HIPAA Common Questions: Administration (Part 3)Posted on: January 5, 2015Categories: HR & Compliance
What are the penalties for failure to comply with the HIPAA Regulations?
The Department of Treasury, the Department of Labor, and the Department of Health and Human Services jointly enforce HIPAA. The Department of Labor has the authority under ERISA to audit a group health plan’s compliance with HIPAA, and HIPAA violations may result in civil penalties or other corrective action for the group health plan sponsor. Also, under the Internal Revenue Code, HIPAA violations may trigger excise taxes of $100 per day of noncompliance for each affected individual.
Under HIPAA, when does creditable coverage reduce a pre-existing condition exclusion?
HIPAA requires that group health plans reduce any pre-existing condition exclusion period by the aggregate number of days that the participant was covered under creditable coverage prior to the enrollment date.
Where a participant has experienced a significant break in coverage (a period of more than 63 days), the prior creditable coverage will not reduce the pre-existing condition exclusion period. For purposes of determining whether a break in coverage has occurred, time spent within a waiting period or an affiliation period may not be taken into account.
The final HIPAA portability regulations released in 2004 clarified that, for purposes of determining whether a significant break in coverage exists, an individual seeking coverage in the individual market is considered to be within his or her waiting period, beginning on the day a substantially completed application for coverage is submitted. In the event coverage is denied or the offer of coverage lapses, the waiting period ends.
Effective for plan years beginning on or after Jan. 1, 2014, the Affordable Care Act prohibits pre-existing condition exclusions for all enrollees. For plan years beginning on or after Sept. 23, 2010, the ACA prohibited pre-existing condition exclusions for children under age 19.
Under HIPAA, what are the two methods of determining the amount of creditable coverage?
The Standard Method
HIPAA requires that a group health plan reduce its pre-existing condition exclusion period by the amount of creditable coverage, without regard to the specific benefits for which coverage was offered during the period. This method of determining the amount of creditable coverage is referred to as the standard method.
The Alternative Method
HIPAA also allows a group health plan to reduce its pre-existing condition exclusion period by the amount of creditable coverage in a way that considers the type of benefits provided under the prior coverage.
Group health plans may elect to use the alternative method for determining creditable coverage. If a group health plan elects to use the alternative method, it must do so uniformly among all participants. It must also prominently state in any disclosure that it has elected to use the alternative method. Under the alternative method, the group health plan may count a period of creditable coverage with respect to any class or category of benefits if any level of benefits is covered within such class or category.
Benefit categories that may be considered include:
- Mental health;
- Substance abuse treatment;
- Prescription drugs;
- Dental care; and
- Vision care.
For example, the IRS may assess an excise tax penalty against group health plans in the amount of $100 per day for failure to comply with HIPAA’s requirements.
Under HIPAA, when are health insurance coverage issuers required to issue a group health insurance plan?
Generally, all health insurance coverage issuers that offer health insurance coverage in the small group market in a state must:
- Offer to any small employer in the state all products that are approved for sale in the small group market and that the issuer is actively marketing, and must accept any employer that applies for any of those products; and
- Accept for enrollment under the coverage every eligible individual who applies for enrollment during the first period in which the individual becomes eligible to enroll under the terms of the group health plan, or during a special enrollment period, and may not impose any restriction on an eligible individual’s being a participant, which is inconsistent with HIPAA’s nondiscrimination provisions.
HIPAA does include limited exceptions to this rule. For example, the health insurance coverage issuer may decline to offer coverage where the employer fails to meet minimum participation or contribution rules.
As of Jan. 1, 2014, the Affordable Care Act expanded HIPAA’s guaranteed availability rules. Under the ACA, the guaranteed availability rules apply to non-grandfathered coverage in the large and small group markets.
Under HIPAA, when are health insurance coverage issuers required to renew a group health plan?
If a health insurance coverage issuer offers health insurance coverage in the small or large market in connection with a group health plan, the issuer must renew or continue in force such coverage at the option of the plan sponsor. However, a health insurance coverage issuer may discontinue health insurance coverage if:
- The plan sponsor fails to pay premiums when due or within the allowable grace period;
- The plan sponsor commits fraud or intentional misrepresentation of a material fact used to issue coverage;
- The plan sponsor fails to comply with a material plan provision relating to employer contribution or group market participation requirements;
- The health insurance coverage issuer discontinues offering a particular type of group health plan or ceases to offer group health plans in the state. In each case, the issuer is required to provide advance notice to the employer. In some cases, the issuer is required to offer another product if appropriate;
- The plan no longer has a covered employee who resides, lives, or works in the insurer’s service area (e.g., the plan offered is a network plan); and
- When the group health plan is offered exclusively to association members, termination of an employer’s membership in the association will allow the issuer to cancel the group health plan.
The Affordable Care Act includes guaranteed renewability rules that apply effective Jan. 1, 2014. These rules also apply to issuers in the small and large group markets and are similar to the HIPAA rules.
Do the HIPAA portability regulations govern health flexible spending accounts (health FSAs)?
The HIPAA portability regulations do not apply to benefits provided under a health flexible spending account when they satisfy the following conditions:
- Other group health plan coverage, not limited to excepted benefits, is made available for the year to the class of participants by reason of their employment; and
- The arrangement is structured so that the maximum benefit payable to any participant in the class for a year cannot exceed two times the participant’s salary reduction election under the arrangement for the year (or, if greater, cannot exceed $500 plus the amount of the participant’s salary reduction election). For this purpose, any amount that an employee can elect to receive as taxable income but elects to apply to the health flexible spending arrangement is considered a salary reduction election (regardless of whether the amount is characterized as salary or as a credit under the arrangement).
Do the HIPAA portability regulations govern health savings accounts (HSAs)?
No. Health savings accounts are not subject to HIPAA because they are not employee welfare benefit plans. However, the high deductible health plan that is offered together with a health savings account is governed by the HIPAA portability regulations.
Under HIPAA, are group health plans and health insurance coverage issuers required to establish a written procedure to explain how participants may request a certificate of creditable coverage?
Group health plans and health insurance coverage issuers are required to establish a written procedure for individuals to request and receive a copy of a certificate of creditable coverage. The written procedures must include all contact information necessary to request a certificate of creditable coverage (such as name, phone number and address).
The Affordable Care Act prohibits pre-existing condition exclusions for all enrollees, effective for plan years beginning on or after Jan. 1, 2014. To take into account non-calendar year plans that may continue to impose pre-existing condition exclusions during portions of 2014 (depending on when their plan year begins), group health plans must continue providing HIPAA certificates of creditable coverage through the end of 2014.