The Health Insurance Portability and Accountability Act (HIPAA) has a significant impact on the medical coverage provided by employer-sponsored group health plans. Among other provisions, HIPAA:
Employers who violate HIPAA’s portability, privacy or security provisions may face fines and/or lawsuits for failing to meet these requirements.
For purposes 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, however, include certain “excepted benefits” such as:
Certain limited scope dental and vision benefits or long-term care benefits are also excepted benefits, if they are provided under a separate policy, certificate or contract of insurance or are otherwise not an integral part of the plan. Also, health flexible spending accounts ordinarily are exempt from HIPAA, as are health savings accounts (HSAs).
HIPAA requirements also generally do not apply to governmental 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.
Many group health plans limit or exclude benefits for expenses incurred as a result of pre-existing conditions. Under HIPAA, a group health plan (or a health insurance issuer offering group health insurance coverage) may impose such an exclusion only if all three of the following requirements are met:
Under the Patient Protection and Affordable Care Act (ACA), a group health plan cannot impose any PCE on children under the age of 19. This is effective for plan years beginning after September 23, 2010, which for calendar year plans means it will be effective as of January 1, 2011.
In order 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 will reduce 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 also state that the current plan will assist in obtaining the certificate, if necessary. 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 period of creditable coverage is not counted if 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. There is an exception when there is a break in coverage of at least 63 days with a subsequent COBRA election for certain individuals eligible for subsidized COBRA coverage according to the American Recovery and Reinvestment Act (ARRA).
A group health plan may count periods of creditable coverage without regard to the specific benefits provided under such coverage. Alternatively, the group health plan may count the periods of creditable coverage for certain types of benefits (i.e., mental health, prescription drugs or dental care).
In general, an individual proves that he/she had prior creditable coverage by presenting to his or her new group health plan a certificate of creditable coverage from the old plan.
A group health plan must furnish a plan participant, without charge, with a certificate of coverage on each of the following occasions:
The summary plan description provided to plan participants and beneficiaries must include an explanation of the procedures to be followed to obtain a certificate.
Self-insured group health plans bear the responsibility for 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.
The certificate of creditable coverage must be in written form and contain specific information. A copy of the model certificate published by the DOL is attached at the end of this chapter.
No written certificate is required in the case of any one of the following situations:
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) through the presentation of documents or other means. 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. The plan must make a determination, based upon the relevant facts and circumstances, whether the individual has creditable coverage and is entitled to offset all or a portion of any PCE period. A plan shall treat the individual as having furnished a certificate if he or she meets all of the following criteria:
The impact of COVID-19 on COBRA timeframes
The Presidential Proclamation on March 13, 2020, declaring a National Emergency concerning the COVID-19 outbreak also resulted in regulatory changes extending various timeframes applicable to all group health, disability and other employee welfare benefit and employee pension benefit plans subject to ERISA or the Internal Revenue Code. Those plans must disregard the period from March 1, 2020, until 60 days after the announced end of the National Emergency or such other date announced by the Department of Labor (the “outbreak period”). The dates may ultimately be extended for up to one year from the following normal time limits:
• the 30-day period (or 60-day period, if applicable) to request special enrollment under ERISA
• the 60-day election period for COBRA continuation coverage under ERISA
• the date for making COBRA premium payments pursuant to ERISA
• the date for individuals to notify the plan of a qualifying event or determination of disability under ERISA
• the date within which individuals may file a benefit claim under the plan's claims procedure
• the date within which claimants may file an appeal of an adverse benefit determination under the plan's claims procedure
• the date within which claimants may file a request for an external review after receipt of an adverse benefit determination or final internal adverse benefit determination
• the date within which a claimant may file information to perfect a request for external review upon a finding that the request was not complete.
With respect to group health plans and their sponsors and administrators, the outbreak period shall be disregarded when determining the date for providing a COBRA election notice.
A plan seeking to impose a pre-existing condition exclusion (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 such 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.
As a general rule, a group health plan may limit the times when an individual can enroll in the plan. However, HIPAA requires group health plans to establish special enrollment periods in certain circumstances. As noted previously, 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.
