The Health Insurance Portability and Accountability Act (HIPAA) regulates the medical coverage of employer-sponsored group health plans by:
Employers who violate HIPAA’s provisions may face fines and lawsuits.
For the purpose of HIPAA’s requirements, health insurance coverage means benefits for medical care under any hospital or medical service policy or certificate, hospital or medical service plan contract, or HMO contract offered by a health insurance issuer. It does not cover:
HIPAA also excludes from its coverage certain dental and vision benefits and long-term care benefits when they are provided under a separate policy, certificate, or contract of insurance, or are otherwise not an integral part of the plan. Also, HIPAA does not cover flexible spending accounts or health savings accounts.
HIPAA requirements also generally do not apply to government plans or to a group health plan for any year in which the plan has only one employee-participant on the first day of the plan year.
HIPAA provides protection to individuals who are changing jobs or health coverage by restricting the ability of the new group health plan to limit coverage for prior medical conditions or other health status factors.
Many group health plans limit or exclude benefits for expenses incurred as a result of conditions that exist before an individual joins the plan. Under HIPAA, a group health plan (or a health insurance issuer offering group health insurance coverage) may only impose this type of exclusion when it meets these requirements:
To impose a PCE, a group health plan must provide, as part of its enrollment materials, a written notice explaining the existence, length and terms of the PCE. The notice must explain that creditable coverage reduces the length of the PCE, that the individual has the right to demonstrate creditable coverage, and that the individual has the right to request a certificate of creditable coverage from his or her prior plan. The notice must include a contact person (with telephone number or address) for assistance or additional information in obtaining a certificate.
In general, creditable coverage means health coverage provided to an individual under programs such as:
A group health plan will not count a period of creditable coverage when there is a break in coverage of at least 63 days (other than any applicable waiting period) between the end of the creditable coverage period and the participant’s or beneficiary’s enrollment date under the new group health plan. This rule does not apply when the individual has a break in coverage of at least 63 days with a subsequent COBRA election according to the American Recovery and Reinvestment Act of 2009 (ARRA) (as discussed in Health insurance continuation coverage).
A group health plan may count periods of creditable coverage without regard to the specific benefits provided under such coverage. Conversely, the group health plan may count the periods of creditable coverage based on the type of benefits (such as mental health, prescription drugs or dental care).
In general, an individual proves that he or she had prior creditable coverage by presenting a certificate of creditable coverage from the old group health plan to the new group health plan.
A group health plan must provide a plan participant with a certificate of coverage without charge, on each of the following occasions:
The summary plan description provided to plan participants and beneficiaries must include an explanation of the procedures a participant must follow to obtain a certificate.
Self-insured group health plans bear the responsibility of providing the certificates. If the plan is a fully insured group health plan, the health insurer will normally fulfill these obligations. However, the plan sponsor must verify with the health insurer that the certificates are being provided as required.
If the accuracy of a certificate is in question or a certificate of creditable coverage is not available, an individual may demonstrate creditable coverage (and any waiting periods) with other documentation. The plan may not consider an individual’s inability to obtain a certificate to be evidence of the absence of creditable coverage. Documents that may establish creditable coverage in the absence of a certificate include:
The plan must take into account all information that it receives on behalf of an individual to determine whether the individual has creditable coverage to offset a portion of the PCE period.
A plan shall treat the individual as having furnished a certificate if he or she:
A plan seeking to impose a PCE is required to disclose to the individual, in writing, its determination of any PCE period that applies to the individual as well as the basis for the determination (including the source and substance of any information on which the plan relied). In addition, the plan is required to provide the individual with a written explanation of any appeal procedures established by the plan and with a reasonable opportunity to submit additional evidence of creditable coverage.
