HIPAA "creditable coverage" rules affect group health plans, insurers.

• Author: Edlund, Taina
• Position: Health Insurance Portability and Accountability Act

On Apr. 1, 1997, the IRS and the Departments of Labor and Health and Human Services issued substantially similar temporary/interim regulations ("interim rules") providing statutorily mandated guidance under the Health Insurance Portability and Accountability Act of 1996 (HIPAA). That statute (P.L. 104-191) amended the Code, ERISA and the Public Service Health Act to impose new requirements on group health plans and insurers.

Among the most significant issues addressed by the interim rules is the requirement that any preexisting condition exclusion period of a group health plan (whether self-insured or insured) must be reduced by an individual's "creditable coverage," i.e., by certain periods of prior coverage. HIPAA's creditable coverage rules raised employer concerns about certifying periods of prior coverage, crediting of periods and plan recordkeeping obligations. If a plan fails to comply with HIPAA's requirements, including those for crediting coverage, a $100-a-day penalty may be imposed under Sec. 4980D. In addition, plan participants may sue to enforce compliance with the HIPAA. In order to avoid potential penalties and lawsuits, an employer must immediately decide how responsibility for compliance with certification requirements is to be allocated between it and service providers.

Temp. Regs. Sec. 54.9806-4T clarifies many of the issues involving creditable coverage. Certificates generally must be provided automatically when an individual loses coverage under a plan and when the individual has the right to elect Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) coverage. Certificates also must be provided on request if made within 24 months after loss of coverage (and must reflect each period of continuous coverage within the 24-month period).

The certificate may indicate, when appropriate, simply that an individual has at least 18 months of coverage uninterrupted by a significant break in coverage, stating the date coverage began. In other cases, the certificate must indicate the date any waiting or affiliation period began and the dates coverage began and ended (or whether it is continuing, as in the case of COBRA coverage).

The interim rules provide three model certifications that can be used by plans to meet these obligations. Model 1 applies to employees who lost health coverage between Oct. 1, 1996 and June 1, 1997, and contains a transition rule that would allow the reporting of generic, rather than...