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The Balancing Act New Rules On Who Qualifies For Health Insurance

The Health Insurance Portability and Accountability Act included non-discrimination rules to allow people to enroll in plans even if they had a health-status issue that formerly kept them barred.

March 28, 2001
Related Topics: Medical Benefits Law, Benefits
The Health Insurance Portability and Accountability Act of 1996 was createdto increase employees' access to health insurance. As part of that goal, HIPAAincluded non-discrimination rules to allow people to enroll in plans even ifthey had a health-status issue that formerly kept them barred. As with any newstatute, questions soon arose.

    Those questions may finally be answered: interim final regulations have beenissued and will go into effect July 1, 2001. Kathryn Bakich, vice president of TheSiegel Company, a benefits consulting firm in Washington, D.C., explains whatthey mean to employers.

Can you explain what HIPAA's non-discrimination rules are?
Let's say a person goes to a new employer, and can't enroll in the planunless they pass a physical. That would be illegal under HIPAA because it'sbasing eligibility on a health-status-related factor.
How is this different from the pre-existing condition clause under HIPAA?
A pre-existing condition used to be dealt with like this: If you have a heartcondition, you never get paid for it under the plan, but you get into the plan.You're covered for everything else, just not the heart condition. HIPAA said youcan only have a 12-month limit on a pre-existing condition, and if the employeeshave creditable coverage from previous employers, you have to offset that 12months with the coverage.
Who do the non-discrimination rules protect?
People who wouldn't get in the plan at all. The statute covers anybody with ahealth-status factor. That could be a diagnosis of cancer or a treatment forhypertension. Formerly, plan administrators could make you produce your medicalrecords -- they call this evidence of insurability testing -- in order to getinto the plan. They can't do that any longer. Basically this allows people tocome into the plan regardless of what their health condition is.
Let's get to the first clarification: Plans may provide different levels ofbenefits for different treatments -- even though those differences may affectpeople with health problems.
This basically means you don't have to go through every benefit in your planand make everything equal. You can still pay a maximum of $10,000 for treatmentrelated to, say, surgery, as opposed to a maximum of $100,000 forhospitalization. You don't have to have equal limits on every type of payment aslong as it's all uniformly applied to people covered by the plan. But becareful, because a lot of the limits might violate the ADA. For example, an AIDSlimit might violate the ADA even if it doesn't violate the non-discriminationrules.
The regulations also have forbidden non-confinement and actively at workclauses -- what are those?
An actively at work clause says if you're eligible for coverage but you'reout sick or on some other leave, you don't get coverage until you come back towork. Those kinds of clauses are illegal because they're eliminating eligibilitybased on a health-status factor. For example, you start your new job, and you'resupposed to be eligible for benefits 30 days later, but you go into the hospitalfor a month. The plan says you can't be eligible for benefits until you get outof the hospital -- that's illegal.
And a non-confinement clause?
A non-confinement clause says if you're in the hospital on the day benefitswould otherwise start, your benefits don't start until you get out of thehospital. If you have either of these types of clauses in your plan, get themout right away. The department thinks they are so obviously illegal that there'sno justification for continuing them, so they have an earlier effective date [atpress time, May 8, 2001 looked likely]. One note: Actively at work clauses canbe applied to people who are absent due to a non-health factor, such as juryduty or a vacation.
The regulations also stated that plan sponsors can't reduce benefits for aspecific treatment in response to an individual's claim.
Here's the scenario: Somebody comes to the plan who has AIDS. They file aclaim for benefits, and the plan administrator says, "We'll pay theseclaims, but we're going to put a $5,000 cap on AIDS benefits right now."You can't do that any longer, because that's going to be presumed to be targetedat the person who filed that claim.
So once an employee has filed a claim for a specific treatment, you can neverchange your plan?
The department didn't want to never allow plans to put limits on benefits. Sothey said that if you place a limit at the beginning of the plan year, it's notpresumed to be targeted at the person who filed the claim. So what thisbasically means is if you're adopting mid-year benefit restrictions targeted ata specific disease, make sure you're not targeting that at a person who filed aclaim.
Another rule: A plan can't deny enrollment because an employee participatesin dangerous activities like motorcycle riding.
Right, if somebody's motorcycling or skydiving, you can't keep them out ofthe plan. But if they're in the plan and have an injury related to themotorcycle riding, you can still deny benefits. It's been very controversial.The groups that advocate for people who engage in motorcycle riding have beenextremely vocal about their disagreement with that provision.
A plan can't deny benefits for an injury that resulted from an act ofdomestic violence or a medical condition -- physical or mental.
This has a lot of litigation potential, I think. It's going to be the mostsignificant implementation problem. For instance, a lot of plans have exclusionsfor attempted suicide and self-inflicted injuries. This is the way this willplay out: The plan gets a report that somebody attempted suicide, and they'ddeny the claim. The person says the reason for the attempted suicide wasdepression. So you have to pay the claim. Right now, the plan would pay for thedepression to be treated, but not the injuries from the attempted suicide. Underthe new rule, they'd have to pay for both.
How does the company know if someone was medically depressed?
There's going to be a lot of factual investigation they'll have to get into.It could be more trouble than it's worth. There's no guidance about how it willwork -- but I'd expect a lawyer to be involved.
What if someone was improperly denied coverage in the past?
Under these rules you have to let them in -- and you have to give peoplenotice and an opportunity to enroll. If the reason they were denied was anegregious violation, like the non-confinement rules, you have to do it by theearlier deadline. If these new rules put you in violation, you have to givepeople notice and an opportunity to enroll by July 7, 2001.
And there are proposed rules about wellness programs, correct?
Yes, a plan that provides rewards for meeting a wellness goal must now offer an alternative goal to those who can't reach the goal for medical reasons. Sosay you have a program for cholesterol testing where employees get a $100 rebateif their cholesterol goes below 200. If somebody has a health condition thatdoesn't allow them to get their cholesterol below 200, youmust let them do something else to get the reward in order to have the program.They could be asked to keep a food diary, and be eligible for the reward even iftheir cholesterol doesn't get down.
What about something less specifically medical, like smoking?
If you have a premium discount for non-smokers, you have to offer that tosomeone who's still smoking as long as they will meet whatever alternativecriteria you come up with -- like going to a smoking-cessation class. So peoplewho'd get the discount would be non-smokers and people who are going to theclass. This is all done to make sure you're not designing wellness programs thatpenalize people because of their health conditions -- and smoking is considereda nicotine addiction.

Workforce, April 2001, pp. 82-84SubscribeNow!

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