A group health plan must permit an eligible employee and/or dependent to enroll for coverage under the plan if all of the following conditions are met:
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 in order to be eligible for special enrollment. Coverage shall become effective on the following dates:
On or before the time an employee is offered the opportunity to enroll in a group health plan, the plan is required to provide the employee with a description of the HIPAA special enrollment rules. Language for a sample notice has been provided by the DOL.
Sample Notice of Special Enrollment Rights
If you are declining enrollment for yourself or your dependents (including your spouse) because of other health insurance or group health plan coverage, you may be able to enroll yourself and your dependents in this plan if you or your dependents lose eligibility for that other coverage (or if the employer stops contributing towards your or your dependents’ other coverage).
However, you must request enrollment within [insert “30 days” or any longer period that applies under the plan] after you or your dependents’ other coverage ends (or after the employer stops contributing toward the other coverage).
In addition, if you have a new dependent as a result of marriage, birth, adoption or placement for adoption, you may be able to enroll yourself and your dependents. However, you must request enrollment within [insert “30 days” or any longer period that applies under the plan] after the marriage, birth, adoption or placement for adoption.
To request special enrollment or obtain more information, contact [insert the name, title, telephone number and any additional contact information of the appropriate plan representative]
A group health plan cannot establish eligibility rules that 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.
Example - A group health plan may 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 on the basis of any health-related factor that may apply to the individual. However, the plan may charge different premiums for different classes of employees (i.e., full-time and part-time employees), as long as the different classes are based on bona-fide distinctions not related to health factors.
A group health plan may offer premium discounts, rebates and adjustments to deductibles or co-payments in exchange for adherence to health promotion and disease prevention programs such as weight loss or smoking cessation programs as part of a wellness program. If these incentives are contingent on particular results (i.e., specified blood pressure levels, refraining from smoking), then a number of restrictions apply.
In addition to possible exposure to a participant lawsuit, HIPAA imposes a tax on group health plans which fail to meet the requirements of the law.
An employer whose group health plan fails to meet the requirements (or the plan, in the case of a multiple employer plan) faces a penalty tax of $100 for each day of the noncompliance period for each affected individual. The noncompliance period begins on the date the failure occurs and ends on the date of correction.
The penalty amounts are applied per violation. Each tier is subject to a calendar year cap of $1,806,757.
In addition to the regulation of health insurance portability and nondiscrimination rules, HIPAA provides for the protection of participants’ medical records and other individually identifiable health information that is created, received or maintained by the group health plan and is commonly referred to as protected health information (PHI). The privacy regulations under HIPAA (Privacy Rule) are outlined in the sections that follow.
The Privacy Rule sets limits on how a group health plan may use PHI. To ensure that the group health plan’s activities are not unduly hampered, activities for treatment, payment and healthcare operations (TPO Activities) are exempted from certain aspects of the Privacy Rule. For instance, a group health plan does not need to obtain the participant’s authorization prior to the use of his or her PHI for TPO Activities but may use or share only the minimum amount of protected information needed for a particular purpose and generally may only disclose it to entities that are also subject to HIPAA’s privacy requirements, either by law or by regulation. In most other situations, the plan cannot use or disclose the PHI unless the plan participant signs a specific authorization permitting the use or disclosure.
Plan participants generally have the right to see and obtain copies of their medical and claim records and request corrections if they identify errors and mistakes. Access to these records must generally be provided within 30 days and the group health plan may charge plan participants for the cost of copying and sending the records. If the participant identifies errors and requests the records be changed, the plan must comply.
A group health plan must provide a notice to its plan participants explaining how the plan intends to use their private health information as well as the participants’ rights under the Privacy Rule. Plan participants also have the right to ask their group health plan to restrict the use or disclosure of their information beyond the practices included in the notice, but the group health plan is not required to comply with such requests.
Under the Privacy Rule, a plan participant must be permitted to request to receive confidential communications of his PHI by alternative means or at alternative locations, if the individual states that the disclosure of the information could endanger the individual. A group health plan is required to comply with such a request if the group health plan can reasonably accommodate such a request.
In limited circumstances, the Privacy Rule permits (but does not require) a group health plan to disclose limited amounts of PHI for specific public responsibilities. 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 Department of Health and Human Services (HHS) Office for Civil Rights (OCR), which is charged with investigating complaints and enforcing the Privacy Rule.
