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From Thompson Publishing Group's Employer's Guide to Self-Insuring Health Benefits
Summary:An employer task force advising HCFA on the upcoming HIPAA portability rules is concerned that the agency's current approach is overly restrictive and could lead to greater involvement by state regulators.
(March 18, 1997) Health plan sponsors would not have much flexibility in complying with the impending certification-of-coverage rules of the Health Insurance Portability and Accountability Act (HIPAA) if the current views of the Health Care Financing Administration (HCFA) are incorporated in upcoming regulations, according to an employer task force. Employer representatives on the task force are also concerned that states could get more deeply involved in regulating self-funded and insured health plans if HCFA's views prevail.
On March 5, HCFA officials met with members of a regulatory task force chaired by consulting firm Sedgwick Noble Lowndes and developed by the Association of Private Pension and Welfare Plans (APPWP). The task force has offered its guidance in interpreting HIPAA to the Senate Labor Committee, as well as the three federal agencies charged with developing HIPAA regulations -- HCFA and the Departments of Labor and Treasury. Members of the task force emerged from the meeting troubled by HCFA's interpretation of HIPAA regarding four issues: ERISA preemption, stop-loss insurance, certification and state/local government opt-outs.
HIPAA gives states flexibility to be more generous in specific, narrowly defined areas, such as the length of permissible pre-existing condition exclusion periods. The task force has urged that the state flexibility provisions be narrowly construed to emphasize ERISA preemption. Previously, the DOL had indicated it may not want to address such wide-ranging policy issues. However, HCFA said that its authority only extends to ensuring that states meet HIPAA's minimum requirements -- not to setting parameters on state authority.
If the DOL and Treasury go along with this interpretation, states will have a green light to aggressively interpret how much authority they have over insured and self-funded health plans. This could give states the ability to determine whether a plan should be insured or self-funded.
Generally, when stop-loss insurance insures the plan sponsor and not the plan, it is not regulated as health insurance. To that end, federal and state courts have rejected state attempts to impose health insurance status on stop-loss coverage when trigger points are set too low. Apparently, HIPAA's intent is also not to treat stop-loss insurance as health insurance, thereby exempting it from HIPAA's portability provisions. However, this is unclear, and the task force has urged regulators to clarify this point. HCFA maintained that although it is charged with implementing HIPAA's health insurance rules, it does not have the authority to make that determination. This indicates that HCFA would give states the go-ahead to impose health insurance rules on stop-loss coverage. This would have three important implications for self-funded plans: (1) imposition of state-mandated benefits; (2) expansion of annual reporting requirements; and (3) status of these plans being put in jeopardy.
Many employers simply do not have the health coverage data on spouses and dependents needed to provide certificates of coverage. Therefore, the task force has recommended that employers be given the flexibility to rely on employees' personal attestations when other evidence of spousal and dependent coverage is not available. During a U.S. Senate hearing in February, DOL and Treasury officials noted that they have the latitude to be flexible. However, the task force indicated that HCFA has departed from this position by stating that: (1) there is no flexibility in the certification requirements; (2) employers have had ample time to get the required information since HIPAA's enactment in August 1996; and (3) if employers are not given a certain date by which they will be held accountable, they will not comply.
Some HCFA officials suggested the agency would not be overly rigid; however, if this current stance is incorporated in the regulations, many employers will be found in noncompliance with the certification rules despite their administrative difficulties.
Generally, HIPAA allows state and local government plans to opt out of the portability requirements. This raises the question of whether insurers issuing those plans would also be able to opt out. The DOL told the task that some problems could exist in granting full opt-out authority. However, HCFA's interpretation is that self-funded state and local government plans may only opt out of the pre-existing condition exclusion provisions -- not out of the certification requirements. Insured state and local government plans cannot opt out, according to HCFA. The task force noted that HCFA's interpretation on certification actually benefits private employers that hire former government workers, because certificates of prior coverage would be available where they might not have been otherwise. But the interpretation essentially wipes out any option for insured state and local government plans.
It is not clear yet which agency's interpretation will prevail in the upcoming HIPAA regulations, according to the task force. But it believes that HCFA's stance could significantly disrupt the balance between state and federal authority over health plan regulation and affect plan sponsors' decisions on benefits plan design and funding.
Excerpted from the March supplement to Employer's Guide to Self-Insuring Health Benefits, ©Thompson Publishing Group, 1997. All rights reserved.
