The Balancing Act: New Rules On Who Qualifies For Health Insurance - Interview

Workforce, April, 2001 by Gillian Flynn

The Health Insurance Portability and Accountability Act of 1996 was created to increase employees' access to health insurance. As part of that goal, HIPAA included non-discrimination rules to allow people to enroll in plans even if they had a health-status issue that formerly kept them barred. As with any new statute, questions soon arose.

Those questions may finally be answered: interim final regulations have been issued and will go into effect July 1. Kathryn Bakich, vice president of The Siegel Company, a benefits consulting firm in Washington, D.C., explains what they mean to employers.

Can you explain what HIPAA's nondiscrimination rules are?

Let's say a person goes to a new employer, and can't enroll in the plan unless they pass a physical. That would be illegal under HIPAA because it's basing 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 heart condition, 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 you can only have a 12-month limit on a pre-existing condition, and if the employees have creditable coverage from previous employers, you have to offset that 12 months 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 a health-status factor. That could be a diagnosis of cancer or a treatment for hypertension. Formerly, plan administrators could make you produce your medical records--they call this evidence of insurability testing--in order to get into the plan. They can't do that any longer. Basically this allows people to come into the plan regardless of what their health condition is.

Let's get to the first clarification: Plans may provide different levels of benefits for different treatments--even though those differences may affect people with health problems.

This basically means you don't have to go through every benefit in your plan and make everything equal. You can still pay a maximum of $10,000 for treatment related to, say, surgery, as opposed to a maximum of $100,000 for hospitalization. You don't have to have equal limits on every type of payment as long as it's all uniformly applied to people covered by the plan. But be careful, because a lot of the limits might violate the ADA. For example, an AIDS limit might violate the ADA even if it doesn't violate the non-discrimination rules.

The regulations also have forbidden non-confinement and actively at work clauses--what are those?

An actively at work clause says if you're eligible for coverage but you're out sick or on some other leave, you don't get coverage until you come back to work. Those kinds of clauses are illegal because they're eliminating eligibility based on a health-status factor. For example, you start your new job, and you're supposed to be eligible for benefits 30 days later but you go into the hospital for a month. The plan says you can't be eligible for benefits until you get out of the hospital--that's illegal.

And a non-confinement clause?

A non-confinement clause says if you're in the hospital on the day benefits would otherwise start, your benefits don't start until you get out of the hospital. If you have either of these types of clauses in your plan, get them out right away. The department thinks they are so obviously illegal that there's no justification for continuing them, so they have an earlier effective date [at press time, May 8 looked likely]. One note: Actively at work clauses can be applied to people who are absent due to a non-health factor, such as jury duty or a vacation.

The regulations also stated that plan sponsors can't reduce benefits for a specific treatment in response to an individual's claim.

Here's the scenario: Somebody comes to the plan who has AIDS. They file a claim for benefits, and the plan administrator says, "We'll pay these claims, 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 targeted at the person who filed that claim.

So once an employee has filed a claim for a specific treatment, you can never change your plan?

The department didn't want to never allow plans to put limits on benefits. So they said that if you place a limit at the beginning of the plan year, it's not presumed to be targeted at the person who filed the claim. So what this basically means is if you're adopting mid-year benefit restrictions targeted at a specific disease, make sure you re not targeting that at a person who filed a claim.

Another rule: A plan can't deny enrollment because an employee participates in dangerous activities like motorcycle riding.

Right, if somebody's motorcycling or skydiving, you can't keep them out of the plan. But if they're in the plan and have an injury related to the motorcycle riding, you can still deny benefits. It's been very controversial. The groups that advocate for people who engage in motorcycle riding have been extremely vocal about their disagreement with that provision.