The Privacy Rule requires that a group health plan have written privacy procedures, including a description of the members of the group health plan’s workforce that have access to protected information, how it 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 the Privacy Rule. 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 ensure that its policies and procedures are revised regularly to reflect changes in the law and in the plan’s privacy practices.
A group health plan is required to designate an individual as the privacy official who will be responsible for developing the privacy policies and procedures for the group health plan. The privacy official is also responsible for receiving complaints from plan participants and beneficiaries as well as providing further information regarding the group health plan’s notice of privacy practices. In addition to designating a privacy official, a group health plan must provide adequate training of their employees in the plan’s privacy policies and procedures. For newly hired members of the plan’s workforce, training must be completed within a reasonable time period after their hiring.
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 (either by name or class) that can receive access to PHI, including the workforce members who receive PHI for TPO Activities or for other matters relating to the group health plan in the ordinary course of business. Additionally, the workforce members’ access to PHI must be restricted to the plan administration functions performed for the plans by their plan sponsors. Finally, the plan documents must provide for the means to resolve any issues arising from workforce members’ (who have access to PHI) noncompliance with the plan’s policies and procedures or with the Privacy Rule.
A group health plan is required to enter into business associate contracts establishing the permitted and required uses and disclosures of such information by the business associate, including not permitting the business associate to use or disclose PHI in a manner that would violate the Privacy Rule.
A business associate is defined as any entity which on behalf of a group health plan performs or assists in the performance of functions that involve the use of PHI such as claims processing or administration, data analysis and/or transmissions, 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 other capacity other than as an employee of the group health plan, where the provision of such service involves the use of PHI, such entity is treated as a business associate subject to the requirements of the Privacy Rule.
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 the Privacy Rule for a period of six years from the date of its creation or the date when it last was in effect, if later. Such documentation must be made available to the workforce members responsible for implementing the group health plan’s policies and procedures.
An employer who 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 with the exception of summary health information or enrollment information. An employer who sponsors a group health plan that meets this exception is only required to refrain from retaliatory or intimidating acts against individuals who exercise their privacy rights. A group health plan is also prohibited from requiring or requesting waivers of individual rights.
A group health plan that fails to comply with the Privacy Rule is subject to a number of penalties. Civil penalties are based on a tiered system detailed as follows:
Criminal penalties range from $50,000 in fines and one year in prison up to $250,000 in fines and 10 years in prison.
The Health Insurance Portability and Accountability Act’s (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 individually identifiable health information that is created, received or maintained by the health plan electronically (Electronic PHI) against any reasonably anticipated risks.
The security regulations provide 36 implementation specifications, which are further divided into two types:
The required specifications are critical and must be implemented. The addressable specifications may be implemented after the group health plan has performed the following analysis:
The regulations’ administrative safeguards require a group health plan to have documented policies and procedures for managing day-to-day operations, the conduct and access of workforce members to Electronic PHI and the selection, development and use of security controls. The specific standards are as follows:
The physical safeguards are a series of requirements meant to protect a group health plan’s electronic information systems and Electronic PHI from unauthorized physical access. A group health plan must limit physical access while permitting properly authorized access. The specific standards are:
The technical safeguards include several requirements for using technology to protect Electronic PHI, particularly controlling access to it. The specific standards are:
All policies and procedures must be written and documented. A group health plan must maintain all documentation (including risk assessments, policies and procedures) required by the security regulations 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 policies and procedures. Additionally, a group health plan must periodically review such documentation and revise 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 the Privacy Rule. Specifically, civil penalties are based on the tiered system discussed previously and range 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 up to $250,000 in fines and 10 years in prison.
This chapter is intended as a brief overview of the Health Insurance Portability and Accountability Act (HIPAA) requirements under federal and state law. It is by no means exhaustive. If additional information is needed, please consult the following or an attorney.
U.S. Department of Labor’s Employee Benefits Security Administration (EBSA)
Employee Benefits Security Administration (EBSA), Department of Labor
Policies and Forms
Health insurance portability and privacy — Illinois
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Appendix A: Recordkeeping requirements
Appendix B: Posting requirements