implying gally separate or divorce) or joins a
soned that under these circumstances, that the plans directly affected by this family that is eligible for coverage
the preexisting condition exclusion limi- mandate would have direct costs equal (through marriage, birth, or adoption).
tation would not raise the aggregate to about one-tenth of one percent of Special enrollment requirements ben-
costs imposed on employment-based their premiums’’ absent the statute. efit individuals. Absent this provision,
plans. CBO likewise adjusted its esti- The increased costs may be shared by eligible individuals could be subject to
mate to reflect the existence of state insurers, plans, and insured individuals. pre-existing conditions exclusion periods
laws which limited preexisting condition Additionally, costs also may be borne of up to 18 months, and therefore would
exclusion limitations to one year or less directly by plans that an issuer ‘‘experi- might need 18 months of prior credit-
and require that previous coverage be ence rates,’’ i.e. the insurer determines able coverage to fully offset a preexist-
credited against those exclusions. These rates according to the utilization of the ing condition exclusion period. Under
state laws generally apply to group group being insured. Costs may also be the provision, eligible individuals’ exclu-
plans of 50 or fewer employees, and do borne by others insured through an sion periods are limited to 12 months.
not include self-funded health benefit issuer that uses some form of commu- This special enrollment provision also
plans subject to ERISA rather than state nity rating, which spreads risk over a permits eligible individuals to enroll
laws. Since plans covered by such state greater number of ‘‘insured lives’’ be- immediately in plans which otherwise
laws would not have to change their yond the particular group that is the prohibit late enrollment, or which allow
provisions as a result of HIPAA, CBO source of the additional costs. To a late enrollments only during annual
lowered its initial estimate of the people certain extent, a group may have a open enrollment periods.
affected by the bill. choice in the degree of burden: if the Considering some of the major groups
Crediting Prior Coverage: CBO’s group knows that its members incur that could benefit, the Departments esti-
$300 million figure also includes an lower costs than the average of the mate that 734,000 families would gain
estimate that 100,000 people, at a pri- issuer’s pool, the group can avoid a eligibility for special enrollments due to
vate sector cost of about $100 million community-rated pool by becoming self- marriage, as would 701,000 due to
per year, would receive some added insured. births, and 292,000 due to job changes
coverage as a result of HIPAA’s prior There is also the possibility that in the family. These estimates, based on
creditable coverage provision. group market premiums may increase as the Survey of Income and Program
CBO reports that these estimates are a result of the HIPAA reforms in the Participation, reflect an annual count of
subject to considerable uncertainty for individual market if insurers spread the such events following which the rel-
several reasons. First, they are based on costs of claims in the individual market evant spouse or new born was unin-
individuals’ responses to surveys, which across a pool that includes group mem- sured, or covered under an individual
should be treated with caution. Like- bers. HIPAA expressly provides for this policy or Medicaid.
wise, unforeseen changes in the health possibility as one of the elements of an Special enrollments may result in a
insurance market, such as changes in acceptable state alternative mechanism. marginal increase in aggregate premi-
25
ums and claims paid, but no change in event that, in their capacity as sponsors the maximum extent possible, the states
average premium levels for any one of employee health care coverage, they should continue this regulatory role. To
individual, since eligible individuals are choose not to ‘‘opt out’’ of having this end, the law provides states with
not likely to have any higher health care certain provisions of the statute apply to three options: 1) implement an alterna-
costs than the average new health plan them. HIPAA provides that states and tive, state-specific mechanism to ensure
participant. localities that self-insure their health access to individual health care cover-
In summary, HIPAA’s portability and care coverage for employees, are permit- age; 2) adopt and administer the federal
access provisions will result in a number ted, under the statute, to ‘‘opt out’’ of standards of HIPAA; or 3) allow the
of direct costs and benefits. These direct the provisions of the law affecting them federal government to administer the
costs represent transfers among parties with respect to rules governing pre- law.
and not changes in overall social wel- existing condition limitations. Some en- In devising the first option, the imple-
fare. CBO estimates that HIPAA’s group tities that have the option available will mentation of an alternative mechanism,
portability provisions will result in $300 ‘‘opt out.’’ However, this does not re- Congress afforded states’ a good deal of
million of additional annual direct costs lieve them of the responsibility of pro- flexibility in establishing an alternative
to insurance programs, which in turn viding certifications of creditable cover- mechanism. At least 30 states are ex-
represents a direct benefit of $300 mil- age for their covered individuals. pected to implement alternative mecha-
lion in added coverage for individuals. HIPAA does not preempt state and local nisms, each unique to the state’s demo-
Additional direct costs and benefits will government collective bargaining laws. graphics and market conditions. States
arise from similar extensions of cover- If there were no opt-out entities, CBO are encouraged to explore innovative
age under HIPAA’s group-to-individual projects that state and local governments options and intend to afford states as
portability, special enrollment, and non- would see an increase in health care much flexibility as possible in the de-
discrimination provisions. Various esti- costs of less than $50 million, or 0.1% sign of their alternative mechanisms.
mates of the costs and benefits of the of the $40 billion annually in state and Throughout the process of reviewing
group-to-individual provisions are of- local total health insurance expenditures. proposed alternative mechanisms, the
fered below. Costs and benefits of the Those who would benefit from the states’ need for flexibility must be bal-
special enrollment and nondiscrimina- imposition of HIPAA requirements on anced with the rights of the individuals
tion provisions have not been quantified. state and local governments are indi- afforded protection under the law.
3. Affected Market Segments viduals who are subject to a pre-existing Our main concern is that the primary
(1). Impact on State, Local and Tribal condition exclusion that would have goal of HIPAA be achieved: that eligible
Governments been shortened in length by HIPAA individuals are guaranteed coverage in
The statute establishes federal stan- either under the 12-month limit or the the individual market, to the extent that
dards and allows for federal enforce- crediting of prior creditable coverage policies are available, without a preex-
ment in an area that has traditionally provision. As the CBO points out, this isting condition exclusion period. HHS
been the domain of the states, the benefit (for some) is coupled with a cost intends to review states’ mechanisms
regulation of insurance. However, the to (all covered) individuals because it is with this goal in mind; so the informa-
statute also permits states to use alterna- assumed that states and localities would tion presented should present a clear
tive, state-specific mechanisms to pass the cost off to their employees picture of the mechanism’s impact on
achieve greater portability and continu- through reduced compensation or ben- eligible individuals. The information re-
ity in a manner similar to the federal efits. quested in these regulations (section
standards. Many states have undertaken According to CBO, the impact of the 148.126(h)) closely parallels the statu-
insurance reforms similar to the HIPAA law on the states in their capacity as tory provisions. While such information
provisions and are likely to seek ap- regulators enforcing new insurance pro- collection requirements may impose a
proval for the continuation of these vision is marginal. For states that have burden on each state that chooses to
alternative mechanisms. The statute pro- been enacting insurance reform mea- implement an alternative mechanism,
vides that enforcement of the require- sures in the small group and individual such information is necessary in order to
ments of the law will be the responsibil- markets, it could be argued that HIPAA effectively evaluate the mechanism and
ity of the states (for those states provides a benefit to the extent that the ensure that the mechanism will provide
implementing alternative mechanisms as introduction of federal standards facili- eligible individuals the protection guar-
well as for those states implementing tates the states’ ability to continue insur- anteed by the law.
the federal standards), unless a state is ance reforms in these markets. Accord- The states are unlikely to choose the
unwilling or unable to enforce the law. ing to the Intergovernmental Health option whereby the Secretary (HCFA)
Only in the latter case of unwillingness Policy Project (IHPP), in a report dated implements and enforces HIPAA in the
or inability to enforce the law will the June of 1996, all but two states had state. Eight states, however, may choose
federal government implement and en- enacted some type of small group mar- the ‘‘federal fall-back’’ option of incor-
force the law in a given state. It is ket reform, and 35 states had enacted porating the HIPAA standards into state
highly unlikely that there will be any some type of individual insurance mar- law rather than developing an alternative
instance of the federal government as- ket reform. The presence of a federal mechanism.
suming such a role, with the exception standard that may be viewed as consti- The statute provides that a state is
perhaps of the territories. There is no tuting a ‘‘floor’’ of requirements im- presumed to be implementing an accept-
federal financial assistance or resources posed on issuers in these two markets able alternative mechanism as of Janu-
to implement these provisions. may also benefit the states. ary 1, 1998, unless the Secretary of
The CBO has generally determined The individual insurance market has HHS notifies a state of her disapproval
that there will be a negligible impact on traditionally been regulated by the of the mechanism by July 1, 1997. In
these governmental entities, even in the states, and Congress intended that, to states where the legislature does not
26
meet in a regular session between Au- choose the ‘‘federal fallback’’ option HIPAA, including how the issuer will
gust 21, 1996 and August 20, 1997, the (using federal standards), and for states inform eligible individuals of available
state is presumed to be implementing an in which the federal government will policy forms;
acceptable alternative mechanism as of directly administer the HIPAA provi- • Premium volumes or actuarial val-
July 1, 1998. To our knowledge, only sions. These regulations specify the fol- ues (depending on which election is
Kentucky qualifies for this exception. lowing: made regarding compliance with rules
The statute also provides an extension. • Documentation that must be submit- on the type of policy to be offered); and
Before making any initial determination, ted to the state (federal default) or to • A description of the risk spreading/
HHS intends to make every effort to HCFA (direct regulation by the federal financial subsidization mechanism to be
consult with the appropriate state offi- government) demonstrating compliance used for individual policy forms.
cials. After consultation with appropriate with the statute; The last two items represent require-
state officials, should there still be cause • The manner in which an insurer ments of the statute, while the first item
for disapproval, HHS will allow the markets individual policies; is necessary to ensure that there is
state a reasonable opportunity to revise • The procedure and time frames the effective implementation of the statute.
the mechanism or submit a new mecha- issuer follows in determining whether For the first item, issuers will have to
nism. Throughout this process, HHS someone is an eligible individual, and become familiar with the provisions of
may require further information from the effective date of the individual’s HIPAA in order to comply with the
state officials regarding particular as- coverage; documentation requirement, which can
pects of their insurance market reform.
• The procedure to follow for a re- be a considerable burden, but the other
While such requests for information
quest to limit enrollment in the case of information requirements should not be
may also impose an additional burden
an HMO’s or insurer’s capacity limita- burdensome. One way in which these
on the state, this information will be
tions (network capacity or financial ca- regulations lessen the burden for plans
necessary to ensure that the mechanism
pacity); and electing to offer ‘‘representative cover-
will provide the protections guaranteed
• The procedure for determining age’’ rather than the most popular policy
to eligible individuals under the law.
whether the benefit packages offered in forms is by not prescribing the method
As required by law, the Secretary of
the individual market are consistent with of determining the actuarial value of
HHS will review each alternative
statutory requirements. representative coverage. Issuers may
mechanism every three years. In this
In states electing the federal fall-back make their own determinations of actu-
respect, the regulation adheres closely to
approach, the state determines the level arial value and present them to HCFA
the statutory burden and merely clarified
of documentation required to establish for verification.
that resubmission is required on every
three-year anniversary of the last sub- compliance with the HIPAA provisions. (2). Impact of the Law in Different
mission date. HHS has also provided a The Departments do not know the ex- States
process for review of future mecha- tent of burden states will impose on The impact of the law on individuals,
nisms, should a state may wish to revise plans as a result of HIPAA. Although employers, group plans, and issuers may
an existing mechanism or propose a new there is not likely to be direct federal vary somewhat from state to state. Many
mechanism. enforcement in any state, in those states state reforms resemble HIPAA’s port-
In addition to implementing an alter- in which HCFA does administer the law, ability provisions, often meeting or ex-
native mechanism, a state may choose to issuers have 90 days after July 1, 1997, ceeding particular HIPAA standards. The
adopt and administer the federal statu- to provide documentation concerning in- CBO notes that it ‘‘lowered its initial
tory provisions. Our regulations in this dividual policy forms the issuer already estimate of the number of people af-
regard do not differ from the statutory markets; and 90 days prior to the begin- fected by the bill’’ in recognition of
provisions. As noted above, it is likely ning of the calendar year prior to mar- such state reforms. Where state laws
that up to eight states would choose this keting a new policy form. With regard resembling HIPAA exist, the marginal
option. to these time frames, the 90-day period impact of HIPAA is reduced.
Finally, a state may choose to allow should not be burdensome. Much of the The degree to which a state’s reforms
the federal government to administer the information required to be submitted lessen the impact of HIPAA’s portability
federal statutory provisions in the state. regarding the policy forms in the indi- provisions depends on the degree to
Although this is a possibility contem- vidual market is material the issuer will which the state’s requirements exceed
plated in the statute, it is unlikely that generally have filed with a state insur- these provisions, and on what proportion
any state would choose this option. ance commissioner (‘‘information on all of insured individuals in the state are
However, the impact of the regulations products offered in the individual mar- covered by the state’s reforms. In gen-
that implement this option is discussed ket’’; marketing material, often submit- eral, individuals not covered by state
below. ted to states on a ‘‘file and use,’’ or reforms are those enrolled in programs
In states that have an acceptable alter- informational basis). For such informa- for which such state reforms are pre-
native mechanism for ensuring access to tion the submission to the federal gov- empted by federal law. These include
individual insurance or health care cov- ernment is burdensome only in that it is individuals enrolled in federal programs
erage, the implementation of laws and duplicative of material given to the such as Medicare and the federal Em-
determination of compliance with those state. The HIPAA-specific materials are ployees Health Benefits Program or in
laws is exclusively a state matter. For generally not duplicative and constitute self-insured ERISA plans. Individuals
other states, HIPAA gives the Secretary a burden on issuers to provide HCFA enrolled in ERISA plans that are not self
authority to issue regulations to carry with the following information: insured are covered by such state re-
out the implementation and enforcement • An explanation of how the issuer is forms that are specifically saved from
of HIPAA provisions for the states that complying with the provisions of preemption by HIPAA.
27
According to a study by Jacob Kler- enrolling outside of an initial or special numbers declined from 2.9 million to
man of RAND, New Estimates of the enrollment period) for conditions arising 2.2 million from 1993 to 1995 (a 24%
Effect of Kassebaum-Kennedy’s Group- within the six months (‘‘look-back’’) decline).
to-Individual Conversion Provision on preceding the enrollment date in a group The relevance of these numbers to an
Premiums for Individual Health Insur- health plan. HIPAA also provides that analysis of HIPAA has to do both with
ance (1996), 42 states have guaranteed prior coverage for which there was not a the number of people that can poten-
issue rules in the individual market or a break in coverage of 63 days or more
tially benefit from the HIPAA provisions
high-risk pool that could qualify the would be credited against the pre-
(if the employees moving to ERISA-
states as meeting the alternative mecha- existing condition exclusion. Using the
nism requirements of HIPAA. This is PWBA analysis and information from insured plans are in states that already
consistent with other information the the IHPP, as of mid-1996, 30 states had have provisions similar to HIPAA, ef-
Departments have received to the effect time limits on pre-existing condition fects will be smaller), as well as the
that only eight states may adopt the exclusion periods that are the same as, related issue (partially a consequence of
federal HIPAA standards (to be adminis- or more favorable to individuals, than the former) of the extent to which the
tered by the states). (The individual the HIPAA provisions for the group small group market in a given state may
market issues are discussed in greater market; and 14 other states have limits be ‘‘disrupted’’ because of the effects of
detail below.) on pre-existing condition time limits. HIPAA. (For example, will the HIPAA
An analysis prepared by staff of the Among these 44 states, ten states allow provisions create a situation in which
Pension and Welfare Benefits Adminis- crediting of prior coverage for which the either insurers will abandon markets or
tration (PWBA) of the Department of duration of the break in coverage equals employers will discontinue health care
Labor found, for the group market, that or exceeds 63 days (more generous than coverage?) Although the Departments’
41 states have small group guaranteed HIPAA); eight states allowed breaks in economic impact analysis does not con-
issue; of that number five do not con- coverage of 60 days; 18 states allowed tain a state-by-state analysis of the rela-
form with (or are not more generous 30 or 31 days of a break in coverage; tionship between employees covered un-
than) HIPAA rules on guaranteed issue, and four states had no crediting of prior der self-insured plans (and any changes
and 21 define a small group differently coverage. state laws which exceed in those numbers) and the states that
from HIPAA by starting the small group HIPAA standards will not be pre-empted have reforms similar to HIPAA, Liston
category at three individuals (rather than by HIPAA. and Patterson found that the South was
HIPAA’s two)—the situation in 11 (3). Group Plans the only region of the country in which
states—or by extending the provisions HIPAA sets minimum standards for there was an increase in the number of
to groups not reaching HIPAA’s 50 (4 all group health plans, including self- employees covered by self-insured or
states define a small group as up to 49; funded plans that are shielded by ERISA partially self-insured (reflecting the
one as 40; and ten as either 24 or 25). from states’ HIPAA-like requirements. lower penetration of HMOs in Southern
These states are likely to make rela- The General Accounting Office has esti- states). Data about individual states do
tively small changes as necessary to mated that about 27% of the Nation’s not appear to be available. A recent
conform their laws to HIPAA standards. population received health care coverage GAO report notes that ‘‘no analysis
The National Association of Insurance through ERISA self-funded plans (17%). exists on the number of individuals
Commissioners has also engaged in ex- Although the GAO report indicated affected by these state [insurance] re-
tensive efforts to help the states conform that the number of people covered by forms’’ (Health Insurance Portability:
their laws. self-insured plans is increasing, other Reform Could Ensure Continued Cover-
Thirty-one states already have provi- data indicate that there has been a age for Up to 25 Million Americans,
sions which require that group health decline in such coverage because of the HEHS–95–257, September 1995).
plans offer additional enrollment oppor- increasing number of individuals cov- For 1995, the South (stretching, under
tunities to employees under circum- ered by HMOs that operate as insured the Liston-Patterson definition, from the
stances similar to HIPAA’s special en- plans. However, an HMO network may South Atlantic states to the West South
rollment opportunities. The statute constitute an exclusive provider organi- Central states of Arkansas, Louisiana,
expands the state baseline by adding zation for a self-insured plan. Liston and Oklahoma and Texas) had 35% of all
legal separation as a grounds for special Patterson (Analysis of the Number of employees covered by self-insured or
enrollment eligibility, and expressly in- Workers Covered by Self-Insured Health partially self-insured plans, while those
cludes COBRA as prior group health Plans Under the Employee Retirement same states had 30% of the private-
coverage. The statute further requires Income Security Act of 1974—1993 and sector employees with health care cover-
retroactive coverage for newborns and 1995, prepared for the Henry J. Kaiser age. Three of the seven states that had
adopted children if special enrollment is Family Foundation, August 1996) found no pre-existing condition limitations
requested within 30 days of birth, place- that from 1993 to 1995 the number of regulations in the PWBA analysis were
ment for adoption, or adoption. Current Americans covered by fully or partly Southern states; of the 11 states that had
state requirements reduce the overall self-insured plans declined from 37.6 no guaranteed renewal provisions for
economic impact of the special enroll- million to 32.5 million (a 14% decline). group health plans, four were in South-
ment requirements on the group health The rate of decline was greatest in ern states. It would appear then, that to
market. smaller firms: for firms with fewer than the extent that practices in the ERISA
For pre-existing conditions limitations 100 workers, the number of workers small group market in Southern states
in group health plans, HIPAA provides covered under fully or partially self- diverge significantly from HIPAA provi-
that the maximum allowable period insured plans declined from 8.2 million sions employers will have to adhere to,
is 12 months (‘‘look-forward’’), or 18 to 5.4 million (a 34% decline). For there are possible major impacts of
months for a late enrollee (someone firms with 25 or fewer employees, the HIPAA in those markets.
28
(4). The Individual Insurance Market teed issue laws for the individual mar- market, the number of new entrants in
In the individual insurance market the ket. Eight additional states have an the market, their costs, and the price-
statute provides for guaranteed issue of insurer (Blue Cross-Blue Shield) offer- sensitivity of purchasers or insurance.
a policy to ‘‘eligible individuals’’ (indi- ing open enrollment in the individual Other studies have arrived at conclu-
viduals coming from the group market, market. Twenty-three states have laws sions that are very different from the
who have 18 months of aggregate cred- limiting the period of pre-existing condi- HIAA conclusions. The main difference
itable coverage, from any of various tion exclusions, but only one state al- with other studies is that HIAA assumes
types of health care coverage). In addi- lows no such exclusion period, with that HIPAA will cause states to impose
tion to this guaranteed issue require- most states allowing a 12-month exclu- restrictions on the level of premiums
ment, insurers are not permitted to apply sion period with a 6- or 12-month ‘‘look insurers may charge in the individual
any pre-existing condition exclusions to back.’’ market. There are no such requirements
this group. Individual policies are guar- One of the most contentious issues in in HIPAA. The HIAA assumes that
anteed renewable except under certain discussions of HIPAA’s effect on the people currently covered in the indi-
circumstances. The statute does not individual insurance market has been the vidual market will be included in the
place any limits on the premiums insur- issue of premiums in that market. rating pool that includes individuals who
ers may charge for the policies made HIPAA does not impose any rating are newly insured under HIPAA provi-
available to eligible individuals. states requirements on insurers in the indi- sions. The American Academy of Actu-
are permitted to have alternative mecha- vidual market, meaning that the insurers aries (AAA), for example, found that
nisms that achieve the same ends as the are free to price their individual prod- the premium increases in the individual
HIPAA requirements, though any alter- ucts in any manner that is consistent market would be in the range of two to
native is required to have no pre- with state law. IHPP data show that for five percent, and the increases would
existing condition exclusions. the individual market, seven states have take effect over a longer time span that
The individual insurance market re- rating bands (premiums must be within one year. The AAA took into account
forms are of greatest benefit to individu- certain upper and lower bounds in rela- current state laws, including state laws
als who voluntarily or involuntarily tion to a ‘‘standard’’ premium), and related rate restrictions in the small
leave their jobs and wish to maintain eight states require community rating of group market.
some level of health insurance. As dis- some form (a form of rating that can be Jacob Klerman, of RAND, examined
cussed above, the availability of indi- roughly described as rating across a HIAA’s assumptions and methodology
vidual insurance may decrease ‘‘job larger pool of insured individuals, for and found that (a) using HIAA’s assump-
lock’’ by allowing people to maintain example, across all of an issuer’s in- tions, but employing more up-to-date or
continuous protection as they move be- sured individuals, across defined age otherwise improved data (‘‘better esti-
tween jobs. Individuals who enter the categories, etc.). Rating bands and com- mates of the underlying figures’’), the
individual market from the group market munity rating requirements have the increase in individual premi-
may choose to do so because their new same intended effect as HIPAA, to in- ums would be 5.7%; and (b) using
employer may not offer insurance or the crease the availability of insurance, but different assumptions, the premium ef-
employer’s coverage is limited; or they they additionally seek to assure afford- fect would be 2.3% and may be as little
may expect to be without a job for a able coverage. There will be interactions as 1% or less (New Estimates of the
period of time (for example, because between the HIPAA approach to in- Effect of Kassebaum-Kennedy’s Group-
they are ‘‘early retirees’’ who do not yet creased availability (guaranteed issue to-Individual Conversion Provision on
have Medicare entitlement and do not and elimination of pre-existing condition Premiums for Individual Health Insur-
have employment-based retiree health exclusions for certain individuals with ance, RAND, 1996). For the latter pro-
care coverage). The CBO projects, in prior coverage) and the rating approach jections, Klerman assumed a different
data cited above, that the number of in those states in which guaranteed issue level of claims costs for new entrants
people benefitting from the HIPAA (get- rules and pre-existing condition exclu- (150%, based on studies of the costs for
ting coverage when it would have been sion rules differ from HIPAA’s provi- COBRA continuation policies, versus the
denied absent HIPAA) individual market sions. HIAA’s 200%), that the premium pricing
reforms would ‘‘plateau’’ at the 150,000 Affordability of individual coverage is for the new policies would not be pooled
range by the fourth year of the law. The a significant issue with HIPAA. The with others in the individual market, and
GAO (HEHS–95–257, cited above) de- Health Insurance Association of America that state laws would have effects that
termined that about two million people (HIAA) has projected that the individual the HIAA analysis did not consider. Note
each year could convert to individual market reform provisions of HIPAA will that, as with the GAO report quoted
insurance from group coverage, based cause an eventual 22% increase in pre- above, these analyses are based on an
on turnover rates among small employ- miums in that market (‘‘The Cost of earlier version of an insurance reform
ers and rates of COBRA continuation of Ending ‘‘Job Lock’’ or How Much bill, S. 1028, in which the guaranteed
coverage. Would Health Insurance Costs Go Up If issue was available only to those with 18
Individual market premium effects ‘‘Portability’’ of Health Insurance Were months of group coverage. This analysis
vary by state. In state regulatory activ- Guaranteed?’’, February 20, 1996). does not measure how many more
ity, fewer states have provisions similar HIAA projects, on that basis, that even- people are encompassed in the larger
to HIPAA’s in the individual market as tually 500,000 to one million people HIPAA ‘‘eligible individual’’ group com-
compared to state reforms in the small would leave the individual insurance prising individuals whose last type of
group market. HIPAA will affect the market because of rate increases neces- coverage was group coverage but who
individual insurance markets in many sitated by the HIPAA reforms. HIAA had prior coverage during the 18-month
states. The RAND and IHPP data indi- bases this estimate on the current num- period from a different source; this will
cate that only eleven states have guaran- ber of people insured in the individual slightly increase the cost.
29
Another study, done for HHS, by (respectively) that become subject to plans, health insurance issuers and self-
Actuarial Research Corporation (ARC), HIPAA in 1997 are 15 percent and 24 funded plans of performing the continu-
had results that were similar to the percent; in 1998, 68 percent and 69 ing administrative tasks of calculating
RAND results. ARC projects possible percent; in 1999, 11 percent and 4 periods of creditable coverage, printing
increases in individual premiums rang- percent; and in 2000, 5 percent and 2 forms for notices, preparing an original
ing from 1.4 percent to 2.8 percent. percent. and a copy of notices and certifications
The compliance costs of these regula- for participants with dependants having
K. Statutory Provisions Affecting tions regarding certification and notice, identical coverage, and mailing these
Administrative Processes pre-existing condition exclusion notifica- documents to individuals. Also included
tion, and notice of enrollment rights was in ongoing expenditures is the cost to
While these rules implement the stat- estimated based upon information in the
ute’s goal of expanding coverage and plans which use pre-existing condition
public domain and data available to the exclusions to notify participants of the
portability of coverage by reducing the Departments on industry practices. To
use of pre-existing condition exclusions, plans’ provisions, and calculating peri-
derive data on health coverage and ods of pre-existing condition exclusions
for purposes of performing this eco- employment shifts of individuals, for the
nomic impact analysis, it is appropriate for new participants, and issuing an
purposes of this analysis the Depart- individualized notification, as necessary,
to break the regulations down into the ments referred to data collected from the
following components: certifications and to each individual who would be subject
Census Bureau’s Current Population to a pre-existing condition exclusion of
notices informing individuals of their Survey and Survey of Income and Pro-
right to request a certification; notifica- any duration. Total annualized initial
gram Participation, as well as the Na- costs and ongoing costs were aggregated
tion of the application of a pre-existing tional Health Interview Survey and the
condition exclusion period; alternative to estimate total annual costs.
Department of Labor’s database of 1993
methods of crediting coverage; and 3. The Certification Process
Form 5500 information, the most cur-
guidelines for implementing the statute’s rent available. Supplemental data on The statute specifies that every indi-
special enrollment requirements. The no- employer-sponsored health care was ob- vidual leaving a group health plan, end-
tice and notification requirements are tained from the Peat Marwick Benefits ing COBRA coverage, ending individual
largely a result of this rulemaking. The Survey and the BLS Employee Benefits insurance coverage, or leaving other
certification requirements are largely Survey. types of health coverage must receive a
prescribed by HIPAA, with certain as- 2. Initial vs. Ongoing Costs written certification of creditable cover-
pects that mitigate the impact of the Costs may be separated into initial age containing specific information
statute resulting from this rulemaking. costs and ongoing costs. Initial costs of about the individual and his or her
While the alternative method of count- the new certification, notice, pre-existing coverage, including information on the
ing compliance is authorized by HIPAA, condition exclusion notification, and coverage of dependents. This require-
the classes and categories of coverage to special enrollment requirements have ment constitutes a burden in information
be measured were created at the discre- several components, including capital collection and processing.
tion of the three Departments. costs of preparations for collecting in- Despite recent incremental state re-
1. Staggered Effective Dates formation such as purchasing or upgrad- forms in the laws affecting the group
In general, the effective dates of ing computers and software, and record health insurance market, no states have
HIPAA’s group health plan provisions storage facilities. Initial costs may also required group health plans or health
are tied to plans’ fiscal years and to the be expected to include programming or insurance issuers to provide participants
expiration of collective bargaining agree- reprogramming automated systems to and their dependants with certifications
ments under which some plans are main- track periods of prior creditable cover- or notices regarding prior health cover-
tained. Provisions whose effective dates age, and to track plan participants and age. Therefore, the statute imposes dis-
are so tied included those pertaining to the type of coverage they hold, e.g. crete new burdens on all group health
pre-existing condition exclusions, credit- individual or family coverage. Initial plans and health insurance issuers in
ing prior coverage, and special enroll- costs also include up-front expenditures connection with providing certifications,
ments. (The effective dates of HIPAA’s for revisions of plan documents to com- and issuing notices to individuals of
certification provisions are not so tied.) ply with the new statutory and regula- their right to receive a certification.
Non-collectively bargained plans become tory requirements. These costs were an- Respondents preparing certification
subject to these provisions of HIPAA in nualized over the estimated ‘‘life’’ of the forms must collect the appropriate infor-
the first plan year beginning on or after regulation, 10 years, in order to show mation about a person, prepare a certifi-
the July 1, 1997. Collectively bargained such costs on an annual basis. It is cation form, and, in most cases, mail the
plans become subject the first plan year estimated that the 15,604 plans that will information. One certification can serve
beginning on or after the later of July 1, process certifications internally (rather to provide information about dependents
1997 or the expiration of a collective than use a service provider) will incur covered under the same policy. The
bargaining agreement that was in place an average cost of $5,000 per plan to respondent may have to prepare multiple
prior to HIPAA’s date of enactment, revise their automated records systems certification forms for an individual, or
August 21, 1996. to accommodate this information for a for dependents, in the event that the
More than one-half of plans begin total cost of $78 million over 10 years certificate is lost or misplaced. The
their fiscal years on January 1. There- beginning in 1997. Presented here as process may require the development of
fore, there is a large concentration of direct costs, initial costs are a compo- new information systems or, more likely,
plans and participants that become sub- nent of overall social costs. modifications to existing information
ject to HIPAA in January 1998. Overall, Ongoing expenditures incurred annu- systems, to collect and process the nec-
the proportions of participants and plans ally include the costs to group health essary information.
30
The statute makes the certification last continuous period of coverage with- nity to correct any failure to establish
requirement a key implementation com- out any break. This is the most efficient credit for prior coverage before a claim
ponent of the portability provision in and simplest method of record keeping is denied.
both the group and individual markets. for plans and issuers. Under the regulation, in the group
The cost of providing certifications Seventh, the period of coverage con- health plan enrollment materials ordi-
for private group plans (absent the regu- tained in the on-request certification will narily provided to most new partici-
latory relief described below) is esti- be all periods of coverage ending within pants, plans that contain pre-existing
mated to be at least $98 million for 69 24 months before the date of the re- condition exclusion provisions must also
million certifications in 1997 and $84 quest. Essentially, a plan may simply provide notice that the plan contains
million for 59 million in each subse- look back two years and send copies of these provisions, that the participant has
quent year. Absent transition relief pro- any automatic certifications issued dur- the right to prove prior creditable cover-
vided under the regulations, early year ing that period. age, including the right to secure a
costs could be far higher. The direct cost The above reductions in burdens on certificate from a prior plan or issuer,
of certifications contributes to the over- plans and issuers may cause more fre- and that the new plan will assist in
all social cost of the statute. quent circumstances in which partici- obtaining the certificate. Those plans
pants are required to prove creditable using the alternative method of crediting
L. Impact of Regulatory Discretion coverage and the status of their depen- coverage also must disclose their meth-
dents. In order to help offset some of ods to the participant, including an iden-
These regulations mitigate the impact
the additional burdens that will be tification of the categories of coverage
of the statutory requirements on the
shifted to the participants, the regula- used.
regulated public, while preserving pro-
tions provide the following protections: In addition, a plan seeking to impose
tections, in several ways. These regula-
First, if an individual is required to a pre-existing condition exclusion on a
tions will reduce implementation costs.
demonstrate dependent status, the group participant or dependant must inform
The Departments exercised discretion
health plan or issuer is required to treat them in writing of the determination that
in connection with group plan provi-
the individual as having furnished a they lack adequate prior coverage, and
sions, as follows:
certificate showing the dependent status provide an opportunity for the individual
First, intermediate issuers will not if the individual attests to such depen- to submit additional materials regarding
have to issue a certification when an dency and the period of such status, and prior creditable coverage, and provide
individual changes options under the the individual cooperates with the plan’s an explanation of any appeals procedure.
same health plan. In lieu of the certifica- or issuer’s efforts to verify the depen- The annual cost of these disclosure
tion, they could simply transfer the start dent status. procedures to private group plans is
and stop dates of coverage to the plan. Second, a plan shall treat an indi- estimated to be $280,000 in 1997, $2.1
An individual would retain the right to vidual as having furnished a certificate million in 1998, and $1.9 million in
get a certification upon request if they if the individual attests to the period of 1999 (about 20 cents per notice). The
leave the plan. creditable coverage, and the individual same costs for state group plans would
Second, telephonic certification will also presents relevant corroborating evi- be $25,500, $51,000, and $51,000, re-
fulfill the requirement to send a certifi- dence of some creditable coverage dur- spectively. For local plans, they would
cation if the receiving plan and the prior ing the period and the individual coop- be $42,000, $84,000, and $84,000. The
plan mutually agree to that arrangement. erates with the plan’s efforts to verify Departments believe the marginal bur-
The individual can always get a written the individual’s coverage. den of the notice will be modest be-
certification upon request. Third, plans and issuers that impose cause, irrespective of the notice require-
Third, the requirement to send certifi- preexisting condition exclusions periods ment, under the statute plans must make
cations on June 1, 1997 to those who must notify participants of this fact. this determination before imposing a
have left plans between October 1, 1996 They must also explain that prior credit- preexisting condition exclusion. Com-
and May 31, 1997 can be satisfied by able coverage can reduce the length of a ments are encouraged as to whether this
sending a notice; the Departments have preexisting condition exclusion period assumption is appropriate. These costs
offered a model notice in these regula- and offer to request a certification on do not include any burdens attributable
tions for that purpose. the participant’s behalf. An exclusion to the use of the alternative methods of
Fourth, until July 1, 1998, plans and may not be imposed until this notice is crediting coverage, since it is assumed
issuers that do not collect individual given. This is beneficial to participants that any plans incorporating this method
information on dependants can comply insofar as it forewarns them of potential will do so only if the net cost is less
with the requirement to send each claim denials and enables then to more than using the standard method. Under
dependant a separate certification by easily exercise their right to protection the alternative method of crediting cov-
simply listing the category of coverage from such denials under HIPAA’s port- erage, the regulation allows the prior
(e.g., individual, spouse or family). ability provisions. plan to charge the receiving plan using
Fifth, in situations where the issuer Fourth, a plan that imposes a preexist- the alternative method for the reasonable
and the plan contract for the issuer to ing condition exclusion must notify a costs of providing evidence of classes
complete the certifications, the plan participant if the individual’s creditable and categories of prior health coverage.
would not remain liable if the issuer coverage is not enough to completely On balance, to the extent that the
failed to send the certifications. offset the exclusion period, and give the Departments have exercised regulatory
Thus, plans would not need to keep individual the option to provide addi- discretion, they have acted to reduce
data and files on this information. tional information. An exclusion may compliance costs. This is particulary
Sixth, the period of coverage listed on not be imposed until this notice is given. true with respect to the certification
automatic certifications will only be the This provides participants an opportu- process.
31
These regulations attempt to reduce remaining information of the certifica- In another discretionary provision,
the burden of certifications by limiting tion form could also be available to the these regulations require group plans to
the amount of information that needs to issuer, especially for COBRA-eligible notify eligible new employees of their
be reported and offering a model form individuals: whether COBRA continua- special enrollment rights. This provision
that can be used to satisfy the require- tion coverage is involved (given that the is necessary to make sure employees are
ment of the law. In the absence of a premium is charged directly to the indi- sufficiently informed to exercise their
written certification, the regulations al- vidual at a specified rate); the beginning rights within the 30-day window pro-
low for alternative means of establishing and ending dates of coverage and wait- vided in the statute. The cost of this
creditable coverage, which includes hav- ing periods; and the name, address, disclosure is expected to be small, since
ing the individual present documentation phone number and contact person (or it is a uniform disclosure that can
of coverage or conducting telephone Department) for information. accompany ordinary materials provided
verification with the entity that previ- Respondents may need to modify to new participants. In order to mini-
ously covered the individual. their systems to determine whether, for mize the burden, the preamble to these
During a transition period, respon- a given insurer’s coverage of a particu- regulations provides model language for
dents may provide individuals with a lar individual, there was a 63-day period the notice adequate for meeting the
notice that they have the right to receive of interrupted coverage for purposes of statutory obligation. The cost, which
a certificate of creditable coverage, a specifying this information on a certifi- would reach $1.72 million in 1999 for
requirement that can be met by includ- cation form. As noted above, the De- private group plans, is described in the
ing the information in an evidence of partments have taken consideration the PRA analysis. In 1999, the cost for State
coverage or other generic document in- difficulties insurers have in identifying plans would reach $167,000; the cost for
dividuals receive that contains informa- dependents under family coverage, and local plans would reach $290,000.
tion about their policy. This notice may the regulations make appropriate accom- The direct cost of certifications and
be provided in lieu of a certificate for modations, in recognition of the need notices contribute to the overall social
events that occur on or after October 1, for a transition period during which cost of the statute and regulations.
1996 but before June 1, 1997. information about dependent coverage HHS has exercised regulatory discre-
The cost to issuers of the certification information may be unavailable from tion regarding two specific provisions
requirement is primarily in the paper- issuers. that will be enforced exclusively by
work production of the certification The cost of producing and issuing HHS (also referred to as the ‘‘non-
form. All health insurance issuers are certifications (or notices in lieu of certi- shared group market’’ provisions).
likely to have the kinds of systems in fications where permitted) for private These two areas are as follows:
place to be able to produce the informa- group plans is estimated to be $57 Guaranteed Availability of Coverage
tion necessary for a certification, al- million for 53 million certifications in for Employers in the PHS Act Group
though there will be moderate systems 1997, $64 million for 44 million in Health Market Provisions
start-up costs, and some systems modifi- 1998, and $66 million for 44 million in The group market provisions include
cations for insurers and HMOs. Systems each subsequent year. Medicaid pro- rules relating to guaranteed availability
modifications may also be necessary to grams would provide 10 million certifi- of coverage for employers in the small
retain the data for the certificates for cations annually at an annual cost of group market that are only in the PHS
several years, but, like the other require- $600,000. Medicare would issue 92,000 Act (not in ERISA or the Code). Section
ments, this burden should also be lim- annually at a cost of $115,000. (Should 146.150 of the HHS regulations imple-
ited. The model certification form of the HHS decide to allow the Medicare ments section 2711 of the PHS Act. In
Preamble contains the kind of informa- award and termination letters to suffice general, this section requires health in-
tion that is routinely used as the basis as certifications, then there would be no surance issuers that offer coverage in
for claims processing by a health insur- cost to the Medicare program for the the small group market to offer all
ance issuer or by an HMO (for example, HIPAA certification requirements.) By policy forms to any eligible small em-
in adjudicating an out-of-network 1999, the annual cost and volume would ployer and to accept for enrollment
claim). total $500,000 and 200,000 for OPM, every eligible individual without regard
For example, in order to deny a claim $2.9 million and 1.9 million for state to health status. HHS has interpreted
dating from a period prior to the begin- plans, and $6.1 million and 4.1 million this guaranteed availability requirement
ning date of coverage of a particular for local plans, and $4.7 million and 2.9 to apply to all products offered in the
individual, the issuer’s information sys- million for individual market issuers. small group market. Some States and
tem could determine that 1) a particular Relative to the cost implied by the issuers argue that the statute would
individual was covered by the issuer; 2) statute alone, regulatory provisions di- permit guaranteed availability of an is-
the issuer identification number submit- rected at the certification process reduce suer’s basic and standard plan, as op-
ted with the claim is correct; 3) the private group plans’ cost of compliance posed to all products offered by the
individual was insured on the date the by a minimum of $41 million (or 42 issuer in the small group market. HHS
health care service was provided; 4) the percent) in 1997, $20 million (or 24 does not agree with this interpretation
service was provided during a waiting percent) in 1998, and $18 million (or 21 and have proposed our interpretation in
period or affiliation period before cover- percent) in 1999 and later years, through the regulation. Depending upon State
age was available; and 5) coverage may the creation of transitional rules, safe law, this decision may provide the ben-
have ended prior to the date of service. harbors and good faith compliance peri- efit of additional choices to small em-
The issuer’s information system would ods. The regulation acts to reduce paral- ployers purchasing coverage in the small
also determine the limitations of cover- lel burdens on issuers and state and group market, while adding some poten-
age (e.g. high or low option coverage, local government group plans in similar tial costs for issuers offering coverage in
with or without specific riders). The proportion. the small group market.
