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WASHINGTON-Employers have less than two months to get their administrative systems in order to comply with the federal law that curbs their ability to exclude coverage for new employees' pre-existing medical conditions.
Although the law's key component-limiting pre-existing medical condition exclusions-won't go into effect for many employers until Jan. 1, 1998, a requirement that companies certify that employees have had health care coverage kicks in on June 1.
To aid employers in complying with the new law-known as the Health Insurance Portability and Accountability Act of 1996, or HIPAA-the departments of Health and Human Services, Labor and Treasury have published about 500 pages of interim regulations.
Fortunately, much of the law and regulations are, as Mary Case, a principal at The Kwasha Lipton Group in Fort Lee, N.J., puts it, "pretty straightforward and mechanical."
"Compared with Section 89, this is a walk in the park," added Barry Carleton, a consultant in the Philadelphia office of Towers Perrin, referring to the ultra-complex health care non-discrimination rules that Congress repealed in 1989.
Still, with the clock ticking, employers will have a lot of information to assimilate.
To help employers understand their responsibilities and related issues under the portability law, Business Insurance interviewed employee benefit experts for their insights:
Q: What is the basic intent of HIPAA?
A: HIPAA is intended to make it easier for employees to move from job to job by limiting pre-existing medical condition exclusions in group health care plans.
Under the law, employers can deny coverage for new employees' pre-existing conditions for 12 months. But that exclusionary period is offset by employees' prior continuous coverage.
For example, if an employee was covered under a prior corporate health care plan for six "continuous" months, the new employer could deny coverage for that condition for a maximum of six months. Continuous coverage is defined as that without a break exceeding 63 days.
Q: How will an employer know whether a new employee had health insurance from a prior employer?
A: Employers will be required to furnish employees with statements "certifying" coverage.
This certification requirement begins June 1, but is phased in. Starting on June 1, employers have to provide certification statements to employees who lost health care coverage from July 1, 1996, through Sept. 30, 1996, and who request statements.
For employees who lost coverage from Oct. 1, 1996, through May 31, 1997, employers have a choice: they can provide the certification statements to employees or they can give employees a notice informing them where they can obtain the statements.
Employees who lose coverage on or after June 1, 1997, generally must be given certification statements.
Q: What events would trigger the issuance of a certification statement?
A: Certification statements would have to be issued for several situations.
The most common would be when an individual loses group health care coverage and becomes entitled to elect COBRA coverage. Another situation would be when an individual loses group coverage and is not entitled to COBRA coverage. This could occur, for example, if an employee who worked for a company with fewer than 20 employees lost his job; small employers are not covered by the COBRA statute.
Yet another situation where a certification statement would have to be furnished would be after an individual's COBRA coverage is exhausted.
Individuals also can ask their former employers for a health care coverage certification statement up to 24 months after they lost coverage.
Q: What information is required to be furnished on the certificate?
A: Information that must be provided includes the name of the group health plan that provided the coverage, the name of the participant or dependent for whom the certificate applies, and the name, address and phone number of the plan administrator required to provide the certificate. The statement also would have to indicate when coverage began and ended.
But, if an individual had at least 18 months of continuous coverage, the administrator filling out the certificate only would have to check a box saying the individual had at least 18 months of continuous coverage and indicating when coverage ended.
Q: What special certification rules exist for employees' dependents?
A: Through June 30, 1998, the certification statement only has to provide coverage information for the employee and the type of coverage selected, such as individual, employee plus spouse and family coverage.
After June 30, 1998, employers have to provide the names of the dependents on the certification statement.
Many employers, especially if they have self-insured traditional indemnity plans, do not have dependents' names for health care coverage information. For example, in the case of an employee opting for family coverage, employers might not have names of dependents until an employee files a claim on behalf of a dependent.
The new certification rule should be a trigger for employers to begin to collect dependent coverage information, said Richard Stover, an employee benefit consultant with Buck Consultants Inc. in Secaucus, N.J.
Q: Can an employer use one certification statement for employees and dependents?
A: Generally, yes. However, separate statements would be required if the employee and dependents had different periods of coverage through the employer. An example would include an employee who got married several months after starting work at a company and added a spouse as a dependent on her group health care plan.
Q: How are certification statements to be delivered?
A: By first-class mail to the participant's last known address. If separate certificates are being sent to family members residing at the same address, separate mailings are unnecessary.
However, if an employee and dependent live at different addresses, perhaps because they are legally separated, certification statements would have to be mailed to each address.
Q: In view of all the paperwork requirements, will some employers be better off eliminating pre-existing condition exclusions from their plans?
A: That depends a lot on an employer's health care plan philosophy as well as its demographics.
For example, if an employer typically hires employees who have been covered for relatively long periods of service under a prior employer's health care plan, there would be little reason to have pre-existing medical condition provision.
Those individuals would have sufficient prior coverage to offset the maximum 12-month exclusion the law allows.
"There would be an administrative burden for collecting this information, but there would be little savings" because the employer could not apply a pre-existing condition exclusion to many of the new hires, noted Mr. Carleton of Towers Perrin.
On the other hand, it may be cost-effective for employers to retain pre-existing medical condition exclusions if they are in high-turnover industries and many of their new hires lacked prior coverage, he added.