Care called for regarding new health insurance regulations

Running a business today is more complex than ever, especially when it involves regulations that are new and confusing. The health insurance and benefit area is particularly complex. Busi-nesses are faced with new rules and compliance issues that need to be well- thought-out and well-managed.

The Health Insurance Portability and Accountability Act is just one example of this. The HIPAA was signed into law in 1996; however, in 2001 additional regulations were released. HIPAA is de-signed to ensure that employees who have a medical condition could leave or change employment without losing their health insurance.

It includes provisions that set limitations for pre-existing conditions, provide for guaranteed issuance of group coverage to small employers, and eliminate discrimination by a health plan based on an individual's health status.

In general, HIPAA does not allow an insurer or employer to deny benefits or charge a higher premium than required of a similarly situated individual, based upon health factors.

Pre-existing conditions

While HIPAA allows the use of pre-existing condition limitations, it requires that the limitation be applied uniformly to all similarly situated individuals.

Similarly situated individuals

HIPAA does not allow a plan to treat an individual within a group of similarly situated individuals differently. How-ever, a plan may provide different health benefits for employees in different groups if the distinction between the groups is based on bona fide employment-based classifications.

For example, a plan may provide different health benefits to employees at different geographic locations, or based on their employment classifications (e.g., full-time versus part-time status).

The regulations also mention that a plan may take into consideration a group's past claims experience when designing the benefits, as long as all individuals within the group are treated uniformly.

Discrimination in premiums

HIPAA does not prohibit an insurer from considering all relevant health factors of individuals in order to establish aggregate rates for coverage. The insurer is required to blend the rates into an overall group rate and provide a per-participant rate to the employer.

An employer may not charge an individual within a group of similarly situated individuals a different rate for health coverage based upon that individual's health factors; however, an employer may establish premium or contribution differentials through a bona fide wellness program.

Benefit limitations

HIPAA does not mandate coverage for particular benefits but requires that benefit limitations be applied uniformly. For example, a plan may place a lifetime limit on services for temporomandibular joint syndrome. This limitation may adversely affect individuals with TMJ, but because the limitation applies to all similarly situated individuals, it is permissible.

The regulations clarify that the addition of a uniformly applied benefit limitation effective at the beginning of a plan year will not be considered to be directed at any individual. Plan design changes made in the middle of a plan year will be reviewed under the facts and circumstances test to determine if the change was made in anticipation of a specific individual's claim for treatment.

Source of injury restrictions

HIPAA prohibits an employer from charging an employee a higher premium or denying eligibility based upon an employee's participation in a dangerous or hazardous activity (e.g. skydiving, bungee jumping). A plan may exclude coverage for treatment of injuries related to these activities. A plan may not exclude benefits because they are related to an act of domestic violence or a medical condition.

HIPAA does not allow a plan to treat an individual less favorably as a result of that individual's health conditions. The regulations clarify that a plan may treat individuals with an adverse condition more favorably. For example, a plan may continue to extend coverage to dependents that are beyond the limiting age but who are totally disabled.

Penalties for HIPAA violations

The penalty for violating an HIPAA provision is $100 per day per aggrieved individual, unless the violation is unintentional and it is corrected within 30 days of discovering the violation.

Knowing the rules can eliminate costly mistakes in plan design or implementation of benefit plans.

(Richard Ollis is a commercial in-surance specialist with Ollis & Company.)