32
Exclusion of Certain Plans from the individual applies for such coverage, Prior Creditable Coverage and Notice of
PHS Act Group Market Requirements: and assuming the individual’s applica- Enrollment Rights) are prescribed by the
The group market provisions also in- tion for coverage was accepted. statute.
clude rules under which certain plans The impact of this regulatory provi- The first ICR implements statutorily
are excluded from the group market sion is that an individual who wishes to prescribed requirements necessary to es-
provisions that are only in the PHS Act maintain creditable coverage may delay, tablish prior creditable coverage. This is
(not in ERISA or the Code). Section for up to 63 days, an application for accomplished primarily through the issu-
146.180 of the HHS regulations imple- coverage in the individual insurance ance of certificates of prior coverage by
ments section 2721 of the PHS Act. market, especially if he or she is assured group health plans or by service provid-
Section 146.180(b) includes rules per- of being covered by an issuer (e.g., if ers that the group health plans contract
taining to non-federal governmental the person is guaranteed issuance of an with in order to provide these docu-
plans, which are permitted under HIPAA individual product as an individual com- ments. In addition, this ICR permits the
to elect to be exempted from some or ing from group coverage, under the use of a notice that may be used by the
all of HIPAA’s requirements in the PHS Act’s guaranteed availability provisions). plans to meet their obligations in con-
Act. HHS has exercised regulatory dis- The individual may forego medical nection with periods of coverage ending
cretion by prescribing the form and treatment during the 63-day period of during the transition period, October 1,
manner of the election and the contents non-coverage, resulting in a deteriora- 1996 through May 31, 1997, saving the
of the notice. HHS has also required a tion of health on entering the new health respondents both hours and cost during
non-federal governmental plan making plan, with a potential for greater costs that period. This ICR also covers the
this election to notify plan participants, incurred by the insurer or health plan. requests that certain plans will make
at the time of enrollment and on an The regulation could have required regarding additional information they re-
annual basis, of the fact and conse- that the individual apply for coverage quire because they are using the Alter-
quences of the election. HHS has exer- within a reasonable time period in ad- native Method of Crediting Coverage.
cised this regulatory authority in order vance of the 63-day period, such as 30 Finally, this ICR also includes the occa-
to ensure adequate documentation of a days after the end of prior coverage sional circumstances where a participant
non-federal governmental plan’s proper (which is similar to the statutory re- is unable to secure a certificate and
and appropriate election without placing quirement for a request for enrollment needs to provide some supplemental
an undue burden on the plan. In addi- in a group health plan following exhaus- form of documentation in order to estab-
tion, HHS has provided a non-federal tion of COBRA coverage or other ex- lish prior creditable coverage.
governmental plan the flexibility to elect haustion of coverage); or, the insurer The second ICR, Notice of Special
to opt out of specific provisions of the could have been required to begin cov- Enrollment Rights, implements the
statute and have allowed for this flex- erage within some specified time period statutorily prescribed disclosure obliga-
ibility in the contents of the notice. The after application. However, the approach tion of the plans to inform a participant,
cost of providing these notices for taken in the regulation is consistent with at the time of enrollment, of the plan’s
nonfederal governmental would range statutory provisions regarding the treat- special enrollment rules.
from $79,000 to $158,000 in 1997 and ment of waiting periods or HMO affilia- The third ICR, Notice of Pre-Existing
from $158,000 to $315,000 in 1999. tion periods, which the statute specifi- Condition Exclusion, concerns the dis-
HHS has also exercised regulatory cally excludes from being considered closure requirements on those plans that
discretion in connection with individual breaks in coverage. The regulatory pro- contain pre-existing condition exclusion
market provisions by specifying that vision also accords the same status to all provisions. This ICR has two compo-
college health plans are treated as bona individuals in any circumstance by mak- nents: a notice to all participants at the
fide associations. Since, under HIPAA, ing a 63-day period the maximum dur- time of enrollment stating the terms of
coverage offered through a bona fide ing which an individual can be without the plan’s pre-existing condition provi-
association is creditable coverage, indi- coverage and still receive credit for sions, the participant’s right to demon-
viduals covered under a college plan creditable coverage. strate creditable coverage, and that the
would receive credit for this coverage. plan or issuer will assist in securing a
However, because this coverage is of- M. Paperwork Reduction Act - certificate if necessary; and notice by
fered though a bona fide association (as Department of Labor and Department of the plan of its determination that an
defined in Part 144 of the group market the Treasury exclusion period applies to an indi-
rules), the issuer benefits because it does vidual.
not have to make the coverage available The Department of Labor and the 1. Establishing Prior Creditable Cov-
in the individual market to eligible indi- Department of the Treasury have sub- erage
viduals, and does not have to renew mitted this emergency processing public i. Department of Labor
coverage for a student who leaves the information collection request (ICR), The Department of Labor, as part of
association. This regulatory provision is consisting of three distinct ICRs, to the its continuing effort to reduce paper-
expected to minimally disrupt business OMB for review and clearance under work and respondent burden, conducts a
practices for those college plans. the Paperwork Reduction Act of 1995 preclearance consultation program to
HHS also exercised regulatory discre- (Pub. L. 104–13, 44 U.S.C. Chapter 35). provide the general public and federal
tion in connection with individual mar- The Departments have asked for OMB agencies with an opportunity to com-
ket provisions. When an eligible indi- clearance as soon as possible, and OMB ment on proposed information collection
vidual applies for coverage in the approval is anticipated by or before June requests (ICR) in accordance with the
individual market, the effective date of 1, 1997. Paperwork Reduction Act of 1995 (PRA
such coverage is deemed, in the regula- These regulations contain three dis- 95)(Pub. L. 104–13, 44 U.S.C. Chapter
tions, to be the date on which the tinct ICRs. Two of them (Establishing 35) and 5 CFR 1320.11. This program
33
helps to ensure that requested data can crued under a group health plan. The insurance provider would be limited in
be provided in the desired format, re- likely respondents are business or other the extent to which it could use pre-
porting burden (time and financial re- for-profit institutions, non-profit institu- existing condition exclusions to limit
sources) is minimized, collection instru- tions, small businesses or organizations, coverge. This ICR covers the submis-
ments are clearly understood, and the and Taft-Hartley trusts. Responses to sion of materials sufficient to establish
impact of collection requirements on this collection of information are man- prior creditable coverage.
respondents can be properly assessed. datory. II. Current Actions: Under 29 CFR
Currently, the Pension and Welfare Ben- Books or records relating to a collec- 2590.701–5 and 26 CFR 54.9801–5T of
efits Administration is soliciting com- tion of information must be retained as the interim rule, a group health plan
ments concerning the proposed new col- long as their contents may become ma- offering group health insurance coverage
lection of Establishing Prior Creditable terial in the administration of any inter- is obligated to provide a written certifi-
Coverage. nal revenue law. Generally, tax returns cate of information suitable for estab-
Dates: Written comments must be and tax return information are confiden- lishing the prior creditable coverage of a
submitted to the office listed in the tial, as required by 26 U.S.C. 6103. participant or beneficiary. To the extent
addressee section below on or before Comments on the collection of infor- that a certification is not available or
May 31, 1997. In light of the request for mation should be sent to the Office of inadequate to prove prior creditable cov-
OMB clearance by June 1, 1997, sub- Management and Budget, Attn: Desk erage, paragraph (c) provides other
mission of comments within the first 30 Officer for the Department of the Trea- methods for establishing creditable cov-
days is encouraged to ensure their con- sury, Office of Information and Regula- erage. During the transition period for
sideration. tory Affairs, Washington, DC 20503, certification (29 CFR 2590.710(e) and
The Department of Labor is particu- with copies to the Internal Revenue 26 CFR 54.9806–1T(e)), plans have the
larly interested in comments which: Service, Attn: IRS Reports Clearance option of providing notices regarding
• evaluate whether the proposed col- Officer, T:FP, Washington, DC 20224. participant’s rights to certification rather
lection is necessary for the proper Comments on the collection of informa- than the certification itself; plans then
performance of the functions of the tion should be received by May 31, provide certificates only to those partici-
agency, including whether the infor- 1997. In light of the request for OMB pants who request them. 29 CFR
mation will have practical utility; clearance by June 1, 1997, submission 2590.701–5(a)(7) and 26 CFR 54.9801–
• evaluate the accuracy of the agen- of comments within the first 30 days is 5T(a)(7) provides special rules for estab-
cy’s estimate of the burden of the encouraged to ensure their consideration. lishing prior coverage of dependants,
proposed collection of information, Comments are specifically requested and 29 CFR 2590.701–5(b) and 26 CFR
including the validity of the meth- concerning: 54.9801–5T(b) provides guidance on
odology and assumptions used; Whether the proposed collection of providing evidence of coverage to those
• enhance the quality, utility, and information is necessary for the proper plans that use the alternative method of
clarity of the information to be performance of the functions of the crediting coverage.
collected; and Internal Revenue Service, including These regulations offer model certifi-
• minimize the burden of the collec- whether the information will have prac- cation and notice forms to be used by
tion of information on those who tical utility; group health plans and health insurance
are to respond, including through The accuracy of the estimated burden issuers, containing the minimum infor-
the use of appropriate automated, associated with the proposed collection mation mandated by the statute. Based
electronic, mechanical, or other of information; on past experience, the staff believes
technological collection techniques How to enhance the quality, utility, that most of the materials required to be
or other forms of information tech- and clarity of the information to be exchanged under the certification proce-
nology, e.g., permitting electronic collected; dure will be prepared by contract ser-
submissions of responses. How to minimize the burden of com- vice providers such as insurance compa-
Addressee: Gerald B. Lindrew, Office plying with the proposed collection of nies and third-party administrators.
of Policy and Research, U.S. Depart- information, including the application of Type of Review: New
ment of Labor, Pension and Welfare automated collection techniques or other
Agencies: U.S. Department of Labor,
Benefits Administration, 200 Constitu- forms of information technology; and
Pension and Welfare Benefits Adminis-
tion Avenue, Room N–5647, Washing- Estimates of capital or start up costs
tration; U.S. Department of the Treasury,
ton, D.C. 20210. Telephone: 202–219– and costs of operation, maintenance, and
Internal Revenue Service
4782 (this is not a toll-free number). purchase of services to provide informa-
Fax: 202–219–4745. tion. Title: Establishing Prior Creditable
ii. Department of the Treasury Additional PRA 95 Information: Coverage
The collection of information is in I. Background: In order to meet Affected Public: Individuals or
Section 54.9801–5T. This information is HIPAA’s goal of improving access to household; Business or other for-profit;
required by the statute so that partici- and portability of health care benefits, Not-for-profit institutions; Group Health
pants will be informed about their rights the statute provides that, after the sub- Plans.
under HIPAA and about the amount of mission of evidence establishing prior Frequency: On occasion
creditable coverage that they have ac- creditable coverage, a subsequent health Burden:
34
Year Total Respondents Total Responses Average Time per Burden Hours Cost (range)
Response (range) (range)
1997 2,600,000 51,799,410 3.23 min 502,080 $57,180,000
6.12 min 950,710 $84,590,000
1998 2,600,000 44,431,970 5.04 min 672,120 $64,480,000
11.77 min 1,569,390 $119,310,000
1999 2,600,000 44,399,150 5.27 min 702,360 $66,310,000
12.01 min 1,599,630 $121,140,000
TOTALS ///////// ///////
Start up costs: It is estimated that the • evaluate whether the proposed col- Management and Budget, Attn: Desk
15,604 plans that will perform these lection is necessary for the proper Officer for the Department of the Trea-
functions internally (rather than use a performance of the functions of the sury, Office of Information and Regula-
service provider) will incur an average agency, including whether the infor- tory Affairs, Washington, DC 20503,
cost of $5,000 per plan to revise their mation will have practical utility; with copies to the Internal Revenue
automated records systems to ac- • evaluate the accuracy of the agen- Service, Attn: IRS Reports Clearance
comodate this information for a total cy’s estimate of the burden of the Officer, T:FP, Washington, DC 20224.
cost of $78 million over 10 years begin- proposed collection of information, Comments on the collection of informa-
ning in 1997. including the validity of the meth- tion should be received by May 31,
odology and assumptions used; 1997. In light of the request for OMB
Estimated total cost: • enhance the quality, utility, and clearance by June 1, 1997, submission
Comments submitted in response to clarity of the information to be of comments within the first 30 days in
this notice will be summarized and/or collected; and encouraged to ensure their consideration.
included in the request for Office of • minimize the burden of the collec- Comments are specifically requested
Management and Budget approval of the tion of information on those who concerning:
information collection request; they will are to respond, including through Whether the proposed collection of
also become a matter of public record. the use of appropriate automated, information is necessary for the proper
2. Notice of Enrollment Rights electronic, mechanical, or other performance of the functions of the
technological collection techniques Internal Revenue Service, includig
i. Department of Labor
or other forms of information tech- whether the information will have prac-
The Department of Labor, as part of nology, e.g., permitting electronic tical utility;
its continuing effort to reduce paper- submissions of responses.
work and respondent burden, condcuts a The accuracy of the estimated burden
Addressee: Gerald B. Lindrew, Office associated with the proposed collection
prelearance consultation program to pro- of Policy and Research, U.S. Depart-
vide the general public and federal of information;
ment of Labor, Pension and Welfare How to enhance the quality, utility,
agencies with an opportunity to com- Benefits Administration, 200 Constitu-
ment on proposed information collection and clarity of the information to be
tion Avenue, Room N–5647, Washing- collected;
requests (ICR) in accordance with the ton, D.C. 20210. Telephone: 202–219–
Paperwork Reduction Act of 1995 (PRA 4782 (this is not a toll-free number). How to minimize the burden of com-
95) (Pub. L. 104–13, 44 U.S.C. Chapter Fax: 202–219–4745. plying with the proposed collection of
35) and 5 CFR 1320.11. This program ii. Department of the Treasury information, including the applicatio of
helps to ensure that requested data can The collection of information is in automated collection techniques or other
be provided in the desired format, re- Section 54.9801–6T. This information is forms of information technology; and
porting burden (time and financial re- required by the statute so that partici- Estimates of capital or start up costs
sources) is minimized, collection instru- pants will be informed about their rights and costs of operation, maintenance, and
ments are clearly understood, and the under HIPAA and about the amount of purchase of services to provide informa-
impact of collection requirements on creditable coverage that they have ac- tion.
respondents can be properly assessed. crued under a group health plan. The Additionally PRA 95 Information:
Currently, the Pension and Welfare Ben- likely respondents are business or other I. Background: In order to improve
efits Administration is soliciting com- for-profit institutions, small businesses participants’ understanding of their
ments concerning the proposed new col- or organizations, and Taft-Hartley trusts. rights under an employer’s welfare ben-
lection of Notice of Enrollment Rights. Responses to this collection of informa- efits plan, the statute provides that, a
Dates: Written comments must be tion are mandatory. participant be provided with a descrip-
submitted to the office listed in the Books or records relating to a collec- tion of a plan’s special enrollment rules
addressee section below on or before tion of information must be retained as on or before the time when a participant
May 31, 1997. In light of the request for long as their contents may become ma- is offered the opportunity to enroll in a
OMB clearance by June 1, 1997, sub- terial in the administration of any inter- group health plan.
mission of comments within the first 30 nal revenue law. Generally, tax returns II. Current Actions: Under 29 CFR
days is encouraged in ensure their con- and tax return information are confiden- 2590.701–6 and 26 CFR 54.9801–6T of
sideration. tial, as required by 26 U.S.C. 6103. the interim rule, a group health plan
The Department of Labor is particu- Comments on the collection of infor- offering group health insurance coverage
larly interested in comments which: mation should be sent to the Office of is obligated to provide a description of
35
the plans’ special enrollment rules. The statute. Based on past experience, the tration; U.S. Department of the Treasury,
special enrollment rules generally apply staff believes that most of the materials Internal Revenue Service.
in circumstances when the participant required to be supplied under this ICR Title: Notice of Enrollment Rights
initially declined to enroll in the plan, will be prepared by contract service Affected Public: Individuals or house-
and subsequently would like to have providers such as insurance companies holds; Business or other for-profit; Not-
coverage. and third-party administrators. for-profit institutions; Group Health
These regulation offer a model form
Type of Review: New Plans.
to be used by group health plans and
health insurance issuers, containing the Agencies: U.S. Department of Labor, Frequency: On occasion
minimum information mandated by the Pension and Welfare Benefits Adminis- B u r d e n :
Year Total Respondents Total Responses Average Time per Burden Hours Cost
(000) Response
1997 2,600,000 499,080 .50 min 750 100,000
1998 2,600,000 7,622,010 .50 min 11,430 1,460,000
1999 2,000,000 8,959,380 .50 min 13,440 1,720,000
TOTALS ///////// ///////
3. Notice of Pre-Existing Condition proposed collection of information, and tax return information are confiden-
Exclusion including the validity of the meth- tial, as required by 26 U.S.C. 6103.
i. Department of Labor odology and assumptions used; Comments on the collection of infor-
The Department of Labor, as part of • enhance the quality, utility, and mation should be sent to the Office of
its continuing effort to reduce paper- clarity of the information to be Management and Budget, Attn: Desk
work and respondent burden, conducts a collected; and Officer for the Department of the Trea-
preclearance consultation program to sury, Office of Information and Regula-
• minimize the burden of the collec- tory Affairs, Washington, DC 20503,
provide the general public and federal
tion of information on those who with copies to the Internal Revenue
agencies with an opportunity to com-
ment on proposed information collection are to respond, including through Service, Attn: IRS Reports Clearance
requests (ICR) in accordance with the the use of appropriate automated, Officer, T:FP, Washington, DC 20224.
Paperwork Reduction Act of 1995 (PRA electronic, mechanical, or other Comments on the collection of informa-
95)(Pub. L. 104–13, 44 U.S.C. Chapter technological collection techniques tion should be received by May 31,
35) and 5 CFR 1320.11. This program or other forms of information tech- 1997. In light of the request for OMB
helps to ensure that requested data can nology, e.g., permitting electronic clearance by June 1, 1997, submission
be provided in the desired format, re- submissions of responses. of comments within the first 30 days is
porting burden (time and financial re- Addressee: Gerald B. Lindrew, Office encouraged to ensure their consideration.
sources) is minimized, collection instru- of Policy and Research, U.S. Depart- Comments are specifically requested
ments are clearly understood, and the ment of Labor, Pension and Welfare concerning:
impact of collection requirements on Benefits Administration, 200 Constitu- Whether the proposed collection of
respondents can be properly assessed. tion Avenue, Room N–5647, Washing- information is necessary for the proper
Currently, the Pension and Welfare Ben- ton, D.C. 20210. Telephone: 202–219– performance of the functions of the
efits Administration is soliciting com- 4782 (this is not a toll-free number). Internal Revenue Service, including
ments concerning the proposed new col- Fax: 202–219–4745. whether the information will have prac-
lection of Notice of Pre-Existing ii. Department of the Treasury tical utility;
Condition Exclusion. The collection of information is in The accuracy of the estimated burden
Dates: Written comments must be Sections 54.9801–3T, 54.9801–4T, and associated with the proposed collection
submitted to the office listed in the 54.9801–5T. This information is re- of information;
addressee section below on or before quired by the statute so that participants How to enhance the quality, utility,
May 31, 1997. In light of the request for will be informed about their rights under and clarity of the information to be
OMB clearance by June 1, 1997, sub- HIPAA and about the amount of credit- collected;
mission of comments within the first 30 able coverage that they have accrued How to minimize the burden of com-
days is encouraged to ensure their con- under a group health plan. The likely plying with the proposed collection of
sideration. respondents are business or other for- information, including the application of
The Department of Labor is particu- profit institutions, non-profit institutions, automated collection techniques or other
larly interested in comments which: small businesses or organizations, and forms of information technology; and
• evaluate whether the proposed col- Taft-Hartley trusts. Responses to this Estimates of capital or start up costs
lection is necessary for the proper collection of information are mandatory. and costs of operation, maintenance, and
performance of the functions of the Books or records relating to a collec- purchase of services to provide informa-
agency, including whether the infor- tion of information must be retained as tion.
mation will have practical utility; long as their contents may become ma- Additional PRA 95 Information:
• evaluate the accuracy of the agen- terial in the administration of any inter- I. Background: In order to meet
cy’s estimate of the burden of the nal revenue law. Generally, tax returns HIPAA’s goal of improving portability
36
of health care coverage, participants sions on a participant unless the partici- that before a plan or issuer imposes a
need to understand their rights to show pant has been notified in writing that the pre-existing condition exclusion on a
prior creditable coverage when entering plan contains pre-existing condition ex- particular participant, it must first dis-
a group health plan that contain pre- clusions, that a participant has the right close that determination in writing, in-
existing condition exclusion provisions. to demonstrate any period of prior cred- cluding the basis for the decision, and
In addition, participants entering plans itable coverage, and that the plan or an explanation of any appeal procedure
that use the alternative method of credit- issuer will assist the participant in ob- established by the plan or issuer.
ing coverage also need to be informed taining a certificate of prior coverage Type of Review: New
of the plan’s provisions. Therefore, the from any prior plan or issuer, if neces- Agencies: U.S. Department of Labor,
Department has determined that plans sary. 29 CFR 2590.701–4(c)(4) and 26 Pension and Welfare Benefits Adminis-
that contain these provisions must dis- CFR 54.9801–4T(c)(4) requires that tration; U.S. Department of the Treasury,
close that fact to new participants, as plans that use the alternative method of Internal Revenue Service.
well as inform individual participants of crediting coverage disclose their method Title: Notice of Pre-Existing Exclu-
the extent to which a pre-existing condi- at the time of enrollment in the plan. No sion Provisions
tion exclusion applies to them. additional cost of preparing or distribut-
II. Current Actions: 29 CFR ing this information has been included in Affected Public: Individuals or
2590.701–3(c) and 26 CFR 54.9801– this analysis because plans would only households; Business or other for-profit;
3T(c) requires that a group health plan pursue this option if it were, on net, less Not-for-profit institutions; Group Health
or health insurance issuer offering group costly than the standard method. Plans.
health insurance under the plan may not In addition, 29 CFR 2590.701–5(d)(2) Frequency: On occasion
impose any pre-existing condition exclu- and 26 CFR 54.9801–5T(d)(2) requires Burden:
Cite/Reference Total Respondents Total Responses Average Time per Burden Hours Cost
Response
Notice at time of
Enrollment
1997 1,261,450 500,800 0.70 min 2,470 $ 180,000
1998 1,261,450 7,626,880 0.54 min 16,300 $1,700,000
1999 1,261,450 8,959,700 0.50 min 13,750 $1,730,000
Notice of Pre-
Existing Condition
causing lack of
coverage
1997 1,261,450 57,900 2.27 min 1,800 $ 100,000
1998 1,261,450 862,830 0.84 min 6,160 $ 410,000
1999 1,261,450 1,008,810 0.52 min 1,830 $ 210,000
TOTALS /////
N. Paperwork Reduction Act — • The accuracy of our estimate of the 1320, to ensure compliance with section
Department of Health and Human information collection burden. 111 of the HIPAA necessary to imple-
Services • The quality, utility, and clarity of ment congressional intent with respect
the information to be collected. to guaranteeing availability of individual
Under the Paperwork Reduction Act
• Recommendations to minimize the health insurance coverage to certain in-
of 1995, HHS is required to provide
60-day notice in the Federal Register information collection burden on dividuals with prior group coverage. We
and solicit public comment before a the affected public, including auto- cannot reasonably comply with the nor-
collection of information requirement is mated collection techniques. mal clearance procedures because public
submitted to the Office of Management harm is likely to result because eligible
We are, however, requesting an emer-
and Budget (OMB) for review and ap- gency review of this notice. In compli- individuals will not receive the health
proval. In order to fairly evaluate ance with the requirement of section insurance protections under the statute.
whether an information collection 3506(c)(2)(A) of the Paperwork Reduc- We are requesting that OMB pro-
should be approved by OMB, section tion Act of 1995, we have submitted to vide a 30-day public comment period
3506(c)(2)(A) of the Paperwork Reduc- the Office of Management and Budget from the date of the publication, with
tion Act of 1995 requires that we solicit (OMB) the following requirement for OMB review and approval by June 1,
comment on the following issues: emergency review. We are requesting an 1997, and a 180-day approval. During
• The need for the information collec- emergency review because the collection this 180-day period, we will publish a
tion and its usefulness in carrying of this information is needed before the separate Federal Register notice an-
out the proper functions of our expiration of the normal time limits nouncing the initiation of an extensive
agency. under OMB’s regulations at 5 CFR, Part 60-day agency review and public com-
37
ment period on these requirements. We Total Annual Cost: $36.8 million to and when they have a right to elect
will submit the requirements for OMB $53.9 million in 1997; $42.4 million to COBRA continuation coverage.
review and an extension of this emer- $76.3 million in 1998; and $43.5 million We anticipate that approximately
gency approval. to $77.3 million in 1999. 1,400 issuers will be required to produce
Type of Information Request: New col- 45 CFR §§ 146.120, 146.122, 146.150, 30 million certifications per year based
lection on the model certificate provided. Our
146.152, 146.160, and 146.180 of this
Title of Information Collection: Informa- estimate of issuers (1,400) includes
document contain information collection
tion Collection Requirements Refer-
requirements. commercial insurers and HMOs, but
enced in HIPAA for Group Health Plans
does not include some types of issuers,
Form Number: HCFA–R–206
Use: This regulation and related infor- 45 CFR § 146.120 Certificates and Dis- such as Preferred Provider Organizations
mation collection requirements will en- closure of Previous Coverage (PPOs); however, these types of issuers
sure that group health plans provide are small in number. The time estimate
Certificates and Disclosure of Prior includes the time required to gather the
individuals with documentation necessary
Coverage. This section sets forth guid- pertinent information, create a certifi-
to demonstrate prior creditable coverage,
ance regarding the certification and cate, and mail the certificate to the plan
and that group health plans notify indi-
viduals of their special enrollment rights other disclosure of information require- participant. This time estimate is based
in the group health insurance market. ments relating to prior creditable cover- on discussions with industry individuals.
Frequency: On occasion age of an individual. In general, the We believe that, as a routine business
Affected Public: State and local govern- certificate must be provided in writing practice, the issuers’ administrative staff
ments, Business or other for profit, and must include the following informa- have the necessary information readily
not-for-profit institutions, individuals or tion: (1) the date any waiting or affilia- available to generate the required certifi-
households, Federal government tion period began, (2) the date coverage cates. In addition, we have determined
Number of Respondents: 1,430 began, and (3) the date coverage ended that the majority of issuers have or will
Total Annual Responses: Due to the (or indicate if coverage is continuing). have the capability to automatically
rolling effective dates in the statute, the The regulations also allow a plan or computer generate and disseminate the
number of annual responses is estimated issuer in an appropriate case to simply necessary certification when appropriate.
to be 32.5 million in 1997, but will state in the certificate that the individual These estimates include the certifi-
increase to 41 million in 1998 and 42.5 has at least 18 months of creditable cates required by issuers acting as ser-
million in 1999. coverage that is not interrupted by a vice providers on behalf of group health
Total Annual Hours Requested: 1.8 mil- significant break and indicate the date plans and state and local government
lion to 3.6 million hours in 1997; 2.3 coverage ended. In general, individuals health plans. We anticipate that most, if
million to 5.8 million hours in 1998; have the right to receive a certificate not all, state and local government
and 2.6 million to 5.9 million hours in automatically (an automatic certificate) health plans will contract with an issuer
1999. when they lose coverage under a plan to develop the certificate.
Estimates for Certifications
Year Total Respondents Total Responses Average Time per Burden Hours (range) Cost (range)
Response (range)
1997 1,400 32,698,845 3.32 min. 1,809,119 hrs. $36,366,106
6.34 min. 3,456,036 hrs. $53,434,628
1998 1,400 28,072,131 5.19 min. 2,242,866 hrs. $40,928,939
12.23 min. 5,720,198 hrs. $74,859,759
1999 1,400 28,055,984 5.37 min. 2,510,461 hrs. $42,124,907
12.41 min. 5,804,408 hrs. $75,760,119
Note: The costs above include the costs associated with issuers acting as service providers for group health plans. The costs are also included in the
Department of Labor’s estimates.
Notice to all participants. Under this outlining the existence and terms of any 1997; $330,000 in 1998; and $377,000
section, issuers are required to notify all preexisting condition exclusion under in 1999. These estimates and subsequent
participants at the time of enrollment the plan and the rights of individuals to estimates are based on an hourly wage
stating the terms of the issuer’s pre- demonstrate creditable coverage. In spe- of $11 for issuers and $15 for State and
existing condition exclusion provisions, cific, we anticipate that issuers will be local government employees. These esti-
the participant’s right to demonstrate required to develop approximately mates include the notices required by
creditable coverage, and that the issuer 660,000 notices in 1997; 5.6 million issuers on behalf of state and local
will assist in securing a certificate if notices in 1998; and 6.2 million notices government health plans, since we an-
necessary. in 1999. At 30 seconds for each notice, ticipate that most, if not all state and
We have estimated the burden associ- we estimate the total hour burden to be local government health plans will con-
ated with this information collection 4,400 hours in 1997; 30,000 hours in tract with an issuer to develop the
requirement to be the time required for 1998; and 34,000 hours in 1999. The notice. The estimates have been disag-
issuers to develop standardized language respective costs will be $49,000 in gregated below:
38
Total Notices
Year Issuers State Health Plans Local Health Plans Total Notices
1997 320,000 129,826 214,880 664,706
1998 4,878,200 259,653 429,761 5,567,614
1999 5,734,300 259,653 429,761 6,189,714
Total Burden Hours
Year Issuers State Health Plans Local Health Plans Total Hours
1997 1,592 1,078 1,784 4,454
1998 24,293 2,155 3,567 30,015
1999 28,557 2,155 3,567 34,279
Notice to individual of period of pre- would prevent access to urgent medical 1998; and 498,000 notices in 1999. At 2
existing condition exclusion. Within a services. The individual need only be minutes for each notice, we estimate the
reasonable time following the receipt of notified, however, if, after considering total hour burden to be 960 hours in
the certificate, information relating to the evidence, a preexisting condition 1997; 14,000 hours in 1998; and 16,600
the alternative method, or other evidence exclusion period will be imposed on the hours in 1999. We estimate the respec-
of coverage, a plan or issuer is required individual. The basis of the determina- tive costs associated with these burdens
to make a determination regarding the tion, including the source and substance to be $10,600 in 1997; $156,000 in
length of any preexisting condition ex- of any information on which the plan or 1998; and $183,000 in 1999. These
clusion period that applies to the indi- issuer relied, must be included in the estimates include the notices required by
vidual and notify the individual of its notice. The plan’s appeals procedures issuers on behalf of state and local
determination. Whether a determination and the opportunity of the individual to government health plans, since we an-
and notification is made within a rea- present additional evidence must also be ticipate that most, if not all state and
sonable period of time will depend upon explained in the notification. local government health plans will con-
the relevant facts and circumstances in- We estimate that issuers will be re- tract with an issuer to develop the
cluding whether the application of the quired to develop approximately 29,000 notice. The estimates have been disag-
preexisting condition exclusion period notices in 1997; 425,000 notices in gregated below:
Total Notices
Year Issuers State Health Plans Local Health Plans Total Notices
1997 27,650 588 766 29,004
1998 422,136 1,176 1,531 425,143
1999 496,182 1,176 1,531 498,889
Total Burden Hours
Year Issuers State Health Plans Local Health Plans Total Hours
1997 921 20 25 966
1998 14,057 40 51 14,148
1999 16,553 40 51 16,644
45 CFR § 146.122 Special Enrollment health insurance issuers and state and At 30 seconds for each notice, we
Periods local government health plans to incor- estimate the total hour burden to be
This section in the regulation provides porate the model notice into the plan’s 8,300 hours in 1997; 43,000 hours in
guidance regarding new enrollment rights standard policy information. We estimate 1998; and 48,000 hours in 1999. We
that employees and dependents have un- the burden to be 2 hours annually per have estimated the costs associated with
der HIPAA. A health insurance issuer issuer, for a total burden of 2,800 hours. these hour burdens to be $91,000 in
offering group health insurance coverage The cost associated with this hour bur- 1997; $469,000 in 1998; and $527,000
is required to provide a description of the den is estimated to be $30,800 annually. in 1999. These estimates include the
special enrollment rights to anyone who The second burden associated with notices required by issuers on behalf of
declines coverage at the time of enroll- this requirement is the time required to state and local government health plans,
ment. The regulations provide a model of disseminate the notice to new enrollees. since we anticipate that most, if not all
such a description containing the mini- We estimate that issuers will be required state and local government health plans
mum information mandated by the statute. to develop approximately 1 million no- will contract with an issuer to develop
The first burden associated with this tices in 1997; 5.3 million notices in the notice. The estimates have been
requirement is the time required for 1998; and 5.9 million notices in 1999. disaggregated below:
39
Total Notices
Year Issuer State Health Plan Local Health Plan Total Notices
1997 245,508 287,938 500,750 1,034,196
1998 3,750,024 575,875 1,001,500 5,327,399
1999 4,407,828 575,875 1,001,500 5,985,203
Total Burden Hours
Year Issuer State Health Plan Local Health Plan Total Hours
1997 1,964 2,304 4,006 8,273
1998 30,000 4,607 8,012 42,619
1999 35,263 4,607 8,012 47,881
45 CFR § 146.150 Guaranteed Avail- cost associated with this hour burden to viduals or entities who failed to imple-
ability of Coverage for Employers in the be $163,000. If the State identifies a ment the Federal guarantee renewability
PHS Act Group Market Provisions violation and a State has to take some requirements.
action, we believe that each State will
This section allows a health insurance 45 CFR § 146.160 Disclosure of Infor-
be required to initiate fewer than 10
issuer to deny health insurance coverage
administrative actions on an annual ba- mation by Issuers to Employers Seeking
in the small group market if the issuer
sis against specific individuals or enti- Coverage in the Small Group Market in
has demonstrated to the applicable State
ties who failed to implement the Federal the PHS Act Provisions
authority (if required by the State au-
guarantee availability requirements.
thority) that it does not have the finan- This section requires issuers to dis-
cial reserves necessary to underwrite close information to employers seeking
45 CFR § 146.152 Guaranteed Renew-
additional coverage and that it is apply- coverage in the small group market.
ability of Coverage for Employers in the
ing this denial uniformly to all employ-
PHS Act Group Market Provisions This section requires information to be
ers in the small group market in the
provided by a health insurance issuer
State consistent with applicable State In this section issuers are only re-
law and without regard to the claims offering any health insurance coverage
quired to report if they are discontinuing to a small employer. This information
experience of those employers and their a particular type of coverage or discon-
employees (and their dependents) or any includes the issuer’s right to change
tinuing all coverage. This requirement
health status-related factor relating to premium rates and the factors that may
exists in the absence of this regulation
those employees and dependents. Thus, because under current insurance prac- affect changes in premium rates, renew-
issuers are only required to report to the tices, State insurance departments over- ability of coverage, any preexisting con-
applicable State authority if they are see discontinuance of insurance products dition exclusion, any affiliation periods
discontinuing coverage in the small in their State as a normal business applied by HMOs, the geographic areas
group market. practice. Therefore, these information served by HMOs, and the benefits and
This requirement exists in the absence collection requirements are exempt from premiums available under all health in-
of this regulation because under current the PRA under 5 CFR 1320.3(b)(2) and surance coverage for which the em-
insurance practices, State insurance de- 5 CFR 1320.3(b)(3). However, under ployer is qualified. The issuer is ex-
partments oversee discontinuance of in- HIPAA, States must review policies dur- empted from disclosing information that
surance products in their State as a ing their oversight process to make sure is proprietary or trade secret information
normal business practice. Therefore, there is a guaranteed availability clause under applicable law.
these information collection require- in each policy. For the 43 States that The information described in this sec-
ments are exempt from the PRA under 5 currently require guaranteed renewabil- tion must be language that is under-
CFR 1320.3(b)(2) and 5 CFR ity, it is our understanding that this is standable by the average small employer
1320.3(b)(3). However, under HIPAA, normal business practice. For the other and sufficient to reasonably inform
States must review policies during their 12 States, however, we see this State small employers of their rights and
oversight process to make sure there is a burden to be about 10 minutes per obligations under the health insurance
guaranteed availability clause in each policy, since States already review poli- coverage. This requirement is satisfied if
policy. For the 37 States that currently cies for other requirements and this the issuer provides an outline of cover-
require guaranteed availability, it is our process does not prescribe a timetable age, the minimum contribution and
understanding that this is normal busi- for reviewing the policies. We see this group participation rules that apply to
ness practice. For the other 18 States, as a total burden of 6,700 hours. We any particular type of coverage, and any
however, we see this State burden to be have estimated the cost associated with other information required by the State.
about 10 minutes per policy, since States this hour burden to be $100,500. If the An outline of coverage is defined as a
already review policies for other re- State identifies a violation and a State general description of benefits and pre-
quirements and this process does not has to take some action, we believe that miums. This would include an outline of
prescribe a timetable for reviewing the each State will be required to initiate coverage similar to the manner in which
policies. We see this as a total burden of fewer than 10 administrative actions on Medigap policies are presented, allowing
10,850 hours. We have estimated the an annual basis against specific indi- the employer to easily compare one
40
policy form to another to determine 100 percent. Using these ranges, we authority contained in 26 U.S.C. 7805,
what is covered and how much the estimated 400,000 to 800,000 of these 9806; Sec. 401, Pub. L. 104–191, 101
coverage will cost. notices would need to be produced in Stat. 1936.
We have estimated the total burden 1997 and 800,000 to 1.6 million in 1998
associated with this activity to be 2,400 and 1999. At 30 seconds per notice, we Amendments to the Regulations
hours. We anticipate that 1,200 issuers estimate the total burden hours to range Internal Revenue Service
will be required to provide disclosure to from 3,400 to 6,800 in 1997; and 6,800 26 CFR Chapter I
small employers on an annual basis. We to 13,600 in 1998 and 1999. We have Accordingly, 26 CFR part 54 is
estimate this time to be approximately 2 estimated the costs associated with these amended as follows:
hours for each issuer to develop and hour burdens to range from $37,400 to
update the standard information related $74,800 in 1997; and from $74,800 to PART 54—PENSION EXCISE TAXES
to the general description of benefits $149,600 in 1998 and 1999.
and premiums on an annual basis and We have submitted a copy of this rule Paragraph 1. The authority citation
include this information in their policy to OMB for its review of these informa- for part 54 is amended by adding entries
information. We have estimated the cost tion collections. A notice will be pub- in numerical order to read as follows:
associated with this hour burden to be lished in the Federal Register when Authority: 26 U.S.C. 7805 * * *
$36,000. approval is obtained. Interested persons Section 54.9801–1T also issued under
are invited to send comments regarding 26 U.S.C. 9806.
45 CFR § 146.180 Exclusion of Certain this burden or any other aspect of these Section 54.9801–2T also issued under
Plans from the PHS Act Group Market collections of information. If you com- 26 U.S.C. 9806.
Requirements ment on these information collection Section 54.9801–3T also issued under
and record keeping requirements, please 26 U.S.C. 9806.
Section 146.180(b) includes rules per- mail copies directly to the following Section 54.9801–4T also issued under
taining to nonfederal governmental addresses: 26 U.S.C. 9806.
plans, which are permitted under HIPAA Section 54.9801–5T also issued under
Health Care Financing Administra-
to elect to be exempted from some or 26 U.S.C. 9801(c)(4), 9801(e)(3), and
tion,
all of HIPAA’s requirements in the PHS 9806.
Act. The regulation establishes the form Office of Financial and Human Re-
sources, Section 54.9801–6T also issued under
and manner of the election. In particular, 26 U.S.C. 9806.
a nonfederal governmental plan making Management Planning and Analysis
Staff, Section 54.9802–1T also issued under
this election is required to notify plan 26 U.S.C. 9806.
participants, at the time of enrollment Room C2–26–17, 7500 Security Bou-
Section 54.9804–1T also issued under
and on an annual basis, of the fact and levard,
26 U.S.C. 9806.
consequences of the election. The bur- Baltimore, MD 21244–1850. Section 54.9806–1T also issued under
den imposed by this is the requirement Attn: John Burke 26 U.S.C. 9806.
for plans to disseminate standard notifi- Office of Information and Regulatory Par. 2. Sections 54.9801–1T,
cation language describing the plans’ Affairs, 54.9801–2T, 54.9801–3T, 54.9801–4T,
election and the consequences of this
Office of Management and Budget, 54.9801–5T, 54.9801–6T, 54.9802–1T,
election. We anticipate that between
Room 10235, New Executive Office 54.9804–1T, and 54.9806–1T are added
3,500 and 5,000 nonfederal governmen-
Building, to read as follows:
tal plans will make this election and will
therefore be required to disseminate no- Washington, DC 20503,
§ 54.9801–1T Basis and scope (tempo-
tifications to their participants on an Attn: Allison Herron Eydt, HCFA rary).
annual basis. Since this is standard lan- Desk Officer.
guage that will be incorporated into (a) Statutory basis. Sections
plans’ existing policy documents, we see Statutory Authorities 54.9801–1T through 54.9801–6T,
the burden as approximately 2 hours per 54.9802–1T, 54.9804–1T, and
plan to develop and update this stan- The Department of Labor interim fi- 54.9806–1T (portability sections) imple-
dardized disclosure statement on an an- nal rule is adopted pursuant to the ment Chapter 100 of Subtitle K of the
nual basis. Thus, we estimate the total authority contained in Section 707 of Internal Revenue Code of 1986.
burden for this activity to range from ERISA (Pub. L. 93–406, 88 Stat. 894; (b) Scope. A group health plan may
7,000 to 10,000 hours. We estimate the 29 U.S.C. 1135) as amended by HIPAA, provide greater rights to participants and
cost associated with these hourly bur- (Pub. L. 104–191; 101 Stat. 1936; 29 beneficiaries than those set forth in
dens to range from $77,000 to 110,000 U.S.C. 1181). these portability sections. These port-
per year. The Department of Health and Hu- ability sections set forth minimum re-
The above estimate does not include man Services interim final rule is quirements for group health plans con-
the cost of disseminating the notices to adopted pursuant to the authority con- cerning:
all plan participants on annual basis and tained in Sections 2701, 2702, 2711, (1) Limitations on a preexisting con-
to new enrollees at the time of enroll- 2712, 2713, and 2792 of the PHS Act, dition exclusion period.
ment. Although we do not have an as established by HIPAA, (Pub. L. 104– (2) Certificates and disclosure of pre-
accurate estimate of the number of 191, 42 U.S.C. 300gg–1 through 300gg– vious coverage.
nonfederal governmental plans will 13, and 300gg–92). (3) Rules relating to creditable cover-
choose to opt out of these provisions, The Department of the Treasury tem- age.
we have provided for a range of 50 to porary rule is adopted pursuant to the (4) Special enrollment periods.
41
(c) Similar Requirements under the (ii) When the individual no longer connection with a group health plan.
Public Health Service Act and Employee resides, lives, or works in a service area (However, certain very small plans may
Retirement Income Security Act. Sec- of an HMO or similar program (whether be treated as being in the individual
tions 2701, 2702, 2721, and 2791 of the or not within the choice of the indi- market, rather than the group market;
Public Health Service Act and sections vidual) and there is no other COBRA see the definition of individual market
701, 702, 703, 705, and 706 of the continuation coverage available to the in this section.)
Employee Retirement Income Security individual. Health insurance coverage means
Act of 1974 impose requirements simi- Condition means a medical condition. benefits consisting of medical care (pro-
lar to those imposed under Chapter 100 Creditable coverage means creditable vided directly, through insurance or re-
of Subtitle K of the Internal Revenue coverage within the meaning of imbursement, or otherwise) under any
Code with respect to health insurance § 54.9801–4T(a). hospital or medical service policy or
issuers offering group health insurance Employee Retirement Income Security certificate, hospital or medical service
coverage. See 45 CFR Parts 144, 146, Act of 1974 (ERISA) means the Em- plan contract, or HMO contract offered
and 148 and 29 CFR Part 2590. See ployee Retirement Income Security Act by a health insurance issuer. However,
also Part B of Title XXVII of the Public of 1974, as amended (29 U.S.C. 1001 et benefits described in § 54.9804–
Health Service Act and 45 CFR Part seq.). 1T(b)(2) are not treated as benefits
148 for other rules applicable to health Enroll means to become covered for consisting of medical care.
insurance offered in the individual mar- benefits under a group health plan (i.e., Health insurance issuer or issuer
ket (defined in § 54.9801–2T). when coverage becomes effective), with- means an insurance company, insurance
out regard to when the individual may service, or insurance organization (in-
§ 54.9801–2T Definitions (temporary). have completed or filed any forms that cluding an HMO) that is required to be
Unless otherwise provided, the defini- are required in order to enroll in the licensed to engage in the business of
tions in this section govern in applying plan. For this purpose, an individual insurance in a State and that is subject
the provisions of §§ 54.9801–1T who has health insurance coverage un- to State law that regulates insurance
through 54.9801–6T, 54.9802–1T, der a group health plan is enrolled in (within the meaning of section 514(b)(2)
54.9804–1T, and 54.9806–1T. the plan regardless of whether the indi- of ERISA). Such term does not include
Affiliation period means a period of vidual elects coverage, the individual is a group health plan.
time that must expire before health a dependent who becomes covered as a Health maintenance organization or
insurance coverage provided by an result of an election by a participant, or HMO means—
HMO becomes effective, and during the individual becomes covered without
(1) A federally qualified health main-
which the HMO is not required to an election.
tenance organization (as defined in sec-
provide benefits. Enrollment date definitions (enroll-
tion 1301(a) of the PHSA);
ment date and first day of coverage) are
set forth in § 54.9801–3T(a)(2)(i) and (2) An organization recognized under
COBRA definitions: State law as a health maintenance orga-
(ii).
(1) COBRA means Title X of the Excepted benefits means the benefits nization; or
Consolidated Omnibus Budget Recon- described as excepted in § 54.9804– (3) A similar organization regulated
ciliation Act of 1985, as amended. 1T(b). under State law for solvency in the
(2) COBRA continuation coverage Genetic information means informa- same manner and to the same extent as
means coverage, under a group health tion about genes, gene products, and such a health maintenance organization.
plan, that satisfies an applicable COBRA inherited characteristics that may derive Individual health insurance coverage
continuation provision. from the individual or a family member. means health insurance coverage offered
(3) COBRA continuation provision This includes information regarding car- to individuals in the individual market,
means sections 601–608 of the ERISA, rier status and information derived from but does not include short-term, limited
section 4980B of the Internal Revenue laboratory tests that identify mutations duration insurance. For this purpose,
Code (other than paragraph (f)(1) of in specific genes or chromosomes, short-term, limited duration insurance
such section 4980B insofar as it relates physical medical examinations, family means health insurance coverage pro-
to pediatric vaccines), and Title XXII of histories, and direct analysis of genes or vided pursuant to a contract with an
the PHSA. chromosomes. issuer that has an expiration date speci-
(4) Exhaustion of COBRA continua- Group health insurance coverage fied in the contract (taking into account
tion coverage means that an individual’s means health insurance coverage offered any extensions that may be elected by
COBRA continuation coverage ceases in connection with a group health plan. the policyholder without the issuer’s
for any reason other than either failure Group health plan means a plan (in- consent) that is within 12 months of the
of the individual to pay premiums on a cluding a self-insured plan) of, or con- date such contract becomes effective.
timely basis, or for cause (such as tributed to by, an employer (including a Individual health insurance coverage can
making a fraudulent claim or an inten- self-employed person) or employee or- include dependent coverage.
tional misrepresentation of a material ganization to provide health care (di- Individual market means the market
fact in connection with the plan). An rectly or otherwise) to the employees, for health insurance coverage offered to
individual is considered to have ex- former employees, the employer, others individuals other than in connection
hausted COBRA continuation coverage associated or formerly associated with with a group health plan. Unless a State
if such coverage ceases— the employer in a business relationship, elects otherwise in accordance with sec-
(i) Due to the failure of the employer or their families. tion 2791(e)(1)(B)(ii) of the PHSA, such
or other responsible entity to remit pre- Group market means the market for term also includes coverage offered in
miums on a timely basis; or health insurance coverage offered in connection with a group health plan that
42
has fewer than two participants as cur- as a condition identified as a result of a from, an individual licensed or similarly
rent employees on the first day of the pre-enrollment questionnaire or physical authorized to provide such services un-
plan year. examination given to the individual, or der State law and operating within the
Issuer means a health insurance is- review of medical records relating to the scope of practice authorized by State
suer. pre-enrollment period. law.
Late enrollment definitions (late en- Public health plan means public (B) For purposes of this paragraph
rollee and late enrollment) are set forth health plan within the meaning of (a)(1)(i), the 6-month period ending on
in § 54.9801–3T(a)(2)(iii) and (iv). § 54.9801–4T(a)(1)(ix). the enrollment date begins on the
Medical care has the meaning given Public Health Service Act (PHSA) 6-month anniversary date preceding the
such term by section 213(d) of the means the Public Health Service Act (42 enrollment date. For example, for an
Internal Revenue Code, determined U.S.C. 201, et seq.). enrollment date of August 1, 1998, the
without regard to section 213(d)(1)(C) Significant break in coverage means a 6-month period preceding the enrollment
and so much of section 213(d)(1)(D) as significant break in coverage within the date is the period commencing on Feb-
relates to qualified long-term care insur- meaning of § 54.9801–4T(b)(2)(iii). ruary 1, 1998 and continuing through
ance. Special enrollment date means a spe- July 31, 1998. As another example, for
Medical condition or condition means cial enrollment date within the meaning an enrollment date of August 30, 1998,
any condition, whether physical or men- of § 54.9801–6T(d). the 6-month period preceding the enroll-
tal, including, but not limited to, any State health benefits risk pool means ment date is the period commencing on
condition resulting from illness, injury a State health benefits risk pool within February 28, 1998 and continuing
(whether or not the injury is accidental), the meaning of § 54.9801– through August 29, 1998.
pregnancy, or congenital malformation. 4T(a)(1)(vii). (C) The rules of this paragraph
However, genetic information is not a Waiting period means the period that (a)(1)(i) are illustrated by the following
condition. must pass before an employee or depen- examples:
Placement, or being placed, for adop- Example 1. (i) Individual A is treated for a
dent is eligible to enroll under the terms medical condition 7 months before the enrollment
tion means the assumption and retention of a group health plan. If an employee date in Employer R’s group health plan. As part of
of a legal obligation for total or partial or dependent enrolls as a late enrollee or such treatment, A’s physician recommends that a
support of a child by a person with on a special enrollment date, any period follow-up examination be given 2 months later.
whom the child has been placed in before such late or special enrollment is Despite this recommendation, A does not receive a
anticipation of the child’s adoption. The follow-up examination and no other medical ad-
not a waiting period. If an individual vice, diagnosis, care, or treatment for that condi-
child’s placement for adoption with such seeks and obtains coverage in the indi- tion is recommended to A or received by A during
person terminates upon the termination vidual market, any period after the date the 6-month period ending on A’s enrollment date
of such legal obligation. the individual files a substantially com- in Employer R’s plan.
Plan year means the year that is (ii) In this Example 1, Employer R’s plan may
plete application for coverage and be- not impose a preexisting condition exclusion with
designated as the plan year in the plan fore the first day of coverage is a respect to the condition for which A received
document of a group health plan, except waiting period. treatment 7 months prior to the enrollment date.
that if the plan document does not Example 2. (i) Same facts as Example 1 except
designate a plan year or if there is no § 54.9801–3T Limitations on preexist- that Employer R’s plan learns of the condition and
plan document, the plan year is— attaches a rider to A’s policy excluding coverage
ing condition exclusion period (tempo- for the condition. Three months after enrollment,
(1) The deductible/limit year used un- rary). A’s condition recurs, and Employer R’s plan
der the plan; denies payment under the rider.
(2) If the plan does not impose (a) Preexisting condition exclusion— (ii) In this Example 2, the rider is a preexisting
deductibles or limits on a yearly basis, (1) In general. Subject to paragraph condition exclusion and Employer R’s plan may
(b) of this section, a group health plan not impose a preexisting condition exclusion with
then the plan year is the policy year; respect to the condition for which A received
(3) If the plan does not impose may impose, with respect to a partici- treatment 7 months prior to the enrollment date.
deductibles or limits on a yearly basis, pant or beneficiary, a preexisting condi- Example 3. (i) Individual B has asthma and is
and either the plan is not insured or the tion exclusion only if the requirements treated for that condition several times during the
insurance policy is not renewed on an of this paragraph (a) are satisfied. (See 6-month period before B’s enrollment date in
PHSA section 2701 and ERISA section Employer S’s plan. The plan imposes a 12-month
annual basis, then the plan year is the preexisting condition exclusion. B has no prior
employer’s taxable year; or 701 under which this prohibition is also creditable coverage to reduce the exclusion period.
(4) In any other case, the plan year is imposed on a health insurance issuer Three months after the enrollment date, B begins
the calendar year. offering group health insurance cover- coverage under Employer S’s plan. Two months
age.) later, B is hospitalized for asthma.