HIPAA also requires a group health plan to permit a special enrollment period when an employee acquires a new dependent through marriage, birth or adoption. In general, if an eligible individual gains a dependent through marriage, birth, adoption or placement for adoption, the group health plan must permit the individual, the new spouse and any new dependent, to enroll in the plan. The individual generally must notify the plan of the special enrollment event within 30 days to be eligible for special enrollment. Coverage shall become effective on the following dates:
Generally, a group health plan may limit the times when an individual may enroll in the plan. However, HIPAA requires group health plans to establish special enrollment periods in certain circumstances. As noted above, an individual who enrolls for coverage in a group health plan after the first period in which he or she is eligible to enroll generally can be subject to an 18-month PCE as a “late enrollee.” However, any individual who enrolls in a group health plan during one of the special enrollment periods set forth herein is not considered a “late enrollee” and is, therefore, subject only to a 12-month PCE period
On or before an employee enrolls in a group health plan, the plan must provide the employee with a description of the HIPAA special enrollment rules. The Department of Labor provides sample language at the files tab above.
A group health plan cannot discriminate against any individual with respect to coverage or continued coverage or premium amounts based on any of the following factors:
These requirements, however, do not prevent a group health plan from limiting the amount, level, extent, or nature of the benefits provided as long as such limitations do not discriminate among similarly-situated individuals. Thus, a group health plan could choose not to cover experimental medical procedures or choose to limit the benefits for experimental medical procedures, provided this limitation applies equally to all similarly situated individuals.
A group health plan cannot require an individual to pay a higher premium based on a health-related factor. However, the plan may charge different premiums for different classes of employees (such as full-time and part-time employees), as long as the different classes are based on bona-fide distinctions unrelated to health factors.
A group health plan may offer premium discounts, rebates, and adjustments to deductibles or copayments in exchange for adherence to health promotion and disease prevention programs such as weight loss or non-smoking programs. If these incentives are contingent on particular results (such as specified blood pressure levels or not smoking), then a number of restrictions apply.
Failure to meet the requirements of HIPAA may expose an employer to lawsuits brought by group health plan participants or cause an employer to incur tax liability.
An employer whose group health plan fails to meet the HIPAA requirements incurs a tax penalty of $100 for each day of the non-compliance period for each affected individual. The noncompliance period begins on the date the failure occurs and ends on the date the plan is corrected.
HIPAA also includes provisions to protect participants’ medical records and other individually identifiable health information when the information is created, received, or maintained by a group health plan (commonly called, PHI).
HIPAA limits how a group health plan may use PHI. The law permits a group health plan to use an individual’s health information for treatment, payment, and health care without authorization; however, it may only use or share the minimum amount of information needed and, generally, may only disclose the information to entities that are also subject to HIPAA’s privacy requirements.
Generally, a group health plan may not otherwise use or disclose PHI without a plan participant’s written authorization.
A plan participant generally may see and obtain copies of his or her medical and claim records, and may request corrections of any identified errors and mistakes. The group health plan may charge plan participants for the cost of copying and sending the records, but it must provide access to the records within 30 days. If the participant identifies errors and requests the records be changed, the plan must comply with the request.
A group health plan must provide notice to its plan participants concerning the participants’ privacy rights, as well as how the plan intends to use participants’ private health information. While plan participants have the right to ask the group health plan to restrict the use or disclosure of information beyond the practices included in plan’s notice, group health plans are not required to comply with these requests.
A group health plan must allow a plan participant to receive confidential communications concerning his or her PHI by alternative means or at alternative locations if the individual states that the standard disclosure could endanger the individual. The group health plan must comply with such requests when it can reasonably do so.
In limited circumstances, HIPAA permits a group health plan to disclose limited amounts of PHI to satisfy specific public needs.
These permitted disclosures include:
Plan participants may file formal complaints regarding the privacy practices of a group health plan. Such complaints may be made directly to the group health plan or to the Health and Human Services Commission’s Office for Civil Rights (OCR), which is the agency that investigates and enforces HIPAA privacy law.
HIPAA privacy regulations require that a group health plan have written privacy procedures, including a description of those individuals who have access to protected information, how the information will be used, and when it may be disclosed. A group health plan must implement policies and procedures with respect to PHI that are designed to comply with HIPAA. The group health plan’s policies and procedures must take into account the size of the group health plan and the types of activities in which the group health plan engages. The group health plan must also regularly revise its policies and procedures to reflect changes in the law and in the plan’s privacy practices.
