The Health Insurance Portability and Accountability Act of 1996 (HIPAA), often referred to as the Kennedy-Kassebaum legislation, deals with insurance coverage of pre-existing conditions when an employee moves from one firm to another. The law - with more than 400 pages of regulations - may be even more complex to administer than the 10-year-old COBRA law, another landmark in employee benefits legislation that lets employees who are between jobs extend their insurance coverage for up to 18 months. HIPAA will involve virtually every business in Florida that offers a health plan, since it applies to all businesses with more than two employees.
In addition to the headaches that HIPAA will create for employers' human resources offices, it will also provide a lot of business for employee benefits attorneys and third-party firms that have sprung up to administer health plans and COBRA programs for employers. Patrick Manders, vice president of ABR Cobraserv of Clearwater, a health benefits administrator, says his firm has had to hire "dozens of computer programmers" to set up the firm's computers to gather information required to meet HIPAA's complex demands. Manders says many firms, including sizable employers of more than 1,000 workers, are still ignorant of HIPAA - and the stiff penalties for not complying. "I get calls from clients with questions about COBRA, and when I ask them what they're doing about HIPAA, they say, ?What's that?'''
To help answer that, Florida Trend Managing Editor Mark Howard spoke with Roberta Watson, an attorney with the Tampa law firm of Trenam Kemker who has worked in the employee benefits law sector for more than a decade and is a leding national expert on HIPAA.
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What problem is HIPAA supposed to solve?
It's called "job-lock" - when employees, or an employee's dependents, have health conditions that cause them to stay in a job because they're afraid a new employer's health plan won't cover a pre-existing condition. Pre-existing conditions make people stay in places that may not be optimal - for either employee or employer. Would you want somebody working for you whose commitment to you was based on the need to stay in your health plan?
What does the new law mean for an employee?
The bottom line for workers is that if they have more than 12 months of participation in their present employer's insurance plan and then change jobs, their new employer's insurance plan will have to cover pre-existing conditions as soon as they join the plan. This is not true "portability,'' since it's the new employer's plan that's providing the coverage, but it does allow the worker to change jobs without fear that a health condition won't be covered.
The law says that when a new employee joins a company's health plan, the plan can exclude coverage of pre-existing conditions for up to 12 months. But that 12-month period is reduced - or eliminated - depending on how many days the employee was in his or her previous health plan. The number of days the employee was in the previous plan is called "creditable coverage.''
For example: Let's say Joe Smith, who has diabetes, has been on Firm A's insurance plan for eight months. Smith then takes a job with Firm B. The law lets Firm B's insurance plan exclude coverage of Smith's diabetes for up to 12 months. But since Smith has eight months of "creditable coverage'' from Firm A, Firm B can only exclude coverage of the diabetes for four months after Smith joins Firm B's plan. If Smith had been on Firm A's health plan for 12 months, then he would have had 12 months of "creditable coverage,'' and Firm B's insurance plan would have had to cover the diabetes as soon as he joined Firm B's health plan.
Can insurance companies try to keep from paying for pre-existing conditions by not allowing a new employee with a health condition to join a health plan at all?
That's called "medical underwriting" and HIPAA doesn't permit it. A plan is not allowed to discriminate against individuals on the basis of health-related factors. You have to let even sick people into your plan. Part of the complexity in the law involves the definitions of conditions that you cannot exclude. For example, a genetic condition that has not produced symptoms can't be the basis for denying coverage - even during the pre-existing condition period.
Likewise, pregnancy cannot be treated as a pre-existing condition. Delivery expenses will be covered even if the birth occurs on the first day of coverage. That's quite revolutionary, and it means that women who need to change jobs while pregnant will have health coverage. There's also no pre-existing condition exclusions on newborns, if they're enrolled within 30 days after birth, or on children who are newly adopted or newly placed for adoption.
If you look at a child born in December of 1998 (by that time virtually all plans in the country will be subject to HIPAA rules), he will be able to go literally from cradle to grave without ever having a pre-existing condition period imposed on him.
What if there's a break in coverage?
The law allows an insurer to impose the pre-existing condition period if a worker goes 63 days without any insurance before joining the health plan. That's considered a "significant" break in coverage under the law. The health plan's waiting period - the time that workers have to wait before they can join their new employer's health plan - doesn't count against that 63-day period.
What's the biggest thing employers need to worry about?
As of June 1, employers have to give any employee or dependent who discontinues health coverage a certificate that spells out how much "creditable coverage" they've accumulated. They have to be given a certificate regardless of the reason for leaving - whether it's a "COBRA-qualifying event'' or not. In fact, if the employee or dependent chooses to go into COBRA, the employer will end up giving two certificates - one when the regular coverage lapses, and another when they drop out of COBRA.
The employer also has to let anyone who has left the plan between October 1996 and May 31, 1997 know that a certificate is available, again including the employee's dependents. A lot of companies don't have information on the dependents, so it's a big problem, because anybody who discontinues their health coverage is supposed to get a certificate.
Are there penalties?
Yes, and they're awful - a company can be fined $100 a day for each person, including dependents, for each day they don't have the certificate.
In addition to the governmental penalties, the courts have allowed employees to sue former employers for not providing timely notification of rights and benefits. There is a case involving the COBRA law where a federal court is allowing a worker who didn't get notification of his COBRA rights to sue his former employer, even though the employer provided the COBRA coverage and paid for it.
How would you describe awareness among the business community of HIPAA and the fines?
In general, very low, but many companies are working very hard at implementation.
What about the cost to employers of administering this?
There will be some administrative costs, no question about it. Making sure an employer has the data on employees and their dependents is the biggest challenge right now.
It seems some insurance companies will end up having to expand their coverage if they can't exclude these pre-existing conditions. Won't insurance premiums have to go up?
It's difficult to say. Insurers raise premiums regularly for a number of reasons. I am optimistic that the actual costs of coverage for self-insured plans won't go up significantly. The employers who have been excluding pre-existing conditions for the first 12 months will have to cover a lot of those conditions now, which will mean some higher up-front costs with new employees. But that should even out because some employees whose health conditions generate higher costs will feel free to move on. Also, there should be some productivity gains because you won't have people who are only working for you just because of your health insurance.
Wouldn't it have been easier for Congress to just outlaw the whole idea of pre-existing conditions rather than create all these administrative complexities?
Yes. But everything Congress does in the benefits area is like this. I do think the complexity is beyond the social utility of the rules.
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