Preexisting condition exclusion means (ii) In this Example 3, Employer S’s plan may
a limitation or exclusion of benefits (i) 6-month look-back rule. A preex- exclude payment for the hospital stay and the
relating to a condition based on the fact isting condition exclusion must relate to physician services associated with this illness
that the condition was present before the a condition (whether physical or men- because the care is related to a medical condition
first day of coverage, whether or not tal), regardless of the cause of the for which treatment was received by B during the
6-month period before the enrollment date.
any medical advice, diagnosis, care, or condition, for which medical advice,
Example 4. (i) Individual D, who is subject to a
treatment was recommended or received diagnosis, care, or treatment was recom- preexisting condition exclusion imposed by Em-
before that day. A preexisting condition mended or received within the 6-month ployer U’s plan, has diabetes, as well as a foot
exclusion includes any exclusion appli- period ending on the enrollment date. condition caused by poor circulation and retinal
cable to an individual as a result of (A) For purposes of this paragraph degeneration (both of which are conditions that
may be directly attributed to diabetes). After
information that is obtained relating to (a)(1)(i), medical advice, diagnosis, care, enrolling in the plan, D stumbles and breaks a leg.
an individual’s health status before the or treatment is taken into account only (ii) In this Example 4, the leg fracture is not a
individual’s first day of coverage, such if it is recommended by, or received condition related to D’s diabetes, even though
43
poor circulation in D’s extremities and poor vision be reduced under paragraph (a)(1)(iii) by E’s days plan may not impose any preexisting
may have contributed towards the accident. How- of creditable coverage as of October 13, 1998. condition exclusion with regard to the
ever, any additional medical services that may be (iii) Late enrollee means an indi-
needed because of D’s preexisting diabetic condi- child.
tion that would not be needed by another patient vidual whose enrollment in a plan is a (ii) Example. The rule of this paragraph (b)(1)
with a broken leg who does not have diabetes may late enrollment. is illustrated by the following example:
be subject to the preexisting condition exclusion Example. (i) Seven months after enrollment in
(iv)(A) Late enrollment means enroll- Employer W’s group health plan, Individual E has
imposed under Employer U’s plan. ment under a group health plan other
(ii) Maximum length of preexisting condition a child born with a birth defect. Because the child
exclusion (the look-forward rule). A preexisting than on— is enrolled in Employer W’s plan within 30 days
condition exclusion is not permitted to extend for (1) The earliest date on which cover- of birth, no preexisting condition exclusion may
more than 12 months (18 months in the case of a be imposed with respect to the child under
age can become effective under the Employer W’s plan. Three months after the child’s
late enrollee) after the enrollment date. For pur-
poses of this paragraph (a)(1)(ii), the 12-month
terms of the plan; or birth, E commences employment with Employer X
and 18-month periods after the enrollment date are (2) A special enrollment date for the and enrolls with the child in Employer X’s plan 45
determined by reference to the anniversary of the individual. days after leaving Employer W’s plan. Employer
enrollment date. For example, for an enrollment X’s plan imposes a 12-month exclusion for any
date of August 1, 1998, the 12-month period after
(B) If an individual ceases to be preexisting condition.
the enrollment date is the period commencing on eligible for coverage under the plan by (ii) In this Example, Employer X’s plan may
August 1, 1998 and continuing through July 31, terminating employment, and then sub- not impose any preexisting condition exclusion
1999. sequently becomes eligible for coverage with respect to E’s child because the child was
(iii) Reducing a preexisting condition exclusion covered within 30 days of birth and had no
under the plan by resuming employ- significant break in coverage. This result applies
period by creditable coverage. The period of any
preexisting condition exclusion that would other- ment, only eligibility during the indi- regardless of whether E’s child is included in the
wise apply to an individual under a group health vidual’s most recent period of employ- certificate of creditable coverage provided to E by
plan is reduced by the number of days of credit- ment is taken into account in Employer W indicating 300 days of dependent
able coverage the individual has as of the enroll- coverage or receives a separate certificate indicat-
determining whether the individual is a ing 90 days of coverage. Employer X’s plan may
ment date, as counted under § 54.9801–4T. For
purposes of § 54.9801–1T through § 54.9801–
late enrollee under the plan with respect impose a preexisting condition exclusion with
6T, the phrase ‘‘days of creditable coverage’’ has to the most recent period of coverage. respect to E for up to 2 months for any preexisting
the same meaning as the phrase ‘‘aggregate of the Similar rules apply if an individual condition of E for which medical advice, diagno-
periods of creditable coverage’’ as such phrase is again becomes eligible for coverage fol- sis, care, or treatment was recommended or re-
used in section 9801(a)(3) of the Internal Revenue ceived by E within the 6-month period ending on
lowing a suspension of coverage that E’s enrollment date in Employer X’s plan.
Code.
(iv) Other standards. See § 54.9802–1T for applied generally under the plan. (2) Adopted children. Subject to para-
other standards that may apply with respect to (v) Examples. The rules of this para- graph (b)(3) of this section, a group
certain benefit limitations or restrictions under a graph (a)(2) are illustrated by the fol-
group health plan.
health plan may not impose any preex-
lowing examples: isting condition exclusion in the case of
(2) Enrollment definitions—
(i) Enrollment date means the first day of Example 1. (i) Employee F first becomes eli- a child who is adopted or placed for
coverage or, if there is a waiting period, the first gible to be covered by Employer W’s group health
plan on January 1, 1999, but elects not to enroll in adoption before attaining 18 years of
day of the waiting period. age and who, as of the last day of the
the plan until April 1, 1999. April 1, 1999 is not a
(ii)(A) First day of coverage means, in the case
of an individual covered for benefits under a
special enrollment date for F. 30-day period beginning on the date of
group health plan in the group market, the first (ii) In this Example 1, F would be a late the adoption or placement for adoption,
day of coverage under the plan and, in the case of enrollee with respect to F’s coverage that became is covered under creditable coverage.
an individual covered by health insurance cover- effective under the plan on April 1, 1999.
This rule does not apply to coverage
age in the individual market, the first day of Example 2. (i) Same as Example 1, except that
coverage under the policy. F does not enroll in the plan on April 1, 1999 and before the date of such adoption or
(B) The following example illustrates the rule terminates employment with Employer W on July placement for adoption.
of paragraph (a)(2)(ii)(A) of this section: 1, 1999, without having had any health insurance (3) Break in coverage. Paragraphs
Example. (i) Employer V’s group health plan coverage under the plan. F is rehired by Employer (b)(1) and (2) of this section no longer
provides for coverage to begin on the first day of W on January 1, 2000 and is eligible for and
elects coverage under Employer W’s plan effective apply to a child after a significant break
the first payroll period following the date an
employee is hired and completes the applicable on January 1, 2000. in coverage.
enrollment forms, or on any subsequent January 1 (ii) In this Example 2, F would not be a late (4) Pregnancy. A group health plan
after completion of the applicable enrollment enrollee with respect to F’s coverage that became may not impose a preexisting condition
forms. Employer V’s plan imposes a preexisting effective on January 1, 2000. exclusion relating to pregnancy as a
condition exclusion for 12 months (reduced by the (b) Exceptions pertaining to preexist-
individual’s creditable coverage) following an indi-
preexisting condition.
vidual’s enrollment date. Employee E is hired by
ing condition exclusions— (5) Special enrollment dates. For spe-
Employer V on October 13, 1998 and then on (1) Newborns— cial enrollment dates relating to new
October 14, 1998 completes and files all the forms (i) In general. Subject to paragraph dependents, see § 54.9801–6T(b).
necessary to enroll in the plan. E’s coverage under
the plan becomes effective on October 25, 1998 (b)(3) of this section, a group health (c) Notice of plan’s preexisting condi-
(which is the beginning of the first payroll period plan may not impose any preexisting tion exclusion. A group health plan may
after E’s date of hire). condition exclusion with regard to a not impose a preexisting condition ex-
(ii) In this Example, E’s enrollment date is child who, as of the last day of the clusion with respect to a participant or
October 13, 1998 (which is the first day of the 30-day period beginning with the date dependent of the participant before noti-
waiting period for E’s enrollment and is also E’s
date of hire). Accordingly, with respect to E, the of birth, is covered under any creditable fying the participant, in writing, of the
6-month period in paragraph (a)(1)(i) would be the coverage. Accordingly, if a newborn is existence and terms of any preexisting
period from April 13, 1998 through October 12, enrolled in a group health plan (or other condition exclusion under the plan and
1998, the maximum permissible period during creditable coverage) within 30 days af- of the rights of individuals to demon-
which Employer V’s plan could apply a preexist-
ing condition exclusion under paragraph (a)(1)(ii)
ter birth and subsequently enrolls in strate creditable coverage (and any ap-
would be the period from October 13, 1998 another group health plan without a plicable waiting periods) as required by
through October 12, 1999, and this period would significant break in coverage, the other § 54.9801–5T. The description of the
44
rights of individuals to demonstrate of such State and who, by reason of the any days in a waiting period for a plan
creditable coverage includes a descrip- existence or history of a medical condi- or policy are not creditable coverage
tion of the right of the individual to tion— under the plan or policy.
request a certificate from a prior plan or (1) Are unable to acquire medical (ii) Days not counted before signifi-
issuer, if necessary, and a statement that care coverage for such condition cant break in coverage. Days of credit-
the current plan or issuer will assist in through insurance or from an HMO; or able coverage that occur before a sig-
obtaining a certificate from any prior (2) Are able to acquire such coverage nificant break in coverage are not
plan or issuer, if necessary. only at a rate which is substantially in required to be counted.
excess of the rate for such coverage (iii) Definition of significant break in
§ 54.9801–4T Rules relating to credit- through the membership organization. coverage. A significant break in cover-
able coverage (temporary). (viii) A health plan offered under age means a period of 63 consecutive
(a) General rules— Title 5 U.S.C. Chapter 89 (the Federal days during all of which the individual
Employees Health Benefits Program). does not have any creditable coverage,
(1) Creditable coverage. For purposes
(ix) A public health plan. For pur- except that neither a waiting period nor
of this section, except as provided in
poses of this section, a public health an affiliation period is taken into ac-
paragraph (a)(2) of this section, the term
plan means any plan established or count in determining a significant break
creditable coverage means coverage of
maintained by a State, county, or other in coverage. (See section 731(b)(2)(iii)
an individual under any of the follow-
political subdivision of a State that of ERISA and section 2723(b)(2)(iii) of
ing:
provides health insurance coverage to the PHSA which exclude from preemp-
(i) A group health plan as defined in
individuals who are enrolled in the plan. tion State insurance laws that require a
§ 54.9801–2T.
(x) A health benefit plan under sec- break of more than 63 days before an
(ii) Health insurance coverage as de- tion 5(e) of the Peace Corps Act (22
fined in § 54.9801–2T (whether or not individual has a significant break in
U.S.C. 2504(e)). coverage for purposes of State law.)
the entity offering the coverage is sub- (2) Excluded coverage. Creditable
ject to Chapter 100 of Subtitle K of the (iv) Examples. The following ex-
coverage does not include coverage con- amples illustrate how creditable cover-
Internal Revenue Code, and without re- sisting solely of coverage of excepted
gard to whether the coverage is offered age is counted in reducing preexisting
benefits (described in § 54.9804–1T). condition exclusion periods under this
in the group market, the individual mar- (3) Methods of counting creditable
ket, or otherwise). paragraph (b)(2):
coverage. For purposes of reducing any Example 1. (i) Individual A works for Employer
(iii) Part A or B of Title XVIII of the preexisting condition exclusion period, P and has creditable coverage under Employer P’s
Social Security Act (Medicare). as provided under § 54.9801– plan for 18 months before A’s employment termi-
(iv) Title XIX of the Social Security 3T(a)(1)(iii), a group health plan deter- nates. A is hired by Employer Q, and enrolls in
Act (Medicaid), other than coverage mines the amount of an individual’s Employer Q’s group health plan, 64 days after the
consisting solely of benefits under sec- last date of coverage under Employer P’s plan.
creditable coverage by using the stan- Employer Q’s plan has a 12-month preexisting
tion 1928 of the Social Security Act (the dard method described in paragraph (b) condition exclusion period.
program for distribution of pediatric of this section, except that the plan may (ii) In this Example 1, because A had a break in
vaccines). use the alternative method under para- coverage of 63 days, Employer Q’s plan may
(v) Title 10 U.S.C. Chapter 55 (medi- graph (c) of this section with respect to disregard A’s prior coverage and A may be subject
cal and dental care for members and to a 12-month preexisting condition exclusion
any or all of the categories of benefits period.
certain former members of the uni- described under paragraph (c)(3) of this Example 2. (i) Same facts as Example 1, except
formed services, and for their depen- section or may provide that a health that A is hired by Employer Q, and enrolls in
dents; for purposes of Title 10 U.S.C. insurance issuer offering health insur- Employer Q’s plan, on the 63rd day after the last
Chapter 55, uniformed services means ance coverage under the plan may use date of coverage under Employer P’s plan.
the armed forces and the Commissioned the alternative method of counting cred- (ii) In this Example 2, A has a break in
Corps of the National Oceanic and At- coverage of 62 days. Because A’s break in cover-
itable coverage. age is not a significant break in coverage, Em-
mospheric Administration and of the (b) Standard method— ployer Q’s plan must count A’s prior creditable
Public Health Service). (1) Specific benefits not considered. coverage for purposes of reducing the plan’s
(vi) A medical care program of the Under the standard method, a group preexisting condition exclusion as it applies to A.
Indian Health Service or of a tribal health plan determines the amount of Example 3. (i) Same facts as Example 1, except
organization. that Employer Q’s plan provides benefits through
creditable coverage without regard to an insurance policy that, as required by applicable
(vii) A State health benefits risk pool. the specific benefits included in the State insurance laws, defines a significant break in
For purposes of this section, a State coverage. coverage as 90 days.
health benefits risk pool means— (2) Counting creditable coverage— (ii) In this Example 3, the issuer that provides
(A) An organization qualifying under (i) Based on days. For purposes of group health insurance to Employer Q’s plan must
section 501(c)(26); count A’s period of creditable coverage prior to
reducing the preexisting condition exclu- the 63-day break.
(B) A qualified high risk pool de- sion period, a group health plan deter- Example 4. (i) Same facts as Example 3, except
scribed in section 2744(c)(2) of the mines the amount of creditable coverage that Employer Q’s plan is a self-insured plan, and,
PHSA; or by counting all the days that the indi- thus is not subject to State insurance laws.
(C) Any other arrangement sponsored vidual has under one or more types of (ii) In this Example 4, the plan is not governed
by a State, the membership composition creditable coverage. Accordingly, if on a by the longer break rules under State insurance
law and A’s previous coverage may be disre-
of which is specified by the State and particular day, an individual has credit- garded.
which is established and maintained pri- able coverage from more than one Example 5. (i) Individual B begins employment
marily to provide health insurance cov- source, all the creditable coverage on with Employer R 45 days after terminating cover-
erage for individuals who are residents that day is counted as one day. Further, age under a prior group health plan. Employer R’s
45
plan has a 30-day waiting period before coverage is May 1, 1997. Plan Z has a 12-month preexisting (4) Plan notice. If the alternative
begins. B enrolls in Employer R’s plan when first condition exclusion period.
method is used, the plan is required to—
eligible. (ii) In this Example, Plan Z may determine, in
(ii) In this Example 5, B does not have a accordance with the rules prescribed in paragraph (i) State prominently that the plan is
significant break in coverage for purposes of (b)(2)(i), (ii), and (iii), that F has 82 days of using the alternative method of counting
determining whether B’s prior coverage must be creditable coverage (29 days in January, 28 days creditable coverage in disclosure state-
counted by Employer R’s plan. B has only a in February, and 25 days in March). Thus, the ments concerning the plan, and state this
44-day break in coverage because the 30-day preexisting condition exclusion period will no
waiting period is not taken into account in deter- longer apply to F on February 8, 1998 (82 days to each enrollee at the time of enroll-
mining a significant break in coverage. before the 12-month anniversary of F’s enrollment ment under the plan; and
Example 6. (i) Individual C works for Em- (May 1)). For administrative convenience, how- (ii) Include in these statements a de-
ployer S and has creditable coverage under Em- ever, Plan Z may consider that the preexisting scription of the effect of using the
ployer S’s plan for 200 days before C’s employ- condition exclusion period will no longer apply to
F on the first day of the month (February 1).
alternative method, including an identifi-
ment is terminated and coverage ceases. C is then
unemployed for 51 days before being hired by (c) Alternative method— cation of the categories used.
Employer T. Employer T’s plan has a 3-month (1) Specific benefits considered. Un- (5) Disclosure of information on pre-
waiting period. C works for Employer T for 2
der the alternative method, a group vious benefits. See § 54.9801–5T(b) for
months and then terminates employment. Eleven special rules concerning disclosure of
days after terminating employment with Employer health plan determines the amount of
T, C begins working for Employer U. Employer creditable coverage based on coverage coverage to a plan (or issuer) using the
U’s plan has no waiting period, but has a 6- within any category of benefits de- alternative method of counting credit-
month preexisting condition exclusion period.
scribed in paragraph (c)(3) of this sec- able coverage under this paragraph (c).
(ii) In this Example 6, C does not have a
tion and not based on coverage for any (6) Counting creditable coverage—
significant break in coverage because, after disre- (i) In general. Under the alternative
garding the waiting period under Employer T’s other benefits. The plan may use the
plan, C had only a 62-day break in coverage (51 alternative method for any or all of the method, the group health plan counts
days plus 11 days). Accordingly, C has 200 days categories. The plan may apply a differ- creditable coverage within a category if
of creditable coverage and Employer U’s plan may
ent preexisting condition exclusion pe- any level of benefits is provided within
not apply its 6-month preexisting condition exclu- the category. Coverage under a reim-
sion period with respect to C. riod with respect to each category (and
may apply a different preexisting condi- bursement account or arrangement such
Example 7. (i) Individual D terminates employ-
ment with Employer V on January 13, 1998 after tion exclusion period for benefits that as a flexible spending arrangement (as
being covered for 24 months under Employer V’s are not within any category). The credit- defined in section 106(c)(2) of the Inter-
group health plan. On March 17, the 63rd day
able coverage determined for a category nal Revenue Code) does not constitute
without coverage, D applies for a health insurance coverage within any category.
policy in the individual market. D’s application of benefits applies only for purposes of
is accepted and the coverage is made effective reducing the preexisting condition exclu- (ii) Special rules. In counting an indi-
May 1. sion period with respect to that category. vidual’s creditable coverage under the
(ii) In this Example 7, because D applied for An individual’s creditable coverage for alternative method, the group health
the policy before the end of the 63rd day,
benefits that are not within any category plan first determines the amount of the
coverage under the policy ultimately became ef- individual’s creditable coverage that
fective, the period between the date of application for which the alternative method is
and the first day of coverage is a waiting period being used is determined under the may be counted under paragraph (b) of
and no significant break in coverage occurred even standard method of paragraph (b) of this this section, up to a total of 365 days of
though the actual period without coverage was 107 section. the most recent creditable coverage (546
days. days for a late enrollee). The period
Example 8. (i) Same facts as Example 7, except
(2) Uniform application. A plan using
the alternative method is required to over which this creditable coverage is
that D’s application for a policy in the individual
market is denied. apply it uniformly to all participants and determined is referred to as the determi-
(ii) In this Example 8, because D did not obtain beneficiaries under the plan. A plan that nation period. Then, for the category
coverage following application, D incurred a sig- provides benefits through one or more specified under the alternative method,
nificant break in coverage on the 64th day.
insurance policies (or in part through the plan counts within the category all
(v) Other permissible counting one or more insurance policies) will not days of coverage that occurred during
methods— fail the uniform application requirement the determination period (whether or not
(A) Rule. Notwithstanding any other of this paragraph (c)(2) if the alternative a significant break in coverage for that
provision of this paragraph (b)(2), for method is used (or not used) separately category occurs), and reduces the indi-
purposes of reducing a preexisting con- with respect to participants and benefi- vidual’s preexisting condition exclusion
dition exclusion period (but not for ciaries under any policy, provided that period for that category by that number
purposes of issuing a certificate under the alternative method is applied uni- of days. The plan may determine the
§ 54.9801–5T), a group health plan may formly with respect to all coverage amount of creditable coverage in any
determine the amount of creditable cov- under that policy. The use of the alterna- other reasonable manner, uniformly ap-
erage in any other manner that is at tive method is required to be set forth in plied, that is at least as favorable to the
least as favorable to the individual as the plan. individual.
the method set forth in this paragraph (3) Categories of benefits. The alter- (iii) Example. The rules of this para-
(b)(2), subject to the requirements of native method for counting creditable graph (c)(6) are illustrated by the fol-
other applicable law. coverage may be used for coverage for lowing example:
(B) Example. The rule of this para- Example. (i) Individual D enrolls in Employer
the following categories of benefits— V’s plan on January 1, 2001. Coverage under the
graph (b)(2)(v) is illustrated by the (i) Mental health; plan includes prescription drug benefits. On April
following example: (ii) Substance abuse treatment; 1, 2001, the plan ceases providing prescription
Example. (i) Individual F has coverage under (iii) Prescription drugs; drug benefits. D’s employment with Employer V
group health plan Y from January 3, 1997 through ends on January 1, 2002, after D was covered
March 25, 1997. F then becomes covered by (iv) Dental care; or under Employer V’s group health plan for 365
group health plan Z. F’s enrollment date in Plan Z (v) Vision care. days. D enrolls in Employer Y’s plan on February
46
1, 2002 (D’s enrollment date). Employer Y’s plan (though the issuer would have violated (2) Example. The rule of this para-
uses the alternative method of counting creditable graph (a)(1)(iv)(B) is illustrated by the
coverage and imposes a 12-month preexisting
the certification requirements pursuant
condition exclusion on prescription drug benefits. to section 2701(e) of the PHSA and following example:
(ii) In this Example, Employer Y’s plan may section 701(e) of ERISA). Example. (i) A group health plan provides cov-
impose a 275-day preexisting condition exclusion erage under an HMO option and an indemnity
with respect to D for prescription drug benefits
(iv) Special rules relating to issuers option with a different issuer, and only allows
because D had 90 days of creditable coverage providing coverage under a plan— employees to switch on each January 1. Neither
relating to prescription drug benefits within D’s the HMO nor the indemnity issuer has entered into
(A)(1) Responsibility of issuer for cov- an agreement with the plan to provide automatic
determination period.
erage period. See 29 CFR 2590.701–5 certificates as permitted under paragraph (a)(2)(ii)
and 45 CFR 146.115, under which an of this section.
§ 54.9801–5T Certification and disclo- (ii) In this Example, if an employee switches
sure of previous coverage (temporary). issuer is not required to provide infor-
from the indemnity option to the HMO option on
mation regarding coverage provided to January 1, the issuer must provide the plan (or a
(a) Certificate of creditable cover- an individual by another party. person designated by the plan) with appropriate
age— (2) Example. The rule referenced by information with respect to the individual’s cover-
(1) Entities required to provide cer- age with the indemnity issuer. However, if the
this paragraph (a)(1)(iv)(A) is illustrated individual’s coverage with the indemnity issuer
tificate— by the following example: ceases at a date other than January 1, the issuer is
(i) In general. A group health plan is Example. (i) A plan offers coverage with an instead required to provide the individual with an
required to furnish certificates of credit- HMO option from one issuer and an indemnity automatic certificate.
able coverage in accordance with this option from a different issuer. The HMO has not (2) Individuals for whom certificate
paragraph (a) of this section. (See PHSA entered into an agreement with the plan to provide must be provided; timing of issuance—
section 2701(e) and ERISA section certificates as permitted under paragraph (a)(1)(iii) (i) Individuals. A certificate must be
701(e) under which this obligation is of this section. provided, without charge, for partici-
also imposed on a health insurance (ii) In this Example, if an employee switches pants or dependents who are or were
from the indemnity option to the HMO option and
issuer offering group health insurance covered under a group health plan upon
later ceases to be covered under the plan, any
coverage.) certificate provided by the HMO is not required to the occurrence of any of the events
(ii) Duplicate certificates not re- provide information regarding the employee’s cov- described in paragraph (a)(2)(ii) or (iii)
quired. An entity required to provide a erage under the indemnity option. of this section.
certificate under this paragraph (a)(1) (B)(1) Cessation of issuer coverage (ii) Issuance of automatic certificates.
for an individual is deemed to have prior to cessation of coverage under a The certificates described in this para-
satisfied the certification requirements plan. If an individual’s coverage under graph (a)(2)(ii) are referred to as auto-
for that individual if another party pro- an issuer’s policy ceases before the matic certificates.
vides the certificate, but only to the individual’s coverage under the plan (A) Qualified beneficiaries upon a
extent that information relating to the ceases, the issuer is required (under qualifying event. In the case of an
individual’s creditable coverage and section 2701(e) of the PHSA and section individual who is a qualified beneficiary
waiting or affiliation period is provided 701(e) of ERISA) to provide sufficient (as defined in section 4980B(g)(1)) en-
by the other party. For example, a group information to the plan (or to another titled to elect COBRA continuation cov-
health plan is deemed to have satisfied party designated by the plan) to enable a erage, an automatic certificate is re-
the certification requirement with re- certificate to be provided by the plan (or quired to be provided at the time the
spect to a participant or beneficiary if other party), after cessation of the indi- individual would lose coverage under
any other entity actually provides a vidual’s coverage under the plan, that the plan in the absence of COBRA
certificate that includes the information reflects the period of coverage under the continuation coverage or alternative
required under paragraph (a)(3) of this policy. The provision of that information coverage elected instead of COBRA
section with respect to the participant or to the plan will satisfy the issuer’s continuation coverage. A plan satisfies
beneficiary. obligation to provide an automatic cer- this requirement if it provides the auto-
(iii) Special rule for group health tificate for that period of creditable matic certificate no later than the time
plans. To the extent coverage under a coverage for the individual under para- a notice is required to be furnished
plan consists of group health insurance graph (a)(2)(ii) and (3) of this section. for a qualifying event under section
coverage, the plan is deemed to have In addition, an issuer providing that 4980B(f)(6) (relating to notices required
satisfied the certification requirements information is required to cooperate under COBRA ).
under this paragraph (a)(1) if any issuer with the plan in responding to any (B) Other individuals when coverage
offering the coverage is required to request made under paragraph (b)(2) of ceases. In the case of an individual who
provide the certificates pursuant to an this section (relating to the alternative is not a qualified beneficiary entitled to
agreement between the plan and the method of counting creditable coverage). elect COBRA continuation coverage, an
issuer. For example, if there is an agree- If the individual’s coverage under the automatic certificate is required to be
ment between an issuer and the em- plan ceases at the time the individual’s provided at the time the individual
ployer sponsoring the plan under which coverage under the issuer’s policy ceases to be covered under the plan. A
the issuer agrees to provide certificates ceases, the issuer must provide an auto- plan satisfies this requirement if it pro-
for individuals covered under the plan, matic certificate under paragraph vides the automatic certificate within a
and the issuer fails to provide a certifi- (a)(2)(ii) of this section. An issuer may reasonable time period thereafter. In the
cate to an individual when the plan presume that an individual whose cover- case of an individual who is entitled to
would have been required to provide age ceases at a time other than the elect to continue coverage under a State
one under this paragraph (a), then the effective date for changing enrollment program similar to COBRA and who
plan does not violate the certification options has ceased to be covered under receives the automatic certificate not
requirements of this paragraph (a) the plan. later than the time a notice is required
47
to be furnished under the State program, employees and thus R’s plan is not subject to the mation necessary for the plan providing
COBRA continuation coverage provisions. How-
the certificate is deemed to be provided ever, R is in a State that has a State program
the coverage specified in the certificate
within a reasonable time period after the similar to COBRA. B terminates employment with to identify the individual, such as the
cessation of coverage under the plan. R and loses coverage under R’s plan. individual’s identification number under
(C) Qualified beneficiaries when CO- (ii) In this Example 3, the automatic certificate the plan and the name of the participant
BRA ceases. In the case of an individual may be provided not later than the time a notice is if the certificate is for (or includes) a
required to be furnished under the State program.
who is a qualified beneficiary and has Example 4. (i) Individual C terminates employ-
dependent;
elected COBRA continuation coverage ment with Employer S and receives both a notice (D) The name, address, and telephone
(or whose coverage has continued after of C’s rights under COBRA and an automatic number of the plan administrator or
the individual became entitled to elect certificate. C elects COBRA continuation coverage issuer required to provide the certificate;
COBRA continuation coverage), an au- under Employer S’s group health plan. After four (E) The telephone number to call for
months of COBRA continuation coverage and the
tomatic certificate is to be provided at expiration of a 30-day grace period, S’s group further information regarding the certifi-
the time the individual’s coverage under health plan determines that C’s COBRA continua- cate (if different from paragraph
the plan ceases. A plan satisfies this tion coverage has ceased due to failure to make a (a)(3)(ii)(D) of this section);
requirement if it provides the automatic timely payment for continuation coverage. (F) Either—
(ii) In this Example 4, the plan must provide an (1) A statement that an individual has
certificate within a reasonable time after updated automatic certificate to C within a reason-
coverage ceases (or after the expiration able time after the end of the grace period. at least 18 months (for this purpose, 546
of any grace period for nonpayment of Example 5. (i) Individual D is currently covered days is deemed to be 18 months) of
premiums). An automatic certificate is under the group health plan of Employer T. D creditable coverage, disregarding days of
required to be provided to such an requests a certificate, as permitted under paragraph creditable coverage before a significant
(a)(2)(iii). Under the procedure for Employer T’s
individual regardless of whether the in- plan, certificates are mailed (by first class mail) 7
break in coverage, or
dividual has previously received an au- business days following receipt of the request. (2) The date any waiting period (and
tomatic certificate under paragraph This date reflects the earliest date that the plan, affiliation period, if applicable) began
(a)(2)(ii)(A) of this section. acting in a reasonable and prompt fashion, can and the date creditable coverage began;
provide certificates. and
(iii) Any individual upon request. Re-
(ii) In this Example 5, the plan’s procedure
quests for certificates are permitted to satisfies paragraph (a)(2)(iii) of this section.
(G) The date creditable coverage
be made by, or on behalf of, an indi- (3) Form and content of certificate— ended, unless the certificate indicates
vidual within 24 months after coverage that creditable coverage is continuing as
(i) Written certificate—
ceases. Thus, for example, a plan in of the date of the certificate.
(A) In general. Except as provided in
which an individual enrolls may, if (iii) Periods of coverage under cer-
paragraph (a)(3)(i)(B) of this section, the
authorized by the individual, request a tificate. If an automatic certificate is
certificate must be provided in writing
certificate of the individual’s creditable provided pursuant to paragraph (a)(2)(ii)
(including any form approved by the
coverage on behalf of the individual of this section, the period that must be
Secretary as a writing).
from a plan in which the individual was included on the certificate is the last
(B) Other permissible forms. No writ- period of continuous coverage ending on
formerly enrolled. After the request is
ten certificate is required to be provided the date coverage ceased. If an indi-
received, a plan or issuer is required to
under paragraph (a) with respect to a vidual requests a certificate pursuant to
provide the certificate by the earliest
particular event described in paragraph paragraph (a)(2)(iii) of this section, a
date that the plan, acting in a reasonable
(a)(2)(ii) or (iii) of this section if— certificate must be provided for each
and prompt fashion, can provide the
(1) An individual is entitled to re- period of continuous coverage ending
certificate. A certificate is required to be
ceive a certificate; within the 24-month period ending on
provided under this paragraph (a)(2)(iii)
even if the individual has previously (2) The individual requests that the the date of the request (or continuing on
received an automatic certificate under certificate be sent to another plan or the date of the request). A separate
paragraph (a)(2)(ii) of this section. issuer instead of to the individual; certificate may be provided for each
(3) The plan or issuer that would such period of continuous coverage.
(iv) Examples. The following ex-
otherwise receive the certificate agrees (iv) Combining information for fami-
amples illustrate the rules of this para-
to accept the information in this para- lies. A certificate may provide informa-
graph (a)(2):
Example 1. (i) Individual A terminates employ- graph (a)(3) through means other than a tion with respect to both a participant
ment with Employer Q. A is a qualified benefi- written certificate (e.g., by telephone); and the participant’s dependents if the
ciary entitled to elect COBRA continuation cover- and information is identical for each indi-
age under Employer Q’s group health plan. A (4) The receiving plan or issuer re-
notice of the rights provided under COBRA is vidual or, if the information is not
typically furnished to qualified beneficiaries under
ceives such information from the send- identical, certificates may be provided
the plan within 10 days after a covered employee ing plan or issuer in such form within on one form if the form provides all the
terminates employment. the time periods required under para- required information for each individual
(ii) In this Example 1, the automatic certificate graph (a)(2) of this section. and separately states the information
may be provided at the same time that A is (ii) Required information. The certifi-
provided the COBRA notice. that is not identical.
Example 2. (i) Same facts as Example 1, except
cate must include the following— (v) Model certificate. The require-
that the automatic certificate for A is not com- (A) The date the certificate is issued; ments of paragraph (a)(3)(ii) of this
pleted by the time the COBRA notice is furnished (B) The name of the group health section are satisfied if the plan provides
to A. plan that provided the coverage de- a certificate in accordance with a model
(ii) In this Example 2, the automatic certificate scribed in the certificate;
may be provided within the period permitted by
certificate authorized by the Secretary.
law for the delivery of notices under COBRA. (C) The name of the participant or (vi) Excepted benefits; categories of
Example 3. (i) Employer R maintains an in- dependent with respect to whom the benefits. No certificate is required to be
sured group health plan. R has never had 20 certificate applies, and any other infor- furnished with respect to excepted ben-
48
efits described in § 54.9804–1T. In ad- certificate relating to the dependent cov- name of any dependent of an individual
dition, the information in the certificate erage. In any case in which an auto- covered by the certificate, the individual
regarding coverage is not required to matic certificate is required to be fur- may, if necessary, use the procedures
specify categories of benefits described nished with respect to a dependent described in paragraph (c) of this sec-
in § 54.9801–4T(c) (relating to the al- under paragraph (a)(2)(ii) of this section, tion for submitting documentation to
ternative method of counting creditable no individual certificate is required to be establish that the creditable coverage in
coverage). However, if excepted benefits furnished until the plan knows (or mak- the certificate applies to the dependent.
are provided concurrently with other ing reasonable efforts should know) of (C) Demonstrating a dependent’s cred-
creditable coverage (so that the coverage the dependent’s cessation of coverage itable coverage. See paragraph (c)(4) of
does not consist solely of excepted under the plan. this section for special rules to demon-
benefits), information concerning the (B) Example. The rules of this para- strate dependent status.
benefits may be required to be disclosed graph (a)(5) are illustrated by the fol- (D) Duration. This paragraph (a)(5)-
under paragraph (b) of this section. lowing example: (iii) is only effective for certifications
(4) Procedures— Example. (i) A group health plan covers em- provided with respect to events occur-
ployees and their dependents. The plan annually
(i) Method of delivery. The certificate requests all employees to provide updated infor-
ring through June 30, 1998.
is required to be provided to each mation regarding dependents, including the spe- (6) Special certification rules for en-
individual described in paragraph (a)(2) cific date on which an employee has a new tities not subject to Chapter 100 of
of this section or an entity requesting dependent or on which a person ceases to be a Subtitle K of the Internal Revenue
the certificate on behalf of the indi- dependent of the employee. Code—
(ii) In this Example, the plan has satisfied the
vidual. The certificate may be provided standard in this paragraph (a)(5)(i) of this section (i) Issuers. For rules requiring that
by first-class mail. If the certificate or that it make reasonable efforts to determine the issuers in the group and individual mar-
certificates are provided to the partici- cessation of dependents’ coverage and the related kets provide certificates consistent with
pant and the participant’s spouse at the dependent coverage information. the rules in this section, see section
participant’s last known address, then (ii) Special rules for demonstrating 701(e) of ERISA and sections 2701(e),
the requirements of this paragraph (a)(4) coverage. If a certificate furnished by a 2721(b)(1)(B), and 2743 of the PHSA.
are satisfied with respect to all individu- plan or issuer does not provide the name (ii) Other entities. For special rules
als residing at that address. If a depen- of any dependent of an individual cov- requiring that certain other entities, not
dent’s last known address is different ered by the certificate, the individual subject to Chapter 100 of Subtitle K of
than the participant’s last known ad- may, if necessary, use the procedures the Internal Revenue Code, provide cer-
dress, a separate certificate is required to described in paragraph (c)(4) of this tificates consistent with the rules in this
be provided to the dependent at the section for demonstrating dependent sta- section, see section 2791(a)(3) of the
dependent’s last known address. If sepa- tus. In addition, an individual may, if PHSA applicable to entities described in
rate certificates are being provided by necessary, use these procedures to dem- sections 2701(c)(1)(C), (D), (E), and
mail to individuals who reside at the onstrate that a child was enrolled within (F) (relating to Medicare, Medicaid,
same address, separate mailings of each 30 days of birth, adoption, or placement CHAMPUS, and Indian Health Service),
certificate are not required. for adoption. See § 54.9801–3T(b), un- section 2721(b)(1)(A) of the PHSA ap-
(ii) Procedure for requesting certifi- der which such a child would not be plicable to nonfederal governmental
cates. A plan or issuer must establish a subject to a preexisting condition exclu- plans generally, and section 2721(b)(2)-
procedure for individuals to request and sion. (C)(ii) of the PHSA applicable to non-
receive certificates pursuant to para- (iii) Transition rule for dependent federal governmental plans that elect to
graph (a)(2)(iii) of this section. coverage through June 30, 1998— be excluded from the requirements of
(iii) Designated recipients. If an auto- (A) In general. A group health plan Subparts 1 and 3 of Part A of Title
matic certificate is required to be pro- that cannot provide the names of de- XXVII of the PHSA.
vided under paragraph (a)(2)(ii) of this pendents (or related coverage informa- (b) Disclosure of coverage to a plan,
section, and the individual entitled to tion) for purposes of providing a certifi- or issuer, using the alternative method
receive the certificate designates another cate of coverage for a dependent may of counting creditable coverage—
individual or entity to receive the certifi- satisfy the requirements of paragraph (1) In general. If an individual en-
cate, the plan or issuer responsible for (a)(3)(ii)(C) of this section by providing rolls in a group health plan with respect
providing the certificate is permitted to the name of the participant covered by to which the plan (or issuer) uses the
provide the certificate to the designated the group health plan and specifying alternative method of counting credit-
party. If a certificate is required to be that the type of coverage described in able coverage described in § 54.9801–
provided upon request under paragraph the certificate is for dependent coverage 4T(c), the individual provides a certifi-
(a)(2)(iii) of this section and the indi- (e.g., family coverage or employee-plus- cate of coverage under paragraph (a) of
vidual entitled to receive the certificate spouse coverage). this section, and the plan (or issuer) in
designates another individual or entity to (B) Certificates provided on request. which the individual enrolls so requests,
receive the certificate, the plan or issuer For purposes of certificates provided on the entity that issued the certificate (the
responsible for providing the certificate the request of, or on behalf of, an prior entity) is required to disclose
is required to provide the certificate to individual pursuant to paragraph promptly to a requesting plan (or issuer)
the designated party. (a)(2)(iii) of this section, a plan must (the requesting entity) the information
(5) Special rules concerning depen- make reasonable efforts to obtain and set forth in paragraph (b)(2) of this
dent coverage— provide the names of any dependent section.
(i)(A) Reasonable efforts. A plan is covered by the certificate where such (2) Information to be disclosed. The
required to use reasonable efforts to information is requested to be provided. prior entity is required to identify to the
determine any information needed for a If a certificate does not include the requesting entity the categories of ben-
49
efits with respect to which the request- make a determination, based on the a certificate from Employer W’s plan. F attests
that, to the best of F’s knowledge, F had at least
ing entity is using the alternative relevant facts and circumstances, 12 months of continuous coverage under Employer
method of counting creditable coverage, whether an individual has creditable W’s plan, and that the coverage ended no earlier
and the requesting entity may identify coverage and is entitled to offset all or a than F’s termination of employment from Em-
specific information that the requesting portion of any preexisting condition ex- ployer W. In addition, F presents evidence of
entity reasonably needs in order to de- clusion period. A plan shall treat the coverage, such as an explanation of benefits for a
claim that was made during the relevant period.
termine the individual’s creditable cov- individual as having furnished a certifi- (ii) In this Example, based solely on these facts,
erage with respect to any such category. cate under paragraph (a) of this section F has demonstrated creditable coverage for the 12
The prior entity is required to disclose if the individual attests to the period of months of coverage under Employer W’s plan in
promptly to the requesting entity the creditable coverage, the individual also the same manner as if F had presented a written
creditable coverage information so re- presents relevant corroborating evidence certificate of creditable coverage.
quested. of some creditable coverage during the (3) Demonstrating categories of cred-
(3) Charge for providing information. period, and the individual cooperates itable coverage. Procedures similar to
The prior entity furnishing the informa- with the plan’s efforts to verify the those described in this paragraph (c)
tion under paragraph (b) of this section individual’s coverage. For this purpose, apply in order to determine an individu-
may charge the requesting entity for the cooperation includes providing (upon al’s creditable coverage with respect to
reasonable cost of disclosing such infor- the plan’s or issuer’s request) a written any category under paragraph (b) of this
mation. authorization for the plan to request a section (relating to determining credit-
(c) Ability of an individual to demon- certificate on behalf of the individual, able coverage under the alternative
strate creditable coverage and waiting and cooperating in efforts to determine method).
period information— the validity of the corroborating evi- (4) Demonstrating dependent status.
(1) In general. The rules in this para- dence and the dates of creditable cover- If, in the course of providing evidence
graph (c) implement section 9801(c)(4), age. While a plan may refuse to credit (including a certificate) of creditable
which permits individuals to establish coverage where the individual fails to coverage, an individual is required to
creditable coverage through means other cooperate with the plan’s or issuer’s demonstrate dependent status, the group
than certificates, and section 9801(e)(3), efforts to verify coverage, the plan may health plan or issuer is required to treat
which requires the Secretary to establish not consider an individual’s inability to the individual as having furnished a
rules designed to prevent an individual’s obtain a certificate to be evidence of the certificate showing the dependent status
subsequent coverage under a group absence of creditable coverage. if the individual attests to such depen-
health plan or health insurance coverage (ii) Documents. Documents that may dency and the period of such status and
from being adversely affected by an establish creditable coverage (and wait- the individual cooperates with the plan’s
entity’s failure to provide a certificate ing periods or affiliation periods) in the or issuer’s efforts to verify the depen-
with respect to that individual. If the absence of a certificate include explana- dent status.
accuracy of a certificate is contested or tions of benefit claims (EOB) or other (d) Determination and notification of
a certificate is unavailable when needed correspondence from a plan or issuer creditable coverage—
by the individual, the individual has the indicating coverage, pay stubs showing (1) Reasonable time period. In the
right to demonstrate creditable coverage a payroll deduction for health coverage, event that a group health plan receives
(and waiting or affiliation periods) a health insurance identification card, a information under paragraph (a) of this
through the presentation of documents certificate of coverage under a group section (certifications), paragraph (b) of
or other means. For example, the indi- health policy, records from medical care this section (disclosure of information
vidual may make such a demonstration providers indicating health coverage, relating to the alternative method), or
when— third party statements verifying periods paragraph (c) of this section (other evi-
(i) An entity has failed to provide a of coverage, and any other relevant dence of creditable coverage), the plan
certificate within the required time pe- documents that evidence periods of is required, within a reasonable time
riod; health coverage. period following receipt of the informa-
(ii) The individual has creditable cov- (iii) Other evidence. Creditable cover- tion, to make a determination regarding
erage but an entity may not be required age (and waiting period or affiliation the individual’s period of creditable cov-
to provide a certificate of the coverage period information) may also be estab- erage and notify the individual of the
pursuant to paragraph (a) of this section; lished through means other than docu- determination in accordance with para-
(iii) The coverage is for a period mentation, such as by a telephone call graph (d)(2) of this section. Whether a
before July 1, 1996; from the plan or provider to a third determination and notification regarding
(iv) The individual has an urgent party verifying creditable coverage. an individual’s creditable coverage is
medical condition that necessitates a (iv) Example. The rules of this para- made within a reasonable time period is
determination before the individual can graph (c)(2) are illustrated by the fol- determined based on the relevant facts
deliver a certificate to the plan; or lowing example: and circumstances. Relevant facts and
(v) The individual lost a certificate Example. (i) Individual F terminates employ- circumstances include whether a plan’s
ment with Employer W and, a month later, is hired application of a preexisting condition
that the individual had previously re- by Employer X. Employer X’s group health plan
ceived and is unable to obtain another imposes a preexisting condition exclusion of 12 exclusion would prevent an individual
certificate. months on new enrollees under the plan and uses from having access to urgent medical
(2) Evidence of creditable coverage— the standard method of determining creditable services.
(i) Consideration of evidence. A plan coverage. F fails to receive a certificate of prior (2) Notification to individual of pe-
coverage from the self-insured group health plan
is required to take into account all maintained by F’s prior employer, Employer W, riod of preexisting condition exclusion.
information that it obtains or that is and requests a certificate. However, F (and Em- A plan seeking to impose a preexisting
presented on behalf of an individual to ployer X’s plan, on F’s behalf) is unable to obtain condition exclusion is required to dis-
50
close to the individual, in writing, its following receipt of the evidence that is consistent (5) Conditions for special enrollment.
determination of any preexisting condi- with the urgency of H’s health condition (this An employee or dependent is eligible to
determination may be modified as permitted under
tion exclusion period that applies to the paragraph (d)(2) of this section).
enroll during a special enrollment period
individual, and the basis for such deter- if each of the following applicable con-
mination, including the source and sub- § 54.9801–6T Special enrollment peri- ditions is met:
stance of any information on which the (i) When the employee declined en-
ods (temporary).
plan relied. In addition, the plan is rollment for the employee or the depen-
required to provide the individual with a (a) Special enrollment for certain in- dent, the employee stated in writing that
written explanation of any appeal proce- dividuals who lose coverage— coverage under another group health
dures established by the plan, and with a (1) In general. A group health plan is plan or other health insurance coverage
reasonable opportunity to submit addi- required to permit employees and de- was the reason for declining enrollment.
tional evidence of creditable coverage. pendents described in paragraph (a)(2), This paragraph (a)(5)(i) applies only
However, nothing in this paragraph (d) (3), or (4) of this section to enroll for if—
or paragraph (c) of this section prevents coverage under the terms of the plan if (A) The plan required such a state-
a plan from modifying an initial deter- the conditions in paragraph (a)(5) of this ment when the employee declined en-
mination of creditable coverage if it section are satisfied and the enrollment rollment; and
determines that the individual did not is requested within the period described (B) The employee is provided with
have the claimed creditable coverage, in paragraph (a)(6) of this section. The notice of the requirement to provide the
provided that— enrollment is effective at the time de- statement in this paragraph (a)(5)-
(i) A notice of such reconsideration, scribed in paragraph (a)(7) of this sec- (i) (and the consequences of the em-
as described in this paragraph (d), is tion. The special enrollment rights under ployee’s failure to provide the state-
provided to the individual; and this paragraph (a) apply without regard ment) at the time the employee declined
(ii) Until the final determination is to the dates on which an individual enrollment.
made, the plan, for purposes of approv- would otherwise be able to enroll under (ii)(A) When the employee declined
ing access to medical services (such as a the plan. (See PHSA section 2701(f)(1) enrollment for the employee or depen-
pre-surgery authorization), acts in a and ERISA section 701(f)(1) under dent under the plan, the employee or
manner consistent with the initial deter- which this obligation is also imposed on dependent had COBRA continuation
mination. a health insurance issuer offering group coverage under another plan and CO-
(3) Examples. The following ex- health insurance coverage.) BRA continuation coverage under that
amples illustrate this paragraph (d): other plan has since been exhausted; or
Example 1. (i) Individual G is hired by Em- (2) Special enrollment of an employee (B) If the other coverage that applied
ployer Y. Employer Y’s group health plan imposes only. An employee is described in this to the employee or dependent when
a preexisting condition exclusion for 12 months paragraph (a)(2) if the employee is enrollment was declined was not under
with respect to new enrollees and uses the stan- eligible, but not enrolled, for coverage
dard method of determining creditable coverage. a COBRA continuation provision, either
Employer Y’s plan determines that G is subject to
under the terms of the plan and, when the other coverage has been terminated
a 4-month preexisting condition exclusion, based enrollment was previously offered to the as a result of loss of eligibility for the
on a certificate of creditable coverage that is employee under the plan and was de- coverage or employer contributions to-
provided by G to Employer Y’s plan indicating 8 clined by the employee, the employee wards the other coverage have been
months of coverage under G’s prior group health was covered under another group health
plan. terminated. For this purpose, loss of
(ii) In this Example 1, Employer Y’s plan must
plan or had other health insurance cov- eligibility for coverage includes a loss
notify G within a reasonable period of time erage. of coverage as a result of legal separa-
following receipt of the certificate that G is (3) Special enrollment of dependents tion, divorce, death, termination of em-
subject to a 4-month preexisting condition exclu- only. A dependent is described in this
sion beginning on G’s enrollment date in Y’s plan. ployment, reduction in the number of
Example 2. (i) Same facts as in Example 1, paragraph (a)(3) if the dependent is a hours of employment, and any loss of
except that Employer Y’s plan determines that G dependent of an employee participating eligibility after a period that is measured
has 14 months of creditable coverage based on G’s in the plan, the dependent is eligible, by reference to any of the foregoing.
certificate indicating 14 months of creditable cov- but not enrolled, for coverage under the
erage under G’s prior plan.
