[Federal Register Volume 62, Number 67 (Tuesday, April 8, 1997)]
[Rules and Regulations]
[Pages 16985-17004]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-8217]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Part 148
[BPD-882-IFC]
RIN 0938-AH75
Individual Market Health Insurance Reform: Portability From Group
to Individual Coverage; Federal Rules for Access in the Individual
Market; State Alternative Mechanisms to Federal Rules
AGENCY: Department of Health and Human Services.
ACTION: Interim final rule with comment period.
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SUMMARY: This interim final rule with comment period implements section
111 of the Health Insurance Portability and Accountability Act of 1996,
which sets forth Federal requirements designed to improve access to the
individual health insurance market. Certain ``eligible individuals''
who lose group health insurance coverage are assured availability of
coverage in the individual market, on a guaranteed issue basis, without
preexisting condition exclusions. In addition, all individual health
insurance coverage must be guaranteed renewable. This rule also sets
forth procedures that apply to States that choose to implement a
[[Page 16986]]
mechanism under State law, as an alternative to the Federal
requirements, with respect to guaranteed availability for eligible
individuals. It also sets forth the rules that apply if a State does
not substantially enforce the statutory requirements.
DATES: Effective date: These regulations are effective April 8, 1997.
However, affected parties do not have to comply with the
information collection requirements in Secs. 148.120, 148.122, 148.124,
148.126, 148.200, and 148.202 until the Department has published in the
Federal Register the control numbers assigned by the Office of
Management and Budget (OMB) to these information collection
requirements. Section 148.128 is currently approved under emergency OMB
approval number 0938-0699, which will expire on July 31, 1997, but will
be reapproved with the sections referenced above. Publication of the
control numbers notifies the public that OMB has approved these
information collection requirements under the Paperwork Reduction Act
of 1995.
Comment date: Comments will be considered if we receive them at the
appropriate address, as provided below, no later than 5 p.m. on July 7,
1997.
Applicability dates: The various dates that these regulations are
applicable are set forth in the Supplementary Information section of
the preamble.
ADDRESSES: Mail written comments (1 original and 3 copies) to the
following address: Health Care Financing Administration, Department of
Health and Human Services, Attention: BPD-882-IFC, P.O. Box 26676,
Baltimore, MD 21207-0488.
If you prefer, you may deliver your written comments (1 original
and 3 copies) to one of the following addresses:
Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,
Washington, DC 20201, or
Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.
Because of staffing and resource limitations, we cannot accept
comments by facsimile (FAX) or E-mail transmission. In commenting,
please refer to file code BPD-882-IFC. Comments received timely will be
available for pubic inspection as they are received, generally
beginning approximately 3 weeks after publication of a document, in
Room 309-G of the Department's offices at 200 Independence Avenue, SW.,
Washington, DC, on Monday through Friday of each week from 8:30 a.m. to
5 p.m. (phone: (202) 690-7890).
Copies: To order copies of the Federal Register containing this
document, send your request to: New Orders, Superintendent of
Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date
of the issue requested and enclose a check or money order payable to
the Superintendent of Documents, or enclose your Visa or Master Card
number and expiration date. Credit card orders can also be placed by
calling the order desk at (202) 512-1800 or by faxing to (202) 512-
2250. The cost for each copy is $8. As an alternative, you can view and
photocopy the Federal Register document at most libraries designated as
Federal Depository Libraries and at many other public and academic
libraries throughout the country that receive the Federal Register.
FOR FURTHER INFORMATION CONTACT:
Gertrude Saunders of the Insurance Reform Implementation Task Force
(IRITF), (410) 786-5888.
SUPPLEMENTARY INFORMATION:
I. Summary of Recent Legislation
The Health Insurance Portability and Accountability Act of 1996
(HIPAA, Pub. L. 104-191) was enacted on August 21, 1996. Title I of the
statute enacted reforms in both the group and individual health
insurance markets, in part, to help many individuals maintain insurance
coverage if they lose or leave their jobs. Sections 101 through 103 of
HIPAA amended the Employee Retirement Income Security Act of 1974
(ERISA), the Public Health Service Act (PHS Act), and the Internal
Revenue Code of 1986 (Code) to provide for improved access and
renewability with respect to employment-related group health plans
(GHPs), and health insurance coverage sold in connection with GHPs.
Section 111 of HIPAA amends the PHS Act to improve availability and
renewability in the individual market.
Group health plans are generally regulated by the Department of
Labor under ERISA, and by the Internal Revenue Service under the Code.
For health insurance coverage sold to group health plans, and sold in
the individual market, the insurance issuers are regulated by the
States under State law.
