The new regulations focus only on HIPAA’s portability rules relating to preexisting condition exclusions, creditable coverage rules, special enrollment opportunities and related notices. The new rules are effective for plan years beginning on or after July 1, 2005 (January 1, 2006 for a calendar year plan). 

What Employers Need to Consider

There are numerous clarifications that often will be minor but could be significant in certain circumstances. This newsletter highlights the most significant changes but is not meant to describe every change. 

Preexisting Condition Exclusions

• The six-month look-back period for preexisting condition exclusions (PCEs) examines whether any medical advice, diagnosis, care, or treatment was recommended or received during the six-month period ending on the enrollment date. The final regulations have clarified that taking a prescription drug during the look-back period constitutes medical care.
  
  
• If a plan imposes a PCE, the insurer (or plan sponsor for a self-funded plan) must provide a written general notice of PCEs to each participant. This notice informs individuals of any PCEs under their plan, and notifies them of the right to reduce the PCE through creditable coverage. PCEs cannot be imposed upon someone if they are not provided the general written notice. The notice should be distributed with other enrollment/application materials. A new model general notice has been provided by the DOL.
  
  
• If a plan imposes a PCE, the insurer (or plan sponsor for a self-funded plan) must send an individual notice to any person to whom a PCE will be applied. The notice informs the individual of several items, including the PCE period that applies and how the plan made this determination. The insurer or plan sponsor may need to make some changes to the individual notice under the new regulations, including stating the last day the PCE will apply and ensuring that the notice is promptly distributed.

Special Enrollment Rights:

• HIPAA grants a special enrollment right to certain individuals who initially declined health plan coverage. The special enrollment rights notice informs individuals of this right. 
  
  
• The special enrollment rules allow eligible individuals who previously declined coverage to elect coverage due to loss of eligibility or acquisition of a new spouse or dependent. The regulations clarify that an individual can be considered to “decline” plan coverage not just upon initial enrollment, but any time the employee passes on an enrollment opportunity (such as an annual open enrollment).
  
  
• Individuals are also given special enrollment rights if they reach a lifetime limit on all benefits. This can be a significant concern to sponsors of self-funded plans. Such a sponsor should examine whether it is at risk of an individual reaching a lifetime limit then switching to a different plan with a new (or higher) limit.
  
  
• If an employer ceases all contributions to an employee’s or dependent’s coverage, regardless of whether the employee or dependent ceases participation, this can create a special enrollment event.

Credible Coverage

Under the new regulations the content of the Certificate of Credible Coverage remains unchanged. However, a new educational statement has been added to the certificate.

Definition of Dependent

The final regulations define a “dependent” as “any individual who is or may become eligible for coverage under the terms of a group health plan because of a relationship to the participant.”

What Employers Need to Do

• Review plan’s definition of PCEs to consider whether the definition of medical care should be expanded to include taking prescription drugs.
  
  
• Employers must distribute a special enrollment rights notice to all employees during open enrollment.
  
  
• Employers should request that their insurers state that the insurer will comply with the special enrollment and creditable coverage rules under the final regulations.

Additional Information

• Final Regulations
  
• DOL New Health Laws Notice Guide