Thus, for example, if an employee’s
terms of the plan, and, when enrollment coverage ceases following a termination
(ii) In this Example 2, Employer Y’s plan is not
required to notify G that G will not be subject to a was previously offered under the plan of employment and the employee is
preexisting condition exclusion. and was declined, the dependent was eligible for but fails to elect COBRA
Example 3. (i) Individual H is hired by Em- covered under another group health plan continuation coverage, this is treated as
ployer Z. Employer Z’s group health plan imposes or had other health insurance coverage.
a preexisting condition exclusion for 12 months
a loss of eligibility under this paragraph
with respect to new enrollees and uses the stan- (4) Special enrollment of both em- (a)(5)(ii)(B). However, loss of eligibility
dard method of determining creditable coverage. H ployee and dependent. An employee and does not include a loss due to failure of
develops an urgent health condition before receiv- any dependent of the employee are the individual or the participant to pay
ing a certificate of prior coverage. H attests to the described in this paragraph (a)(4) if they premiums on a timely basis or termina-
period of prior coverage, presents corroborating
documentation of the coverage period, and autho- are eligible, but not enrolled, for cover- tion of coverage for cause (such as
rizes the plan to request a certificate on H’s age under the terms of the plan and, making a fraudulent claim or an inten-
behalf. when enrollment was previously offered tional misrepresentation of a material
(ii) In this Example 3, Employer Z’s plan must to the employee or dependent under the fact in connection with the plan). In
review the evidence presented by H. In addition, plan and was declined, the employee or addition, for purposes of this paragraph
the plan must make a determination and notify H
regarding any preexisting condition exclusion pe- dependent was covered under another (a)(5)(ii)(B), employer contributions in-
riod that applies to H (and the basis of such group health plan or had other health clude contributions by any current or
determination) within a reasonable time period insurance coverage. former employer (of the individual or
51
another person) that was contributing to participant and a child becomes a de- (9) Example. The rules of this para-
coverage for the individual. pendent of the participant through birth, graph (b) are illustrated by the following
(6) Length of special enrollment pe- adoption or placement for adoption. example:
riod. The employee is required to re- (4) Special enrollment of an employee Example. (i) Employee A is hired on September
quest enrollment (for the employee or who is eligible but not enrolled and the 3, 1998 by Employer X, which has a group health
the employee’s dependent, as described spouse of such employee. An employee plan in which A can elect to enroll either for
in paragraph (a)(2), (3), or (4) of this who is eligible, but not enrolled, in the employee-only coverage, for employee-plus-spouse
coverage, or for family coverage, effective on the
section) not later than 30 days after the plan, and an individual who is a depen- first day of any calendar quarter thereafter. A is
exhaustion of the other coverage de- dent of such employee, are described in married and has no children. A does not elect to
scribed in paragraph (a)(5)(ii)(A) of this this paragraph (b)(4) if the employee join Employer X’s plan (for employee-only cover-
section or termination of the other cov- would be a participant but for a prior age, employee-plus-spouse coverage, or family
erage as a result of the loss of eligibility election by the employee not to enroll in coverage) on October 1, 1998 or January 1, 1999.
for the other coverage for items de- the plan during a previous enrollment On February 15, 1999, a child is placed for
adoption with A and A’s spouse.
scribed in paragraph (a)(5)(ii)(B) of this period, and either—
section or following the termination of (i) The employee and the individual (ii) In this Example, the conditions for special
enrollment of an employee with a new dependent
employer contributions toward that other become married; or under paragraph (b)(2) of this section are satisfied,
coverage. The plan may impose the (ii) The employee and individual are the conditions for special enrollment of an em-
same requirements that apply to employ- married and a child becomes a depen- ployee and a spouse with a new dependent under
ees who are otherwise eligible under the dent of the employee through birth, paragraph (b)(4) of this section are satisfied, and
plan to immediately request enrollment adoption or placement for adoption. the conditions for special enrollment of an em-
for coverage (e.g., that the request be (5) Special enrollment of a dependent ployee and a new dependent under paragraph
(b)(6) of this section are satisfied. Accordingly,
made in writing). of a participant. An individual is de- Employer X’s plan will satisfy this paragraph (b) if
(7) Effective date of enrollment. En- scribed in this paragraph (b)(5) if the and only if it allows A to elect, by filing the
rollment is effective not later than the individual is a dependent of a partici- required forms by March 16, 1999, to enroll in
first day of the first calendar month pant and the individual becomes a de- Employer X’s plan either with employee-only
coverage, with employee-plus-spouse coverage, or
beginning after the date the completed pendent of such participant through mar- with family coverage, effective as of February 15,
request for enrollment is received. riage, birth, or adoption or placement 1999.
(b) Special enrollment with respect to for adoption. (c) Notice of enrollment rights. On or
certain dependent beneficiaries— (6) Special enrollment of an employee before the time an employee is offered
(1) In general. A group health plan who is eligible but not enrolled and a the opportunity to enroll in a group
that makes coverage available with re- new dependent. An employee who is health plan, the plan is required to
spect to dependents of a participant is eligible, but not enrolled, in the plan, provide the employee with a description
required to provide a special enrollment and an individual who is a dependent of of the plan’s special enrollment rules
period to permit individuals described in the employee, are described in this para- under this section. For this purpose, the
paragraph (b)(2), (3), (4), (5), or (6) of graph (b)(6) if the employee would be a plan may use the following model de-
this section to be enrolled for coverage participant but for a prior election by scription of the special enrollment rules
under the terms of the plan if the the employee not to enroll in the plan under this section:
enrollment is requested within the time during a previous enrollment period, and
period described in paragraph (b)(7) of the dependent becomes a dependent of If you are declining enrollment for
this section. The enrollment is effective the employee through marriage, birth, or yourself or your dependents (includ-
at the time described in paragraph (b)(8) adoption or placement for adoption. ing your spouse) because of other
of this section. The special enrollment (7) Length of special enrollment pe- health insurance coverage, you may in
rights under this paragraph (b) apply riod. The special enrollment period un- the future be able to enroll yourself or
without regard to the dates on which an der paragraph (b)(1) of this section is a your dependents in this plan, provided
individual would otherwise be able to period of not less than 30 days and that you request enrollment within 30
enroll under the plan. begins on the date of the marriage, days after your other coverage ends.
(2) Special enrollment of an employee birth, or adoption or placement for In addition, if you have a new depen-
who is eligible but not enrolled. An adoption (except that such period does dent as a result of marriage, birth,
individual is described in this paragraph not begin earlier than the date the plan adoption, or placement for adoption,
(b)(2) if the individual is an employee makes dependent coverage generally you may be able to enroll yourself
who is eligible, but not enrolled, in the available). and your dependents, provided that
plan, the individual would be a partici- (8) Effective date of enrollment. En- you request enrollment within 30 days
pant but for a prior election by the rollment is effective— after the marriage, birth, adoption, or
individual not to enroll in the plan (i) In the case of marriage, not later placement for adoption.
during a previous enrollment period, and than the first day of the first calendar (d)(1) Special enrollment date defini-
a person becomes a dependent of the month beginning after the date the com- tion. A special enrollment date for an
individual through marriage, birth, or pleted request for enrollment is received individual means any date in paragraph
adoption or placement for adoption. by the plan; (a)(7) or (b)(8) of this section on which
(3) Special enrollment of a spouse of (ii) In the case of a dependent’s birth, the individual has a right to have enroll-
a participant. An individual is described the date of such birth; and ment in a group health plan become
in this paragraph (b)(3) if either— (iii) In the case of a dependent’s effective under this section.
(i) The individual becomes the adoption or placement for adoption, the (2) Examples. The rules of this sec-
spouse of a participant; or date of such adoption or placement for tion are illustrated by the following
(ii) The individual is a spouse of the adoption. examples:
52
Example 1. (i)(A) Employer Y maintains a (i) To require a group health plan to given a cholesterol test and those who achieve a
group health plan that allows employees to enroll provide particular benefits other than count under 200 receive a premium discount.
in the plan either— (ii) In this Example, because enrollees who
(1) Effective on the first day of employment by
those provided under the terms of such otherwise comply with the program may be unable
an election filed within three days thereafter; plan; or to achieve a cholesterol count under 200 due to a
(2) Effective on any subsequent January 1 by (ii) To prevent such a plan from health status-related factor, this is not a bona fide
an election made during the preceding months of establishing limitations or restrictions on wellness program and such discounts would dis-
November or December; or criminate impermissibly based on one or more
the amount, level, extent, or nature of health status-related factors. However, if, instead,
(3) Effective as of any special enrollment date the benefits or coverage for similarly individuals covered by the plan were entitled to
described in this section.
situated individuals enrolled in the plan receive the discount for complying with the diary
(B) Employee B is hired by Employer Y on and dietary requirements and were not required to
March 15, 1998 and does not elect to enroll in
or coverage.
pass a cholesterol test, the program would be a
Employer Y’s plan until January 31, 1999 when B (3) Construction. For purposes of bona fide wellness program.
loses coverage under another plan. B elects to paragraph (a)(1) of this section, rules for
enroll in Employer Y’s plan effective on February eligibility to enroll include rules defin-
1, 1999, by filing the completed request form by
§ 54.9804–1T Special Rules Relating to
ing any applicable waiting (or affilia- Group Health Plans (temporary).
January 31, 1999, in accordance with the special
rule set forth in paragraph (a) of this section. tion) periods for such enrollment and
(ii) In this Example 1, B has enrolled on a rules relating to late and special enroll- (a) General exception for certain
special enrollment date because the enrollment is ment. small group health plans. The require-
effective at a date described in paragraph (a)(7) of (4) Example. The following example ments of Chapter 100 of Subtitle K of
this section. illustrates the rules of this paragraph (a): the Internal Revenue Code do not apply
Example 2. (i) Same facts as Example 1, except Example. (i) An employer sponsors a group to any group health plan for any plan
that B’s loss of coverage under the other plan health plan that is available to all employees who year if, on the first day of the plan year,
occurs on December 31, 1998 and B elects to enroll within the first 30 days of their employ-
enroll in Employer Y’s plan effective on January 1, ment. However, individuals who do not enroll in
the plan has fewer than 2 participants
1999 by filing the completed request form by the first 30 days cannot enroll later unless they who are current employees.
December 31, 1998, in accordance with the special pass a physical examination. (b) Excepted benefits—
rule set forth in paragraph (a) of this section. (ii) In this Example, the plan discriminates on (1) In general. The requirements of
(ii) In this Example 2, B has enrolled on a the basis of one or more health status-related §§ 54.9801–1T through 54.9801–6T and
special enrollment date because the enrollment is factors.
effective at a date described in paragraph (a)(7) of 54.9802–1T do not apply to any group
(b) In premiums or contributions—
this section (even though this date is also a regular health plan in relation to its provision of
enrollment date under the plan).
(1) In general. A group health plan the benefits described in paragraph
may not require an individual (as a (b)(2), (3), (4), or (5) of this section (or
§ 54.9802–1T Prohibiting discrimina- condition of enrollment or continued any combination of these benefits).
tion against participants and beneficia- enrollment under the plan) to pay a (2) Benefits excepted in all circum-
ries based on a health status-related premium or contribution that is greater stances. The following benefits are ex-
factor (temporary). than the premium or contribution for a cepted in all circumstances—
similarly situated individual enrolled in (i) Coverage only for accident (in-
(a) In eligibility to enroll— the plan based on any health status- cluding accidental death and dismember-
(1) In general. Subject to paragraph related factor, in relation to the indi- ment);
(a)(2) of this section, a group health vidual or a dependent of the individual. (ii) Disability income insurance;
plan may not establish rules for eligibil- (2) Construction. Nothing in para- (iii) Liability insurance, including
ity (including continued eligibility) of graph (b)(1) of this section shall be general liability insurance and automo-
any individual to enroll under the terms construed— bile liability insurance;
of the plan based on any of the follow- (i) To restrict the amount that an (iv) Coverage issued as a supplement
ing health status-related factors in rela- employer may be charged by an issuer to liability insurance;
tion to the individual or a dependent of for coverage under a group health plan; (v) Workers’ compensation or similar
the individual: or insurance;
(i) Health status. (ii) To prevent a group health plan (vi) Automobile medical payment in-
(ii) Medical condition (including both from establishing premium discounts or surance;
physical and mental illnesses), as de- rebates or modifying otherwise appli- (vii) Credit-only insurance (for ex-
fined in § 54.9801–2T. cable copayments or deductibles in re- ample, mortgage insurance); and
(iii) Claims experience. turn for adherence to a bona fide well- (viii) Coverage for on-site medical
ness program. For purposes of this clinics.
(iv) Receipt of health care.
section, a bona fide wellness program is (3) Limited excepted benefits—
(v) Medical history. a program of health promotion and (i) In general. Limited-scope dental
(vi) Genetic information, as defined disease prevention. benefits, limited-scope vision benefits,
in § 54.9801–2T. (3) Example. The rules of this para- or long-term care benefits are excepted
(vii) Evidence of insurability (includ- graph (b) are illustrated by the following if they are provided under a separate
ing conditions arising out of acts of example: policy, certificate, or contract of insur-
domestic violence). Example. (i) Plan X offers a premium discount
to participants who adhere to a cholesterol- ance, or are otherwise not an integral
(viii) Disability. reduction wellness program. Enrollees are ex- part of the plan, as defined in paragraph
(2) No application to benefits or ex- pected to keep a diary of their food intake over 6 (b)(3)(ii) of this section.
clusions. To the extent consistent with weeks. They periodically submit the diary to the (ii) Integral. For purposes of para-
plan physician who responds with suggested diet
section 9801 and § 54.9801–3T, para- modifications. Enrollees are to modify their diets graph (b)(3)(i) of this section, benefits
graph (a)(1) of this section shall not be in accordance with the physician’s recommenda- are deemed to be an integral part of a
construed — tions. At the end of the 6 weeks, enrollees are plan unless a participant has the right to
53
elect not to receive coverage for the Title 10 of the United States Code (also upon the effective date for his or her
benefits and, if the participant elects to known as CHAMPUS supplemental pro- plan, the individual may use creditable
receive coverage for the benefits, the grams); and coverage that the individual had prior to
participant pays an additional premium (iii) Similar supplemental coverage the enrollment date to reduce the re-
or contribution for that coverage. provided to coverage under a group maining preexisting condition exclusion
(iii) Limited scope. Limited scope health plan. period applicable to the individual.
dental or vision benefits are dental or (ii) Examples. The following ex-
vision benefits that are sold under a (c) Treatment of partnerships. [Re-
amples illustrate the rules of this para-
separate policy or rider and that are served] graph (a)(3):
limited in scope to a narrow range or Example 1. (i) Individual A has been working
type of benefits that are generally ex- § 54.9806–1T Effective Dates (tempo- for Employer X and has been covered under
cluded from hospital/medical/surgical rary). Employer X’s plan since March 1, 1997. Under
Employer X’s plan, as in effect before January 1,
benefit packages. 1998, there is no coverage for any preexisting
(a) General effective dates—
(iv) Long-term care. Long-term care condition. Employer X’s plan year begins on
benefits are benefits that are either— (1) Non-collectively-bargained plans. January 1, 1998. A’s enrollment date in the plan is
(A) Subject to State long-term care Except as otherwise provided in this March 1, 1997 and A has no creditable coverage
insurance laws; section, Chapter 100 of Subtitle K of the before this date.
Internal Revenue Code and §§ 54.9801– (ii) In this Example 1, Employer X may con-
(B) For qualified long-term care in- tinue to impose the preexisting condition exclusion
surance services, as defined in section 1T through 54.9804–1T apply with re- under the plan through February 28, 1998 (the end
7702B(c)(1) of the Internal Revenue spect to group health plans for plan of the 12-month period using anniversary dates).
Code, or provided under a qualified years beginning after June 30, 1997. Example 2. (i) Same facts as in Example 1,
long-term care insurance contract, as (2) Collectively bargained plans. Ex- except that A’s enrollment date was August 1,
cept as otherwise provided in this sec- 1996, instead of March 1, 1997.
defined in section 7702B(b); or (ii) In this Example 2, on January 1, 1998,
(C) Based on cognitive impairment or tion (other than paragraph (a)(1) of this Employer X’s plan may no longer exclude treat-
a loss of functional capacity that is section), in the case of a group health ment for any preexisting condition that A may
expected to be chronic. plan maintained pursuant to one or more have; however, because Employer X’s plan is not
(4) Noncoordinated benefits— collective bargaining agreements be- subject to HIPAA until January 1, 1998, A is not
tween employee representatives and one entitled to claim reimbursement for expenses un-
(i) Excepted benefits that are not co- der the plan for treatments for any preexisting
ordinated. Coverage for only a specified or more employers ratified before Au- condition of A received before January 1, 1998.
disease or illness (for example, cancer- gust 21, 1996, Chapter 100 of Subtitle
(b) Effective date for certification re-
only policies) or hospital indemnity or K of the Internal Revenue Code and
quirement—
other fixed dollar indemnity insurance §§ 54.9801–1T through 54.9804–1T do
not apply to plan years beginning before (1) In general. Subject to the transi-
(for example, $100/day) is excepted tional rule in § 54.9801–5T(a)(5)(iii),
only if it meets each of the conditions the later of July 1, 1997, or the date on
which the last of the collective bargain- the certification rules of § 54.9801–5T
specified in paragraph (b)(4)(ii) of this apply to events occurring on or after
section. ing agreements relating to the plan ter-
minates (determined without regard to July 1, 1996.
(ii) Conditions. Benefits are described
in paragraph (b)(4)(i) of this section any extension thereof agreed to after (2) Period covered by certificate. A
only if— August 21, 1996). For these purposes, certificate is not required to reflect cov-
(A) The benefits are provided under a any plan amendment made pursuant to a erage before July 1, 1996.
separate policy, certificate, or contract of collective bargaining agreement relating (3) No certificate before June 1,
insurance; to the plan, that amends the plan solely 1997. Notwithstanding any other provi-
(B) There is no coordination between to conform to any requirement of such sion of § 54.9801–5T, in no case is a
the provision of the benefits and an Chapter, is not treated as a termination certificate required to be provided be-
exclusion of benefits under any group of the collective bargaining agreement. fore June 1, 1997.
health plan maintained by the same plan (3)(i) Preexisting condition exclusion (c) Limitation on actions. No enforce-
sponsor; and periods for current employees. Any pre- ment action is to be taken, pursuant to
(C) The benefits are paid with respect existing condition exclusion period per- Chapter 100 of Subtitle K of the Inter-
to an event without regard to whether mitted under § 54.9801–3T is measured nal Revenue Code, against a group
benefits are provided with respect to the from the individual’s enrollment date in health plan or health insurance issuer
event under any group health plan main- the plan. Such exclusion period, as with respect to a violation of a require-
tained by the same plan sponsor. limited under § 54.9801–3T, may be ment imposed by Chapter 100 of Sub-
(5) Supplemental benefits. The fol- completed prior to the effective date of title K of the Internal Revenue Code
lowing benefits are excepted only if the Health Insurance Portability and Ac- before January 1, 1998 if the plan or
they are provided under a separate countability Act of 1996 (HIPAA) for issuer has sought to comply in good
policy, certificate, or contract of insur- his or her plan. Therefore, on the date faith with such requirements. Compli-
ance— the individual’s plan becomes subject to ance with these regulations is deemed to
(i) Medicare supplemental health in- Chapter 100 of Subtitle K of the Inter- be good faith compliance with the re-
surance (as defined under section nal Revenue Code, no preexisting condi- quirements of Chapter 100 of Subtitle K
1882(g)(1) of the Social Security Act; tion exclusion may be imposed with of the Internal Revenue Code.
also known as Medigap or MedSupp respect to an individual beyond the (d) Transition rules for counting
insurance); limitation in § 54.9801–3T. For an indi- creditable coverage. An individual who
(ii) Coverage supplemental to the vidual who has not completed the per- seeks to establish creditable coverage
coverage provided under Chapter 55, mitted exclusion period under HIPAA, for periods before July 1, 1996 is en-
54
titled to establish such coverage through provide a certificate) apply with respect 2590.712 Parity in the application
the presentation of documents or other to the provision of the notice. of certain limits to mental
means in accordance with the provisions health benefits. [Reserved]
of § 54.9801–5T(c). For coverage relat- Margaret Milner Richardson,
ing to an event occurring before July 1, Subpart C—General Provisions
Commissioner of Internal Revenue.
1996, a group health plan and a health Sec.
insurance issuer is not subject to any Approved March 24, 1997. 2590.731 Preemption; State flexibil-
penalty or enforcement action with re- ity; construction.
Donald C. Lubrick, 2590.732 Special rules relating to
spect to the plan’s or issuer’s counting
Assistant Secretary of the Treasury. group health plans.
(or not counting) such coverage if the
plan or issuer has sought to comply in 2590.734 Enforcement. [Reserved]
Pension and Welfare Benefits 2590.736 Effective dates.
good faith with the applicable require- Administration
ments under § 54.9801–5T(c). Authority: Sec. 29 U.S.C. 1027, 1059,
29 CFR Chapter XXV 1135, 1171, 1194; Sec. 101, Pub. L.
(e) Transition rules for certificates of
For the reasons set forth above, Chapter 104–191, 101 Stat. 1936 (29 U.S.C.
creditable coverage—
XXV of Title 29 of the Code of Federal 1181); Secretary of Labor’s Order No.
(1) Certificates only upon request. 1–87, 52 FR 13139, April 21, 1987.
Regulations is amended as set forth
For events occurring on or after July 1,
below: Subpart A—Requirements Relating to
1996 but before October 1, 1996, a
certificate is required to be provided 1. A new Subchapter L, consisting of Access and Renewability of Coverage,
only upon a written request by or on Part 2590, is added to read as follows: and Limitations on Preexisting Condi-
behalf of the individual to whom the SUBCHAPTER L-HEALTH INSUR- tion Exclusion Periods
certificate applies. ANCE PORTABILITY AND RENEW-
(2) Certificates before June 1, 1997. § 2590.701–1 Basis and scope.
ABILITY FOR GROUP HEALTH
For events occurring on or after October PLANS (a) Statutory basis. This Subpart
1, 1996 and before June 1, 1997, a implements Part 7 of Subtitle B of Title
certificate must be furnished no later PART 2590-RULES AND REGULA- I of the Employee Retirement Income
than June 1, 1997, or any later date TIONS FOR HEALTH INSURANCE Security Act of 1974, as amended (here-
permitted under § 54.9801–5T(a)(2)(ii) PORTABILITY AND RENEWABILITY inafter ERISA or the Act).
and (iii). FOR GROUP HEALTH PLANS (b) Scope. A group health plan or
(3) Optional notice— health insurance issuer offering group
Subpart A—Requirements Relating to
(i) In general. This paragraph (e)(3) health insurance coverage may provide
Access and Renewability of Coverage,
applies with respect to events described greater rights to participants and benefi-
and Limitations on Preexisting Condi-
in § 54.9801–5T(a)(5)(ii), that occur on ciaries than those set forth in this Sub-
tion Exclusion Periods
or after October 1, 1996 but before June part. This Subpart A sets forth minimum
1, 1997. A group health plan or health Sec. requirements for group health plans and
insurance issuer offering group health 2590.701–1 Basis and scope. health insurance issuers offering group
coverage is deemed to satisfy 2590.701–2 Definitions. health insurance coverage concerning:
§ 54.9801–5T(a)(2) and (3) if a notice 2590.701–3 Limitations on preexisting (1) Limitations on a preexisting con-
is provided in accordance with the pro- condition exclusion pe- dition exclusion period.
visions of paragraphs (e)(3)(i) through riod. (2) Certificates and disclosure of pre-
(iv) of this section. 2590.701–4 Rules relating to credit- vious coverage.
able coverage. (3) Rules relating to counting credit-
(ii) Time of notice. The notice must
2590.701–5 Certification and disclo- able coverage.
be provided no later than June 1, 1997.
sure of previous coverage. (4) Special enrollment periods.
(iii) Form and content of notice. A 2590.701–6 Special enrollment peri-
notice provided pursuant to this para- (5) Use of an affiliation period by an
ods. HMO as an alternative to a preexisting
graph (e)(3) must be in writing and 2590.701–7 HMO affiliation period as
must include information substantially condition exclusion.
alternative to preexisting
similar to the information included in a condition exclusion.
model notice authorized by the Secre- § 2590.701–2 Definitions.
2590.702 Prohibiting discrimination
tary. Copies of the model notice are against participants and Unless otherwise provided, the defini-
available at the following website — beneficiaries based on a tions in this section govern in applying
http://www.irs.ustreas.gov (or call (202) health status-related factor. the provisions of §§ 2590.701 through
622–4695). 2590.703 Guaranteed renewability 2590.734.
(iv) Providing certificate after re- in multiemployer plans Affiliation period means a period of
quest. If an individual requests a certifi- and multiple employer time that must expire before health
cate following receipt of the notice, the welfare arrangements. insurance coverage provided by an
certificate must be provided at the time [Reserved] HMO becomes effective, and during
of the request as set forth in § 54.9801– which the HMO is not required to
5T(a)(5)(iii). Subpart B—Other Requirements provide benefits.
(v) Other certification rules apply. Sec. COBRA definitions:
The rules set forth in § 54.9801– 2590.711 Standards relating to ben- (1) COBRA means Title X of the
5T(a)(4)(i) (method of delivery) and efits for mothers and new- Consolidated Omnibus Budget Recon-
54.9801–5T(a)(1) (entities required to borns. [Reserved] ciliation Act of 1985, as amended.
55
(2) COBRA continuation coverage inherited characteristics that may de- Individual health insurance coverage
means coverage, under a group health rive from the individual or a family means health insurance coverage of-
plan, that satisfies an applicable member. This includes information re- fered to individuals in the individual
COBRA continuation provision. garding carrier status and information market, but does not include short-
(3) COBRA continuation provision derived from laboratory tests that term, limited duration insurance. For
means sections 601–608 of the Act, identify mutations in specific genes or this purpose, short-term, limited-
section 4980B of the Code (other than chromosomes, physical medical ex- duration insurance means health in-
paragraph (f)(1) of such section aminations, family histories, and di- surance coverage provided pursuant to
4980B insofar as it relates to pediatric rect analysis of genes or chromo- a contract with an issuer that has an
vaccines), and Title XXII of the somes. expiration date specified in the con-
PHSA. Group health insurance coverage tract (taking into account any exten-
(4) Exhaustion of COBRA continua- means health insurance coverage of- sions that may be elected by the
tion coverage means that an individu- fered in connection with a group policyholder without the issuer’s con-
al’s COBRA continuation coverage health plan. sent) that is within 12 months of the
ceases for any reason other than ei- Group health plan means an em- date such contract becomes effective.
ther failure of the individual to pay ployee welfare benefit plan to the Individual health insurance coverage
premiums on a timely basis, or for extent that the plan provides medical can include dependent coverage.
cause (such as making a fraudulent care (including items and services Individual market means the market
claim or an intentional misrepresenta- paid for as medical care) to employ- for health insurance coverage offered
tion of a material fact in connection ees or their dependents (as defined to individuals other than in connec-
with the plan). An individual is con- under the terms of the plan) directly tion with a group health plan. Unless
sidered to have exhausted COBRA or through insurance, reimbursement, a State elects otherwise in accordance
continuation coverage if such cover- or otherwise. with section 2791(e)(1)(B)(ii) of the
age ceases— Group market means the market for PHSA, such term also includes cover-
(i) Due to the failure of the em- health insurance coverage offered in age offered in connection with a
ployer or other responsible entity to connection with a group health plan. group health plan that has fewer than
remit premiums on a timely basis; (However, certain very small plans two participants as current employees
or may be treated as being in the indi- on the first day of the plan year.
(ii) When the individual no longer vidual market, rather than the group Internal Revenue Code (Code) means
resides, lives, or works in a service market; see the definition of indi- the Internal Revenue Code of 1986,
area of an HMO or similar program vidual market in this section.) as amended (Title 26, United States
(whether or not within the choice Health insurance coverage means Code).
of the individual) and there is no benefits consisting of medical care Issuer means a health insurance is-
other COBRA continuation cover- (provided directly, through insurance suer.
age available to the individual. or reimbursement, or otherwise) under Late enrollment definitions (late en-
Condition means a medical condition. any hospital or medical service policy rollee and late enrollment) are set
Creditable coverage means credita- or certificate, hospital or medical ser- forth in § 2590.701–3(a)(2)(iii) and
ble coverage within the meaning of vice plan contract, or HMO contract (iv).
§ 2590.701–4(a). offered by a health insurance issuer. Medical care means amounts paid
Enroll means to become covered for for—
Health insurance issuer or issuer
benefits under a group health plan (1) The diagnosis, cure, mitigation,
means an insurance company, insur-
(i.e., when coverage becomes effec- treatment, or prevention of disease, or
ance service, or insurance organiza-
tive), without regard to when the amounts paid for the purpose of af-
tion (including an HMO) that is re-
individual may have completed or fecting any structure or function of
quired to be licensed to engage in the
filed any forms that are required in the body;
business of insurance in a State and
order to enroll in the plan. For this (2) Transportation primarily for and
that is subject to State law that regu-
purpose, an individual who has health essential to medical care referred to in
lates insurance (within the meaning of
insurance coverage under a group paragraph (1) of this definition; and
section 514(b)(2) of the Act). Such
health plan is enrolled in the plan (3) Insurance covering medical care
term does not include a group health
regardless of whether the individual referred to in paragraphs (1) and (2)
plan.
elects coverage, the individual is a of this definition.
dependent who becomes covered as a Health Maintenance Organization or Medical condition or condition means
result of an election by a participant, HMO means— any condition, whether physical or
or the individual becomes covered (1) A federally qualified health main- mental, including, but not limited to,
without an election. tenance organization (as defined in any condition resulting from illness,
Enrollment date definitions (enroll- section 1301(a) of the PHSA); injury (whether or not the injury is
ment date and first day of coverage) (2) An organization recognized under accidental), pregnancy, or congenital
are set forth in § 2590.701–3(a)(2)(i) State law as a health maintenance malformation. However, genetic infor-
and (ii). organization; or mation is not a condition.
Excepted benefits means the benefits (3) A similar organization regulated Placement, or being placed, for adop-
described as excepted in under State law for solvency in the tion means the assumption and reten-
§ 2590.732(b). same manner and to the same extent tion of a legal obligation for total or
Genetic information means informa- as such a health maintenance organi- partial support of a child by a person
tion about genes, gene products, and zation. with whom the child has been placed
56
in anticipation of the child’s adoption. State health benefits risk pool means (C) The rules of this paragraph
The child’s placement for adoption a State health benefits risk pool (a)(1)(i) are illustrated by the following
with such person terminates upon the within the meaning of § 2590.701– examples:
termination of such legal obligation. 4(a)(1)(vii). Example 1. (i) Individual A is treated for a
medical condition 7 months before the enrollment
Plan year means the year that is Waiting period means the period that date in Employer R’s group health plan. As part of
designated as the plan year in the must pass before an employee or such treatment, A’s physician recommends that a
plan document of a group health plan, dependent is eligible to enroll under follow-up examination be given 2 months later.
except that if the plan document does the terms of a group health plan. If an Despite this recommendation, A does not receive a
employee or dependent enrolls as a follow-up examination and no other medical ad-
not designate a plan year or if there is vice, diagnosis, care, or treatment for that condi-
no plan document, the plan year is— late enrollee or on a special enroll- tion is recommended to A or received by A during
(1) The deductible/limit year used un- ment date, any period before such late the 6-month period ending on A’s enrollment date
der the plan; or special enrollment is not a waiting in Employer R’s plan.
period. If an individual seeks and (ii) In this Example 1, Employer R’s plan may
(2) If the plan does not impose not impose a preexisting condition exclusion pe-
deductibles or limits on a yearly ba- obtains coverage in the individual riod with respect to the condition for which A
sis, then the plan year is the policy market, any period after the date the received treatment 7 months prior to the enroll-
year; individual files a substantially com- ment date.
plete application for coverage and Example 2. (i) Same facts as Example 1, except
(3) If the plan does not impose before the first day of coverage is a that Employer R’s plan learns of the condition and
deductibles or limits on a yearly ba- waiting period. attaches a rider to A’s policy excluding coverage
sis, and either the plan is not insured for the condition. Three months after enrollment,
A’s condition recurs, and Employer R’s plan
or the insurance policy is not renewed § 2590.701–3 Limitations on preexisting denies payment under the rider.
on an annual basis, then the plan year condition exclusion period. (ii) In this Example 2, the rider is a preexisting
is the employer’s taxable year; or condition exclusion and Employer R’s plan may
(4) In any other case, the plan year is (a) Preexisting condition exclusion— not impose a preexisting condition exclusion with
(1) In general. Subject to paragraph respect to the condition for which A received
the calendar year. treatment 7 months prior to the enrollment date.
Preexisting condition exclusion means (b) of this section, a group health plan,
Example 3. (i) Individual B has asthma and is
a limitation or exclusion of benefits and a health insurance issuer offering treated for that condition several times during the
relating to a condition based on the group health insurance coverage, may 6-month period before B’s enrollment date in
fact that the condition was present impose, with respect to a participant or Employer S’s plan. The plan imposes a 12-month
beneficiary, a preexisting condition ex- preexisting condition exclusion. B has no prior
before the first day of coverage, creditable coverage to reduce the exclusion period.
whether or not any medical advice, clusion only if the requirements of this Three months after the enrollment date, B begins
diagnosis, care, or treatment was rec- paragraph (a) are satisfied. coverage under Employer S’s plan. Two months
ommended or received before that (i) 6-month look-back rule. A preex- later, B is hospitalized for asthma.
day. A preexisting condition exclusion isting condition exclusion must relate to (ii) In this Example 3, Employer S’s plan may
a condition (whether physical or men- exclude payment for the hospital stay and the
includes any exclusion applicable to physician services associated with this illness
an individual as a result of informa- tal), regardless of the cause of the because the care is related to a medical condition
tion that is obtained relating to an condition, for which medical advice, for which treatment was received by B during the
individual’s health status before the diagnosis, care, or treatment was recom- 6-month period before the enrollment date.
individual’s first day of coverage, mended or received within the 6-month Example 4. (i) Individual D, who is subject to a
period ending on the enrollment date. preexisting condition exclusion imposed by Em-
such as a condition identified as a ployer U’s plan, has diabetes, as well as a foot
result of a pre-enrollment question- (A) For purposes of this paragraph condition caused by poor circulation and retinal
naire or physical examination given to (a)(1)(i), medical advice, diagnosis, care, degeneration (both of which are conditions that
the individual, or review of medical or treatment is taken into account only may be directly attributed to diabetes). After
if it is recommended by, or received enrolling in the plan, D stumbles and breaks a leg.
records relating to the pre-enrollment (ii) In this Example 4, the leg fracture is not a
period. from, an individual licensed or similarly condition related to D’s diabetes, even though
Public health plan means public authorized to provide such services un- poor circulation in D’s extremities and poor vision
health plan within the meaning of der State law and operating within the may have contributed towards the accident. How-
§ 2590.701–4(a)(1)(ix). scope of practice authorized by State ever, any additional medical services that may be
law. needed because of D’s preexisting diabetic condi-
Public Health Service Act (PHSA) tion that would not be needed by another patient
means the Public Health Service Act (B) For purposes of this paragraph with a broken leg who does not have diabetes may
(42 U.S.C. 201, et seq.). (a)(1)(i), the 6-month period ending on be subject to the preexisting condition exclusion
the enrollment date begins on the imposed under Employer U’s plan.
Significant break in coverage means a 6-month anniversary date preceding the (ii) Maximum length of preexisting
significant break in coverage within enrollment date. For example, for an condition exclusion (the look-forward
the meaning of § 2590.701– enrollment date of August 1, 1998, the rule). A preexisting condition exclusion
4(b)(2)(iii). 6-month period preceding the enrollment is not permitted to extend for more than
Special enrollment date means a spe- date is the period commencing on Feb- 12 months (18 months in the case of a
cial enrollment date within the mean- ruary 1, 1998 and continuing through late enrollee) after the enrollment date.
ing of § 2590.701–6(d). July 31, 1998. As another example, for For purposes of this paragraph (a)(1)(ii),
State means each of the several an enrollment date of August 30, 1998, the 12-month and 18-month periods af-
States, the District of Columbia, the 6-month period preceding the enroll- ter the enrollment date are determined
Puerto Rico, the Virgin Islands, ment date is the period commencing on by reference to the anniversary of the
Guam, American Samoa, and the February 28, 1998 and continuing enrollment date. For example, for an
Northern Mariana Islands. through August 29, 1998. enrollment date of August 1, 1998, the
57
12-month period after the enrollment (iii) Late enrollee means an indi- not impose any preexisting condition
date is the period commencing on Au- vidual whose enrollment in a plan is a exclusion with regard to the child.
gust 1, 1998 and continuing through late enrollment. (ii) Example. The rule of this para-
July 31, 1999. (iv)(A) Late enrollment means enroll- graph (b)(1) is illustrated by the follow-
(iii) Reducing a preexisting condition ment under a group health plan other ing example:
than on— Example. (i) Seven months after enrollment in
exclusion period by creditable coverage. Employer W’s group health plan, Individual E has
The period of any preexisting condition (1) The earliest date on which cover- a child born with a birth defect. Because the child
exclusion that would otherwise apply to age can become effective under the is enrolled in Employer W’s plan within 30 days
an individual under a group health plan terms of the plan; or of birth, no preexisting condition exclusion may
be imposed with respect to the child under
is reduced by the number of days of (2) A special enrollment date for the Employer W’s plan. Three months after the child’s
creditable coverage the individual has as individual. birth, E commences employment with Employer X
of the enrollment date, as counted under (B) If an individual ceases to be and enrolls with the child in Employer X’s plan 45
eligible for coverage under the plan by days after leaving Employer W’s plan. Employer
§ 2590.701–4. For purposes of this sub- X’s plan imposes a 12-month exclusion for any
part the phrase ‘‘days of creditable cov- terminating employment, and then sub- preexisting condition.
sequently becomes eligible for coverage (ii) In this Example, Employer X’s plan may
erage’’ has the same meaning as the
under the plan by resuming employ- not impose any preexisting condition exclusion
phrase ‘‘aggregate of the periods of
ment, only eligibility during the indi- with respect to E’s child because the child was
creditable coverage’’ as such term is vidual’s most recent period of employ- covered within 30 days of birth and had no
used in section 701(a)(3) of the Act. ment is taken into account in
significant break in coverage. This result applies
regardless of whether E’s child is included in the
(iv) Other standards. See § 2590.702 determining whether the individual is a certificate of creditable coverage provided to E by
for other standards that may apply with late enrollee under the plan with respect Employer W indicating 300 days of dependent
respect to certain benefit limitations or to the most recent period of coverage. coverage or receives a separate certificate indicat-
restrictions under a group health plan. ing 90 days of coverage. Employer X’s plan may
Similar rules apply if an individual impose a preexisting condition exclusion with
(2) Enrollment definitions— again becomes eligible for coverage fol- respect to E for up to 2 months for any preexisting
(i) Enrollment date means the first lowing a suspension of coverage that condition of E for which medical advice, diagno-
day of coverage or, if there is a waiting applied generally under the plan. sis, care, or treatment was recommended or re-
ceived by E within the 6-month period ending on
period, the first day of the waiting (v) Examples. The rules of this para- E’s enrollment date in Employer X’s plan.
period. graph (a)(2) are illustrated by the fol- (2) Adopted children. Subject to para-
(ii)(A) First day of coverage means, lowing examples: graph (b)(3) of this section, a group
in the case of an individual covered for Example 1. (i) Employee F first becomes eli-
gible to be covered by Employer W’s group health health plan, and a health insurance is-
benefits under a group health plan in the plan on January 1, 1999, but elects not to enroll in suer offering group health insurance
group market, the first day of coverage the plan until April 1, 1999. April 1, 1999 is not a coverage, may not impose any preexist-
under the plan and, in the case of an special enrollment date for F. ing condition exclusion in the case of a
individual covered by health insurance (ii) In this Example 1, F would be a late child who is adopted or placed for
coverage in the individual market, the enrollee with respect to F’s coverage that became
effective under the plan on April 1, 1999.
adoption before attaining 18 years of
first day of coverage under the policy. age and who, as of the last day of the
Example 2. (i) Same as Example 1, except that
(B) The following example illustrates F does not enroll in the plan on April 1, 1999 and 30-day period beginning on the date of
the rule of paragraph (a)(2)(ii)(A) of this terminates employment with Employer W on July the adoption or placement for adoption,
section: 1, 1999, without having had any health insurance is covered under creditable coverage.
coverage under the plan. F is rehired by Employer
Example. (i) Employer V’s group health plan
W on January 1, 2000 and is eligible for and
This rule does not apply to coverage
provides for coverage to begin on the first day of before the date of such adoption or
the first payroll period following the date an elects coverage under Employer W’s plan effective
employee is hired and completes the applicable on January 1, 2000. placement for adoption.
enrollment forms, or on any subsequent January 1 (ii) In this Example 2, F would not be a late (3) Break in coverage. Paragraphs
after completion of the applicable enrollment enrollee with respect to F’s coverage that became (b)(1) and (2) of this section no longer
forms. Employer V’s plan imposes a preexisting effective on January 1, 2000. apply to a child after a significant break
condition exclusion for 12 months (reduced by the (b) Exceptions pertaining to preexist- in coverage.
individual’s creditable coverage) following an indi- ing condition exclusions—
vidual’s enrollment date. Employee E is hired by (4) Pregnancy. A group health plan,
Employer V on October 13, 1998 and then on (1) Newborns— and a health insurance issuer offering
October 14, 1998 completes and files all the forms (i) In general. Subject to paragraph group health insurance coverage, may
necessary to enroll in the plan. E’s coverage under (b)(3) of this section, a group health not impose a preexisting condition ex-
the plan becomes effective on October 25, 1998
(which is the beginning of the first payroll period
plan, and a health insurance issuer offer- clusion relating to pregnancy as a preex-
after E’s date of hire). ing group health insurance coverage, isting condition.
(ii) In this Example, E’s enrollment date is may not impose any preexisting condi- (5) Special enrollment dates. For spe-
October 13, 1998 (which is the first day of the tion exclusion with regard to a child cial enrollment dates relating to new
waiting period for E’s enrollment and is also E’s who, as of the last day of the 30-day dependents, see § 2590.701–6(b).
date of hire). Accordingly, with respect to E, the period beginning with the date of birth,
6-month period in paragraph (a)(1)(i) would be the
(c) Notice of plan’s preexisting condi-
period from April 13, 1998 through October 12, is covered under any creditable cover- tion exclusion. A group health plan, and
1998, the maximum permissible period during age. Accordingly, if a newborn is en- health insurance issuer offering group
which Employer V’s plan could apply a preexist- rolled in a group health plan (or other health insurance under the plan, may not
ing condition exclusion under paragraph (a)(1)(ii) creditable coverage) within 30 days after impose a preexisting condition exclusion
would be the period from October 13, 1998
through October 12, 1999, and this period would
birth and subsequently enrolls in another with respect to a participant or depen-
be reduced under paragraph (a)(1)(iii) by E’s days group health plan without a significant dent of the participant before notifying
of creditable coverage as of October 13, 1998. break in coverage, the other plan may the participant, in writing, of the exist-
58
ence and terms of any preexisting condi- (C) Any other arrangement sponsored the amount of creditable coverage by
tion exclusion under the plan and of the by a State, the membership composition counting all the days that the individual
rights of individuals to demonstrate of which is specified by the State and has under one or more types of credit-
creditable coverage (and any applicable which is established and maintained pri- able coverage. Accordingly, if on a
waiting periods) as required by marily to provide health insurance cov- particular day, an individual has credit-
§ 2590.701–5. The description of the erage for individuals who are residents able coverage from more than one
rights of individuals to demonstrate of such State and who, by reason of the source, all the creditable coverage on
creditable coverage includes a descrip- existence or history of a medical condi- that day is counted as one day. Further,
tion of the right of the individual to tion— any days in a waiting period for a plan
request a certificate from a prior plan or (1) Are unable to acquire medical or policy are not creditable coverage
issuer, if necessary, and a statement that care coverage for such condition under the plan or policy.
the current plan or issuer will assist in through insurance or from an HMO, or (ii) Days not counted before signifi-
obtaining a certificate from any prior (2) Are able to acquire such coverage cant break in coverage. Days of credit-
plan or issuer, if necessary. only at a rate which is substantially in able coverage that occur before a sig-
excess of the rate for such coverage nificant break in coverage are not
§ 2590.701–4 Rules relating to credit- through the membership organization. required to be counted.
able coverage. (viii) A health plan offered under (iii) Definition of significant break in
(a) General rules— Title 5 U.S.C. Chapter 89 (the Federal coverage. A significant break in cover-
Employees Health Benefits Program). age means a period of 63 consecutive
(1) Creditable coverage. For purposes
(ix) A public health plan. For pur- days during all of which the individual
of this section, except as provided in
poses of this section, a public health does not have any creditable coverage,
paragraph (a)(2) of this section, the term
plan means any plan established or except that neither a waiting period nor
creditable coverage means coverage of
maintained by a State, county, or other an affiliation period is taken into ac-
an individual under any of the follow-
political subdivision of a State that count in determining a significant break
ing:
provides health insurance coverage to in coverage. (See section 731(b)(2)(iii)
(i) A group health plan as defined in
individuals who are enrolled in the plan. of the Act and section 2723(b)(2)(iii) of
§ 2590.701–2.
(x) A health benefit plan under sec- the PHSA which exclude from preemp-
(ii) Health insurance coverage as de- tion 5(e) of the Peace Corps Act (22
fined in § 2590.701–2 (whether or not tion State insurance laws that require a
U.S.C. 2504(e)). break of more than 63 days before an
the entity offering the coverage is sub- (2) Excluded coverage. Creditable
ject to Part 7 of Subtitle B of Title I of individual has a significant break in
coverage does not include coverage con- coverage for purposes of State law.)
the Act, and without regard to whether sisting solely of coverage of excepted
the coverage is offered in the group (iv) Examples. The following ex-
benefits (described in § 2590.732). amples illustrate how creditable cover-
market, the individual market, or other- (3) Methods of counting creditable
wise). age is counted in reducing preexisting
coverage. For purposes of reducing any condition exclusion periods under this
(iii) Part A or B of Title XVIII of the preexisting condition exclusion period,
Social Security Act (Medicare). paragraph (b)(2):
as provided under § 2590.701– Example 1. (i) Individual A works for Employer
(iv) Title XIX of the Social Security 3(a)(1)(iii), a group health plan, and a P and has creditable coverage under Employer P’s
Act (Medicaid), other than coverage health insurance issuer offering group plan for 18 months before A’s employment termi-
consisting solely of benefits under sec- health insurance coverage, determines nates. A is hired by Employer Q, and enrolls in
tion 1928 of the Social Security Act (the Employer Q’s group health plan, 64 days after the
the amount of an individual’s creditable last date of coverage under Employer P’s plan.
program for distribution of pediatric coverage by using the standard method Employer Q’s plan has a 12-month preexisting
vaccines). described in paragraph (b) of this sec- condition exclusion period.