A group health plan is required to designate an individual to be responsible for developing the privacy policies and procedures. This individual must also receive complaints from plan participants and beneficiaries, as well as provide information regarding the group health plan’s notice of privacy practices. The group health plan must also provide adequate training to employees in the plan’s privacy policies and procedures.
A group health plan must ensure that its plan documents provide for adequate separation between the group health plan and the plan sponsor. Specifically, the plan documents must identify the members of the group health plan’s workforce that may access PHI. The plan documents further must provide for the means to resolve any issues arising from employees’ non-compliance with the plan’s policies and procedures or with the privacy rules.
Before a group health plan discloses PHI to a business associate, it must enter into a contract with the entity to establish the permitted and required uses and disclosures of information by the business associate. Specifically, the group health plan must include language to prohibit the business associate from using or disclosing PHI in a manner that would violate HIPAA privacy rules.
A business associate is any entity that, on behalf of a group health plan, performs functions that involve the use of PHI, such as claims processing or administration, data analysis or transmission, billing, benefit management, utilization reviews or quality assurance. Furthermore, if an entity provides legal, accounting, consulting, management, administrative or financial services for a group health plan in any capacity other than as an employee of the group health plan, such entity is considered a business associate subject to the requirements of the HIPAA privacy rules.
The contract must also provide that the business associate agrees, among other things, to:
A group health plan must maintain all documentation (including policies, procedures, and required notices) required by HIPAA for a period of six years from the date of its creation or the date when it last was in effect, whichever is later. Such documentation must be made available to the workforce members responsible for implementing the group health plan’s policies and procedures.
An employer that sponsors a group health plan is not subject to the requirements of the privacy standards if benefits are provided under the plan solely through an insurance contract with a health insurance issuer or an HMO and the employer does not create or receive PHI (except for summary health information or enrollment information). The only requirement for an employer that meets the above requirements is to refrain from retaliatory or intimidating acts against individuals who exercise their privacy rights. A group health plan may not require or request waivers of individual rights.
A group health plan that fails to comply with HIPAA privacy rules is subject to a number of penalties. Penalties are based on a tiered system:
HIPAA’s security regulations require a group health plan to protect the confidentiality, integrity, and availability of PHI when it is stored, maintained, or transmitted electronically. A group health plan must maintain reasonable and appropriate administrative, physical, and technical safeguards to protect the confidentiality, integrity, and availability of PHI against any reasonably anticipated risks.
The security regulations provide 36 implementation specifications, which fall into two categories:
The group health plan must implement the 14 required specifications. Conversely, the group health plan should implement the 22 addressable specifications after it performs the following analysis:
The regulations’ administrative safeguards require a group health plan to have written policies and procedures for concerning security controls. The policies and procedures must include certain standards:
HIPAA also has a series of requirements to protect a group health plan’s electronic information system from unauthorized physical access.
The specific standards are listed herein:
Group health plans must meet technical requirements to safeguard electronic PHI.
The specific standards are:
The group health plan must maintain all of its policies and procedures in writing. Documentation required by the HIPAA security regulations (including risk assessments, policies and procedures) must be retained for a period of six years from the date of its creation or the date when it last was in effect, whichever is later. The group health plan must make this documentation available to its employees who implement the policies. In addition, the plan must periodically review its documentation and update it as needed to ensure the confidentiality, integrity and availability of electronic PHI.
The penalties for failing to comply with the security regulations are similar to the penalties for failing to comply with HIPAA privacy rules. Specifically, civil penalties are based on the tiered system that ranges from $120 per violation, up to $1,806,757 per year for each requirement violated. Criminal penalties range from $50,000 in fines and one year in prison to up to $250,000 in fines and 10 years in prison.
The Health Information Technology for Economic and Clinical Health Act (HITECH Act), included as part of the stimulus bill, greatly expands the privacy and security provisions of HIPAA and mandates extensive new regulations concerning electronic medical records. These changes became effective as of February 17, 2010 and are not discussed in this chapter.
This chapter is intended as a brief overview of the HIPAA requirements under federal law. It is by no means exhaustive. Employers should consider consulting an attorney for more information, or contacting the following sources:
Employee Benefits Security Administration (EBSA), Department of Labor