How does HIPAA affect health care coverage of preexisting conditions?

Under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), group health plans, including HMOs, are required to expand the availability of coverage to new employees who have preexisting conditions. HIPAA was effective July 1, 1997, for most plans. Employer-sponsored group health plans must generally cover employees with preexisting conditions within 12 months of when the employee starts a job. This 12-month waiting period is reduced or eliminated depending upon the length of the employee's creditable coverage. For example, the preexisting condition waiting period would be eliminated for a new employee who had been covered for at least one year by his or her prior employer's health plan.

Who is covered? These portability rules apply to group health plans with two or more participants who are active employees on the first day of the plan year. HIPAA applies to group health plans and to individual or group health plan issuers. The regulations define a group health plan as an employee welfare benefit plan to the extent that the plan provides medical care to employees or their dependents. However, the HIPAA rules relating to preexisting condition exclusions and certification of creditable coverage do not apply to small employer plans (those that employ, on average, 50 employees or less).

What is health care "portability?" Portability, in this instance, does not mean that an employee is taking existing health insurance with him or her when changing jobs. The right to be covered, free of preexisting conditions, is what is portable. Along with the Act's nondiscrimination and guaranteed renewability provisions, the requirements, combined with existing COBRA coverage continuation rules, complete a health insurance portability system that is designed to allow employees to change jobs without fear of losing coverage for themselves and their families. The system also provides access to coverage for individuals with health conditions that have prevented them from obtaining coverage.

Late enrollees. To take advantage of the 12-month preexisting exclusion period, employees must enroll in an employer's group health plan at the first opportunity; otherwise, an 18-month exclusion period may apply.

Exceptions. Many types of plans providing only limited types of benefits are exempted from the health care portability rules. Among the types of plans exempted from these rules are accident insurance, disability insurance, and car insurance, as well as plans providing limited-scope dental or vision benefits. Also exempted are non-coordinated benefits that meet certain conditions, such as plans providing coverage for a specific disease or illness.

Medicare supplement coverage is exempted if provided under a separate policy, certificate, or contract of insurance. Health flexible spending accounts are exempted from HIPAA's certification requirements in certain situations (see ¶42,440 ).

Discrimination prohibited. No group health plan may discriminate in eligibility for coverage, eligibility for continued coverage or premiums charged based solely on health status, medical condition (physical or mental), claims experience, receipt of health care, medical history, genetic information, evidence of insurability (including conditions caused by domestic violence) or disability of the individual seeking coverage or the individual's dependents.

However, plans are not required to cover any particular procedure and may limit benefit levels so long as they do not discriminate on the basis of these health factors among similarly situated employees. Insurers remain free to charge employers at their discretion and may offer discounts, rebates and adjustments to copayments or deductibles in return for adherence to programs of health promotion and disease prevention.