(v) Title 10 U.S.C. Chapter 55 (medi- tion, except that the plan, or issuer, may (ii) In this Example 1, because A had a break in
cal and dental care for members and use the alternative method under para- coverage of 63 days, Employer Q’s plan may
certain former members of the uni- disregard A’s prior coverage and A may be subject
graph (c) of this section with respect to to a 12-month preexisting condition exclusion
formed services, and for their depen- any or all of the categories of benefits period.
dents; for purposes of Title 10 U.S.C. described under paragraph (c)(3) of this Example 2. (i) Same facts as Example 1, except
Chapter 55, uniformed services means section. that A is hired by Employer Q, and enrolls in
the armed forces and the Commissioned (b) Standard method— Employer Q’s plan, on the 63rd day after the last
Corps of the National Oceanic and At- date of coverage under Employer P’s plan.
(1) Specific benefits not considered. (ii) In this Example 2, A has a break in
mospheric Administration and of the Under the standard method, a group coverage of 62 days. Because A’s break in cover-
Public Health Service). health plan, and a health insurance is- age is not a significant break in coverage, Em-
(vi) A medical care program of the suer offering group health insurance ployer Q’s plan must count A’s prior creditable
Indian Health Service or of a tribal coverage, determines the amount of coverage for purposes of reducing the plan’s
organization. preexisting condition exclusion period as it applies
creditable coverage without regard to to A.
(vii) A State health benefits risk pool. the specific benefits included in the Example 3. (i) Same facts as Example 1, except
For purposes of this section, a State coverage. that Employer Q’s plan provides benefits through
health benefits risk pool means— (2) Counting creditable coverage— an insurance policy that, as required by applicable
(A) An organization qualifying under (i) Based on days. For purposes of State insurance laws, defines a significant break in
section 501(c)(26) of the Code; coverage as 90 days.
reducing the preexisting condition exclu-
(ii) In this Example 3, the issuer that provides
(B) A qualified high risk pool de- sion period, a group health plan, and a group health insurance to Employer Q’s plan must
scribed in section 2744(c)(2) of the health insurance issuer offering group count A’s period of creditable coverage prior to
PHSA; or health insurance coverage, determines the 63-day break.
59
Example 4. (i) Same facts as Example 3, except method set forth in this paragraph (iv) Dental care; or
that Employer Q’s plan is a self-insured plan, and, (b)(2), subject to the requirements of
thus, is not subject to State insurance laws.
(v) Vision care.
(ii) In this Example 4, the plan is not governed other applicable law. (4) Plan notice. If the alternative
by the longer break rules under State insurance (B) Example. The rule of this para- method is used, the plan is required to—
law and A’s previous coverage may be disre- graph (b)(2)(v) is illustrated by the (i) State prominently that the plan is
garded. following example:
Example 5. (i) Individual B begins employment
using the alternative method of counting
Example. (i) Individual F has coverage under creditable coverage in disclosure state-
with Employer R 45 days after terminating cover- group health plan Y from January 3, 1997 through
age under a prior group health plan. Employer R’s March 25, 1997. F then becomes covered by
ments concerning the plan, and state this
plan has a 30-day waiting period before coverage group health plan Z. F’s enrollment date in Plan Z to each enrollee at the time of enroll-
begins. B enrolls in Employer R’s plan when first is May 1, 1997. Plan Z has a 12-month preexisting ment under the plan; and
eligible. condition exclusion period.
(ii) In this Example 5, B does not have a (ii) Include in these statements a de-
(ii) In this Example, Plan Z may determine, in scription of the effect of using the
significant break in coverage for purposes of
accordance with the rules prescribed in paragraph
determining whether B’s prior coverage must be
(b)(2)(i), (ii), and (iii) of this section, that F has alternative method, including an identifi-
counted by Employer R’s plan. B has only a cation of the categories used.
82 days of creditable coverage (29 days in Janu-
44-day break in coverage because the 30-day
waiting period is not taken into account in deter-
ary, 28 days in February, and 25 days in March). (5) Disclosure of information on pre-
Thus, the preexisting condition exclusion period vious benefits. See § 2590.701–5(b) for
mining a significant break in coverage.
will no longer apply to F on February 8, 1998 (82
Example 6. (i) Individual C works for Employer
days before the 12-month anniversary of F’s
special rules concerning disclosure of
S and has creditable coverage under Employer S’s coverage to a plan, or issuer, using the
enrollment (May 1)). For administrative conve-
plan for 200 days before C’s employment is
terminated and coverage ceases. C is then unem-
nience, however, Plan Z may consider that the alternative method of counting credit-
preexisting condition exclusion period will no able coverage under this paragraph (c).
ployed for 51 days before being hired by Em-
longer apply to F on the first day of the month
ployer T. Employer T’s plan has a 3-month
(February 1).
(6) Counting creditable coverage—
waiting period. C works for Employer T for 2 (i) In general. Under the alternative
months and then terminates employment. Eleven (c) Alternative method—
days after terminating employment with Employer (1) Specific benefits considered. Un- method, the group health plan or issuer
T, C begins working for Employer U. Employer der the alternative method, a group counts creditable coverage within a cat-
U’s plan has no waiting period, but has a 6-month
health plan, or a health insurance issuer egory if any level of benefits is pro-
preexisting condition exclusion period. vided within the category. Coverage un-
(ii) In this Example 6, C does not have a offering group health insurance cover-
age, determines the amount of creditable der a reimbursement account or
significant break in coverage because, after disre-
garding the waiting period under Employer T’s coverage based on coverage within any arrangement, such as a flexible spending
plan, C had only a 62-day break in coverage (51 category of benefits described in para- arrangement (as defined in section
days plus 11 days). Accordingly, C has 200 days
graph (c)(3) of this section and not 106(c)(2) of the Internal Revenue Code),
of creditable coverage and Employer U’s plan may does not constitute coverage within any
not apply its 6-month preexisting condition exclu- based on coverage for any other ben-
sion period with respect to C. efits. The plan or issuer may use the category.
Example 7. (i) Individual D terminates employ- alternative method for any or all of the (ii) Special rules. In counting an indi-
ment with Employer V on January 13, 1998 after categories. The plan may apply a differ- vidual’s creditable coverage under the
being covered for 24 months under Employer V’s alternative method, the group health
group health plan. On March 17, the 63rd day ent preexisting condition exclusion pe-
riod with respect to each category (and plan, or issuer, first determines the
without coverage, D applies for a health insurance
policy in the individual market. D’s application is may apply a different preexisting condi- amount of the individual’s creditable
accepted and the coverage is made effective May tion exclusion period for benefits that coverage that may be counted under
1.
are not within any category). The credit- paragraph (b) of this section, up to a
(ii) In this Example 7, because D applied for total of 365 days of the most recent
the policy before the end of the 63rd day, and able coverage determined for a category
of benefits applies only for purposes of creditable coverage (546 days for a late
coverage under the policy ultimately became ef-
fective, the period between the date of application reducing the preexisting condition exclu- enrollee). The period over which this
and the first day of coverage is a waiting period sion period with respect to that category. creditable coverage is determined is re-
and no significant break in coverage occurred even
An individual’s creditable coverage for ferred to as the determination period.
though the actual period without coverage was 107 Then, for the category specified under
days. benefits that are not within any category
Example 8. (i) Same facts as Example 7, except for which the alternative method is the alternative method, the plan or issuer
that D’s application for a policy in the individual being used is determined under the counts within the category all days of
market is denied. standard method of paragraph (b) of this coverage that occurred during the deter-
(ii) In this Example 8, because D did not obtain
section. mination period (whether or not a sig-
coverage following application, D incurred a sig- nificant break in coverage for that
nificant break in coverage on the 64th day. (2) Uniform application. A plan or
issuer using the alternative method is category occurs), and reduces the indi-
(v) Other permissible counting meth- vidual’s preexisting condition exclusion
ods — required to apply it uniformly to all
participants and beneficiaries under the period for that category by that number
(A) Rule. Notwithstanding any other of days. The plan or issuer may deter-
provisions of this paragraph (b)(2), for plan or policy. The use of the alternative
method is required to be set forth in the mine the amount of creditable coverage
purposes of reducing a preexisting con- in any other reasonable manner, uni-
dition exclusion period (but not for plan.
formly applied, that is at least as favor-
purposes of issuing a certificate under (3) Categories of benefits. The alter-
able to the individual.
§ 2590.701–5), a group health plan, and native method for counting creditable
coverage may be used for coverage for (iii) Example. The rules of this para-
a health insurance issuer offering group
the following categories of benefits— graph (c)(6) are illustrated by the fol-
health insurance coverage, may deter-
(i) Mental health; lowing example:
mine the amount of creditable coverage Example. (i) Individual D enrolls in Employer
in any other manner that is at least as (ii) Substance abuse treatment; V’s plan on January 1, 2001. Coverage under the
favorable to the individual as the (iii) Prescription drugs; plan includes prescription drug benefits. On April
60
1, 2001, the plan ceases providing prescription then the issuer, but not the plan, violates an agreement with the plan to provide automatic
drug benefits. D’s employment with Employer V the certification requirements of this certificates as permitted under paragraph (a)(2)(ii)
ends on January 1, 2002, after D was covered of this section.
under Employer V’s group health plan for 365 paragraph (a). (ii) In this Example, if an employee switches
days. D enrolls in Employer Y’s plan on February (iv) Special rules for issuers— from the indemnity option to the HMO option on
1, 2002 (D’s enrollment date). Employer Y’s plan (A)(1) Responsibility of issuer for January 1, the issuer must provide the plan (or a
uses the alternative method of counting creditable coverage period. An issuer is not re- person designated by the plan) with appropriate
coverage and imposes a 12-month preexisting information with respect to the individual’s cover-
condition exclusion on prescription drug benefits.
quired to provide information regarding age with the indemnity issuer. However, if the
(ii) In this Example, Employer Y’s plan may coverage provided to an individual by individual’s coverage with the indemnity issuer
impose a 275-day preexisting condition exclusion another party. ceases at a date other than January 1, the issuer is
with respect to D for prescription drug benefits (2) Example. The rule of this para- instead required to provide the individual with an
because D had 90 days of creditable coverage graph (a)(1)(iv)(A) is illustrated by the automatic certificate.
relating to prescription drug benefits within D’s (2) Individuals for whom certificate
determination period. following example:
Example. (i) A plan offers coverage with an must be provided; timing of issuance—
HMO option from one issuer and an indemnity (i) Individuals. A certificate must be
§ 2590.701–5 Certification and disclo- option from a different issuer. The HMO has not
sure of previous coverage. provided, without charge, for partici-
entered into an agreement with the plan to provide
certificates as permitted under paragraph (a)(1)(iii) pants or dependents who are or were
(a) Certificate of creditable cover- of this section. covered under a group health plan upon
age— (ii) In this Example, if an employee switches the occurrence of any of the events
(1) Entities required to provide cer- from the indemnity option to the HMO option and described in paragraph (a)(2)(ii) or (iii)
later ceases to be covered under the plan, any
tificate— certificate provided by the HMO is not required to
of this section.
(i) In general. A group health plan, provide information regarding the employee’s cov- (ii) Issuance of automatic certificates.
and each health insurance issuer offering erage under the indemnity option. The certificates described in this para-
group health insurance coverage under a (B)(1) Cessation of issuer coverage graph (a)(2)(ii) are referred to as auto-
group health plan, is required to furnish prior to cessation of coverage under a matic certificates.
certificates of creditable coverage in plan. If an individual’s coverage under (A) Qualified beneficiaries upon a
accordance with this paragraph (a) of an issuer’s policy ceases before the qualifying event. In the case of an
this section. individual’s coverage under the plan individual who is a qualified beneficiary
(ii) Duplicate certificates not re- ceases, the issuer is required to provide (as defined in section 607(3) of the Act)
quired. An entity required to provide a sufficient information to the plan (or to entitled to elect COBRA continuation
certificate under this paragraph (a)(1) another party designated by the plan) to coverage, an automatic certificate is re-
for an individual is deemed to have enable a certificate to be provided by quired to be provided at the time the
satisfied the certification requirements the plan (or other party), after cessation individual would lose coverage under
for that individual if another party pro- of the individual’s coverage under the the plan in the absence of COBRA
vides the certificate, but only to the plan, that reflects the period of coverage continuation coverage or alternative cov-
extent that information relating to the under the policy. The provision of that erage elected instead of COBRA con-
individual’s creditable coverage and information to the plan will satisfy the tinuation coverage. A plan or issuer
waiting or affiliation period is provided issuer’s obligation to provide an auto- satisfies this requirement if it provides
by the other party. For example, in the matic certificate for that period of cred- the automatic certificate no later than
case of a group health plan funded itable coverage for the individual under the time a notice is required to be
through an insurance policy, the issuer is paragraph (a)(2)(ii) and (3) of this sec- furnished for a qualifying event under
deemed to have satisfied the certifica- tion. In addition, an issuer providing section 606 of the Act (relating to
tion requirement with respect to a par- that information is required to cooperate notices required under COBRA ).
ticipant or beneficiary if the plan actu- with the plan in responding to any (B) Other individuals when coverage
ally provides a certificate that includes request made under paragraph (b)(2) of ceases. In the case of an individual who
the information required under para- this section (relating to the alternative is not a qualified beneficiary entitled to
graph (a)(3) of this section with respect method of counting creditable coverage). elect COBRA continuation coverage, an
to the participant or beneficiary. If the individual’s coverage under the automatic certificate is required to be
(iii) Special rule for group health plan ceases at the time the individual’s provided at the time the individual
plans. To the extent coverage under a coverage under the issuer’s policy ceases to be covered under the plan. A
plan consists of group health insurance ceases, the issuer must provide an auto- plan or issuer satisfies this requirement
coverage, the plan is deemed to have matic certificate under paragraph if it provides the automatic certificate
satisfied the certification requirements (a)(2)(ii) of this section. An issuer may within a reasonable time period thereaf-
under this paragraph (a)(1) if any issuer presume that an individual whose cover- ter. In the case of an individual who is
offering the coverage is required to age ceases at a time other than the entitled to elect to continue coverage
provide the certificates pursuant to an effective date for changing enrollment under a State program similar to CO-
agreement between the plan and the options has ceased to be covered under BRA and who receives the automatic
issuer. For example, if there is an agree- the plan. certificate not later than the time a
ment between an issuer and the plan (2) Example. The rule of this para- notice is required to be furnished under
sponsor under which the issuer agrees to graph (a)(1)(iv)(B) is illustrated by the the State program, the certificate is
provide certificates for individuals cov- following example. deemed to be provided within a reason-
ered under the plan, and the issuer fails Example. (i) A group health plan provides cov- able time period after the cessation of
erage under an HMO option and an indemnity
to provide a certificate to an individual option with a different issuer, and only allows
coverage under the plan.
when the plan would have been required employees to switch on each January 1. Neither (C) Qualified beneficiaries when CO-
to provide one under this paragraph (a), the HMO nor the indemnity issuer has entered into BRA ceases. In the case of an individual
61
who is a qualified beneficiary and has (ii) In this Example 3, the automatic certificate certificate applies, and any other infor-
may be provided not later than the time a notice is
elected COBRA continuation coverage required to be furnished under the State program.
mation necessary for the plan providing
(or whose coverage has continued after Example 4. (i) Individual C terminates employ- the coverage specified in the certificate
the individual became entitled to elect ment with Employer S and receives both a notice to identify the individual, such as the
COBRA continuation coverage), an au- of C’s rights under COBRA and an automatic individual’s identification number under
tomatic certificate is to be provided at certificate. C elects COBRA continuation coverage the plan and the name of the participant
under Employer S’s group health plan. After four
the time the individual’s coverage under months of COBRA continuation coverage and the if the certificate is for (or includes) a
the plan ceases. A plan, or issuer, satis- expiration of a 30-day grace period, S’s group dependent;
fies this requirement if it provides the health plan determines that C’s COBRA continua-
tion coverage has ceased due to failure to make a (D) The name, address, and telephone
automatic certificate within a reasonable
timely payment for continuation coverage. number of the plan administrator or
time after coverage ceases (or after the (ii) In this Example 4, the plan must provide an issuer required to provide the certificate;
expiration of any grace period for non- updated automatic certificate to C within a reason-
payment of premiums). An automatic able time after the end of the grace period. (E) The telephone number to call for
certificate is required to be provided to Example 5. (i) Individual D is currently covered further information regarding the certifi-
such an individual regardless of whether under the group health plan of Employer T. D
requests a certificate, as permitted under paragraph
cate (if different from paragraph
the individual has previously received (a)(2)(iii) of this section. Under the procedure for (a)(3)(ii)(D) of this section);
an automatic certificate under paragraph Employer T’s plan, certificates are mailed (by first
(a)(2)(ii)(A) of this section. class mail) 7 business days following receipt of (F) Either—
(iii) Any individual upon request. Re- the request. This date reflects the earliest date that
the plan, acting in a reasonable and prompt
(1) A statement that an individual has
quests for certificates are permitted to fashion, can provide certificates. at least 18 months (for this purpose, 546
be made by, or on behalf of, an indi- (ii) In this Example 5, the plan’s procedure days is deemed to be 18 months) of
vidual within 24 months after coverage satisfies paragraph (a)(2)(iii) of this section. creditable coverage, disregarding days of
ceases. Thus, for example, a plan in creditable coverage before a significant
(3) Form and content of certificate—
which an individual enrolls may, if break in coverage, or
authorized by the individual, request a (i) Written certificate—
certificate of the individual’s creditable (2) The date any waiting period (and
(A) In general. Except as provided in affiliation period, if applicable) began
coverage on behalf of the individual
paragraph (a)(3)(i)(B) of this section, the and the date creditable coverage began;
from a plan in which the individual was
certificate must be provided in writing and
formerly enrolled. After the request is
(including any form approved by the
received, a plan or issuer is required to (G) The date creditable coverage
Secretary as a writing).
provide the certificate by the earliest ended, unless the certificate indicates
date that the plan or issuer, acting in a (B) Other permissible forms. No writ- that creditable coverage is continuing as
reasonable and prompt fashion, can pro- ten certificate is required to be provided of the date of the certificate.
vide the certificate. A certificate is re- under this paragraph (a) with respect to
quired to be provided under this para- a particular event described in paragraph (iii) Periods of coverage under cer-
graph (a)(2)(iii) even if the individual (a)(2)(ii) or (iii) of this section, if— tificate. If an automatic certificate is
has previously received a certificate un- provided pursuant to paragraph (a)(2)(ii)
(1) An individual is entitled to re- of this section, the period that must be
der this paragraph (a)(2)(iii) or an auto-
ceive a certificate; included on the certificate is the last
matic certificate under paragraph
(a)(2)(ii) of this section. (2) The individual requests that the period of continuous coverage ending on
(iv) Examples. The following ex- certificate be sent to another plan or the date coverage ceased. If an indi-
amples illustrate the rules of this para- issuer instead of to the individual; vidual requests a certificate pursuant to
graph (a)(2): paragraph (a)(2)(iii) of this section, a
Example 1. (i) Individual A terminates employ-
(3) The plan or issuer that would certificate must be provided for each
ment with Employer Q. A is a qualified benefi- otherwise receive the certificate agrees period of continuous coverage ending
ciary entitled to elect COBRA continuation cover- to accept the information in this para- within the 24-month period ending on
age under Employer Q’s group health plan. A graph (a)(3) through means other than a
notice of the rights provided under COBRA is
the date of the request (or continuing on
written certificate (e.g., by telephone); the date of the request). A separate
typically furnished to qualified beneficiaries under
the plan within 10 days after a covered employee and certificate may be provided for each
terminates employment.
(4) The receiving plan or issuer re- such period of continuous coverage.
(ii) In this Example 1, the automatic certificate
may be provided at the same time that A is ceives such information from the send- (iv) Combining information for fami-
provided the COBRA notice. ing plan or issuer in such form within lies. A certificate may provide informa-
Example 2. (i) Same facts as Example 1, except the time periods required under para- tion with respect to both a participant
that the automatic certificate for A is not com- graph (a)(2)of this section. and the participant’s dependents if the
pleted by the time the COBRA notice is furnished
to A. (ii) Required information. The certifi- information is identical for each indi-
(ii) In this Example 2, the automatic certificate cate must include the following— vidual or, if the information is not
may be provided within the period permitted by identical, certificates may be provided
law for the delivery of notices under COBRA. (A) The date the certificate is issued; on one form if the form provides all the
Example 3. (i) Employer R maintains an in- required information for each individual
sured group health plan. R has never had 20 (B) The name of the group health
employees and thus R’s plan is not subject to the plan that provided the coverage de- and separately states the information
COBRA continuation coverage provisions. How- scribed in the certificate; that is not identical.
ever, R is in a State that has a State program
similar to COBRA. B terminates employment with (C) The name of the participant or (v) Model certificate. The require-
R and loses coverage under R’s plan. dependent with respect to whom the ments of paragraph (a)(3)(ii) of this
62
section are satisfied if the plan or issuer designates another individual or entity to described in the certificate is for depen-
provides a certificate in accordance with receive the certificate, the plan or issuer dent coverage (e.g., family coverage or
a model certificate authorized by the responsible for providing the certificate employee-plus-spouse coverage).
Secretary. is required to provide the certificate to (B) Certificates provided on request.
the designated party. For purposes of certificates provided on
(vi) Excepted benefits; categories of the request of, or on behalf of, an
benefits. No certificate is required to be (5) Special rules concerning depen- individual pursuant to paragraph
furnished with respect to excepted ben- dent coverage— (a)(2)(iii) of this section, a plan or issuer
efits described in § 2590.732. In addi- must make reasonable efforts to obtain
tion, the information in the certificate (i)(A) Reasonable efforts. A plan or
issuer is required to use reasonable and provide the names of any dependent
regarding coverage is not required to covered by the certificate where such
specify categories of benefits described efforts to determine any information
needed for a certificate relating to the information is requested to be provided.
in § 2590.701–4(c) (relating to the alter- If a certificate does not include the
native method of counting creditable dependent coverage. In any case in
which an automatic certificate is re- name of any dependent of an individual
coverage). However, if excepted benefits covered by the certificate, the individual
are provided concurrently with other quired to be furnished with respect to a
dependent under paragraph (a)(2)(ii) of may, if necessary, use the procedures
creditable coverage (so that the coverage described in paragraph (c) of this sec-
does not consist solely of excepted this section, no individual certificate is
required to be furnished until the plan or tion for submitting documentation to
benefits), information concerning the establish that the creditable coverage in
benefits may be required to be disclosed issuer knows (or making reasonable ef-
forts should know) of the dependent’s the certificate applies to the dependent.
under paragraph (b) of this section. (C) Demonstrating a dependent’s
cessation of coverage under the plan.
(4) Procedures— creditable coverage. See paragraph
(B) Example. The rules of this para- (c)(4) of this section for special rules to
(i) Method of delivery. The certificate graph (a)(5) are illustrated by the fol- demonstrate dependent status.
is required to be provided to each lowing example: (D) Duration. This paragraph
individual described in paragraph (a)(2) Example. (i) A group health plan covers em- (a)(5)(iii) is only effective for certifica-
of this section or an entity requesting ployees and their dependents. The plan annually
requests all employees to provide updated infor- tions provided with respect to events
the certificate on behalf of the indi- mation regarding dependents, including the spe- occurring through June 30, 1998.
vidual. The certificate may be provided cific date on which an employee has a new (6) Special certification rules for en-
by first-class mail. If the certificate or dependent or on which a person ceases to be a tities not subject to Part 7 of Subtitle B
certificates are provided to the partici- dependent of the employee.
of Title I of the Act—
pant and the participant’s spouse at the (ii) In this Example, the plan has satisfied the
standard in this paragraph (a)(5)(i) of this section (i) Issuers. For special rules requiring
participant’s last known address, then that it make reasonable efforts to determine the that issuers, not subject to Part 7 of
the requirements of this paragraph (a)(4) cessation of dependents’ coverage and the related Subtitle B of Title I of the Act, provide
are satisfied with respect to all individu- dependent coverage information. certificates consistent with the rules in
als residing at that address. If a depen- (ii) Special rules for demonstrating this section, including issuers offering
dent’s last known address is different coverage. If a certificate furnished by a coverage with respect to creditable cov-
than the participant’s last known ad- plan or issuer does not provide the name erage described in sections 701(c)(1)(G)
dress, a separate certificate is required to of any dependent of an individual cov- through (c)(1)(J) of the Act (coverage
be provided to the dependent at the ered by the certificate, the individual under a State health benefits risk pool,
dependent’s last known address. If sepa- may, if necessary, use the procedures the Federal Employees Health Benefits
rate certificates are being provided by described in paragraph (c)(4) of this Program, a public health plan, and a
mail to individuals who reside at the section for demonstrating dependent sta- health benefit plan under section 5(e) of
same address, separate mailings of each tus. In addition, an individual may, if the Peace Corps Act), see section
certificate are not required. necessary, use these procedures to dem- 2721(b)(1)(B) of the PHSA (requiring
onstrate that a child was enrolled within certificates by issuers offering health
(ii) Procedure for requesting certifi- 30 days of birth, adoption, or placement
cates. A plan or issuer must establish a insurance coverage in connection with a
for adoption. See § 2590.701–3(b), un- group health plan, including a church
procedure for individuals to request and der which such a child would not be
receive certificates pursuant to para- plan or a governmental plan (including
subject to a preexisting condition exclu- the Federal Employees Health Benefits
graph (a)(2)(iii) of this section. sion. Program (FEHBP)). In addition, see sec-
(iii) Designated recipients. If an auto- (iii) Transition rule for dependent tion 2743 of the PHSA applicable to
matic certificate is required to be pro- coverage through June 30, 1998— health insurance issuers in the individual
vided under paragraph (a)(2)(ii) of this (A) In general. A group health plan market. (However, this section does not
section, and the individual entitled to or health insurance issuer that cannot require a certificate to be provided with
receive the certificate designates another provide the names of dependents (or respect to short-term limited duration
individual or entity to receive the certifi- related coverage information) for pur- insurance, as described in the definition
cate, the plan or issuer responsible for poses of providing a certificate of cover- of individual health insurance coverage
providing the certificate is permitted to age for a dependent may satisfy the in § 2590.701–2, that is not provided by
provide the certificate to the designated requirements of paragraph (a)(3)(ii)(C) a group health plan or issuer offering
party. If a certificate is required to be of this section by providing the name of health insurance in connection with a
provided upon request under paragraph the participant covered by the group group health plan.)
(a)(2)(iii) of this section and the indi- health plan or health insurance issuer (ii) Other entities. For special rules
vidual entitled to receive the certificate and specifying that the type of coverage requiring that certain other entities, not
63
subject to Part 7 of Subtitle B of Title I the Act, which permits individuals to age. While a plan or issuer may refuse
of the Act, provide certificates consistent establish creditable coverage through to credit coverage where the individual
with the rules in this section, see section means other than certificates, and sec- fails to cooperate with the plan’s or
2791(a)(3) of the PHSA applicable to tion 701(e)(3) of the Act, which requires issuer’s efforts to verify coverage, the
entities described in sections the Secretary to establish rules designed plan or issuer may not consider an
2701(c)(1)(C), (D), (E), and (F) of the to prevent an individual’s subsequent individual’s inability to obtain a certifi-
PHSA (relating to Medicare, Medicaid, coverage under a group health plan or cate to be evidence of the absence of
CHAMPUS, and Indian Health Service), health insurance coverage from being creditable coverage.
section 2721(b)(1)(A) of the PHSA ap- adversely affected by an entity’s failure
(ii) Documents. Documents that may
plicable to nonfederal governmental to provide a certificate with respect to
establish creditable coverage (and wait-
plans generally, section 2721(b)(2)(C)(ii) that individual. If the accuracy of a
ing periods or affiliation periods) in the
of the PHSA applicable to nonfederal certificate is contested or a certificate is
absence of a certificate include explana-
governmental plans that elect to be unavailable when needed by the indi-
tions of benefit claims (EOB) or other
excluded from the requirements of Sub- vidual, the individual has the right to
correspondence from a plan or issuer
parts 1 and 3 of Part A of Title XXVII demonstrate creditable coverage (and
indicating coverage, pay stubs showing
of the PHSA, and section 9805(a) of the waiting or affiliation periods) through
a payroll deduction for health coverage,
Internal Revenue Code applicable to the presentation of documents or other
a health insurance identification card, a
group health plans, which includes means. For example, the individual may
certificate of coverage under a group
church plans (as defined in section make such a demonstration when—
health policy, records from medical care
414(e) of the Internal Revenue Code). (i) An entity has failed to provide a
providers indicating health coverage,
(b) Disclosure of coverage to a plan, certificate within the required time pe-
third party statements verifying periods
or issuer, using the alternative method riod;
of coverage, and any other relevant
of counting creditable coverage— (ii) The individual has creditable cov-
documents that evidence periods of
(1) In general. If an individual en- erage but an entity may not be required
health coverage.
rolls in a group health plan with respect to provide a certificate of the coverage
to which the plan, or issuer, uses the pursuant to paragraph (a) of this section; (iii) Other evidence. Creditable cover-
alternative method of counting credit- (iii) The coverage is for a period age (and waiting period or affiliation
able coverage described in § 2590.701– before July 1, 1996; period information) may also be estab-
4(c) of this regulation, the individual (iv) The individual has an urgent lished through means other than docu-
provides a certificate of coverage under medical condition that necessitates a mentation, such as by a telephone call
paragraph (a) of this section, and the determination before the individual can from the plan or provider to a third
plan or issuer in which the individual deliver a certificate to the plan; or party verifying creditable coverage.
enrolls so requests, the entity that issued (v) The individual lost a certificate (iv) Example. The rules of this para-
the certificate (the prior entity) is re- that the individual had previously re- graph (c)(2) are illustrated by the fol-
quired to disclose promptly to a request- ceived and is unable to obtain another lowing example:
ing plan or issuer (the requesting entity) certificate. Example. (i) Individual F terminates employ-
ment with Employer W and, a month later, is hired
the information set forth in paragraph (2) Evidence of creditable coverage— by Employer X. Employer X’s group health plan
(b)(2) of this section. (i) Consideration of evidence. A plan imposes a preexisting condition exclusion of 12
(2) Information to be disclosed. The or issuer is required to take into account months on new enrollees under the plan and uses
prior entity is required to identify to the all information that it obtains or that is the standard method of determining creditable
requesting entity the categories of ben- presented on behalf of an individual to coverage. F fails to receive a certificate of prior
coverage from the self-insured group health plan
efits with respect to which the request- make a determination, based on the maintained by F’s prior employer, Employer W,
ing entity is using the alternative relevant facts and circumstances, and requests a certificate. However, F (and Em-
method of counting creditable coverage, whether an individual has creditable ployer X’s plan, on F’s behalf) is unable to obtain
and the requesting entity may identify coverage and is entitled to offset all or a a certificate from Employer W’s plan. F attests
that, to the best of F’s knowledge, F had at least
specific information that the requesting portion of any preexisting condition ex- 12 months of continuous coverage under Employer
entity reasonably needs in order to de- clusion period. A plan or issuer shall W’s plan, and that the coverage ended no earlier
termine the individual’s creditable cov- treat the individual as having furnished than F’s termination of employment from Em-
erage with respect to any such category. a certificate under paragraph (a) of this ployer W. In addition, F presents evidence of
The prior entity is required to disclose section if the individual attests to the coverage, such as an explanation of benefits for a
claim that was made during the relevant period.
promptly to the requesting entity the period of creditable coverage, the indi-
(ii) In this Example, based solely on these facts,
creditable coverage information so re- vidual also presents relevant corroborat- F has demonstrated creditable coverage for the 12
quested. ing evidence of some creditable cover- months of coverage under Employer W’s plan in
(3) Charge for providing information. age during the period, and the individual the same manner as if F had presented a written
The prior entity furnishing the informa- cooperates with the plan’s or issuer’s certificate of creditable coverage.
tion under paragraph (b) of this section efforts to verify the individual’s cover- (3) Demonstrating categories of cred-
may charge the requesting entity for the age. For this purpose, cooperation in- itable coverage. Procedures similar to
reasonable cost of disclosing such infor- cludes providing (upon the plan’s or those described in this paragraph (c)
mation. issuer’s request) a written authorization apply in order to determine an individu-
(c) Ability of an individual to demon- for the plan or issuer to request a al’s creditable coverage with respect to
strate creditable coverage and waiting certificate on behalf of the individual, any category under paragraph (b) of this
period information— and cooperating in efforts to determine section (relating to determining credit-
(1) In general. The rules in this para- the validity of the corroborating evi- able coverage under the alternative
graph (c) implement section 701(c)(4) of dence and the dates of creditable cover- method).
64
(4) Demonstrating dependent status. vidual did not have the claimed credit- the conditions in paragraph (a)(5) of this
If, in the course of providing evidence able coverage, provided that— section are satisfied and the enrollment
(including a certificate) of creditable (i) A notice of such reconsideration, is requested within the period described
coverage, an individual is required to as described in this paragraph (d), is in paragraph (a)(6) of this section. The
demonstrate dependent status, the group provided to the individual; and enrollment is effective at the time de-
health plan or issuer is required to treat (ii) Until the final determination is scribed in paragraph (a)(7) of this sec-
the individual as having furnished a made, the plan or issuer, for purposes of tion. The special enrollment rights under
certificate showing the dependent status approving access to medical services this paragraph (a) apply without regard
if the individual attests to such depen- (such as a pre-surgery authorization), to the dates on which an individual
dency and the period of such status and acts in a manner consistent with the would otherwise be able to enroll under
initial determination. the plan.
the individual cooperates with the plan’s
(3) Examples. The following ex- (2) Special enrollment of an employee
or issuer’s efforts to verify the depen-
amples illustrate this paragraph (d): only. An employee is described in this
dent status.
Example 1. (i) Individual G is hired by Em- paragraph (a)(2) if the employee is
(d) Determination and notification of ployer Y. Employer Y’s group health plan imposes eligible, but not enrolled, for coverage
creditable coverage— a preexisting condition exclusion for 12 months under the terms of the plan and, when
with respect to new enrollees and uses the stan-
(1) Reasonable time period. In the dard method of determining creditable coverage. enrollment was previously offered to the
event that a group health plan or health Employer Y’s plan determines that G is subject to employee under the plan and was de-
insurance issuer offering group health a 4-month preexisting condition exclusion, based clined by the employee, the employee
insurance coverage receives information on a certificate of creditable coverage that is was covered under another group health
under paragraph (a) of this section (cer- provided by G to Employer Y’s plan indicating 8
months of coverage under G’s prior group health
plan or had other health insurance cov-
tifications), paragraph (b) of this section plan. erage.
(disclosure of information relating to the (ii) In this Example 1, Employer Y’s plan must (3) Special enrollment of dependents
alternative method), or paragraph (c) of notify G within a reasonable period of time only. A dependent is described in this
this section (other evidence of creditable following receipt of the certificate that G is paragraph (a)(3) if the dependent is a
coverage), the entity is required, within subject to a 4-month preexisting condition exclu-
sion beginning on G’s enrollment date in Y’s plan. dependent of an employee participating
a reasonable time period following re- Example 2. (i) Same facts as in Example 1, in the plan, the dependent is eligible,
ceipt of the information, to make a except that Employer Y’s plan determines that G but not enrolled, for coverage under the
determination regarding the individual’s has 14 months of creditable coverage based on G’s terms of the plan, and, when enrollment
period of creditable coverage and notify certificate indicating 14 months of creditable cov- was previously offered under the plan
erage under G’s prior plan.
the individual of the determination in and was declined, the dependent was
(ii) In this Example 2, Employer Y’s plan is not
accordance with paragraph (d)(2) of this required to notify G that G will not be subject to a covered under another group health plan
section. Whether a determination and preexisting condition exclusion. or had other health insurance coverage.
notification regarding an individual’s Example 3. (i) Individual H is hired by Em- (4) Special enrollment of both em-
creditable coverage is made within a ployer Z. Employer Z’s group health plan imposes ployee and dependent. An employee and
reasonable time period is determined a preexisting condition exclusion for 12 months
with respect to new enrollees and uses the stan-
any dependent of the employee are
based on the relevant facts and circum- dard method of determining creditable coverage. H described in this paragraph (a)(4) if they
stances. Relevant facts and circum- develops an urgent health condition before receiv- are eligible, but not enrolled, for cover-
stances include whether a plan’s applica- ing a certificate of prior coverage. H attests to the age under the terms of the plan and,
tion of a preexisting condition exclusion period of prior coverage, presents corroborating when enrollment was previously offered
documentation of the coverage period, and autho-
would prevent an individual from hav- rizes the plan to request a certificate on H’s to the employee or dependent under the
ing access to urgent medical services. behalf. plan and was declined, the employee or
(2) Notification to individual of pe- (ii) In this Example 3, Employer Z’s plan must dependent was covered under another
riod of preexisting condition exclusion. review the evidence presented by H. In addition, group health plan or had other health
the plan must make a determination and notify H
A plan or issuer seeking to impose a regarding any preexisting condition exclusion pe-
insurance coverage.
preexisting condition exclusion is re- riod that applies to H (and the basis of such (5) Conditions for special enrollment.
quired to disclose to the individual, in determination) within a reasonable time period An employee or dependent is eligible to
writing, its determination of any preex- following receipt of the evidence that is consistent enroll during a special enrollment period
isting condition exclusion period that with the urgency of H’s health condition (this if each of the following applicable con-
determination may be modified as permitted under
applies to the individual, and the basis paragraph (d)(2) of this section).
ditions is met:
for such determination, including the (i) When the employee declined en-
source and substance of any information § 2590.701–6 Special enrollment peri- rollment for the employee or the depen-
on which the plan or issuer relied. In ods. dent, the employee stated in writing that
addition, the plan or issuer is required to coverage under another group health
provide the individual with a written (a) Special enrollment for certain in- plan or other health insurance coverage
explanation of any appeal procedures dividuals who lose coverage— was the reason for declining enrollment.
established by the plan or issuer, and (1) In general. A group health plan, This paragraph (a)(5)(i) applies only
with a reasonable opportunity to submit and a health insurance issuer offering if—
additional evidence of creditable cover- group health insurance coverage in con- (A) The plan required such a state-
age. However, nothing in this paragraph nection with a group health plan, is ment when the employee declined en-
(d) or paragraph (c) of this section required to permit employees and de- rollment; and
prevents a plan or issuer from modify- pendents described in paragraph (a)(2), (B) The employee is provided with
ing an initial determination of creditable (3), or (4) of this section to enroll for notice of the requirement to provide the
coverage if it determines that the indi- coverage under the terms of the plan if statement in this paragraph
65
(a)(5)(i) (and the consequences of the plan to immediately request enrollment dent of the employee through birth,
employee’s failure to provide the state- for coverage (e.g., that the request be adoption or placement for adoption.
ment) at the time the employee declined made in writing). (5) Special enrollment of a dependent
enrollment. (7) Effective date of enrollment. En- of a participant. An individual is de-
(ii)(A) When the employee declined rollment is effective not later than the scribed in this paragraph (b)(5) if the
enrollment for the employee or depen- first day of the first calendar month individual is a dependent of a partici-
dent under the plan, the employee or beginning after the date the completed pant and the individual becomes a de-
dependent had COBRA continuation request for enrollment is received. pendent of such participant through mar-
coverage under another plan and CO- (b) Special enrollment with respect to riage, birth, or adoption or placement
BRA continuation coverage under that certain dependent beneficiaries— for adoption.
other plan has since been exhausted; or (1) In general. A group health plan (6) Special enrollment of an employee
(B) If the other coverage that applied that makes coverage available with re- who is eligible but not enrolled and a
to the employee or dependent when spect to dependents of a participant is new dependent. An employee who is
enrollment was declined was not under required to provide a special enrollment eligible, but not enrolled, in the plan,
a COBRA continuation provision, either period to permit individuals described in and an individual who is a dependent of
the other coverage has been terminated paragraph (b)(2), (3), (4), (5), or (6) of the employee, are described in this para-
as a result of loss of eligibility for the this section to be enrolled for coverage graph (b)(6) if the employee would be a
coverage or employer contributions to- under the terms of the plan if the participant but for a prior election by
wards the other coverage have been enrollment is requested within the time the employee not to enroll in the plan
terminated. For this purpose, loss of period described in paragraph (b)(7) of during a previous enrollment period, and
eligibility for coverage includes a loss this section. The enrollment is effective the dependent becomes a dependent of
of coverage as a result of legal separa- at the time described in paragraph (b)(8) the employee through marriage, birth, or
tion, divorce, death, termination of em- of this section. The special enrollment adoption or placement for adoption.
ployment, reduction in the number of rights under this paragraph (b) apply (7) Length of special enrollment pe-
hours of employment, and any loss of without regard to the dates on which an riod. The special enrollment period un-
eligibility after a period that is measured individual would otherwise be able to der paragraph (b)(1) of this section is a
by reference to any of the foregoing. enroll under the plan. period of not less than 30 days and
Thus, for example, if an employee’s (2) Special enrollment of an employee begins on the date of the marriage,
coverage ceases following a termination who is eligible but not enrolled. An birth, or adoption or placement for
of employment and the employee is individual is described in this paragraph adoption (except that such period does
eligible for but fails to elect COBRA (b)(2) if the individual is an employee not begin earlier than the date the plan
continuation coverage, this is treated as who is eligible, but not enrolled, in the makes dependent coverage generally
a loss of eligibility under this paragraph plan, the individual would be a partici- available).
(a)(5)(ii)(B). However, loss of eligibility pant but for a prior election by the (8) Effective date of enrollment. En-
does not include a loss due to failure of individual not to enroll in the plan rollment is effective—
the individual or the participant to pay during a previous enrollment period, and (i) In the case of marriage, not later
premiums on a timely basis or termina- a person becomes a dependent of the than the first day of the first calendar
tion of coverage for cause (such as individual through marriage, birth, or month beginning after the date the com-
making a fraudulent claim or an inten- adoption or placement for adoption. pleted request for enrollment is received
tional misrepresentation of a material by the plan;
(3) Special enrollment of a spouse of
fact in connection with the plan). In (ii) In the case of a dependent’s birth,
a participant. An individual is described
addition, for purposes of this paragraph the date of such birth; and
in this paragraph (b)(3) if either—
(a)(5)(ii)(B), employer contributions in- (iii) In the case of a dependent’s
clude contributions by any current or (i) The individual becomes the
spouse of a participant; or adoption or placement for adoption, the
former employer (of the individual or date of such adoption or placement for
another person) that was contributing to (ii) The individual is a spouse of the
adoption.
coverage for the individual. participant and a child becomes a de-
pendent of the participant through birth, (9) Example. The rules of this para-
(6) Length of special enrollment pe- graph (b) are illustrated by the following
riod. The employee is required to re- adoption or placement for adoption.
example:
quest enrollment (for the employee or (4) Special enrollment of an employee Example. (i) Employee A is hired on September
the employee’s dependent, as described who is eligible but not enrolled and the 3, 1998 by Employer X, which has a group health
in paragraph (a)(2), (3), or (4) of this spouse of such employee. An employee plan in which A can elect to enroll either for
who is eligible, but not enrolled, in the employee-only coverage, for employee-plus-
section) not later than 30 days after the spouse coverage, or for family coverage, effective
exhaustion of the other coverage de- plan, and an individual who is a depen- on the first day of any calendar quarter thereafter.
scribed in paragraph (a)(5)(ii)(A) of this dent of such employee, are described in A is married and has no children. A does not elect
section or termination of the other cov- this paragraph (b)(4) if the employee to join Employer X’s plan (for employee-only
would be a participant but for a prior coverage, employee-plus-spouse coverage, or fam-
erage as a result of the loss of eligibility ily coverage) on October 1, 1998 or January 1,
for the other coverage for items de- election by the employee not to enroll in
1999. On February 15, 1999, a child is placed for
scribed in paragraph (a)(5)(ii)(B) of this the plan during a previous enrollment adoption with A and A’s spouse.
section or following the termination of period, and either— (ii) In this Example, the conditions for special
employer contributions toward that other (i) The employee and the individual enrollment of an employee with a new dependent
become married; or under paragraph (b)(2) of this section are satisfied,
coverage. The plan may impose the the conditions for special enrollment of an em-
same requirements that apply to employ- (ii) The employee and individual are ployee and a spouse with a new dependent under
ees who are otherwise eligible under the married and a child becomes a depen- paragraph (b)(4) of this section are satisfied, and
66
the conditions for special enrollment of an em- occurs on December 31, 1998 and B elects to individual to enroll under the terms of
ployee and a new dependent under paragraph enroll in Employer Y’s plan effective on January 1,
the plan based on any of the following
(b)(6) of this section are satisfied. Accordingly, 1999 by filing the completed request form by
Employer X’s plan will satisfy this paragraph (b) if December 31, 1998, in accordance with the special health status-related factors in relation to
and only if it allows A to elect, by filing the rule set forth in paragraph (a) of this section. the individual or a dependent of the
required forms by March 16, 1999, to enroll in (ii) In this Example 2, B has enrolled on a individual:
Employer X’s plan either with employee-only special enrollment date because the enrollment is (i) Health status.
coverage, with employee-plus-spouse coverage, or effective at a date described in paragraph (a)(7) of
with family coverage, effective as of February 15, this section (even though this date is also a regular (ii) Medical condition (including both
1999. enrollment date under the plan). physical and mental illnesses), as de-
(c) Notice of enrollment rights. On or fined in § 2590.701–2.
before the time an employee is offered § 2590.701–7 HMO affiliation period (iii) Claims experience.
the opportunity to enroll in a group as alternative to preexisting condition (iv) Receipt of health care.
health plan, the plan is required to exclusion. (v) Medical history.
provide the employee with a description (a) In general. A group health plan (vi) Genetic information, as defined
of the plan’s special enrollment rules offering health insurance coverage in § 2590.701–2.
under this section. For this purpose, the through an HMO, or an HMO that (vii) Evidence of insurability (includ-
plan may use the following model de- offers health insurance coverage in con- ing conditions arising out of acts of
scription of the special enrollment rules nection with a group health plan, may domestic violence).
under this section: impose an affiliation period only if each (viii) Disability.
If you are declining enrollment for of the requirements in paragraph (b) of (2) No application to benefits or ex-
yourself or your dependents (including this section is satisfied. clusions. To the extent consistent with
your spouse) because of other health (b) Requirements for affiliation pe- section 701 of the Act and § 2590.701–
insurance coverage, you may in the riod. 3, paragraph (a)(1) of this section shall
future be able to enroll yourself or your (1) No preexisting condition exclu- not be construed —
dependents in this plan, provided that sion is imposed with respect to any (i) To require a group health plan, or
you request enrollment within 30 days coverage offered by the HMO in con- a health insurance issuer offering group
after your other coverage ends. In addi- nection with the particular group health health insurance coverage, to provide
tion, if you have a new dependent as a plan. particular benefits other than those pro-
result of marriage, birth, adoption, or (2) No premium is charged to a par- vided under the terms of such plan or
placement for adoption, you may be ticipant or beneficiary for the affiliation coverage; or
able to enroll yourself and your depen- period. (ii) To prevent such a plan or issuer
dents, provided that you request enroll- (3) The affiliation period for the from establishing limitations or restric-
ment within 30 days after the marriage, HMO coverage is applied uniformly tions on the amount, level, extent, or
birth, adoption, or placement for adop- without regard to any health status- nature of the benefits or coverage for
tion. related factors. similarly situated individuals enrolled in
(d)(1) Special enrollment date defini- (4) The affiliation period does not the plan or coverage.
tion. A special enrollment date for an exceed 2 months (or 3 months in the (3) Construction. For purposes of
individual means any date in paragraph case of a late enrollee). paragraph (a)(1) of this section, rules for
(a)(7) or (b)(8) of this section on which (5) The affiliation period begins on eligibility to enroll include rules defin-
the individual has a right to have enroll- the enrollment date. ing any applicable waiting (or affilia-
ment in a group health plan become (6) The affiliation period for enroll- tion) periods for such enrollment and
effective under this section. ment in the HMO under a plan runs rules relating to late and special enroll-
(2) Examples. The rules of this sec- concurrently with any waiting period. ment.
tion are illustrated by the following (c) Alternatives to affiliation period. (4) Example. The following example
examples: An HMO may use alternative methods illustrates the rules of this paragraph (a):
Example 1. (i)(A) Employer Y maintains a Example. (i) An employer sponsors a group
group health plan that allows employees to enroll in lieu of an affiliation period to address
health plan that is available to all employees who
in the plan either— adverse selection, as approved by the enroll within the first 30 days of their employ-
(1) Effective on the first day of employment by State insurance commissioner or other ment. However, individuals who do not enroll in
an election filed within three days thereafter; official designated to regulate HMOs. the first 30 days cannot enroll later unless they
(2) Effective on any subsequent January 1 by pass a physical examination.
an election made during the preceding months of Nothing in this part requires a State to
receive proposals for or approve alterna- (ii) In this Example, the plan discriminates on
November or December; or
the basis of one or more health status-related
(3) Effective as of any special enrollment date tives to affiliation periods. factors.
described in this section.
(B) Employee B is hired by Employer Y on § 2590.702 Prohibiting discrimination (b) In premiums or contributions—
March 15, 1998 and does not elect to enroll in against participants and beneficiaries (1) In general. A group health plan,
Employer Y’s plan until January 31, 1999 when B
based on a health status-related factor. and a health insurance issuer offering
loses coverage under another plan. B elects to health insurance coverage in connection
enroll in Employer Y’s plan effective on February
1, 1999, by filing the completed request form by
(a) In eligibility to enroll— with a group health plan, may not
January 31, 1999, in accordance with the special (1) In general. Subject to paragraph require an individual (as a condition of
rule set forth in paragraph (a) of this section. (a)(2) of this section, a group health enrollment or continued enrollment un-
(ii) In this Example 1, B has enrolled on a plan, and a health insurance issuer offer- der the plan) to pay a premium or
special enrollment date because the enrollment is ing group health insurance coverage in contribution that is greater than the
effective at a date described in paragraph (a)(7) of
this section. connection with a group health plan, premium or contribution for a similarly
Example 2. (i) Same facts as Example 1, except may not establish rules for eligibility situated individual enrolled in the plan
that B’s loss of coverage under the other plan (including continued eligibility) of any based on any health status-related factor,
67
in relation to the individual or a depen- section and except as provided in para- (v) Prohibits the imposition of any
dent of the individual. graph (c) of this section, Part 7 of preexisting condition exclusion in cases
(2) Construction. Nothing in para- Subtitle B of Title I of the Act is not to not described in section 701(d) of the
graph (b)(1) of this section shall be be construed to supersede any provision Act or expands the exceptions described
construed— of State law which establishes, imple- therein;
(i) To restrict the amount that an ments, or continues in effect any stan- (vi) Requires special enrollment peri-
employer may be charged by an issuer dard or requirement solely relating to ods in addition to those required under
for coverage under a group health plan; health insurance issuers in connection section 701(f) of the Act; or
or with group health insurance coverage (vii) Reduces the maximum period
(ii) To prevent a group health plan, except to the extent that such standard permitted in an affiliation period under
and a health insurance issuer offering or requirement prevents the application section 701(g)(1)(B) of the Act.
group health insurance coverage, from of a requirement of this part. (d) Definitions—
establishing premium discounts or re- (b) Continued preemption with re- (1) State law. For purposes of this
bates or modifying otherwise applicable spect to group health plans. Nothing in § 2590.736 the term State law includes
copayments or deductibles in return for Part 7 of Subtitle B of Title I of the Act all laws, decisions, rules, regulations, or
adherence to a bona fide wellness pro- affects or modifies the provisions of other State action having the effect of
gram. For purposes of this section, a section 514 of the Act with respect to law, of any State. A law of the United
bona fide wellness program is a pro- group health plans. States applicable only to the District of
gram of health promotion and disease (c) Special rules— Columbia is treated as a State law rather
prevention. (1) In general. Subject to paragraph than a law of the United States.
(3) Example. The rules of this para- (c)(2) of this section, the provisions of (2) State. For purposes of this section
graph (b) are illustrated by the following Part 7 of Subtitle B of Title I of the Act the term State includes a State, the
example: relating to health insurance coverage Northern Mariana Islands, any political
Example. (i) Plan X offers a premium discount offered by a health insurance issuer subdivisions of a State or such Islands,
to participants who adhere to a cholesterol- or any agency or instrumentality of
reduction wellness program. Enrollees are ex-
supersede any provision of State law
pected to keep a diary of their food intake over 6 which establishes, implements, or con- either.
weeks. They periodically submit the diary to the tinues in effect a standard or require-
plan physician who responds with suggested diet ment applicable to imposition of a pre- § 2590.732 Special Rules Relating to
modifications. Enrollees are to modify their diets existing condition exclusion specifically Group Health Plans.
in accordance with the physician’s recommenda-
tions. At the end of the 6 weeks, enrollees are governed by section 701 which differs (a) General exception for certain
given a cholesterol test and those who achieve a from the standards or requirements small group health plans. The require-
count under 200 receive a premium discount. specified in such section. ments of this Part 7 of Subtitle B of
(ii) In this Example, because enrollees who (2) Exceptions. Only in relation to
otherwise comply with the program may be unable Title I of the Act do not apply to any
to achieve a cholesterol count under 200 due to a health insurance coverage offered by a group health plan (and group health
health status-related factor, this is not a bona fide health insurance issuer, the provisions of insurance coverage offered in connec-
wellness program and such discounts would dis- this part do not supersede any provision tion with a group health plan) for any
criminate impermissibly based on one or more of State law to the extent that such
health status-related factors. However, if, instead,
plan year if, on the first day of the plan
individuals covered by the plan were entitled to
provision— year, the plan has fewer than 2 partici-
receive the discount for complying with the diary (i) Shortens the period of time from pants who are current employees.
and dietary requirements and were not required to the ‘‘6-month period’’ described in sec- (b) Excepted benefits—
pass a cholesterol test, the program would be a tion 701(a)(1) of the Act and
bona fide wellness program.
(1) In general. The requirements of
§ 2590.701–3(a)(1)(i) (for purposes of Subparts A and C of this part do not
§ 2590.703 Guaranteed renewability in identifying a preexisting condition); apply to any group health plan (or any
multiemployer plans and multiple em- (ii) Shortens the period of time from group health insurance coverage offered
ployer welfare arrangements. [Reserved] the ‘‘12 months’’ and ‘‘18 months’’ in connection with a group health plan)
described in section 701(a)(2)of the Act in relation to its provision of the ben-
Subpart B - Other Requirements and § 2590.701–3(a)(1)(ii) (for purposes efits described in paragraph(b)(2), (3),
of applying a preexisting condition ex- (4), or (5) of this section (or any
§ 2590.711 Standards relating to ben- clusion period); combination of these benefits).
efits for mothers and newborns. [Re- (iii) Provides for a greater number of (2) Benefits excepted in all circum-
served] days than the ‘‘63 day period’’ described stances. The following benefits are ex-
in sections 701(c)(2)(A) and (d)(4)(A) cepted in all circumstances—
§ 2590.712 Parity in the application of of the Act and §§ 2590.701–3(a)(1)(iii) (i) Coverage only for accident (in-
certain limits to mental health benefits. and 2590.701–4 (for purposes of apply- cluding accidental death and dismember-
[Reserved] ing the break in coverage rules); ment);
(iv) Provides for a greater number of (ii) Disability income insurance;
Subpart C - General Provisions
days than the ‘‘30-day period’’ described (iii) Liability insurance, including
§ 2590.731 Preemption; State flexibil- in sections 701(b)(2) and (d)(1) of the general liability insurance and automo-
ity; construction. Act and § 2590.701–3(b) (for purposes bile liability insurance;
of the enrollment period and preexisting (iv) Coverage issued as a supplement
(a) Continued applicability of State condition exclusion periods for certain to liability insurance;
law with respect to health insurance newborns and children that are adopted (v) Workers’ compensation or similar
issuers. Subject to paragraph (b) of this or placed for adoption); insurance;
68
(vi) Automobile medical payment in- exclusion of benefits under any group amends the plan solely to conform to
surance; health plan maintained by the same plan any requirement of such part, is not
(vii) Credit-only insurance (for ex- sponsor; and treated as a termination of the collective
ample, mortgage insurance); and (C) The benefits are paid with respect bargaining agreement.
(viii) Coverage for on-site medical to an event without regard to whether (3)(i) Preexisting condition exclusion
clinics. benefits are provided with respect to the periods for current employees. Any pre-
(3) Limited excepted benefits. (i) In event under any group health plan main- existing condition exclusion period per-
general. Limited-scope dental benefits, tained by the same plan sponsor. mitted under § 2590.701–3 is measured
limited-scope vision benefits, or long- (5) Supplemental benefits. The fol- from the individual’s enrollment date in
term care benefits are excepted if they lowing benefits are excepted only if the plan. Such exclusion period, as
are provided under a separate policy, they are provided under a separate limited under § 2590.701–3, may be
certificate, or contract of insurance, or policy, certificate, or contract of insur- completed prior to the effective date of
are otherwise not an integral part of the ance: the Health Insurance Portability and Ac-
plan, as defined in paragraph (b)(3)(ii) (i) Medicare supplemental health in- countability Act of 1996 (HIPAA) for
of this section. surance (as defined under section his or her plan. Therefore, on the date
(ii) Integral. For purposes of para- 1882(g)(1) of the Social Security Act; the individual’s plan becomes subject to
graph (b)(3)(i) of this section, benefits also known as Medigap or MedSupp Part 7 of Subtitle B of Title I of the Act,
are deemed to be an integral part of a insurance); no preexisting condition exclusion may
plan unless a participant has the right to (ii) Coverage supplemental to the be imposed with respect to an individual
elect not to receive coverage for the coverage provided under Chapter 55, beyond the limitation in § 2590.701–3.
benefits and, if the participant elects to Title 10 of the United States Code (also For an individual who has not com-
receive coverage for the benefits, the known as CHAMPUS supplemental pro- pleted the permitted exclusion period
participant pays an additional premium grams), and under HIPAA, upon the effective date
or contribution for that coverage. (iii) Similar supplemental coverage for his or her plan, the individual may
(iii) Limited scope. Limited scope provided to coverage under a group use creditable coverage that the indi-
dental or vision benefits are dental or health plan. vidual had prior to the enrollment date
vision benefits that are sold under a (c) Treatment of partnerships. [Re- to reduce the remaining preexisting con-
separate policy or rider and that are served] dition exclusion period applicable to the
limited in scope to a narrow range or individual.
type of benefits that are generally ex- § 2590.734 Enforcement. [Reserved] (ii) Examples. The following ex-
cluded from hospital/medical/surgical amples illustrate the rules of this para-
benefit packages. § 2590.736 Effective Dates. graph (a)(3):
(iv) Long-term care. Long-term care Example 1. (i) Individual A has been working
benefits are benefits that are either— (a) General effective dates— for Employer X and has been covered under
Employer X’s plan since March 1, 1997. Under
(A) Subject to State long-term care (1) Non-collectively-bargained plans. Employer X’s plan, as in effect before January 1,
insurance laws; Except as otherwise provided in this 1998, there is no coverage for any preexisting
(B) For qualified long-term care in- section, Part 7 of Subtitle B of Title I of condition. Employer X’s plan year begins on
surance services, as defined in section the Act and Subparts A and C of this January 1, 1998. A’s enrollment date in the plan is
part apply with respect to group health March 1, 1997 and A has no creditable coverage
7702B(c)(1) of the Code, or provided before this date.
under a qualified long-term care insur- plans, including health insurance issuers (ii) In this Example 1, Employer X may con-
ance contract, as defined in section offering health insurance coverage in tinue to impose the preexisting condition exclusion
7702B(b) of the Internal Revenue Code; connection with group health plans, for under the plan through February 28, 1998 (the end
or plan years beginning after June 30, of the 12-month period using anniversary dates).
1997. Example 2. (i) Same facts as in Example 1,
(C) Based on cognitive impairment or except that A’s enrollment date was August 1,
a loss of functional capacity that is (2) Collectively bargained plans. Ex- 1996, instead of March 1, 1997.
expected to be chronic. cept as otherwise provided in this sec- (ii) In this Example 2, on January 1, 1998,
(4) Noncoordinated benefits— tion (other than paragraph (a)(1) of this Employer X’s plan may no longer exclude treat-
(i) Excepted benefits that are not co- section), in the case of a group health ment for any preexisting condition that A may
have; however, because Employer X’s plan is not
ordinated. Coverage for only a specified plan maintained pursuant to one or more subject to HIPAA until January 1, 1998, A is not
disease or illness (for example, cancer- collective bargaining agreements be- entitled to claim reimbursement for expenses un-
only policies) or hospital indemnity or tween employee representatives and one der the plan for treatments for any preexisting
other fixed dollar indemnity insurance or more employers ratified before Au- condition of A received before January 1, 1998.
(for example, $100/day) is excepted gust 21, 1996, Part 7 of Subtitle B of (b) Effective date for certification re-
only if it meets each of the conditions Title I of the Act and Subparts A and C quirement—
specified in paragraph (b)(4)(ii) of this of this part do not apply to plan years (1) In general. Subject to the transi-
section. beginning before the later of July 1, tional rule in § 2590.701–5(a)(5)(iii),
(ii) Conditions. Benefits are described 1997, or the date on which the last of the certification rules of § 2590.701–5
in paragraph (b)(4)(i) of this section the collective bargaining agreements re- apply to events occurring on or after
only if— lating to the plan terminates (determined July 1, 1996.
(A) The benefits are provided under a without regard to any extension thereof (2) Period covered by certificate. A
separate policy, certificate, or contract of agreed to after August 21, 1996). For certificate is not required to reflect cov-
insurance; these purposes, any plan amendment erage before July 1, 1996.
(B) There is no coordination between made pursuant to a collective bargaining (3) No certificate before June 1,
the provision of the benefits and an agreement relating to the plan, that 1997. Notwithstanding any other provi-
69
sion of Subpart A or C of this part, in graph (e)(3) must be in writing and Subpart A—General Provisions
no case is a certificate required to be must include information substantially Sec.
provided before June 1, 1997. similar to the information included in a 144.101 Basis and purpose.
(c) Limitation on actions. No enforce- model notice authorized by the Secre- 144.102 Scope and applicability.
ment action is to be taken, pursuant to tary. Copies of the model notice are
Part 7 of Subtitle B of Title I of the Act, available on the following website — 144.103 Definitions applicable to both
against a group health plan or health http://www.dol.gov/dol/pwba/ (or call group (45 CFR Part 146) and
insurance issuer with respect to a viola- 1–800–998–7542). individual (45 CFR Part 148)
tion of a requirement imposed by Part 7 markets.
(iv) Providing certificate after re-
of Subtitle B of Title I of the Act before quest. If an individual requests a certifi- Subpart B—[RESERVED]
January 1, 1998, if the plan or issuer cate following receipt of the notice, the
has sought to comply in good faith with certificate must be provided at the time Authority: Secs. 2701 through 2763,
such requirements. Compliance with this of the request as set forth in 2791, and 2792 of the Public Health
part is deemed to be good faith compli- § 2590.701–5(a)(5)(iii). Service Act, 42 U.S.C. 300gg through
ance with the requirements of Part 7 of (v) Other certification rules apply. 300gg–63, 300gg–91, and 300gg–92.
Subtitle B of Title I of the Act. The rules set forth in § 2590.701–
(d) Transition rules for counting 5(a)(4)(i) (method of delivery) and PART 144—REQUIREMENTS
creditable coverage. An individual who § 2590.701–5(a)(1) (entities required to RELATING TO HEALTH
seeks to establish creditable coverage provide a certificate) apply with respect INSURANCE COVERAGE
for periods before July 1, 1996 is en- to the provision of the notice.
titled to establish such coverage through Subpart A—General Provisions
the presentation of documents or other Pension and Welfare Benefits
means in accordance with the provisions Administration 29 CFR Chapter XXV § 144.101 Basis and purpose.
of § 2590.701–5(c). For coverage relat-
Signed at Washington, DC this 27 day Part 146 of this subchapter imple-
ing to an event occurring before July 1,
of March, 1997. ments sections 2701 through 2723 of the
1996, a group health plan and a health
Public Health Service Act (PHS Act, 42
insurance issuer is not subject to any
Olena Berg, U.S.C. 300gg, et seq.). Its purpose is to
penalty or enforcement action with re-
Assistant Secretary, Pension and Welfare improve access to group health insur-
spect to the plan’s or issuer’s counting
Benefits Administration, ance coverage and to guarantee the
(or not counting) such coverage if the
U.S. Department of Labor. renewability of all coverage in the group
plan or issuer has sought to comply in
market. Part 148 of this subchapter
good faith with the applicable require-
Department of Health and Human implements sections 2741 through 2763
ments under § 2590.701–5(c).
Services of the PHS Act. Its purpose is to
(e) Transition rules for certificates of
improve access to individual health in-
creditable coverage—(1) Certificates
45 CFR Subtitle A surance coverage for certain eligible
only upon request. For events occurring
individuals who previously had group
on or after July 1, 1996, but before
45 CFR is amended as set forth below: coverage, and to guarantee the renew-
October 1, 1996, a certificate is required
ability of all coverage in the individual
to be provided only upon a written 1. The heading for Subtitle A is re- market. Sections 2791 and 2792 of the
request by or on behalf of the individual vised to read as follows: PHS Act define terms used in the regu-
to whom the certificate applies.
lations in this subchapter and provide
(2) Certificates before June 1, 1997. SUBTITLE A—DEPARTMENT OF the basis for issuing these regulations,
For events occurring on or after October HEALTH AND HUMAN SERVICES respectively.
1, 1996 and before June 1, 1997, a
certificate must be furnished no later 2. Existing parts 1 through 100 are
designated as Subchapter A of Subtitle A § 144.102 Scope and applicability.
than June 1, 1997, or any later date
permitted under § 2590.701–5(a)(2)(ii) and a new Subchapter heading is added (a) For purposes of 45 CFR Parts 144
and (iii). to read as follows: through 148, all health insurance cover-
(3) Optional notice—(i) In general. age is generally divided into two mar-
This paragraph (e)(3) applies with re- SUBCHAPTER A—GENERAL kets— the group market (set forth in 45
spect to events described in ADMINISTRATION CFR Part 146) and the individual mar-
§ 2590.701–5(a)(5)(ii), that occur on or 3. New Subchapter B, consisting of ket (set forth in 45 CFR Part 148). 45
after October 1, 1996 but before June 1, Parts 140 through 199, is added to read CFR Part 146 limits the group market to
1997. A group health plan or health as follows: insurance sold to employment-related
insurance issuer offering group health group health plans and further divides
coverage is deemed to satisfy SUBCHAPTER B—REQUIREMENTS the group market into the large group
§ 2590.701–5(a)(2) and (3) if a notice is RELATING TO HEALTH CARE market and the small group market.
provided in accordance with the provi- ACCESS Federal law further defines the small
sions of paragraphs (e)(3)(i) through (iv) group market as insurance sold to em-
of this section. PARTS 140—143 [RESERVED] ployer plans with 2 to 50 employees.
(ii) Time of notice. The notice must State law, however, may expand the
be provided no later than June 1, 1997. PART 144—REQUIREMENTS definition of the small group market to
(iii) Form and content of notice. A RELATING TO HEALTH include certain coverage that would oth-
notice provided pursuant to this para- INSURANCE COVERAGE erwise, under the Federal law, be con-
70
sidered coverage in the large group (2) Has been formed and maintained tional misrepresentation of a material
market or the individual market. in good faith for purposes other than fact in connection with the plan). An
(b) The protections afforded under 45 obtaining insurance. individual is considered to have ex-
CFR Parts 144 through 148 to individu- (3) Does not condition membership hausted COBRA continuation coverage
als and employers (and other sponsors in the association on any health status- if such coverage ceases—
of health insurance offered in connec- related factor relating to an individual (i) Due to the failure of the employer
tion with a group health plan) are deter- (including an employee of an employer or other responsible entity to remit pre-
mined by whether the coverage involved or a dependent of any employee). miums on a timely basis; or
is obtained in the small group market, (4) Makes health insurance coverage (ii) When the individual no longer
the large group market, or the individual offered through the association available resides, lives, or works in a service area
market. Small employers, and individu- to all members regardless of any health of an HMO or similar program (whether
als who are eligible to enroll under the status-related factor relating to the mem- or not within the choice of the indi-
employer’s plan, are guaranteed avail- bers (or individuals eligible for coverage vidual) and there is no other COBRA
ability of insurance coverage sold in the through a member). continuation coverage available to the
small group market. Small and large (5) Does not make health insurance individual.
employers are guaranteed the right to coverage offered through the association (6) Exhaustion of continuation cover-
renew their group coverage, subject to available other than in connection with a age means that an individual’s continua-
certain exceptions. Eligible individuals member of the association. tion coverage ceases for any reason
are guaranteed availability of coverage (6) Meets any additional requirements other than either failure of the individual
sold in the individual market, and all that may be imposed under State law. to pay premiums on a timely basis, or
coverage in the individual market must Church plan means a Church plan for cause (such as making a fraudulent
be guaranteed renewable. within the meaning of section 3(33) of claim or an intentional misrepresentation
(c) Coverage that is provided to asso- ERISA. of a material fact in connection with the
ciations, but is not related to employ- COBRA definitions: plan). An individual is considered to
ment, is not considered group coverage (1) COBRA means Title X of the have exhausted continuation coverage
under 45 CFR Parts 144 through 148. Consolidated Omnibus Budget Recon- if—
The coverage is considered coverage in ciliation Act of 1985, as amended. (i) Coverage ceases due to the failure
the individual market, regardless of (2) COBRA continuation coverage of the employer or other responsible
whether it is considered group coverage means coverage, under a group health entity to remit premiums on a timely
under State law. plan, that satisfies an applicable COBRA basis, or
continuation provision. (ii) When the individual no longer
§ 144.103 Definitions applicable to (3) COBRA continuation provision resides, lives, or works in a service area
both group (45 CFR Part 146) and means sections 601 through 608 of the of an HMO or similar program (whether
individual (45 CFR Part 148) markets. Employee Retirement Income Security or not within the choice of the indi-
Unless otherwise provided, the follow- Act of 1974, section 4980B of the vidual) and there is no other continua-
ing definitions apply: Internal Revenue Code of 1986 (other tion coverage available to the individual.
Affiliation period means a period of than paragraph (f)(1) of section 4980B Condition means a medical condition.
time that must expire before health insofar as it relates to pediatric vac- Creditable coverage has the meaning
insurance coverage provided by an cines), and Title XXII of the PHS Act. of 45 CFR 146.113(a).
HMO becomes effective, and during (4) Continuation coverage means Eligible individual, for purposes of—
which the HMO is not required to coverage under a COBRA continuation (1) The group market provisions in
provide benefits. provision or a similar State program. 45 CFR Part 146, Subpart E, the term is
Coverage provided by a plan that is defined in 45 CFR 146.150(b); and
Applicable State authority means,
subject to a COBRA continuation provi- (2) The individual market provisions
with respect to a health insurance issuer
sion or similar State program, but that in 45 CFR Part 148, the term is defined
in a State, the State insurance commis-
does not satisfy all the requirements of in 45 CFR 148.103.
sioner or official or officials designated
that provision or program, will be Employee has the meaning given the
by the State to enforce the requirements
deemed to be continuation coverage if it term under section 3(6) of ERISA,
of 45 CFR Parts 146 and 148 for the
allows an individual to elect to continue which states, ‘‘any individual employed
State involved with respect to the issuer.
coverage for a period of at least 18 by an employer.’’
Beneficiary has the meaning given the months. Continuation coverage does not Employer has the meaning given the
term under section 3(8) of the Employee include coverage under a conversion term under section 3(5) of ERISA,
Retirement Income Security Act of 1974 policy required to be offered to an which states, ‘‘any person acting directly
(ERISA), which states, ‘‘a person desig- individual upon exhaustion of continua- as an employer, or indirectly in the
nated by a participant, or by the terms tion coverage, nor does it include con- interest of an employer, in relation to an
of an employee benefit plan, who is or tinuation coverage under the Federal employee benefit plan; and includes a
may become entitled to a benefit’’ under Employees Health Benefits Program. group or association of employers acting
the plan. (5) Exhaustion of COBRA continua- for an employer in such capacity.’’
Bona fide association means, with tion coverage means that an individual’s Enroll means to become covered for
respect to health insurance coverage COBRA continuation coverage ceases benefits under a group health plan (that
offered in a State, an association that for any reason other than either failure is, when coverage becomes effective),
meets the following conditions: of the individual to pay premiums on a without regard to when the individual
(1) Has been actively in existence for timely basis, or for cause (such as may have completed or filed any forms
at least 5 years. making a fraudulent claim or an inten- that are required in order to enroll in the
71
plan. For this purpose, an individual vidual market, rather than the group Large employer means, in connection
who has health insurance coverage un- market; see the definition of ‘‘individual with a group health plan with respect to
der a group health plan is enrolled in market’’ in this section.) a calendar year and a plan year, an
the plan regardless of whether the indi- Health insurance coverage means employer who employed an average of
vidual elects coverage, the individual is benefits consisting of medical care (pro- at least 51 employees on business days
a dependent who becomes covered as a vided directly, through insurance or re- during the preceding calendar year and
result of an election by a participant, or imbursement, or otherwise) under any who employs at least 2 employees on
the individual becomes covered without hospital or medical service policy or the first day of the plan year, unless
an election. certificate, hospital or medical service otherwise provided under State law.
Enrollment date definitions (enroll- plan contract, or HMO contract offered Large group market means the health
ment date and first day of coverage) are by a health insurance issuer. insurance market under which individu-
set forth in 45 CFR 146.11(a)(2)(i) and Health insurance issuer or issuer als obtain health insurance coverage
(a)(2)(ii). means an insurance company, insurance (directly or through any arrangement) on
ERISA stands for the Employee Re- service, or insurance organization (in- behalf of themselves (and their depen-
tirement Income Security Act of 1974, cluding an HMO) that is required to be dents) through a group health plan
as amended (29 U.S.C. 1001 et. seq.). licensed to engage in the business of maintained by a large employer, unless
Excepted benefits for purposes of insurance in a State and that is subject otherwise provided under State law.
the— to State law that regulates insurance Late enrollment definitions (late en-
(1) Group market provisions in 45 (within the meaning of section 514(b)(2) rollee and late enrollment) are set forth
CFR Part 146 Subpart D, the term is of ERISA). This term does not include a in 45 CFR 146.111(a)(2)(iii) and
defined in 45 CFR 146.145(b); and group health plan. (a)(2)(iv).
(2) The individual market provisions Health maintenance organization or Medical care or condition means
in 45 CFR Part 148, the term is defined HMO means— amounts paid for any of the following:
in 45 CFR 148.220. (1) A Federally qualified health main- (1) The diagnosis, cure, mitigation,
Federal governmental plan means a tenance organization (as defined in sec- treatment, or prevention of disease, or
governmental plan established or main- tion 1301(a) of the PHS Act); amounts paid for the purpose of affect-
tained for its employees by the Govern- (2) An organization recognized under ing any structure or function of the
ment of the United States or by any State law as a health maintenance orga- body.
agency or instrumentality of such Gov- nization; or
(2) Transportation primarily for and
ernment. (3) A similar organization regulated
essential to medical care referred to in
Genetic information means informa- under State law for solvency in the
paragraph (1) of this definition.
tion about genes, gene products, and same manner and to the same extent as
inherited characteristics that may derive such a health maintenance organization. (3) Insurance covering medical care
from the individual or a family member. Health status-related factor means referred to in paragraphs (1) and (2) of
This includes information regarding car- health status, medical condition (includ- this definition.
rier status and information derived from ing both physical and mental illnesses), Medical condition means any condi-
laboratory tests that identify mutations claims experience, receipt of health care, tion, whether physical or mental, includ-
in specific genes or chromosomes, medical history, genetic information, ing, but not limited to, any condition
physical medical examinations, family evidence of insurability (including con- resulting from illness, injury (whether or
histories, and direct analysis of genes or ditions arising out of acts of domestic not the injury is accidental), pregnancy,
chromosomes. violence) and disability. or congenital malformation. However,
Governmental plan means a govern- Individual health insurance coverage genetic information is not a condition.
mental plan within the meaning of sec- means health insurance coverage offered NAIC stands for the National Associa-
tion 3(32) of ERISA. to individuals in the individual market, tion of Insurance Commissioners.
Group health insurance coverage but does not include short-term, limited- Network plan means health insurance
means health insurance coverage offered duration insurance. Individual health in- coverage of a health insurance issuer
in connection with a group health plan. surance coverage can include dependent under which the financing and delivery
Group health plan means an em- coverage. of medical care (including items and
ployee welfare benefit plan (as defined Individual market means the market services paid for as medical care) are
in section 3(1) of ERISA) to the extent for health insurance coverage offered to provided, in whole or in part, through a
that the plan provides medical care (as individuals other than in connection defined set of providers under contract
defined in section 2791(a)(2) of the PHS with a group health plan. Unless a State with the issuer.
Act and including items and services elects otherwise in accordance with sec- Non-Federal governmental plan
paid for as medical care) to employees tion 2791(e)(1)(B)(ii) of the PHS Act, means a governmental plan that is not a
or their dependents (as defined under such term also includes coverage offered Federal government plan.
the terms of the plan) directly or in connection with a group health plan Participant has the meaning given the
through insurance, reimbursement, or that has fewer than two participants as term under section 3(7) of ERISA,
otherwise. current employees on the first day of the which states, ‘‘any employee or former
Group market means the market for plan year. employee of an employer, or any mem-
health insurance coverage offered in Internal Revenue Code (Code) means ber or former member of an employee
connection with a group health plan. the Internal Revenue Code of 1986, as organization, who is or may become
(However, unless otherwise provided amended (Title 26, United States Code). eligible to receive a benefit of any type
under State law, certain very small plans Issuer means a health insurance is- from an employee benefit plan which
may be treated as being in the indi- suer. covers employees of such employer or
72
members of such organization, or whose pre-enrollment questionnaire or physical PART 145—[RESERVED]
beneficiaries may be eligible to receive examination given to the individual, or
any such benefit.’’ review of medical records relating to the PART 146—REQUIREMENTS FOR
PHS Act stands for the Public Health pre-enrollment period. THE GROUP HEALTH INSURANCE
Service Act. Public health plan means ‘‘public MARKET
Placement, or being placed, for adop- health plan’’ within the meaning of 45
tion means the assumption and retention CFR 146.113(a)(1)(ix). Subpart A—General Provisions
of a legal obligation for total or partial Short-term limited duration insurance Sec.
support of a child by a person with means health insurance coverage pro- 146.101 Basis and scope.
whom the child has been placed in vided under a contract with an issuer
anticipation of the child’s adoption. The that has an expiration date specified in Subpart B—Requirements Relating to
child’s placement for adoption with the the contract (taking into account any Access and Renewability of Coverage,
person terminates upon the termination extensions that may be elected by the and Limitations on Preexisting
of the legal obligation. policyholder without the issuer’s con- Condition Exclusion Periods
Plan sponsor has the meaning given sent) that is within 12 months of the
the term under section 3(16)(B) of date the contract becomes effective. Sec.
ERISA, which states ‘‘(i) the employer Significant break in coverage has the 146.111 Limitations on preexisting
in the case of an employee benefit plan meaning given the term in 45 CFR condition exclusion period.
established or maintained by a single 146.113(b)(2)(iii). 146.113 Rules relating to creditable
employer, (ii) the employee organization Small employer means, in connection coverage.
in the case of a plan established or with a group health plan with respect to 146.115 Certification and disclosure of
maintained by an employee organiza- a calendar year and a plan year, an previous coverage.
tion, or (iii) in the case of a plan employer who employed an average of 146.117 Special enrollment periods.
established or maintained by two or at least 2 but not more than 50 employ- 146.119 HMO affiliation period as
more employers or jointly by one or ees on business days during the preced- alternative to preexisting con-
more employers and one or more em- ing calendar year and who employs at dition exclusion.
ployee organizations, the association, least 2 employees on the first day of the 146.121 Prohibiting discrimination
committee, joint board of trustees, or plan year, unless otherwise provided against participants and ben-
other similar group of representatives of under State law. eficiaries based on health
the parties who establish or maintain the Small group market means the health status-related factors.
plan.’’ insurance market under which individu- 146.125 Effective dates.
Plan year means the year that is als obtain health insurance coverage
Subpart C—[RESERVED]
designated as the plan year in the plan (directly or through any arrangement) on
document of a group health plan, except behalf of themselves (and their depen- Subpart D—Preemption and Special
that if the plan document does not dents) through a group health plan Rules
designate a plan year or if there is no maintained by a small employer.
plan document, the plan year is: Special enrollment date has the mean- Sec.
(1) The deductible/limit year used un- ing given the term in 45 CFR 146.143 Preemption; State flexibility;
der the plan. 146.117(d). construction.
(2) If the plan does not impose State means each of the several 146.145 Special rules relating to group
deductibles or limits on a yearly basis, States, the District of Columbia, Puerto health plans.
the plan year is the policy year. Rico, the Virgin Islands, Guam, Ameri-
(3) If the plan does not impose can Samoa, and the Northern Mariana Subpart E—Provisions Applicable to
deductibles or limits on a yearly basis, Islands. Only Health Insurance Issuers
and either the plan is not insured or the State health benefits risk pool means Sec.
insurance policy is not renewed on an a ‘‘State health benefits risk pool’’ 146.150 Guaranteed availability of
annual basis, the plan year is the em- within the meaning of 45 CFR coverage for employers in the
ployer’s taxable year. 146.113(a)(1)(vii). small group market.
(4) In any other case, the plan year is Waiting period means the period that 146.152 Guaranteed renewability of
the calendar year. must pass before an employee or depen- coverage for employers in the
Preexisting condition exclusion means dent is eligible to enroll under the terms group market.
a limitation or exclusion of benefits of a group health plan. If an employee 146.160 Disclosure of information.
relating to a condition based on the fact or dependent enrolls as a late enrollee or
that the condition was present before the on a special enrollment date, any period Subpart F—Exclusion of Plans and
first day of coverage, whether or not before such late or special enrollment is Enforcement
any medical advice, diagnosis, care, or not a waiting period. If an individual
treatment was recommended or received seeks and obtains coverage in the indi- Sec.
before that day. A preexisting condition vidual market, any period after the date 146.180 Treatment of non-Federal
exclusion includes any exclusion appli- the individual files a substantially com- governmental plans.
cable to an individual as a result of plete application for coverage and be- 146.184 Enforcement.
information that is obtained relating to fore the first day of coverage is a Authority: Secs. 2701 through 2763,
an individual’s health status before the waiting period. 2791, and 2792 of the PHS Act, 42
individual’s first day of coverage, such U.S.C. 300gg through 300gg–63,
as a condition identified as a result of a SUBPART B—[RESERVED] 300gg–91, and 300gg–92.
73
PART 146—REQUIREMENTS FOR health insurance issuer offering group Example 3: (i) Individual B has asthma and is
THE GROUP HEALTH INSURANCE health insurance coverage, may impose, treated for that condition several times during the
6-month period before B’s enrollment date in
MARKET with respect to a participant or benefi- Employer S’s plan. The plan imposes a 12-month
ciary, a preexisting condition exclusion preexisting condition exclusion. B has no prior
Subpart A—General Provisions only if the requirements of this para- creditable coverage to reduce the exclusion period.
graph (a) are satisfied. Three months after the enrollment date, B begins
§ 146.101 Basis and scope. coverage under Employer S’s plan. B is hospital-
(i) 6-month look-back rule. A preex-
ized for asthma.
(a) Statutory basis. This Part imple- isting condition exclusion must relate to
a condition (whether physical or men- (ii) In this Example, Employer S’s plan may
ments sections 2701 through 2723 of the exclude payment for the hospital stay and the
PHS Act. Its purpose is to improve tal), regardless of the cause of the physician services associated with this of illness
access to group health insurance cover- condition, for which medical advice, because the care is related to a medical condition
age and to guarantee the renewability of diagnosis, care, or treatment was recom- for which treatment was received by B during the
all coverage in the group market. Sec- mended or received within the 6-month 6-month period before the enrollment date.
tions 2791 and 2792 of the PHS Act period ending on the enrollment date. Example 4: (i) Individual D, who is subject to
a preexisting condition exclusion imposed by
define terms used in the regulations in (A) For purposes of this paragraph Employer U’s plan, has diabetes, as well as a foot
this subchapter and provide the basis for (a)(1)(i), medical advice, diagnosis, care, condition caused by poor circulation and retinal
issuing these regulations, respectively. or treatment is taken into account only degeneration (both of which are conditions that
(b) Scope. A group health plan or if it is recommended by, or received may be directly attributed to diabetes). After
from, an individual licensed or similarly enrolling in the plan, D stumbles and breaks a leg.
health insurance issuer offering group
authorized to provide such services un- (ii) In this Example, the leg fracture is not a
health insurance coverage may provide condition related to D’s diabetes, even though
greater rights to participants and benefi- der State law and operating within the poor circulation in D’s extremities and poor vision
ciaries than those set forth in this part. scope of practice authorized by State may have contributed towards the accident. How-
(1) Subpart B. Subpart B of this part law. ever, any additional medical services that may be
sets forth minimum requirements for (B) For purposes of this paragraph needed because of D’s preexisting diabetic condi-
tion that would not be needed by another patient
group health plans and health insurance (a)(1)(i), the 6-month period ending on with a broken leg who does not have diabetes may
issuers offering group health insurance the enrollment date begins on the be subject to the preexisting condition exclusion
coverage concerning: 6-month anniversary date preceding the imposed under Employer U’s plan.
(i) Limitations on a preexisting con- enrollment date. For example, for an (ii) Maximum length of preexisting
dition exclusion period. enrollment date of August 1, 1998, the condition exclusion (the look-forward
(ii) Certificates and disclosure of pre- 6-month period preceding the enrollment rule). A preexisting condition exclusion
vious coverage. date is the period commencing on Feb- is not permitted to extend for more than
(iii) Methods of counting creditable ruary 1, 1998 and continuing through 12 months (18 months in the case of a
coverage. July 31, 1998. As another example, for late enrollee) after the enrollment date.
(iv) Special enrollment periods. an enrollment date of August 30, 1998, For purposes of this paragraph (a)(1)(ii),
(v) Use of an affiliation period by an the 6-month period preceding the enroll- the 12-month and 18-month periods af-
HMO as an alternative to a preexisting ment date is the period commencing on ter the enrollment date are determined
condition exclusion. February 28, 1998 and continuing by reference to the anniversary of the
(2) Subpart D. Subpart D of this part through August 29, 1998. enrollment date. For example, for an
sets forth exceptions to the requirements (C) The following examples illustrate enrollment date of August 1, 1998, the
of Subpart B for certain plans and the requirements of this paragraph 12-month period after the enrollment
certain types of benefits. (a)(1)(i). date is the period commencing on Au-
(3) Subpart E. Subpart E of this part Example 1: (i) Individual A is treated for a gust 1, 1998 and continuing through
medical condition 7 months before the enrollment July 31, 1999.
implements sections 2711 through 2713 date in Employer R’s group health plan. As part of
of the PHS Act, which set forth require- such treatment, A’s physician recommends that a (iii) Reducing a preexisting condition
ments that apply only to health insur- follow-up examination be given 2 months later. exclusion period by creditable coverage.
ance issuers offering health insurance Despite this recommendation, A does not receive a The period of any preexisting condition
follow-up examination and no other medical ad-
coverage, in connection with a group vice, diagnosis, care, or treatment for that condi-
exclusion that would otherwise apply to
health plan. tion is recommended to A or received by A during an individual under a group health plan
(4) Subpart F. Subpart F of this part the 6-month period ending on A’s enrollment date is reduced by the number of days of
addresses the treatment of non-Federal in Employer R’s plan. creditable coverage the individual has as
governmental plans, and sets forth en- (ii) In this Example, Employer R’s plan may of the enrollment date, as counted under
not impose a preexisting condition exclusion pe-
forcement procedures. riod with respect to the condition for which A
§ 146.113. For purposes of this Part, the
received treatment 7 months prior to the enroll- phrase ‘‘days of creditable coverage’’
Subpart B—Requirements Relating to ment date. has the same meaning as the phrase
Access and Renewability of Coverage, Example 2: (i) Same facts as Example 1 except ‘‘the aggregate of the periods of credit-
and Limitations on Preexisting that Employer R’s plan learns of the condition and able coverage’’ as such term is used in
Condition Exclusion Periods attaches a rider to A’s policy excluding coverage section 2701(a)(3) of the PHS Act.
for the condition. Three months after enrollment,
A’s condition recurs, and Employer R’s plan (iv) Other standards. See § 146.121
§ 146.111 Limitations on preexisting denies payment under the rider. for other standards that may apply with
condition exclusion period. (ii) In this Example, the rider is a preexisting respect to certain benefit limitations or
condition exclusion and Employer R’s plan may restrictions under a group health plan.
(a) Preexisting condition exclusion— not impose a preexisting condition exclusion with
(1) General. Subject to paragraph (b) of respect to the condition for which A received (2) Enrollment definitions—(i) En-
this section, a group health plan, and a treatment 7 months prior to the enrollment date. rollment date means the first day of
74
coverage or, if there is a waiting period, (v) Examples. The following ex- (2) Adopted children. Subject to para-
the first day of the waiting period. amples illustrate the requirements of this graph (b)(3) of this section, a group
(ii)(A) First day of coverage means, paragraph (a)(2): health plan, and a health insurance is-
Example 1: (i) Employee F first becomes eli- suer offering group health insurance
in the case of an individual covered for gible to be covered by Employer W’s group health
benefits under a group health plan in the coverage, may not impose any preexist-
plan on January 1, 1999, but elects not to enroll in
group market, the first day of coverage the plan until April 1, 1999. April 1, 1999 is not a ing condition exclusion in the case of a
special enrollment date for F. child who is adopted or placed for
under the plan and, in the case of an
(ii) In this Example, F would be a late enrollee adoption before attaining 18 years of
individual covered by health insurance with respect to F’s coverage that became effective age and who, as of the last day of the
coverage in the individual market, the under the plan on April 1, 1999.
30-day period beginning on the date of
first day of coverage under the policy. Example 2: (i) Same as Example 1, except that
the adoption or placement for adoption,
F does not enroll in the plan on April 1, 1999 and
(B) Example. The following example terminates employment with Employer W on July is covered under creditable coverage.
illustrates the requirements of paragraph 1, 1999, without having had any health insurance This rule does not apply to coverage
(a)(2)(ii)(A) of this section: coverage under the plan. F is rehired by Employer before the date of such adoption or
W on January 1, 2000 and is eligible for and
Example: (i) Employer V’s group health plan
elects coverage under Employer W’s plan effective
placement for adoption.
provides for coverage to begin on the first day of (3) Break in coverage. Paragraphs
on January 1, 2000.
the first payroll period following the date an
(ii) In this Example, F would not be a late (b)(1) and (b)(2) of this section no
employee is hired and completes the applicable
enrollee with respect to F’s coverage that became longer apply to a child after a signifi-
enrollment forms, or on any subsequent January 1 effective on January 1, 2000.
after completion of the applicable enrollment cant break in coverage.
forms. Employer V’s plan imposes a preexisting (b) Exceptions pertaining to preexist- (4) Pregnancy. A group health plan,
condition exclusion for 12 months (reduced by the ing condition exclusions—(1) New- and a health insurance issuer offering
individual’s creditable coverage) following an indi- borns—(i) General rule. Subject to group health insurance coverage, may
vidual’s enrollment date. Employee E is hired by paragraph (b)(3) of this section, a group
Employer V on October 13, 1998 and then on not impose a preexisting condition ex-
October 14, 1998 completes and files all the forms
health plan, and a health insurance is- clusion relating to pregnancy as a preex-
necessary to enroll in the plan. E’s coverage under suer offering group health insurance isting condition.
the plan becomes effective on October 25, 1998 coverage, may not impose any preexist- (5) Special enrollment dates. For spe-
(which is the beginning of the first payroll period ing condition exclusion with regard to a
after E’s date of hire). cial enrollment dates relating to new
child who, as of the last day of the dependents, see § 146.117(b).
(ii) In this Example, E’s enrollment date is 30-day period beginning with the date
October 13, 1998 (which is the first day of the (c) Notice of plan’s preexisting condi-
waiting period for E’s enrollment and is also E’s of birth, is covered under any creditable
tion exclusion. A group health plan, and
date of hire). Accordingly, with respect to E, the coverage. Accordingly, if a newborn is
health insurance issuer offering group
6-month period in paragraph (a)(1)(i) would be the enrolled in a group health plan (or other
period from April 13, 1998 through October 12, health insurance under the plan, may not
creditable coverage) within 30 days after
1998, the maximum permissible period during impose a preexisting condition exclusion
birth and subsequently enrolls in another
which Employer V’s plan could apply a preexist- with respect to a participant or depen-
ing condition exclusion under paragraph (a)(1)(ii) group health plan without a significant
dent of the participant before notifying
would be the period from October 13, 1998 break in coverage, the other plan may
through October 12, 1999, and this period would the participant, in writing, of the exist-
not impose any preexisting condition
be reduced under paragraph (a)(1)(iii) by E’s days ence and terms of any preexisting condi-
exclusion with regard to the child.
of creditable coverage as of October 13, 1998. tion exclusion under the plan and of the
(ii) Example. The following example rights of individuals to demonstrate
(iii) Late enrollee means an indi-
illustrates the requirements of this para- creditable coverage (and any applicable
vidual whose enrollment in a plan is a
graph (b)(1). waiting periods) as required by
late enrollment. Example: (i) Seven months after enrollment in
(iv) Late enrollment means enroll- Employer W’s group health plan, Individual E has § 146.115. The description of the rights
ment under a group health plan other a child born with a birth defect. Because the child of individuals to demonstrate creditable
than on— is enrolled in Employer W’s plan within 30 days coverage includes a description of the
of birth, no preexisting condition exclusion may right of the individual to request a
(A) The earliest date on which cover- be imposed with respect to the child under
certificate from a prior plan or issuer, if
age can become effective under the Employer W’s plan. Three months after the child’s
birth, E commences employment with Employer X necessary, and a statement that the cur-
terms of the plan; or
and enrolls with the child in Employer X’s plan rent plan or issuer will assist in obtain-
(B) A special enrollment date for the within 45 days of leaving Employer W’s plan. ing a certificate from any prior plan or
individual. If an individual ceases to be Employer X’s plan imposes a 12-month exclusion issuer, if necessary.
eligible for coverage under the plan by for any preexisting condition.
terminating employment, and subse- (ii) In this Example, Employer X’s plan may
not impose any preexisting condition exclusion § 146.113 Rules relating to creditable
quently becomes eligible for coverage with respect to E’s child because the child was coverage.
under the plan by resuming employ- covered within 30 days of birth and had no
ment, only eligibility during the indi- significant break in coverage. This result applies (a) General rules—(1) Creditable
vidual’s most recent period of employ- regardless of whether E’s child is included in the coverage. For purposes of this section,
certificate of creditable coverage provided to E by except as provided in paragraph (a)(2),
ment is taken into account in Employer W indicating 300 days of dependent
determining whether the individual is a coverage or receives a separate certificate indicat-
the term creditable coverage means cov-
late enrollee under the plan with respect ing 90 days of coverage. Employer X’s plan may erage of an individual under any of the
to the most recent period of coverage. impose a preexisting condition exclusion with following:
Similar rules apply if an individual respect to E for up to 2 months for any preexisting (i) A group health plan as defined in
condition of E for which medical advice, diagno-
again becomes eligible for coverage fol- sis, care, or treatment was recommended or re-
§ 144.103.
lowing a suspension of coverage that ceived by E within the 6-month period ending on (ii) Health insurance coverage as de-
applied generally under the plan. E’s enrollment date in Employer X’s plan. fined in § 144.103 (whether or not the
75
entity offering the coverage is subject to (2) Excluded coverage. Creditable (iv) Examples. The following ex-
the requirements of this Part and 45 coverage does not include coverage con- amples illustrate how creditable cover-
CFR Part 148, and without regard to sisting solely of coverage of excepted age is counted in reducing preexisting
whether the coverage is offered in the benefits (described in § 146.145). condition exclusion periods:
group market, the individual market, or (3) Methods of counting creditable Example 1: (i) Individual A works for Em-
otherwise). coverage. For purposes of reducing any ployer P and has creditable coverage under Em-
ployer P’s plan for 18 months before A’s employ-
(iii) Part A or Part B of Title XVIII preexisting condition exclusion period, ment terminates. A is hired by Employer Q, and
of the Social Security Act (Medicare). as provided under § 146.111(a)(1)(iii), a enrolls in Employer Q’s group health plan, 64
(iv) Title XIX of the Social Security group health plan, and a health insur- days after the last date of coverage under Em-
Act (Medicaid), other than coverage ance issuer offering group health insur- ployer P’s plan. Employer Q’s plan has a 12-
month preexisting condition exclusion period.
consisting solely of benefits under sec- ance coverage, determines the amount of
(ii) In this Example, because A had a break in
tion 1928 of the Social Security Act (the an individual’s creditable coverage by coverage of 63 days, Employer Q’s plan may
program for distribution of pediatric using the standard method described in disregard A’s prior coverage and A may be subject
vaccines). paragraph (b), except that the plan, or to a 12-month preexisting condition exclusion
(v) Title 10 U.S.C. Chapter 55 (medi- issuer, may use the alternative method period.
cal and dental care for members and under paragraph (c) with respect to any Example 2: (i) Same facts as Example 1, ex-
cept that A is hired by Employer Q, and enrolls in
certain former members of the uni- or all of the categories of benefits Employer Q’s plan, on the 63rd day after the last
formed services, and for their depen- described under paragraph (c)(3). date of coverage under Employer P’s plan.
dents; for purposes of Title 10 U.S.C. (b) Standard method—(1) Specific (ii) In this Example, A has a break in coverage
Chapter 55, ‘‘uniformed services’’ means benefits not considered. Under the stan- of 62 days. Because A’s break in coverage is not a
the armed forces and the Commissioned dard method, a group health plan, and a significant break in coverage, Employer Q’s plan
must count A’s prior creditable coverage for
Corps of the National Oceanic and At- health insurance issuer offering group purposes of reducing the plan’s preexisting condi-
mospheric Administration and of the health insurance coverage, determines tion exclusion period as it applies to A.
Public Health Service). the amount of creditable coverage with- Example 3: (i) Same facts as Example 1, ex-
(vi) A medical care program of the out regard to the specific benefits in- cept that Employer Q’s plan provides benefits
Indian Health Service or of a tribal cluded in the coverage. through an insurance policy that, as required by
applicable State insurance laws, defines a signifi-
organization. (2) Counting creditable coverage— cant break in coverage as 90 days.
(vii) A State health benefits risk pool. (i) Based on days. For purposes of (ii) In this Example, the issuer that provides
For purposes of this section, a State reducing the preexisting condition exclu- group health insurance to Employer Q’s plan must
health benefits risk pool means— sion period, a group health plan, and a count A’s period of creditable coverage prior to the
(A) An organization qualifying under health insurance issuer offering group 63-day break.
Example 4: (i) Same facts as Example 3, ex-
section 501(c)(26) of the Code; health insurance coverage, determines cept that Employer Q’s plan is a self-insured plan,
(B) A qualified high risk pool de- the amount of creditable coverage by and thus is not subject to State insurance laws.
scribed in section 2744(c)(2) of the PHS counting all the days that the individual (ii) In this Example, the plan is not governed
Act; or has under one or more types of credit- by the longer break rules under State insurance
(C) Any other arrangement sponsored able coverage. Accordingly, if on a law and A’s previous coverage may be disre-
garded.
by a State, the membership composition particular day, an individual has credit-
Example 5: (i) Individual B begins employment
of which is specified by the State and able coverage from more than one with Employer R 45 days after terminating cover-
which is established and maintained pri- source, all the creditable coverage on age under a prior group health plan. Employer R’s
marily to provide health insurance cov- that day is counted as one day. Further, group health plan has a 30-day waiting period
erage for individuals who are residents any days in a waiting period for a plan before coverage begins. B enrolls in Employer R’s
plan when first eligible.
of such State and who, by reason of the or policy are not creditable coverage
(ii) In this Example, B does not have a signifi-
existence or history of a medical condi- under the plan or policy. cant break in coverage for purposes of determining
tion— (ii) Days not counted before signifi- whether B’s prior coverage must be counted by
(1) Are unable to acquire medical cant break in coverage. Days of credit- Employer R’s plan. B has only a 44-day break in
care coverage for such condition able coverage that occur before a sig- coverage because the 30-day waiting period is not
taken into account in determining a significant
through insurance or from an HMO; or nificant break in coverage are not break in coverage.
(2) Are able to acquire such coverage required to be counted. Example 6: (i) Individual C works for Em-
only at a rate which is substantially in (iii) Definition of significant break in ployer S and has creditable coverage under Em-
excess of the rate for such coverage coverage. A significant break in cover- ployer S’s plan for 200 days before C’s employ-
through the membership organization. age means a period of 63 consecutive ment is terminated and coverage ceases. C is then
unemployed for 51 days before being hired by
(viii) A health plan offered under days during all of which the individual Employer T. Employer T’s plan has a 3-month
Title 5 U.S.C. Chapter 89 (the Federal does not have any creditable coverage, waiting period. C works for Employer T for 2
Employees Health Benefits Program). except that neither a waiting period nor months and then terminates employment. Eleven
(ix) A public health plan. For pur- an affiliation period is taken into ac- days after terminating employment with Employer
poses of this section, a public health count in determining a significant break T, C begins working for Employer U. Employer
U’s plan has no waiting period, but has a 6-
plan means any plan established or in coverage. (See section 731(b)(2)(iii) month preexisting condition exclusion period.
maintained by a State, county, or other of ERISA and section 2723(b)(2)(iii) of (ii) In this Example, C does not have a signifi-
political subdivision of a State that the PHS Act, which exclude from pre- cant break in coverage because, after disregarding
provides health insurance coverage to emption State insurance laws that re- the waiting period under Employer T’s plan, C had
individuals who are enrolled in the plan. quire a break of more than 63 days only a 62-day break in coverage (51 days plus 11
days). Accordingly, C has 200 days of creditable
(x) A health benefit plan under sec- before an individual has a significant coverage and Employer U’s plan may not apply its
tion 5(e) of the Peace Corps Act (22 break in coverage for purposes of State 6-month preexisting condition exclusion period
U.S.C. 2504(e)). law.) with respect to C.
76
Example 7: (i) Individual D terminates employ- riod with respect to each category (and the group health plan or issuer counts
ment with Employer V on January 13, 1998 after may apply a different preexisting condi-
being covered for 24 months under Employer V’s
creditable coverage within a category if
group health plan. On March 17, the 63rd day tion exclusion period for benefits that any level of benefits is provided within
without coverage, D applies for a health insurance are not within any category). The credit- the category. Coverage under a reim-
policy in the individual market. D’s application able coverage determined for a category bursement account or arrangement, such
is accepted and the coverage is made effective of benefits applies only for purposes of
May 1. as a flexible spending arrangement, (as
(ii) In this Example, because D applied for the
reducing the preexisting condition exclu- defined in section 106(c)(2) of the Inter-
policy before the end of the 63rd day, and sion period with respect to that category. nal Revenue Code), does not constitute
coverage under the policy ultimately became ef- An individual’s creditable coverage for coverage within any category.
fective, the period between the date of application benefits that are not within any category
and the first day of coverage is a waiting period, for which the alternative method is (ii) Special rules. In counting an indi-
and no significant break in coverage occurred even vidual’s creditable coverage under the
though the actual period without coverage was 107 being used is determined under the
days. standard method of paragraph (b). alternative method, the group health
Example 8: (i) Same facts as Example 7, except (2) Uniform application. A plan or plan, or issuer, first determines the
that D’s application for a policy in the individual issuer using the alternative method is amount of the individual’s creditable
market is denied. coverage that may be counted under
(ii) In this Example, because D did not obtain
required to apply it uniformly to all
coverage following application, D incurred a sig- participants and beneficiaries under the paragraph (b), up to a total of 365 days
nificant break in coverage on the 64th day. plan or policy. The use of the alternative of the most recent creditable coverage
(v) Other permissible counting meth- method is set forth in the plan. (546 days for a late enrollee). The
ods—(A) General rule. Notwithstanding (3) Categories of benefits. The alter- period over which this creditable cover-
any other provisions of this paragraph native method for counting creditable age is determined is referred to as the
(b)(2), for purposes of reducing a preex- coverage may be used for coverage for ‘‘determination period.’’ Then, for the
isting condition exclusion period (but any of the following categories of ben- category specified under the alternative
not for purposes of issuing a certificate efits: method, the plan or issuer counts within
under § 146.115), a group health plan, (i) Mental health. the category all days of coverage that
and a health insurance issuer offering (ii) Substance abuse treatment. occurred during the determination period
group health insurance coverage, may (iii) Prescription drugs. (whether or not a significant break in
determine the amount of creditable cov- (iv) Dental care. coverage for that category occurs), and
erage in any other manner that is at (v) Vision care. reduces the individual’s preexisting con-
least as favorable to the individual as (4) Plan notice. If the alternative dition exclusion period for that category
the method set forth in this paragraph method is used, the plan is required to—
by that number of days. The plan or
(b)(2), subject to the requirements of (i) State prominently that the plan is
issuer may determine the amount of
other applicable law. using the alternative method of counting
creditable coverage in disclosure state- creditable coverage in any other reason-
(B) Example. The following example
ments concerning the plan, and state this able manner, uniformly applied, that is
illustrates the requirements of this para-
to each enrollee at the time of enroll- at least as favorable to the individual.
graph (b)(2)(v):
Example: (i) Individual F has coverage under ment under the plan; and (iii) Example. The following example
group health plan Y from January 3, 1997 through (ii) Include in these statements a de- illustrates the requirements of this para-
March 25, 1997. F then becomes covered by scription of the effect of using the graph (c)(7):
group health plan Z. F’s enrollment date in Plan Z
is May 1, 1997. Plan Z has a 12-month preexisting alternative method, including an identifi- Example: (i) Individual D enrolls in Employer
condition exclusion period. cation of the categories used. V’s plan on January 1, 2001. Coverage under the
(ii) In this Example, Plan Z may determine, in (5) Issuer notice. With respect to plan includes prescription drug benefits. On April
accordance with the rules prescribed in paragraph health insurance coverage offered by an 1, 2001, the plan ceases providing prescription
(b)(2)(i), (ii), and (iii), that F has 82 days of drug benefits. D’s employment with Employer V
creditable coverage (29 days in January, 28 days
issuer in the small or large group mar- ends on January 1, 2002, after D was covered
in February, and 25 days in March). Thus, the ket, if the insurance coverage uses the under Employer V’s group health plan for 365
preexisting condition exclusion period will no alternative method, the issuer states days. D enrolls in Employer Y’s plan on February
longer apply to F on February 8, 1998 (82 days prominently in any disclosure statement 1, 2002 (D’s enrollment date). Employer Y’s plan
before the 12-month anniversary of F’s enrollment uses the alternative method of counting creditable
concerning the coverage, and to each coverage and imposes a 12-month preexisting
(May 1)). For administrative convenience, how-
ever, Plan Z may consider that the preexisting employer at the time of the offer or sale condition exclusion on prescription drug benefits.
condition exclusion period will no longer apply to of the coverage, that the issuer is using (ii) In this Example, Employer Y’s plan may
F on the first day of the month (February 1). the alternative method, and include in impose a 275-day preexisting condition exclusion
(c) Alternative method—(1) Specific such statements a description of the with respect to D for prescription drug benefits
benefits considered. Under the alterna- effect of using the alternative method. because D had the equivalent of 90-days of
creditable coverage relating to prescription drug
tive method, a group health plan, or a This applies separately to each type of benefits within D’s determination period.
health insurance issuer offering group coverage offered by the health insurance
health insurance coverage, determines issuer. § 146.115 Certification and disclosure
the amount of creditable coverage based (6) Disclosure of information on pre- of previous coverage.
on coverage within any category of vious benefits. See § 146.115(b) for spe-
benefits described in paragraph (c)(3) cial rules concerning disclosure of cov- (a) Certificate of creditable cover-
and not based on coverage for any other erage to a plan, or issuer, using the age—(1) Entities required to provide
benefits. The plan or issuer may use the alternative method of counting credit- certificate—(i) General. A group health
alternative method for any or all of the able coverage under this paragraph (c). plan, and each health insurance issuer
categories. The plan may apply a differ- (7) Counting creditable coverage—(i) offering group health insurance coverage
ent preexisting condition exclusion pe- General. Under the alternative method, under a group health plan, is required to
77
certificates of creditable coverage in al’s coverage under an issuer’s policy (A) Qualified beneficiaries upon a
accordance with this paragraph (a). ceases before the individual’s coverage qualifying event. In the case of an
(ii) Duplicate certificates not re- under the plan ceases, the issuer is individual who is a qualified beneficiary
quired. An entity required to provide a required to provide sufficient informa- (as defined in section 607(3) of ERISA,
certificate under this paragraph (a)(1) tion to the plan (or to another party section 4980B(g)(1) of the Code, or
for an individual is deemed to have designated by the plan) to enable a section 2208 of the PHS Act) entitled to
satisfied the certification requirements certificate to be provided by the plan (or elect COBRA continuation coverage, an
for that individual if another party pro- other party), after cessation of the indi- automatic certificate is required to be
vides the certificate, but only to the vidual’s coverage under the plan, that provided at the time the individual
extent that information relating to the reflects the period of coverage under the would lose coverage under the plan in
individual’s creditable coverage and policy. The provision of that information the absence of COBRA continuation
waiting or affiliation period is provided to the plan will satisfy the issuer’s coverage or alternative coverage elected
by the other party. For example, in the obligation to provide an automatic cer- instead of COBRA continuation cover-
case of a group health plan funded tificate for that period of creditable age. A plan or issuer satisfies this re-
through an insurance policy, the issuer is coverage for the individual under para- quirement if it provides the automatic
deemed to have satisfied the certifica- graphs (a)(2)(ii) and (a)(3) of this sec- certificate no later than the time a notice
tion requirement with respect to a par- tion. In addition, an issuer providing is required to be furnished for a qualify-
ticipant or beneficiary if the plan actu- that information is required to cooperate ing event under section 606 of the Act,
ally provides a certificate that includes with the plan in responding to any section 4980B(f)(6) of the Code and
the information required under para- request made under paragraph (b)(2) of section 2206 of the PHS Act (relating to
graph (a)(3) with respect to the partici- this section (relating to the alternative notices required under COBRA).
pant or beneficiary. method of counting creditable coverage). (B) Other individuals when coverage
(iii) Special rule for group health If the individual’s coverage under the ceases. In the case of an individual who
plans. To the extent coverage under a plan ceases at the time the individual’s is not a qualified beneficiary entitled to
plan consists of group health insurance coverage under the issuer’s policy elect COBRA continuation coverage, an
coverage, the plan is deemed to have ceases, the issuer must provide an auto- automatic certificate is required to be
satisfied the certification requirements matic certificate under paragraph provided at the time the individual
under this paragraph (a)(1) if any issuer (a)(2)(ii) of this section. An issuer may ceases to be covered under the plan. A
offering the coverage is required to presume that an individual whose cover- plan or issuer satisfies this requirement
provide the certificates pursuant to an age ceases at a time other than the if it provides the automatic certificate
agreement between the plan and the effective date for changing enrollment within a reasonable time period thereaf-
issuer. For example, if there is an agree- options has ceased to be covered under ter. In the case of an individual who is
ment between an issuer and the plan the plan. entitled to elect to continue coverage
sponsor under which the issuer agrees to (2) Example. The following example under a State program similar to CO-
provide certificates for individuals cov- illustrates the requirements of this para- BRA and who receives the automatic
ered under the plan, and the issuer fails graph (a)(1)(iv)(B): certificate not later than the time a
to provide a certificate to an individual Example: (i) A group health plan provides notice is required to be furnished under
when the plan would have been required coverage under an HMO option and an indemnity the State program, the certificate is
option with a different issuer, and only allows
to provide one under this paragraph (a), employees to switch on each January 1. Neither
deemed to be provided within a reason-
then the issuer, but not the plan, violates the HMO nor the indemnity issuer has entered into able time period after the cessation of
the certification requirements of this an agreement with the plan to provide automatic coverage under the plan.
paragraph (a). certificates as permitted under paragraph (a)(2)(ii) (C) Qualified beneficiaries when CO-
of this section.
(iv) Special rules for issuers—(A) BRA ceases. In the case of an individual
(ii) In this Example, if an employee switches
Responsibility of issuer for coverage from the indemnity option to the HMO option on who is a qualified beneficiary and has
period—(1) General rule. An issuer is January 1, the issuer must provide the plan (or a elected COBRA continuation coverage
not required to provide information re- person designated by the plan) with appropriate (or whose coverage has continued after
garding coverage provided to an indi- information with respect to the individual’s cover- the individual became entitled to elect
age with the indemnity issuer. However, if the
vidual by another party. individual’s coverage with the indemnity issuer
COBRA continuation coverage), an au-
(2) Example. The following example ceases at a date other than January 1, the issuer is tomatic certificate is to be provided at
illustrates the requirements of this instead required to provide the individual with an the time the individual’s coverage under
paragraph(a)(1)(iv)(A): automatic certificate. the plan ceases. A plan, or issuer, satis-
Example. (i) A plan offers coverage with an (2) Individuals for whom a certificate fies this requirement if it provides the
HMO option from one issuer and an indemnity must be provided; timing of issuance— automatic certificate within a reasonable
option from a different issuer. The HMO has not
entered into an agreement with the plan to provide
(i) Individuals. A certificate must be time after coverage ceases (or after the
certificates as permitted under paragraph (a)(1)(iii) provided, without charge, for partici- expiration of any grace period for non-
of this section. pants or dependents who are or were payment of premiums). An automatic
(ii) In this Example, if an employee switches covered under a group health plan upon certificate is required to be provided to
from the indemnity option to the HMO option and the occurrence of any of the events such an individual regardless of whether
later ceases to be covered under the plan, any
certificate provided by the HMO is not required to
described in paragraph (a)(2)(ii) and the individual has previously received
provide information regarding the employee’s cov- (a)(2)(iii) of this section. an automatic certificate under paragraph
erage under the indemnity option. (ii) Issuance of automatic certificates. (a)(2)(ii)(A) of this section.
(B) Cessation of issuer coverage The certificates described in this para- (iii) Any individual upon request. Re-
prior to cessation of coverage under a graph (a)(2)(ii) of this section are re- quests for certificates are permitted to
plan—(1) General rule. If an individu- ferred to as ‘‘automatic certificates.’’ be made by, or on behalf of, an indi-
78
vidual within 24 months after coverage (ii) In this Example, the plan’s procedure satis- (2) The date any waiting period (and
fies paragraph (a)(2)(iii) of this section.
ceases. Thus, for example, a plan in affiliation period, if applicable) began
which an individual enrolls may, if (3) Form and content of certificate— and the date creditable coverage began.
authorized by the individual, request a (i) Written certificate—(A) General. Ex- (G) The date creditable coverage
certificate of the individual’s creditable cept as provided in paragraph ended, unless the certificate indicates
coverage on behalf of the individual (a)(3)(i)(B) of this section, the certificate that creditable coverage is continuing as
from a plan in which the individual was must be provided in writing (including of the date of the certificate.
formerly enrolled. After the request is any form approved by HCFA as a (iii) Periods of coverage under cer-
received, a plan or issuer is required to writing). tificate. If an automatic certificate is
provide the certificate by the earliest (B) Other permissible forms. No writ- provided under paragraph (a)(2)(ii) of
date that the plan or issuer, acting in a ten certificate is required to be provided this section, the period that must be
reasonable or prompt fashion can pro- under this paragraph (a) with respect to included on the certificate is the last
vide the certificate. A certificate is to be a particular event described in para- period of continuous coverage ending on
provided under this paragraph (a)(2)(iii) graphs (a)(2)(ii) and (a)(2)(iii) of this the date coverage ceased. If an indi-
even if the individual has previously section if all the following conditions vidual requests a certificate under para-
received a certificate under this para- are met: graph (a)(2)(iii) of this section, a certifi-
graph (a)(2)(iii) or an automatic certifi- (1) An individual is entitled to re- cate must be provided for each period of
cate under paragraph (a)(2)(ii) of this ceive a certificate. continuous coverage ending within the
section. (2) The individual requests that the 24-month period ending on the date of
(iv) Examples. The following ex- certificate be sent to another plan or the request (or continuing on the date of
amples illustrate the requirements of this issuer instead of to the individual. the request). A separate certificate may
paragraph (a)(2). (3) The plan or issuer that would be provided for each such period of
Example 1: (i) Individual A terminates employ-
otherwise receive the certificate agrees continuous coverage.
ment with Employer Q. A is a qualified benefi- (iv) Combining information for fami-
ciary entitled to elect COBRA continuation cover- to accept the information in paragraph
age under Employer Q’s group health plan. A (a)(3) through means other than a writ- lies. A certificate may provide informa-
notice of the rights provided under COBRA is ten certificate (for example, by tele- tion with respect to both a participant
typically furnished to qualified beneficiaries under phone). and the participant’s dependents if the
the plan within 10 days after a covered employee information is identical for each indi-
terminates employment. (4) The receiving plan or issuer re-
vidual or, if the information is not
(ii) In this Example, the automatic certificate ceives the information from the sending
identical, certificates may be provided
may be provided at the same time that A is plan or issuer in such form within the
provided the COBRA notice. on one form if the form provides all the
time periods required under paragraph
Example 2: (i) Same facts as Example 1, except required information for each individual
that the automatic certificate for A is not com-
(a)(2) of this section. and separately states the information
pleted by the time the COBRA notice is furnished (ii) Required information. The certifi- that is not identical.
to A. cate must include all of the following: (v) Model certificate. The require-
(ii) In this Example, the automatic certificate
may be provided within the period permitted by
(A) The date the certificate is issued. ments of paragraph (a)(3)(ii) of this
law for the delivery of notices under COBRA. (B) The name of the group health section are satisfied if the plan or issuer
Example 3: (i) Employer R maintains an insured plan that provided the coverage de- provides a certificate in accordance with
group health plan. R has never had 20 employees scribed in the certificate. a model certificate authorized by HCFA.
and thus R’s plan is not subject to the COBRA (vi) Excepted benefits; categories of
continuation coverage provisions. However, R is (C) The name of the participant or
in a State that has a State program similar to dependent with respect to whom the benefits. No certificate is required to be
COBRA. B terminates employment with R and certificate applies, and any other infor- furnished with respect to excepted ben-
loses coverage under R’s plan. mation necessary for the plan providing efits described in § 146.145. In addi-
(ii) In this Example, the automatic certificate the coverage specified in the certificate tion, the information in the certificate
may be provided not later than the time a notice is regarding coverage is not required to
required to be furnished under the State program. to identify the individual, such as the
individual’s identification number under specify categories of benefits described
Example 4: (i) Individual C terminates employ-
ment with Employer S and receives both a notice the plan and the name of the participant in § 146.113(c) (relating to the alterna-
of C’s rights under COBRA and an automatic if the certificate is for (or includes) a tive method of counting creditable cov-
certificate. C elects COBRA continuation coverage dependent. erage). However, if excepted benefits
under Employer S’s group health plan. After four are provided concurrently with other
months of COBRA continuation coverage and the (D) The name, address, and telephone
expiration of a 30-day grace period, S’s group number of the plan administrator or creditable coverage (so that the coverage
health plan determines that C’s COBRA continua- issuer required to provide the certificate. does not consist solely of excepted
tion coverage has ceased due to failure to make a benefits), information concerning the
timely payment for continuation coverage. (E) The telephone number to call for benefits may be required to be disclosed
(ii) In this Example, the plan must provide an further information regarding the certifi- under paragraph (b) of this section.
updated automatic certificate to C within a reason- cate (if different from paragraph (4) Procedures—(i) Method of deliv-
able time after the end of the grace period. (a)(3)(ii)(D)).
Example 5: (i) Individual D is currently covered
ery. The certificate is required to be
under the group health plan of Employer T. D
(F) Either— provided to each individual described in
requests a certificate, as permitted under paragraph (1) A statement that an individual has paragraph (a)(2) of this section or an
(a)(2)(iii). Under the procedure for Employer T’s at least 18 months (for this purpose, 546 entity requesting the certificate on be-
plan, certificates are mailed (by first class mail) 7 days is deemed to be 18 months) of half of the individual. The certificate
business days following receipt of the request.
This date reflects the earliest date that the plan, creditable coverage, disregarding days of may be provided by first-class mail. If
acting in a reasonable and prompt fashion, can creditable coverage before a significant the certificate or certificates are pro-
provide certificates. break in coverage, or vided to the participant and the partici-
79
pant’s spouse at the participant’s last reasonable efforts to determine the cessation of health insurance market, even if the
dependents’ coverage and the related dependent
known address, then the requirements of coverage information.
coverage is provided in connection with
this paragraph (a)(4) are satisfied with an entity or program that is not itself
(ii) Special rules for demonstrating
respect to all individuals residing at that required to provide a certificate because
coverage. If a certificate furnished by a
address. If a dependent’s last known it is not subject to the group market
plan or issuer does not provide the name
address is different than the participant’s provisions of this Part, Part 7 of Subtitle
of any dependent of an individual cov-
last known address, a separate certificate B of Title I of ERISA, or Chapter 100
ered by the certificate, the individual
is required to be provided to the depen- of Subtitle K of the Internal Revenue
may, if necessary, use the procedures
dent at the dependent’s last known ad- Code. This would include coverage pro-
described in paragraph (c)(4) of this
dress. If separate certificates are being vided in connection with any of the
section for demonstrating dependent sta-
following:
provided by mail to individuals who tus. In addition, an individual may, if
(A) Creditable coverage described in
reside at the same address, separate necessary, use these procedures to dem-
sections 2701(c)(1)(G) through (c)(1)(J)
mailings of each certificate are not re- onstrate that a child was enrolled within
of the PHS Act (coverage under a State
quired. 30 days of birth, adoption, or placement
health benefits risk pool, the Federal
(ii) Procedure for requesting certifi- for adoption. See § 146.111(b), under
Employees Health Benefits Program, a
cates. A plan or issuer must establish a which such a child would not be subject
public health plan, and a health benefit
procedure for individuals to request and to a preexisting condition exclusion.
plan under section 5(e) of the Peace
receive certificates under paragraph (iii) Transition rule for dependent Corps Act),
(a)(2)(iii) of this section. coverage through June 30, 1998—(A) (B) Coverage subject to section
(iii) Designated recipients. If an auto- General. A group health plan or health 2721(b)(1)(B) of the PHS Act (requiring
matic certificate is required to be pro- insurance issuer that cannot provide the certificates by issuers offering health
vided under paragraph (a)(2)(ii) of this names of dependents (or related cover- insurance coverage in connection with
section, and the individual entitled to age information) for purposes of provid- any group health plan, including a
receive the certificate designates another ing a certificate of coverage for a de- church plan or a governmental plan
individual or entity to receive the certifi- pendent may satisfy the requirements of (including the Federal Employees Health
cate, the plan or issuer responsible for paragraph (a)(3)(ii)(C) of this section by Benefits Program (FEHBP)).
providing the certificate is permitted to providing the name of the participant (C) Coverage subject to section 2743
provide the certificate to the designated covered by the group health plan or of the PHS Act applicable to health
party. If a certificate is required to be health insurance issuer and specifying insurance issuers in the individual mar-
provided upon request under paragraph that the type of coverage described in ket. (However, this section does not
(a)(2)(iii) of this section and the indi- the certificate is for dependent coverage require a certificate to be provided with
vidual entitled to receive the certificate (for example, family coverage or respect to short-term limited duration
designates another individual or entity to employee-plus-spouse coverage). insurance, which is excluded from the
receive the certificate, the plan or issuer (B) Certificates provided on request. definition of ‘‘individual health insur-
responsible for providing the certificate For purposes of certificates provided on ance coverage’’ in 45 CFR 144.103 that
is required to provide the certificate to the request of, or on behalf of, an is not provided in connection with a
the designated party. individual under paragraph (a)(2)(iii)of group health plan, as described in para-
(5) Special rules concerning depen- this section, a plan or issuer must make graph (a)(6)(i)(B) of this section.)
dent coverage—(i) Reasonable efforts— reasonable efforts to obtain and provide (ii) Other entities. For special rules
(A) General rule. A plan or issuer is the names of any dependent covered by requiring that certain other entities, not
required to use reasonable efforts to the certificate where such information is subject to this Part, provide certificates
determine any information needed for a requested to be provided. If does not consistent with the rules in this section,
certificate relating to the dependent cov- include the name of any dependent of see section 2791(a)(3) of the PHS Act
erage. In any case in which an auto- an individual covered by the certificate, applicable to entities described in sec-
matic certificate is required to be fur- the individual may, if necessary, use the tions 2701(c)(1)(C), (D), (E), and (F) of
nished with respect to a dependent procedures described in paragraph (c) of the PHS Act (relating to Medicare, Med-
under paragraph (a)(2)(ii) of this section, this section for submitting documenta- icaid, CHAMPUS, and Indian Health
no individual certificate is required to be tion to establish that the creditable cov- Service), section 2721(b)(1)(A) of the
furnished until the plan or issuer knows erage in the certificate applies to the PHS Act applicable to non-Federal gov-
(or making reasonable efforts should dependent. ernmental plans generally, section
know) of the dependent’s cessation of (C) Demonstrating a dependent’s 2721(b)(2)(C)(ii) of the PHS Act appli-
coverage under the plan. creditable coverage. See paragraph cable to non-Federal governmental plans
(c)(4) of this section for special rules to that elect to be excluded from the
(B) Example. The following example
demonstrate dependent status. requirements of Subparts 1 and 3 of Part
illustrates the requirements of this para-
graph (a)(5)(i): (D) Duration. This paragraph A of Title XXVII of the PHS Act, and
Example: (i) A group health plan covers em- (a)(5)(iii) is only effective for certifica- section 9805(a) of the Internal Revenue
ployees and their dependents. The plan annually tions provided with respect to events Code applicable to group health plans,
requests all employees to provide updated infor- occurring through June 30, 1998. which includes church plans (as defined
mation regarding dependents, including the spe- (6) Special certification rules—(i) Is- in section 414(e) of the Internal Rev-
cific date on which an employee has a new
dependent or on which a person ceases to be a suers. Issuers of group and individual enue Code).
dependent of the employee. health insurance are required to provide (b) Disclosure of coverage to a plan,
(ii) In this Example, the plan has satisfied the certificates of any creditable coverage or issuer, using the alternative method
standard in this paragraph (a)(5)(i) that it make they provide in the group or individual of counting creditable coverage—(1)
80
General. If an individual enrolls in a (ii) The individual has creditable cov- of coverage, and any other relevant
group health plan with respect to which erage but an entity may not be required documents that evidence periods of
the plan, or issuer, uses the alternative to provide a certificate of the coverage health coverage.
method of counting creditable coverage under paragraph (a) of this section; (iii) Other evidence. Creditable cover-
described in section 2701(c)(3)(B) of the (iii) The coverage is for a period age (and waiting period or affiliation
PHS Act and § 146.113(c), the indi- before July 1, 1996; period information) may also be estab-
vidual provides a certificate of coverage (iv) The individual has an urgent lished through means other than docu-
under paragraph (a) of this section, and medical condition that necessitates a mentation, such as by a telephone call
the plan or issuer in which the indi- determination before the individual can from the plan or provider to a third
vidual enrolls so requests, the entity that deliver a certificate to the plan; or party verifying creditable coverage.
issued the certificate (the ‘‘prior entity’’) (iv) Example. The following example
(v) The individual lost a certificate illustrates the requirements of this
is required to disclose promptly to a that the individual had previously re-
requesting plan or issuer (the ‘‘request- paragraph(c)(2):
ceived and is unable to obtain another Example: (i) Employer X’s group health plan
ing entity’’) the information set forth in certificate. imposes a preexisting condition exclusion of 12
paragraph (b)(2) of this section. months on new enrollees under the plan and uses
(2) Evidence of creditable coverage— the standard method of determining creditable
(2) Information to be disclosed. The (i) Consideration of evidence. A plan or coverage. F fails to receive a certificate of prior
prior entity is required to identify to the issuer is required to take into account all coverage from the self-insured group health plan
requesting entity the categories of ben- information that it obtains or that is maintained by F’s prior employer, Employer W,
efits with respect to which the request- presented on behalf of an individual to and requests a certificate. However, F (and Em-
ing entity is using the alternative make a determination, based on the
ployer X’s plan, on F’s behalf) is unable to obtain
method of counting creditable coverage, a certificate from Employer W’s plan. F attests
relevant facts and circumstances, that, to the best of F’s knowledge, F had at least
and the requesting entity may identify whether an individual has creditable 12 months of continuous coverage under Employer
specific information that the requesting coverage and is entitled to offset all or a W’s plan, and that the coverage ended no earlier
entity reasonably needs in order to de- portion of any preexisting condition ex- than F’s termination of employment from Em-
termine the individual’s creditable cov- ployer W. In addition, F presents evidence of
clusion period. A plan or issuer shall coverage, such as an explanation of benefits for a
erage with respect to any such category. treat the individual as having furnished claim that was made during the relevant period.
The prior entity is required to disclose a certificate under paragraph (a) of this (ii) In this Example, based solely on these facts,
promptly to the requesting entity the section if the individual attests to the F has demonstrated creditable coverage for the 12
creditable coverage information so re- period of creditable coverage, the indi-
months of coverage under Employer W’s plan in
quested. the same manner as if F had presented a written
vidual also presents relevant corroborat- certificate of creditable coverage.
(3) Charge for providing information. ing evidence of some creditable cover- (3) Demonstrating categories of cred-
The prior entity furnishing the informa- age during the period, and the individual itable coverage. Procedures similar to
tion under paragraph (b) of this section cooperates with the plan’s or issuer’s those described in this paragraph (c)
may charge the requesting entity for the efforts to verify the individual’s cover- apply in order to determine an individu-
reasonable cost of disclosing such infor- age. For this purpose, cooperation in- al’s creditable coverage with respect to
mation. cludes providing (upon the plan’s or any category under paragraph (b) (relat-
(c) Ability of an individual to demon- issuer’s request) a written authorization ing to determining creditable coverage
strate creditable coverage and waiting for the plan or issuer to request a under the alternative method).
period information—(1) General. The certificate on behalf of the individual, (4) Demonstrating dependent status.
rules in this paragraph (c) implement and cooperating in efforts to determine If, in the course of providing evidence
section 2701(c)(4) of the PHS Act, the validity of the corroborating evi- (including a certificate) of creditable
which permits individuals to establish dence and the dates of creditable cover- coverage, an individual is required to
creditable coverage through means other age. While a plan or issuer may refuse demonstrate dependent status, the group
than certificates, and section 2701(e)(3) to credit coverage where the individual health plan or issuer is required to treat
of the PHS Act, which requires the fails to cooperate with the plan’s or the individual as having furnished a
Secretary to establish rules designed to issuer’s efforts to verify coverage, the certificate showing the dependent status
prevent an individual’s subsequent cov- plan or issuer may not consider an if the individual attests to such depen-
erage under a group health plan or individual’s inability to obtain a certifi- dency and the period of such status and
health insurance coverage from being cate to be evidence of the absence of the individual cooperates with the plan’s
adversely affected by an entity’s failure creditable coverage. or issuer’s efforts to verify the depen-
to provide a certificate with respect to (ii) Documents. Documents that may dent status.
that individual. If the accuracy of a establish creditable coverage (and wait- (d) Determination and notification of
certificate is contested or a certificate is ing periods or affiliation periods) in the creditable coverage—(1) Reasonable
unavailable when needed by the indi- absence of a certificate include explana- time period. In the event that a group
vidual, the individual has the right to tions of benefit claims (EOB) or other health plan or health insurance issuer
demonstrate creditable coverage (and correspondence from a plan or issuer offering group health insurance coverage
waiting or affiliation periods) through indicating coverage, pay stubs showing receives information in this section un-
the presentation of documents or other a payroll deduction for health coverage, der paragraph (a) (certifications), para-
means. For example, the individual may a health insurance identification card, a graph (b) (disclosure of information re-
make such a demonstration when— certificate of coverage under a group lating to the alternative method), or
(i) An entity has failed to provide a health policy, records from medical care paragraph (c) (other evidence of credit-
certificate within the required time pe- providers indicating health coverage, able coverage), the entity is required,
riod; third party statements verifying periods within a reasonable time period follow-
81
ing receipt of the information, to make a Example 2: (i) Same facts as in Example 1, and was declined, the dependent was
except that Employer Y’s plan determines that G
determination regarding the individual’s has 14 months of creditable coverage based on G’s
covered under another group health plan
period of creditable coverage and notify certificate indicating 14 months of creditable cov- or had other health insurance coverage.
the individual of the determination in erage under G’s prior plan. (4) Special enrollment of both em-
accordance with paragraph (d)(2) of this (ii) In this Example, Employer Y’s plan is not ployee and dependent. An employee and
section. Whether a determination and required to notify G that G will not be subject to a any dependent of the employee are
preexisting condition exclusion.
notification regarding an individual’s Example 3: (i) Individual H is hired by Em- described in this paragraph (a)(4) if they
creditable coverage is made within a ployer Z. Employer Z’s group health plan imposes are eligible, but not enrolled, for cover-
reasonable time period is determined a preexisting condition exclusion for 12 months age under the terms of the plan and,
based on the relevant facts and circum- with respect to new enrollees and uses the stan- when enrollment was previously offered
dard method of determining creditable coverage. H
stances. Relevant facts and circum- develops an urgent health condition before receiv-
to the employee or dependent under the
stances include whether a plan’s applica- ing a certificate of prior coverage. H attests to the plan and was declined, the employee or
tion of a preexisting condition exclusion period of prior coverage, presents corroborating dependent was covered under another
would prevent an individual from hav- documentation of the coverage period, and autho- group health plan or had other health
ing access to urgent medical services. rizes the plan to request a certificate on H’s insurance coverage.
behalf.
(2) Notification to individual of pe- (ii) In this Example, Employer Z’s plan must (5) Conditions for special enrollment.
riod of preexisting condition exclusion. review the evidence presented by H. In addition, An employee or dependent is eligible to
A plan or issuer seeking to impose a the plan must make a determination and notify H enroll during a special enrollment period
preexisting condition exclusion is re- regarding any preexisting condition exclusion pe- if each of the following applicable con-
riod that applies to H (and the basis of such
quired to disclose to the individual, in determination) within a reasonable time period
ditions is met:
writing, its determination of any preex- following receipt of the evidence that is consistent (i) When the employee declined en-
isting condition exclusion period that with the urgency of H’s health condition (this rollment for the employee or the depen-
applies to the individual, and the basis determination may be modified as permitted under dent, the employee stated in writing that
for such determination, including the paragraph (d)(2)). coverage under another group health
source and substance of any information plan or other health insurance coverage
§ 146.117 Special enrollment periods.
on which the plan or issuer relied. In was the reason for declining enrollment.
addition, the plan or issuer is required to (a) Special enrollment for certain in- This paragraph (a)(5)(i) applies only
provide the individual with a written dividuals who lose coverage—(1) Gen- if—
explanation of any appeal procedures eral. A group health plan, and a health (A) The plan required such a state-
established by the plan or issuer, and insurance issuer offering group health ment when the employee declined en-
with a reasonable opportunity to submit insurance coverage in connection with a rollment; and
additional evidence of creditable cover- group health plan, is required to permit (B) The employee is provided with
age. However, nothing in this paragraph employees and dependents described in notice of the requirement to provide the
(d) or paragraph (c) of this section this section in paragraph (a)(2), (a)(3), statement in paragraph (a)(5)(i) (and the
prevents a plan or issuer from modify- or (a)(4) to enroll for coverage under consequences of the employee’s failure
ing an initial determination of creditable the terms of the plan if the conditions in to provide the statement) at the time the
coverage if it determines that the indi- paragraph (a)(5) are satisfied and the employee declined enrollment.
vidual did not have the claimed credit- enrollment is requested within the pe- (ii)(A) When the employee declined
able coverage, provided that— riod described in paragraph (a)(6). The enrollment for the employee or depen-
(i) A notice of the reconsideration is enrollment is effective at the time de- dent under the plan, the employee or
provided to the individual; and scribed in paragraph (a)(7). The special dependent had COBRA continuation
(ii) Until the final determination is enrollment rights under this paragraph coverage under another plan and CO-
made, the plan or issuer, for purposes of (a) apply without regard to the dates on BRA continuation coverage under that
approving access to medical services which an individual would otherwise be other plan has since been exhausted; or
(such as a pre-surgery authorization), able to enroll under the plan. (B) If the other coverage that applied
acts in a manner consistent with the (2) Special enrollment of an employee to the employee or dependent when
initial determination. only. An employee is described in this enrollment was declined was not under
(3) Examples. The following ex- paragraph (a)(2) if the employee is a COBRA continuation provision, either
amples illustrate this paragraph (d): eligible, but not enrolled, for coverage the other coverage has been terminated
Example: (i) Individual F terminates employ- under the terms of the plan and, when as a result of loss of eligibility for the
ment with Employer W and, a month later, is hired enrollment was previously offered to the coverage or employer contributions to-
by Employer X. Example 1: Individual G is hired employee under the plan and was de- wards the other coverage have been
by Employer Y. Employer Y’s group health plan
imposes a preexisting condition exclusion for 12 clined by the employee, the employee terminated. For this purpose, loss of
months with respect to new enrollees and uses the was covered under another group health eligibility for coverage includes a loss
standard method of determining creditable cover- plan or had other health insurance cov- of coverage as a result of legal separa-
age. Employer Y’s plan determines that G is erage. tion, divorce, death, termination of em-
subject to a 4-month preexisting condition exclu-
sion, based on a certificate of creditable coverage
(3) Special enrollment of dependents ployment, reduction in the number of
that is provided by G to Employer Y’s plan only. A dependent is described in this hours of employment, and any loss of
indicating 8 months of coverage under G’s prior paragraph (a)(3) if the dependent is a eligibility after a period that is measured
group health plan. dependent of an employee participating by reference to any of the foregoing.
(ii) In this Example, Employer Y’s plan must in the plan, the dependent is eligible, Thus, for example, if an employee’s
notify G within a reasonable period of time
following receipt of the certificate that G is but not enrolled, for coverage under the coverage ceases following a termination
subject to a 4-month preexisting condition exclu- terms of the plan, and, when enrollment of employment and the employee is
sion beginning on G’s enrollment date in Y’s plan. was previously offered under the plan eligible for but fails to elect COBRA
82
continuation coverage, this is treated as who is eligible, but not enrolled, in the not begin earlier than the date the plan
a loss of eligibility under this paragraph plan, the individual would be a partici- makes dependent coverage generally
(a)(5)(ii)(B). However, loss of eligibility pant but for a prior election by the available).
does not include a loss due to failure of individual not to enroll in the plan (8) Effective date of enrollment. En-
the individual or the participant to pay during a previous enrollment period, and rollment is effective—
premiums on a timely basis or termina- a person becomes a dependent of the (i) In the case of marriage, not later
tion of coverage for cause (such as individual through marriage, birth, or than the first day of the first calendar
making a fraudulent claim or an inten- adoption or placement for adoption. month beginning after the date the com-
tional misrepresentation of a material pleted request for enrollment is received
fact in connection with the plan). In (3) Special enrollment of a spouse of
a participant. An individual is described by the plan;
addition, for purposes of this paragraph (ii) In the case of a dependent’s birth,
(a)(5)(ii)(B), employer contributions in- in this paragraph (b)(3) if either—
(i) The individual becomes the the date of such birth; and
clude contributions by any current or (iii) In the case of a dependent’s
former employer (of the individual or spouse of a participant; or
adoption or placement for adoption, the
another person) that was contributing to (ii) The individual is a spouse of the
date of such adoption or placement for
coverage for the individual. participant and a child becomes a de-
adoption.
(6) Length of special enrollment pe- pendent of the participant through birth,
adoption, or placement for adoption. (9) Example. The following example
riod. The employee is required to re-
illustrates the requirements of this para-
quest enrollment (for the employee or (4) Special enrollment of an employee graph (b):
the employee’s dependent, as described who is eligible but not enrolled and the Example. (i) Employee A is hired on September
in this section in paragraph (a)(2), para- spouse of such employee. An employee 3, 1998 by Employer X, which has a group health
graph (a)(3), or paragraph (a)(4)) not who is eligible, but not enrolled, in the plan in which A can elect to enroll either for
later than 30 days after the exhaustion plan, and an individual who is a depen- employee-only coverage, for employee-plus-spouse
coverage, or for family coverage, effective on the
of the other coverage described in para- dent of such employee, are described in first day of any calendar quarter thereafter. A is
graph (a)(5)(ii)(A) or termination of the this paragraph (b)(4) if the employee married and has no children. A does not elect to
other coverage as a result of the loss of would be a participant but for a prior join Employer X’s plan (for employee-only cover-
eligibility for the other coverage for election by the employee not to enroll in age, employee-plus-spouse coverage, or family
items described in paragraph coverage) on October 1, 1998 or January 1, 1999.
the plan during a previous enrollment On February 15, 1999, a child is placed for
(a)(5)(ii)(B) or following the termination period, and either— adoption with A and A’s spouse.
of employer contributions toward that (i) The employee and the individual (ii) In this Example, the conditions for special
other coverage. The plan may impose become married; or enrollment of an employee with a new dependent
the same requirements that apply to under paragraph (b)(2) are satisfied, the conditions
(ii) The employee and individual are for special enrollment of an employee and a
employees who are otherwise eligible
married and a child becomes a depen- spouse with a new dependent under paragraph
under the plan to immediately request
dent of the employee through birth, (b)(4) are satisfied, and the conditions for special
enrollment for coverage (for example, enrollment of an employee and a new dependent
adoption or placement for adoption.
that the request be made in writing). under paragraph (b)(6) are satisfied. Accordingly,
(7) Effective date of enrollment. En- (5) Special enrollment of a dependent Employer X’s plan will satisfy this paragraph (b) if
rollment is effective not later than the of a participant. An individual is de- and only if it allows A to elect, by filing the
scribed in this paragraph (b)(5) if the required forms by March 16, 1999, to enroll in
first day of the first calendar month Employer X’s plan either with employee-only
beginning after the date the completed individual is a dependent of a partici- coverage, with employee-plus-spouse coverage, or
request for enrollment is received. pant and the individual becomes a de- with family coverage, effective as of February 15,
(b) Special enrollment with respect to pendent of such participant through mar- 1999.
certain dependent beneficiaries—(1) riage, birth, or adoption or placement (c) Notice of enrollment rights. On or
General. A group health plan that makes for adoption. before the time an employee is offered
coverage available with respect to de- (6) Special enrollment of an employee the opportunity to enroll in a group
pendents of a participant is required to who is eligible but not enrolled and a health plan, the plan is required to
provide a special enrollment period to new dependent. An employee who is provide the employee with a description
permit individuals described in this sec- eligible, but not enrolled, in the plan, of the plan’s special enrollment rules
tion in paragraph (b)(2), (b)(3), (b)(4), and an individual who is a dependent of under this section. For this purpose, the
(b)(5), or (b)(6) to be enrolled for the employee, are described in this para- plan may use the following model de-
coverage under the terms of the plan if graph (b)(6) if the employee would be a scription of the special enrollment rules
the enrollment is requested within the participant but for a prior election by under this section:
time period described in paragraph the employee not to enroll in the plan If you are declining enrollment for
(b)(7). The enrollment is effective at the during a previous enrollment period, and yourself or your dependents (includ-
time described in paragraph (b)(8). The the dependent becomes a dependent of ing your spouse) because of other
special enrollment rights under this the employee through marriage, birth, or health insurance coverage, you may in
paragraph (b) apply without regard to adoption or placement for adoption. the future be able to enroll yourself or
the dates on which an individual would (7) Length of special enrollment pe- your dependents in this plan, provided
otherwise be able to enroll under the riod. The special enrollment period un- that you request enrollment within 30
plan. der paragraph (b)(1) of this section is a days after your other coverage ends.
(2) Special enrollment of an employee period of not less than 30 days and In addition, if you have a new depen-
who is eligible but not enrolled. An begins on the date of the marriage, dent as a result of marriage, birth,
individual is described in this paragraph birth, or adoption or placement for adoption, or placement for adoption,
(b)(2) if the individual is an employee adoption (except that such period does you may be able to enroll yourself
83
and your dependents, provided that (3) The affiliation period for the (ii) To prevent such a plan or issuer
you request enrollment within 30 days HMO coverage is applied uniformly from establishing limitations or restric-
after the marriage, birth, adoption, or without regard to any health status- tions on the amount, level, extent, or
placement for adoption. related factors. nature of the benefits or coverage for
(d) Special enrollment date definition. (4) The affiliation period does not similarly situated individuals enrolled in
(1) General rule. A special enrollment exceed 2 months (or 3 months in the the plan or coverage.
date for an individual means any date in case of a late enrollee). (3) Construction. For purposes of
paragraph (a)(7) or paragraph (b)(8) of (5) The affiliation period begins on paragraph (a)(1) of this section, rules for
this section on which the individual has the enrollment date. eligibility to enroll include rules defin-
a right to have enrollment in a group (6) The affiliation period for enroll- ing any applicable waiting (or affilia-
health plan become effective under this ment in the HMO under a plan runs tion) periods for such enrollment and
section. concurrently with any waiting period. rules relating to late and special enroll-
(2) Examples. The following ex- (c) Alternatives to affiliation period. ment.
amples illustrate the requirements of this An HMO may use alternative methods (4) Example. The following example
paragraph (d): in lieu of an affiliation period to address illustrates the requirements of this para-
Example 1: (i) Employer Y maintains a group adverse selection, as approved by the graph (a):
health plan that allows employees to enroll in the Example. (i) An employer sponsors a group
plan either (a) effective on the first day of
State insurance commissioner or other health plan that is available to all employees who
employment by an election filed within three days official designated to regulate HMOs. enroll within the first 30 days of their employ-
thereafter, (b) effective on any subsequent January Nothing in this section requires a State ment. However, individuals who do not enroll in
1 by an election made during the preceding to receive proposals for or approve the first 30 days cannot enroll later unless they
months of November or December, or (c) effective alternatives to affiliation periods. pass a physical examination.
as of any special enrollment date described in this (ii) In this Example, the plan discriminates on
section. Employee B is hired by Employer Y on the basis of one or more health status-related
March 15, 1998 and does not elect to enroll in § 146.121 Prohibiting discrimination factors.
Employer Y’s plan until January 31, 1999 when B against participants and beneficiaries (b) In premiums or contributions—(1)
loses coverage under another plan. B elects to based on a health status-related factor.
enroll in Employer Y’s plan effective on February General. A group health plan, and a
1, 1999 by filing the completed request form by (a) In eligibility to enroll—(1) Gen- health insurance issuer offering health
January 31, 1999, in accordance with the special eral. Subject to paragraph (a)(2) of this insurance coverage in connection with a
rule set forth in paragraph (a). group health plan, may not require an
(ii) In this Example, B has enrolled on a special
section, a group health plan, and a
health insurance issuer offering group individual (as a condition of enrollment
enrollment date because the enrollment is effective
at a date described in paragraph (a)(7). health insurance coverage in connection or continued enrollment under the plan)
Example 2: (i) Same facts as Example 1, except with a group health plan, may not to pay a premium or contribution that is
that B’s loss of coverage under the other plan establish rules for eligibility (including greater than the premium or contribution
occurs on December 31, 1998 and B elects to for a similarly situated individual en-
enroll in Employer Y’s plan effective on January 1,
continued eligibility) of any individual
to enroll under the terms of the plan rolled in the plan based on any health
1999 by filing the completed request form by
December 31, 1998, in accordance with the special based on any of the following health status-related factor, in relation to the
rule set forth in paragraph (a). status-related factors in relation to the individual or a dependent of the indi-
(ii) In this Example, B has enrolled on a special individual or a dependent of the indi- vidual.
enrollment date because the enrollment is effective (2) Construction. Nothing in para-
at a date described in paragraph (a)(7) (even
vidual:
though this date is also a regular enrollment date (i) Health status. graph (b)(1) of this section can be
under the plan). (ii) Medical condition (including both construed—
physical and mental illnesses), as de- (i) To restrict the amount that an
§ 146.119 HMO affiliation period as fined in § 146.102. employer may be charged by an issuer
alternative to preexisting condition (iii) Claims experience. for coverage under a group health plan;
exclusion. (iv) Receipt of health care. or
(v) Medical history. (ii) To prevent a group health plan,
(a) General. A group health plan of- and a health insurance issuer offering
fering health insurance coverage through (vi) Genetic information, as defined
group health insurance coverage, from
an HMO, or an HMO that offers health in § 146.102.
establishing premium discounts or re-
insurance coverage in connection with a (vii) Evidence of insurability (includ- bates or modifying otherwise applicable
group health plan, may impose an affili- ing conditions arising out of acts of copayments or deductibles in return for
ation period only if each of the require- domestic violence). adherence to a bona fide wellness pro-
ments in paragraph (b) of this section is (viii) Disability. gram. For purposes of this section, a
satisfied. (2) No application to benefits or ex- bona fide wellness program is a pro-
(b) Requirements for affiliation pe- clusions. To the extent consistent with gram of health promotion and disease
riod. section 2701 of the Act and § 146.111, prevention.
(1) No preexisting condition exclu- paragraph (a)(1) of this section shall not (3) Example. The following example
sion is imposed with respect to any be construed — illustrates the requirements of this para-
coverage offered by the HMO in con- (i) To require a group health plan, or graph (b):
nection with the particular group health a health insurance issuer offering group Example. (i) Plan X offers a premium discount
plan. health insurance coverage, to provide to participants who adhere to a cholesterol-
reduction wellness program. Enrollees are ex-
(2) No premium is charged to a par- particular benefits other than those pro- pected to keep a diary of their food intake over 6
ticipant or beneficiary for the affiliation vided under the terms of such plan or weeks. They periodically submit the diary to the
period. coverage; or plan physician who responds with suggested diet
84
modifications. Enrollees are to modify their diets with respect to an individual beyond the the presentation of documents or other
in accordance with the physician’s recommenda- limitation in § 146.111. For an indi- means in accordance with the provisions
tions. At the end of the 6 weeks, enrollees are
given a cholesterol test and those who achieve a vidual who has not completed the per- of § 146.115(c). For coverage relating
count under 200 receive a premium discount. mitted exclusion period under HIPAA, to an event occurring before July 1,
(ii) In this Example, because enrollees who upon the effective date for his or her 1996, a group health plan and a health
otherwise comply with the program may be unable plan, the individual may use creditable insurance issuer is not subject to any
to achieve a cholesterol count under 200 due to a
health status-related factor, this is not a bona fide
coverage that the person had as of the penalty or enforcement action with re-
wellness program and such discounts would dis- enrollment date to reduce the remaining spect to the plan’s or issuer’s counting
criminate impermissibly based on one or more preexisting condition exclusion period (or not counting) such coverage if the
health status-related factors. However, if, instead, applicable to the individual. plan or issuer has sought to comply in
individuals covered by the plan were entitled to (ii) Examples. The following ex- good faith with the applicable require-
receive the discount for complying with the diary
and dietary requirements and were not required to amples illustrate the requirements of this ments under § 146.115(c).
pass a cholesterol test, the program would be a paragraph (a)(3): (e) Transition rules for certificates of
bona fide wellness program. Example 1: (i) Individual A has been working creditable coverage—(1) Certificates
for Employer X and has been covered under
Employer X’s plan since March 1, 1997. Under
only upon request. For events occurring
§ 146.125 Effective dates. on or after July 1, 1996 but before
Employer X’s plan, as in effect before January 1,
(a) General effective dates—(1) Non- 1998, there is no coverage for any preexisting October 1, 1996, a certificate is required
collectively-bargained plans. Except as condition. Employer X’s plan year begins on to be provided only upon a written
otherwise provided in this section, Part January 1, 1998. A’s enrollment date in the plan is request by or on behalf of the individual
March 1, 1997 and A has no creditable coverage
A of Title XXVII of the PHS Act and before this date. to whom the certificate applies.
this Part applies with respect to group (ii) In this Example, Employer X may continue (2) Certificates before June 1, 1997.
health plans, including health insurance to impose the preexisting condition exclusion For events occurring on or after October
issuers offering health insurance cover- under the plan through February 28, 1998 (the end 1, 1996 and before June 1, 1997, a
age in connection with group health of the 12-month period using anniversary dates).
certificate must be furnished no later
Example 2: (i) Same facts as in Example 1,
plans, for plan years beginning after except that A’s enrollment date was August 1, than June 1, 1997, or any later date
June 30, 1997. 1996, instead of March 1, 1997. permitted under § 146.115(a)(2)(ii) and
(2) Collectively bargained plans. Ex- (ii) In this Example, on January 1, 1998, Em- (iii).
cept as otherwise provided in this sec- ployer X’s plan may no longer exclude treatment (3) Optional notice—(i) General.
tion (other than paragraph (a)(1)), in the for any preexisting condition that A may have,
however, because Employer X’s plan is not subject
This paragraph (e)(3) applies with re-
case of a group health plan maintained to HIPAA until January 1, 1998, A is not entitled spect to events described in
under one or more collective bargaining to claim reimbursement for expenses under the § 146.115(a)(5)(ii), that occur on or
agreements between employee represen- plan for treatments for any preexisting condition after October 1, 1996 but before June 1,
tatives and one or more employers rati- received before January 1, 1998. 1997. A group health plan or health
fied before August 21, 1996, Part A of (b) Effective date for certification re- insurance issuer offering group health
Title XXVII of the PHS Act and this quirement—(1) General. Subject to the coverage is deemed to satisfy
Part does not apply to plan years begin- transitional rule in § 146.115(a)(5)(iii), §§ 146.115(a)(2) and (a)(3) if a notice
ning before the later of July 1, 1997, or the certification rules of § 146.115 ap- is provided in accordance with the pro-
the date on which the last of the ply to events occurring on or after July visions of paragraphs (e)(3)(i) through
collective bargaining agreements relating 1, 1996. (e)(3)(iv) of this section.
to the plan terminates (determined with- (2) Period covered by certificate. A (ii) Time of notice. The notice must
out regard to any extension thereof certificate is not required to reflect cov- be provided no later than June 1, 1997.
agreed to after August 21, 1996). For erage before July 1, 1996. (iii) Form and content of notice. A
these purposes, any plan amendment (3) No certificate before June 1, notice provided under this
made under a collective bargaining 1997. Notwithstanding any other provi- paragraph(e)(3) must be in writing and
agreement relating to the plan, that sion of this Part, in no case is a must include information substantially
amends the plan solely to conform to certificate required to be provided be- similar to the information included in a
any requirement of such part, is not fore June 1, 1997. model notice authorized by HCFA. Cop-
treated as a termination of the collective (c) Limitation on actions. No enforce- ies of the model notice are available at
bargaining agreement. ment action is taken, under, against a the following website — www.hcfa.gov
(3) Preexisting condition exclusion group health plan or health insurance (or call (410)786–1565).
periods for current employees. (i) Gen- issuer with respect to a violation of a (iv) Providing certificate after re-
eral rule. Any preexisting condition ex- requirement imposed by Part A of Title quest. If an individual requests a certifi-
clusion period permitted under XXVII of the PHS Act before January cate following receipt of the notice, the
§ 146.111 is measured from the indi- 1, 1998, if the plan or issuer has sought certificate must be provided at the time
vidual’s enrollment date in the plan. to comply in good faith with such of the request as set forth in
This exclusion period, as limited under requirements. Compliance with this part § 146.115(a)(5)(iii).
§ 146.111, may be completed before the is deemed to be good faith compliance (v) Other certification rules apply.
effective date of the Health Insurance with the requirements of Part A of Title The rules set forth in § 146.115(a)(4)(i)
Portability and Accountability Act of XXVII of the PHS Act. (method of delivery) and (a)(1) (entities
1996 (HIPAA) for his or her plan. (d) Transition rules for counting required to provide a certificate) apply
Therefore, on the date the individual’s creditable coverage. An individual who with respect to the provision of the
plan becomes subject to Part A of Title seeks to establish creditable coverage notice.
XXVII of the PHS Act, no preexisting for periods before July 1, 1996 is en-
condition exclusion may be imposed titled to establish such coverage through Subpart C—[RESERVED]
85
Subpart D—Preemption and Special (1)(iii) and 146.113 (for purposes of (i) Coverage only for accident (in-
Rules applying the break in coverage rules); cluding accidental death and dismember-
(iv) Provides for a greater number of ment).
§ 146.143 Preemption; State flexibility; days than the ‘‘30-day period’’ described (ii) Disability income insurance.
construction. in sections 2701(b)(2) and (d)(1) of the (iii) Liability insurance, including
PHS Act and §§ 146.111(b) (for pur- general liability insurance and automo-
(a) Continued applicability of State bile liability insurance.
law with respect to health insurance poses of the enrollment period and pre-
(iv) Coverage issued as a supplement
issuers. Subject to paragraph (b) of this existing condition exclusion periods for
to liability insurance.
section and except as provided in para- certain newborns and children that are
(v) Workers’ compensation or similar
graph (c) of this section, Part A of Title adopted or placed for adoption); insurance.
XXVII of the PHS Act is not to be (v) Prohibits the imposition of any (vi) Automobile medical payment in-
construed to supersede any provision of preexisting condition exclusion in cases surance.
State law which establishes, implements, not described in section 2701(d) of the (vii) Credit-only insurance (for ex-
or continues in effect any standard or PHS Act or expands the exceptions ample, mortgage insurance).
requirement solely relating to health described in that section; (viii) Coverage for on-site medical
insurance issuers in connection with (vi) Requires special enrollment peri- clinics.
group health insurance coverage except ods in addition to those required under (3) Limited excepted benefits—(i)
to the extent that such standard or section 2701(f) of the PHS Act; or General. Limited-scope dental benefits,
requirement prevents the application of limited-scope vision benefits, or long-
a requirement of Part A of Title XXVII (vii) Reduces the maximum period
term care benefits are excepted if they
of the PHS Act. permitted in an affiliation period under
are provided under a separate policy,
section 701(g)(1)(B).
(b) Continued preemption with re- certificate, or contract of insurance, or
spect to group health plans. Nothing in (d) Definitions—(1) State law. For are otherwise not an integral part of the
Part A of Title XXVII of the PHS Act purposes of this section the term ‘‘State plan, as defined in paragraph (b)(3)(ii)
affects or modifies the provisions of law’’ includes all laws, decisions, rules, of this section.
section 514 of ERISA with respect to regulations, or other State action having (ii) Integral. For purposes of para-
group health plans. the effect of law, of any State. A law of graph (b)(3)(i) of this section, benefits
the United States applicable only to the are deemed to be an integral part of a
(c) Special rules—(1) General. Sub-
District of Columbia is treated as a State plan unless a participant has the right to
ject to paragraph (c)(2) of this section,
law rather than a law of the United elect not to receive coverage for the
the provisions of Part A of Title XXVII
States. benefits and, if the participant elects to
of the PHS Act relating to health insur-
ance coverage offered by a health insur- (2) State. For purposes of this section receive coverage for the benefits, the
ance issuer supersede any provision of the term ‘‘State’’ includes a State, the participant pays an additional premium
State law which establishes, implements, Northern Mariana Islands, any political or contribution for that coverage.
or continues in effect a standard or subdivisions of a State or such Islands, (iii) Limited scope. Limited scope
requirement applicable to imposition of or any agency or instrumentality of dental or vision benefits are dental or
a preexisting condition exclusion spe- either. vision benefits that are sold under a
cifically governed by section 2701 of separate policy or rider and that are
the PHS Act, which differs from the § 146.145 Special rules relating to limited in scope to a narrow range or
standards or requirements specified in group health plans. type of benefits that are generally ex-
such section. cluded from hospital/medical/surgical
(a) General exception for certain benefits packages.
(2) Exceptions. Only in relation to small group health plans. The require-
health insurance coverage offered by a (iv) Long-term care. Long-term care
ments of this Part do not apply to any benefits are benefits that are either—
health insurance issuer, the provisions of group health plan (and group health
this part do not supersede any provision (A) Subject to State long-term care
insurance coverage offered in connec- insurance laws;
of State law to the extent that such tion with a group health plan) for any
provision— (B) For qualified long-term care in-
plan year if, on the first day of the plan surance services, as defined in section
(i) Shortens the period of time from year, the plan has fewer than 2 partici- 7702B(c)(1) of the Internal Revenue
the ‘‘6-month period’’ described in sec- pants who are current employees. Code, or provided under a qualified
tion 2701(a)(1) of the PHS Act and (b) Excepted benefits—(1) General. long-term care insurance contract, as
§ 146.111(a)(1)(i) (for purposes of iden- The requirements of subpart B of this defined in section 7702B(b) of the Inter-
tifying a preexisting condition); part do not apply to any group health nal Revenue Code; or
(ii) Shortens the period of time from plan (or any group health insurance (C) Based on cognitive impairment or
the ‘‘12 months’’ and ‘‘18 months’’ coverage offered in connection with a a loss of functional capacity that is
described in section 2701(a)(2)of the group health plan) in relation to its expected to be chronic.
PHS Act and § 146.111(a)(1)(ii) (for provision of the benefits described in (4) Noncoordinated benefits—(i) Ex-
purposes of applying a preexisting con- paragraph (b)(2), (3), (4), or (5) of this cepted benefits that are not coordinated.
dition exclusion period); section (or any combination of these Coverage for only a specified disease or
(iii) Provides for a greater number of benefits). illness (for example, cancer-only poli-
days than the ‘‘63-day period’’ described (2) Benefits excepted in all circum- cies) or hospital indemnity or other
in sections 2701(c)(2)(A) and (d)(4)(A) stances. The following benefits are ex- fixed dollar indemnity insurance (for
of the PHS Act and §§ 146.111(a)- cepted in all circumstances: example, $100/day) is excepted only if
86
it meets each of the conditions specified impose any restriction on an eligible in paragraph (c)(2) of this section is
in paragraph (b)(4)(ii) of this section. individual, which is inconsistent with subject to the requirements of this sec-
(ii) Conditions. Benefits are described the nondiscrimination provisions of § tion.
in paragraph (b)(4)(i) of this section 146.121 on an eligible individual being (d) Application of financial capacity
only if— a participant or beneficiary. limits.
(A) The benefits are provided under a (b) Eligible individual defined. For (1) A health insurance issuer may
separate policy, certificate, or contract of purposes of this section, the term ‘‘eli- deny health insurance coverage in the
insurance; gible individual’’ means an individual small group market if the issuer has
(B) There is no coordination between who is eligible— demonstrated to the applicable State
the provision of the benefits and an (1) To enroll in group health insur- authority (if required by the State au-
exclusion of benefits under any group ance coverage offered to a group health thority) that it—
health plan maintained by the same plan plan maintained by a small employer, in (i) Does not have the financial re-
sponsor; and accordance with the terms of the group serves necessary to underwrite addi-
(C) The benefits are paid with respect health plan; tional coverage; and
to an event without regard to whether (2) For coverage under the rules of (ii) Is applying this paragraph (d)(1)
benefits are provided with respect to the the health insurance issuer which are uniformly to all employers in the small
event under any group health plan main- uniformly applicable in the State to group market in the State consistent
tained by the same plan sponsor. small employers in the small group with applicable State law and without
(5) Supplemental benefits. The fol- market, and regard to the claims experience of those
lowing benefits are excepted only if (3) For coverage in accordance with employers and their employees (and
they are provided under a separate all applicable State laws governing the their dependents) or any health status-
policy, certificate, or contract of insur- issuer and the small group market. related factor relating to those employ-
ance: (c) Special rules for network plans. ees and dependents.
(i) Medicare supplemental health in- (1) In the case of a health insurance (2) An issuer that denies group health
surance (as defined under section issuer that offers health insurance cover- insurance coverage to any small em-
1882(g)(1) of the Social Security Act; age in the small group market through a ployer in a State in accordance with
also known as Medigap or MedSupp network plan, the issuer may— paragraph (d)(1) of this section may not
insurance), (i) Limit the employers that may ap- offer coverage in connection with group
(ii) Coverage supplemental to the ply for the coverage to those with health plans in the small group market
coverage provided under Chapter 55, eligible individuals who live, work, or in the State for a period of 180 days
Title 10 of the United States Code (also reside in the service area for the net- after the later of the date—
known as CHAMPUS supplemental pro- work plan; and (i) The coverage is denied; or
grams), and (ii) Within the service area of the (ii) The issuer demonstrates to the
(iii) Similar supplemental coverage plan, deny coverage to employers if the applicable State authority, if required
provided to coverage under a group issuer has demonstrated to the appli- under applicable State law, that the
health plan. cable State authority (if required by the issuer has sufficient financial reserves to
State authority) that— underwrite additional coverage.
Subpart E—Provisions Applicable to (3) Paragraph (d)(2) of this section
(A) It will not have the capacity to
Only Health Insurance Issuers does not limit the issuer’s ability to
deliver services adequately to enrollees
of any additional groups because of its renew coverage already in force or
§ 146.150 Guaranteed availability of relieve the issuer of the responsibility to
coverage for employers in the small obligations to existing group contract
holders and enrollees; and renew that coverage.
group market.
(B) It is applying this paragraph (4) Coverage offered after the 180-
(a) Issuance of coverage in the small (c)(1) uniformly to all employers with- day period specified in paragraph (d)(2)
group market. Subject to paragraphs (c) out regard to the claims experience of of this section, is subject to the require-
through (f) of this section, each health those employers and their employees ments of this section.
insurance issuer that offers health insur- (and their dependents) or any health (5) An applicable State authority may
ance coverage in the small group market status-related factor relating to those provide for the application of this para-
in a State must— employees and dependents. graph (d) of this section on a service-
(1) Offer, to any small employer in (2) An issuer that denies health insur- area-specific basis.
the State, all products that are approved ance coverage to an employer in any (e) Exception to requirement for fail-
for sale in the small group market and service area in accordance with para- ure to meet certain minimum participa-
that the issuer is actively marketing, and graph (c)(1)(ii) of this section, may not tion or contribution rules.
must accept any employer that applies offer coverage in the small group mar- (1) Paragraph (a) of this section does
for any of those products; and ket within the service area to any em- not preclude a health insurance issuer
(2) Accept for enrollment under the ployer for a period of 180 days after the from establishing employer contribution
coverage every eligible individual (as date the coverage is denied. This para- rules or group participation rules for the
defined in paragraph (b) of this section) graph (c)(2) does not limit the issuer’s offering of health insurance coverage in
who applies for enrollment during the ability to renew coverage already in connection with a group health plan in
period in which the individual first force or relieve the issuer of the respon- the small group market, as allowed
becomes eligible to enroll under the sibility to renew that coverage. under applicable State law.
terms of the group health plan, or during (3) Coverage offered within a service (2) For purposes of paragraph (e)(1)
a special enrollment period, and may not area after the 180-day period specified of this section—
87
(i) The term ‘‘employer contribution (5) Enrollees’ movement outside ser- the coverage) of the discontinuation at
rule’’ means a requirement relating to vice area. For network plans, there is no least 180 days prior to the date the
the minimum level or amount of em- longer any enrollee under the group coverage will be discontinued; and
ployer contribution toward the premium health plan who lives, resides, or works (2) All health insurance policies is-
for enrollment of participants and ben- in the service area of the issuer (or in sued or delivered for issuance in the
eficiaries; and the area for which the issuer is autho- State in the market (or markets) are
(ii) The term ‘‘group participation rized to do business); and in the case of discontinued and not renewed.
rule’’ means a requirement relating to the small group market, the issuer ap- (e) Prohibition on market reentry. An
the minimum number of participants or plies the same criteria it would apply in issuer who elects to discontinue offering
beneficiaries that must be enrolled in denying enrollment in the plan under all health insurance coverage in a mar-
relation to a specified percentage or § 146.150(c). ket (or markets) in a State as described
number of eligible individuals or em- (6) Association membership ceases. in paragraph (d) of this section may not
ployees of an employer. For coverage made available in the issue coverage in the market (or mar-
(f) Exception for coverage offered small or large group market only kets) and State involved during the
only to bona fide association members. through one or more bona fide associa- 5-year period beginning on the date of
Paragraph (a) of this section does not tions, if the employer’s membership in discontinuation of the last coverage not
apply to health insurance coverage of- the association ceases, but only if the renewed.
fered by a health insurance issuer if that coverage is terminated uniformly with- (f) Exception for uniform modifica-
coverage is made available in the small out regard to any health status-related tion of coverage. Only at the time of
group market only through one or more factor relating to any covered individual. coverage renewal may issuers modify
bona fide associations (as defined in 45 (c) Discontinuing a particular prod- the health insurance coverage for a
CFR 144.103). uct. In any case in which an issuer product offered to a group health plan in
decides to discontinue offering a par- the—
§ 146.152 Guaranteed renewability of ticular product offered in the small or (1) Large group market; and
coverage for employers in the group large group market, that product may be (2) Small group market if, for cover-
market. discontinued by the issuer in accordance age available in this market (other than
with applicable State law in the particu- only through one or more bona fide
(a) General rule. Subject to para-
lar market only if— associations), the modification is consis-
graphs (b) through (d) of this section, a
(1) The issuer provides notice in tent with State law and is effective
health insurance issuer offering health
writing to each plan sponsor provided uniformly among group health plans
insurance coverage in the small or large
that particular product in that market with that product.
group market is required to renew or
(and to all participants and beneficiaries (g) Application to coverage offered
continue in force the coverage at the
covered under such coverage) of the only through associations. In the case of
option of the plan sponsor.
discontinuation at least 90 days before health insurance coverage that is made
(b) Exceptions. the date the coverage will be discontin-
An issuer may nonrenew or discon- available by a health insurance issuer in
ued; the small or large group market to
tinue group health insurance coverage (2) The issuer offers to each plan
offered in the small or large group employers only through one or more
sponsor provided that particular product associations, the reference to ‘‘plan
market based only on one or more of the option, on a guaranteed issue basis,
the following: sponsor’’ is deemed, with respect to
to purchase all (or, in the case of the coverage provided to an employer mem-
(1) Nonpayment of premiums. The large group market, any) other health
plan sponsor has failed to pay premiums ber of the association, to include a
insurance coverage currently being of- reference to such employer.
or contributions in accordance with the fered by the issuer to a group health
terms of the health insurance coverage, plan in that market; and § 146.160 Disclosure of information.
including any timeliness requirements. (3) In exercising the option to discon-
(2) Fraud. The plan sponsor has per- tinue that product and in offering the (a) General rule. In connection with
formed an act or practice that constitutes option of coverage under paragraph the offering of any health insurance
fraud or made an intentional misrepre- (c)(2) of this section, the issuer acts coverage to a small employer, a health
sentation of material fact in connection uniformly without regard to the claims insurance issuer is required to—
with the coverage. experience of those sponsors or any (1) Make a reasonable disclosure to
(3) Violation of participation or con- health status-related factor relating to the employer, as part of its solicitation
tribution rules. The plan sponsor has any participants or beneficiaries covered and sales materials, of the availability of
failed to comply with a material plan or new participants or beneficiaries who information described in paragraph (b)
provision relating to any employer con- may become eligible for such coverage. of this section; and
tribution or group participation rules (d) Discontinuing all coverage. An (2) Upon request of the employer,
permitted under § 146.150(e) in the issuer may elect to discontinue offering provide that information to the em-
case of the small group market or under all health insurance coverage in the ployer.
applicable State law in the case of the small or large group market or both (b) Information described. Subject to
large group market. markets in a State in accordance with paragraph (d) of this section, informa-
(4) Termination of plan. The issuer is applicable State law only if— tion that must be provided under para-
ceasing to offer coverage in the market (1) The issuer provides notice in graph (a)(2) of this section is informa-
in accordance with paragraphs (c) and writing to the applicable State authority tion concerning the following:
(d) of this section and applicable State and to each plan sponsor (and all par- (1) Provisions of coverage relating to
law. ticipants and beneficiaries covered under the following:
88
(i) The issuer’s right to change pre- (a) Exemption from requirements. The graphs (c)(1) through (c)(3) of this sec-
mium rates and the factors that may election described in this paragraph (a) tion, the plan is subject to the require-
affect changes in premium rates. exempts a non-Federal governmental ments described in paragraph (a) for the
(ii) Renewability of coverage. plan from the following requirements: entire plan year, or, in the case of a plan
(iii) Any preexisting condition exclu- (1) Limitations on preexisting condi- provided under a collective bargaining
sion, including use of the alternative tion exclusion periods (§ 146.111). agreement, for the term of the agree-
method of counting creditable coverage. (2) Special enrollment periods for in- ment.
(iv) Any affiliation periods applied dividuals (and dependents) losing other (d) Period of election. An election
by HMOs. coverage (§ 146.117). under paragraph (a) of this section ap-
(v) The geographic areas served by (3) Prohibitions against discriminat- plies—
HMOs. ing against individual participants and (1) For a single specified plan year;
(2) The benefits and premiums avail- beneficiaries based on health status or
able under all health insurance coverage (§ 146.121). (2) In the case of a plan provided
for which the employer is qualified, (4) Standards relating to benefits for under a collective bargaining agreement,
under applicable State law. See mothers and newborns (section 2704 of for the term of the agreement. (For
§ 146.150(b) through (f) for allowable the PHS Act). purposes of this section, if a collective
limitations on product availability. (5) Parity in the application of certain bargaining agreement expires during the
(c) Form of information. The infor- limits to mental health benefits (section bargaining process for a new agreement,
mation must be described in language 2705 of the PHS Act). and the parties agree that the prior
that is understandable by the average (b) Form and manner of election— bargaining agreement continues in effect
small employer, with a level of detail (1) The election must be in writing. until the new agreement takes effect, the
that is sufficient to reasonably inform (2) The election document must in- ‘‘term of the agreement’’ is deemed to
small employers of their rights and clude as an attachment a copy of the continue until the new agreement takes
obligations under the health insurance notice described in paragraphs (f) and effect.)
coverage. This requirement is satisfied if (g) of this section. (e) Subsequent elections. An election
the issuer provides each of the following (3) The election document must state under this section may be extended
with respect to each product offered: the name of the plan and the name and through subsequent elections.
(1) An outline of coverage. For pur- address of the plan administrator. (f) Notice to participants—(1) A plan
poses of this section, outline of coverage (4) The election document must ei- that makes the election described in this
means a description of benefits in sum- ther state that the plan does not include section notifies the participant of the
mary form. health insurance coverage, or identify election, and explains the consequences
(2) The rate or rating schedule that which portion of the plan is not funded of the election. This notice must be
applies to the product (with and without through insurance. provided—
the preexisting condition exclusion or (5) The election must be made in (i) To each participant at the time of
affiliation period). conformity with all the plan sponsor’s enrollment under the plan; and
(3) The minimum employer contribu- rules, including any public hearing, if (ii) To all participants on an annual
tion and group participation rules that required, and the election document basis.
apply to any particular type of coverage. must certify that the person signing the (2) The notice shall be in writing,
(4) In the case of a network plan, a election document, including if appli- and must include the information speci-
map or listing of counties served. cable a third party plan administrator, is fied in paragraph (g) of this section.
(5) Any other information required legally authorized to do so by the plan (3) The notice shall be provided to
by the State. sponsor. each participant individually.
(d) Exception. An issuer is not re- (6) The election document must be (4) Subject to paragraph (g) of this
quired to disclose any information that signed by the person described in para- section, the requirements of paragraphs
is proprietary and trade secret informa- graph (b)(5) of this section. (f)(1) through (f)(3) of this section are
tion under applicable law. (c) Timing of election—(1) For plans considered to have been met if the
not subject to collective bargaining notice is prominently printed in the
Subpart F—Exclusion of Plans and agreements, the election must be re- summary plan document, or equivalent
Enforcement ceived by HCFA by the day preceding document, and each participant receives
the beginning date of the plan year. a copy of that document at the time of
§ 146.180 Treatment of non-Federal
(2) For plans provided under a col- enrollment and annually thereafter.
governmental plans.
lective bargaining agreement, the elec- (g) Notice content. The notice must
The plan sponsor of a non-Federal tion must be received by HCFA no later contain at least the following informa-
governmental plan may elect to be ex- than 30 days after— tion:
empted from any or all of the require- (i) The date of the agreement be- (1) A statement that, in general, Fed-
ments identified in paragraph (a) of this tween the governmental entity and union eral law imposes upon group health
section with respect to any portion of its officials; or plans the requirements described in
plan that is not provided through health (ii) If applicable, ratification of the paragraph (a) of this section (which
insurance coverage, if the election com- agreement. must be individually described in the
plies with the requirements of para- (3) HCFA may extend the deadlines notice).
graphs (b) and (c) of this section. The specified under paragraphs (c)(1) and (2) A statement that Federal law
election remains in effect for the period (c)(2) of this section for good cause. gives the plan sponsor of a non-Federal
described in paragraph (d) of this sec- (4) If the plan sponsor fails to file a governmental plan the right to exempt
tion. timely election in accordance with para- the plan in whole or in part from the
89
requirements described in paragraph (a) sions of Title XXVII that apply to (ii) The insurance commissioner or
of this section, and that the plan sponsor health insurance issuers that offer cover- chief insurance regulatory official.
has elected to do so. age in connection with any group health (iii) The official responsible for regu-
(3) A statement identifying which plan are enforced in the first instance by lating HMOs, if different than paragraph
parts of the plan are subject to the the States. If HCFA determines under (c)(2)(ii) of this section, but only if the
election, and each of the requirements of paragraph (b) of this section that a State alleged failure involves HMOs.
paragraph (a) of this section from which is not substantially enforcing the provi- (3) Form and content of notice. The
the plan sponsor has elected to be sions, HCFA enforces them under para- notice described in paragraph (c)(2) is in
exempted. graph (d) of this section. writing, and does the following:
(4) If the plan chooses to provide any (2) Non-Federal governmental plans. (i) Identifies the provision or provi-
of the protections of paragraph (a) of Requirements of this part that apply to sions of the statute and regulations that
this section voluntarily, or is required to group health plans that are non-Federal have allegedly been violated;
under State law, a statement identifying governmental plans (sponsored by a (ii) Describes the facts of the specific
which protections apply. State or local governmental entity) are violations.
(h) Certification and disclosure of enforced by HCFA, as provided in para- (iii) Explains that the consequence of
creditable coverage. Notwithstanding an graph (d) of this section. a failure to substantially enforce any
election under this section, a non- (b) Enforcement with respect to provision(s) is that HCFA enforces the
Federal governmental plan must provide health insurance issuers—(1) General provision(s) in accordance with para-
for certification and disclosure of credit- rule—enforcement by State. Except as graph (d) of this section.
able coverage under the plan with re- provided in paragraph (b)(2) of this (iv) Advises the State that it has 45
spect to participants and their depen- section, each State enforces the require- days to respond to the notice, unless the
dents in accordance with § 146.115. ments of this part with respect to health time is extended as described in para-
(i) Effect of failure to comply with insurance issuers that issue, sell, renew graph (c)(3) of this section, and that the
election requirements—(1) Subject to or offer health insurance coverage in the response should include any information
paragraph (i)(2) of this section, a plan’s small or large group markets in the that the State wishes HCFA to consider
failure to comply with the requirements State. in making the preliminary determination
of paragraphs (f) through (h) of this (2) Enforcement by HCFA. HCFA en- described in paragraph (c)(5) of this
section invalidates an election made un- forces the provisions of this part with section.
der this section. respect to health insurance issuers, using (4) Good cause. The time for re-
(2) Upon a finding by HCFA that a the procedures described in paragraph sponding can be extended for good
non-Federal governmental plan has (d) of this section, only in the following cause. Examples of good cause include
failed to comply with the requirements circumstances: an agreement between HCFA and the
of paragraphs (f) through (h), and has (i) State election. If the State chooses State that there should be a public
failed to correct the noncompliance not to enforce the Federal requirements. hearing on the State’s enforcement, or
within 30 days (as provided in
(ii) State failure to enforce. If HCFA evidence that the State is undertaking
§ 146.184(d)(7)(iii)(B)), HCFA notifies
makes a determination under paragraph expedited enforcement activities.
the plan that its election has been invali-
(c) of this section that a State has failed (5) Preliminary determination. If at
dated and that it is subject to the
to substantially enforce one or more the end of the 45-day period, and any
requirements of this part.
provisions of this part. extension, the State has not established
(3) A non-Federal governmental plan
described in paragraph (i)(2) of this (c) Determination by Administrator. If to HCFA’s satisfaction that it is substan-
section that fails to comply with the HCFA receives information, through a tially enforcing the provision or provi-
requirements of this part is subject to complaint or any other means, that sions described in the notice, HCFA
Federal enforcement by HCFA under raises a question whether a State is takes the following actions:
§ 146.184, including appropriate civil substantially enforcing one or more pro- (i) Consults with the officials de-
money penalties. visions of this part, HCFA follows the scribed in paragraph (c)(1) of this sec-
procedures set forth in this section. tion.
§ 146.184 Enforcement. (1) Verification of exhaustion. HCFA (ii) Notifies the State of HCFA’s pre-
(a) Enforcement with respect to group makes a threshold determination of liminary determination that the State has
health plans—(1) Scope. In general, the whether the individuals affected by the failed to enforce the provisions, and that
requirements of the Health Insurance alleged failure to enforce have made a the failure is continuing.
Portability and Accountability Act that reasonable effort to exhaust any State (iii) Permits the State a reasonable
apply to group health plans are con- remedies. This may involve informal opportunity to show evidence of sub-
tained in Part 7 of Subtitle B of Title I contact with State officials about the stantial enforcement.
of ERISA, and in Subtitle K of the questions raised. (6) Final determination. If, after pro-
Internal Revenue Code. They are en- (2) Notice to the State. If HCFA is viding notice and the opportunity to
forced by the Secretary of Labor under satisfied that there is a reasonable ques- enforce under paragraph (c)(5) of this
Part 5 of Subtitle B of Title I of ERISA, tion whether there has been a failure to section, HCFA finds that the failure to
and the Secretary of the Treasury under substantially enforce, HCFA provides enforce has not been corrected, HCFA
26 U.S.C. 4980D. However, the provi- notice as specified in paragraph (c)(3) of sends the State a written notice of that
sions that apply to group health plans this section, to the following State offi- final determination. The notice—
that are non-Federal governmental plans cials: (i) Identifies the provisions with re-
are contained in Title XXVII of the PHS (i) The Governor or chief executive spect to which HCFA is taking over
Act, and enforced by HCFA. The provi- officer of the State. enforcement;
90
(ii) States the effective date of (B) Evidence that the entity did not (1) Was due to reasonable cause and
HCFA’s enforcement; know, and exercising due diligence was not due to willful neglect; and
(iii) Informs the State of the mecha- could not have known, of the violation; (2) Was corrected within 30 days of
nism for establishing in the future that it (C) Evidence of a previous record of the first day that any of the entities
has corrected the failure, and has begun compliance. against whom the penalty would be
enforcement. This mechanism will in- (5) Notice to other regulators. HCFA imposed knew, or exercising reasonable
clude transition procedures for ending notifies the State if the alleged violation diligence would have known, that the
HCFA’s enforcement. involves a health insurance issuer under failure existed.
(d) Civil money penalties—(1) Gen- its jurisdiction.
eral rule. If any health insurance issuer (6) Notice of assessment. If, based on (C) The burden is on the responsible
that is subject to HCFA’s enforcement the information provided in the com- entity or entities to establish to the
authority under paragraph (b)(2) of this plaint, as well as any information sub- satisfaction of HCFA that none of the
section, or any non-Federal governmen- mitted by the entity or any other parties, entities knew, or exercising reasonable
tal plan (or employer that sponsors a HCFA proposes to assess a civil money diligence could have known that the
non-Federal governmental plan) that is penalty, HCFA sends written notice of failure existed.
subject to HCFA’s enforcement authority assessment to the responsible entity or (8) Hearings—(i) Right to a hearing.
under paragraph (a)(2) of this section, entities by certified mail, return receipt Any entity against which a penalty is
fails to comply with any applicable requested. The notice contains the fol- assessed may request a hearing by
requirement of this part, it may be lowing information: HCFA. The request must be in writing,
subject to a civil money penalty as (i) A reference to the provision that and must be postmarked within 30 days
described in this paragraph (d). was violated. after the date the notice of assessment is
(2) Complaint. Any person who is (ii) The name or names of the indi- issued.
entitled to any right under this part, and viduals with respect to whom a violation (ii) Failure to request a hearing. If
who believes that the right is being occurred, with relevant identification no hearing is requested under this para-
denied as a result of any failure de- numbers. graph, the notice of assessment consti-
scribed in paragraph (d)(1) of this sec- (iii) The facts that support the finding tutes a final order that is not subject to
tion, may file a complaint with HCFA. of a violation, and the initial date of the appeal.
Based on the complaint, HCFA identi- violation. (iii) Parties to the hearing. Parties to
fies which entities are potentially re- (iv) The amount of the proposed pen- the hearing include any responsible enti-
sponsible for the violation, in accor- alty as of the date of the notice. ties, as well as the party who filed the
dance with paragraph (d)(3) of this (v) The basis for calculating the pen- complaint. An informational notice is
section. alty, including consideration of prior also sent to the State, or to the Secretar-
(3) Determination of responsible en- compliance. ies of Labor and the Treasury, as appro-
tity. If a failure to comply is established (vi) Instructions for responding to the priate.
under this section, the responsible entity, notice, including— (iv) Initial agency decision. The ini-
as determined under this paragraph, is (A) A specific statement of the re- tial agency decision is made by an
liable for the penalty. If the violation is spondent’s right to a hearing; and administrative law judge. The decision
due to a failure by— (B) A statement that failure to request is made on the record according to
(i) A health insurance issuer, the is- a hearing within 30 days permits the Section 554 of Title 5, United States
suer is the responsible entity; imposition of the proposed penalty, Code. The decision becomes a final,
(ii) A group health plan that is a without right of appeal. appealable, order after 30 days, unless it
non-Federal governmental plan spon- (7) Amount of penalty—(i) Maximum is modified in accordance with para-
sored by a single employer, the em- daily penalty. The penalty cannot exceed graph (d)(8)(v) of this section.
ployer is the responsible entity; $100 for each day, for each responsible (v) Review by HCFA. HCFA may
(iii) A group health plan that is a entity, for each individual with respect modify or vacate the initial agency
non-Federal governmental plan spon- to whom such a failure occurs. decision. Notice of intent to modify or
sored by two or more employers, the (ii) Standard for calculating daily vacate the decision is issued to the
plan is the responsible entity. penalty. In calculating the amount of the parties within 30 days after the date of
(4) Notice to responsible entities. penalty HCFA takes into account the the decision of the administrative law
HCFA provides notice to the appropriate responsible entity’s previous record of judge.
entity or entities identified under para- compliance and the gravity of the viola- (9) Judicial review—(i) Filing of ac-
graph (d)(3) of this section that a com- tion. tion for review. Any entity against
plaint or other information has been (iii) Limitations on penalties. No civil whom a final order imposing a civil
received alleging a violation of this part. money penalty is imposed: money penalty is entered in accordance
The notice— (A) With respect to a period during with paragraph (d)(8) of this section
(i) Describes the substance of any which a failure existed, but none of the may obtain review in the United States
complaint or other allegation; responsible entities knew, or exercising District Court for any district in which
(ii) Provides 30 days for the respon- reasonable diligence would have known, the entity is located or the United States
sible entity or entities to respond with that the failure existed. District Court for the District of Colum-
additional information. This can in- (B) With respect to the period occur- bia by—
clude— ring immediately after the period de- (A) Filing a notice of appeal in that
(A) Information refuting that there scribed in paragraph(d)(7)(iii)(A) of this court within 30 days from the date of a
has been a violation; section, if the failure— final order; and
91
(B) Simultaneously sending a copy of under paragraphs (d)(7)(i)(A) or the purpose of enforcing the provisions
the notice of appeal by registered mail (d)(7)(iii) of this section, or after the with respect to which the penalty was
to HCFA. court has entered final judgment in imposed.
(ii) Certification of administrative favor of HCFA, HCFA refers the matter
record. HCFA will promptly certify and to the Attorney General, who brings an PARTS 147—199 [RESERVED]
file with the court the record upon action in the appropriate United States Authority: Secs. 2701 through 2723,
which the penalty was imposed. district court to recover the amount 2791, and 2792 of the PHS Act, 42
(iii) Standard of review. The findings assessed. U.S.C. 300gg–41 through 300gg–63,
of HCFA may not be set aside unless (ii) Final order not subject to review. 300gg–91, and 300gg–92.
they are found to be unsupported by In an action brought under paragraph
substantial evidence, as provided by (d)(10)(i) of this section, the validity Bruce C. Vladek,
Section 706(2)(E) of Title 5, United and appropriateness of the final order Administrator, Health
States Code. described in paragraphs (d)(7)(i)(A) or Care Financing Administration.
(iv) Appeal. Any final decision, order (d)(7)(iii) of this section is not subject
or judgment of the district court con- to review. Dated March 25, 1997.
cerning the Administrator’s review is (11) Use of penalty funds—(i) Any
Donna E. Shalala,
subject to appeal as provided in Chapter funds collected under this section will
Secretary.
83 of Title 28, United States Code. be paid to HCFA or other office impos-
ing the penalty. (Filed by the Office of the Federal Register on
(10) Failure to pay assessment, main- April 1, 1997, 12:42 p.m., and published in the
tenance of action—(i) Failure to pay (ii) The funds will be available with- issue of the Federal Register for April 8, 1997, 62
assessment. If any entity fails to pay an out appropriation and until expended. F.R. 16894)
assessment after it becomes a final order (iii) The funds may only be used for