We believe that the individual health insurance market provisions
of HIPAA recognize that States play the primary role in the regulation
of insurance, and afford the States great flexibility in implementing
the reforms required by the statute. While the statute provides
enforcement authority to HHS in the event that a State substantially
fails to enforce Federal requirements, the primary authority clearly
rests with the States.
This rule only pertains to the individual market changes made to
sections 2741 through 2763 and 2791 of the PHS Act by section 111 of
HIPAA. For rules implementing the group market provisions of HIPAA, see
the ``Interim Rules for Health Insurance Portability for Group Health
Plans'' (BPD-890-IFC), which is published elsewhere in this Federal
Register.
II. Provisions of This Interim Final Rule
A. Guaranteed Availability--General
The statue requires all health insurance issuers offering coverage
in the individual market to accept any ``eligible individuals'' who
apply for coverage, without imposing a preexisting condition exclusion.
A health insurance issuer means an insurance company, insurance
service, or insurance organization (including an HMO) that is licensed
to engage in the business of insurance in a State and that is subject
to State law that regulates insurance within the meaning of section
514(b)(2) of the ERISA. The term does not include a group health plan.
For purposes of this rule, we will use the term ``issuer'' to mean a
health insurance issuer.
1. Definition of an Eligible Individual (Sec. 148.103)
An eligible individual must met several criteria:
The individual must have at least 18 months of creditable
coverage without a significant break in coverage.
The rules for determining creditable coverage are set forth in the
group market regulations at Sec. 146.113 and explained in the preamble
to that regulation. In general, creditable coverage includes almost any
type of health care coverage. A significant break in coverage is 63
days without any creditable coverage. This requirement is related to
the group market rules, since an individual in the group market is
protected against preexisting condition exclusions under any
circumstances if the individual has 18 months of creditable coverage
without a significant break. As with the group market rules, States may
have requirements that are more generous to individuals. For instance,
a State may require less than 18 months of creditable coverage in order
to be considered an eligible individual in the individual market. It
may also lengthen the significant break in coverage period from 63 days
to some longer period.
We are also including a provision in Sec. 148.120(f)(2) that deems
certain
[[Page 16987]]
children to be eligible individuals, even if they do not have a full 18
months of creditable coverage. These are children who were covered
under any creditable coverage within 30 days of birth, adoption, or
placement for adoption, and have not had a significant break in
coverage. Under Secs. 146.111(b) and 146.117(b)(5), these children are
entitled to a special enrollment period under a group health plan or
group health insurance coverage, and are fully protected from the
imposition of preexisting condition exclusions under the group
coverage. We believe that deeming these children to be eligible
individuals is necessary in order to carry out clear congressional
intent to provide special protection for them.
The individual's most recent coverage must have been under
a group health plan.
There is no limit on the amount of time that must have been spent
under group coverage--one day is sufficient. The coverage must,
however, be under a group health plan as defined in Part 146, which
means it must be employment-related. However, it does not have to be a
group health plan that is regulated under ERISA. It may be under
governmental or church plans (or under health insurance coverage
offered in connection with either type of group health plan).
Governmental plans are plans for employees of government entities, not
public welfare or other benefit plans such as Medicare, Medicaid, or
IHS.
The individual cannot currently be eligible for Medicare
or Medicaid or covered under any other health insurance.
This requires that the individual actually be covered under the
health insurance. Except for COBRA or similar continuation coverage,
the individual who has the option of purchasing some sort of health
insurance and does not do so may still meet the definition of an
eligible individual.
This interpretation of the law permits an individual to choose
among options. In addition to the products that are available to him or
her as an eligible individual, the individual may have available a
conversion policy, other coverage sold in the individual market on an
underwritten basis, or coverage through any associations to which the
individual may be eligible to join. Eligible individuals cannot be
required to obtain denials of other coverage (a common requirement of
many risk pools) because the only disqualifying circumstance is
``having'' other coverage, not having other options available.
Nevertheless, individuals will want to explore other options to ensure
that they obtain the best coverage for the lowest cost.
The individual has both elected and exhausted any
continuation coverage available under COBRA or a similar State program.
This requirement means that if an individual's qualifying event
entitles him or her to more than 18 months of COBRA coverage, the
individual must exhaust all the COBRA coverage that is available to him
or her before becoming eligible under HIPAA's individual market rules.
Many State laws, by contrast, require less than 18 months. Therefore,
an individual would need to aggregate prior group coverage with the
coverage under the mini-COBRA to reach the minimum of 18 months of
creditable coverage required to be an eligible individual. Note,
however, that the exhaustion requirement refers only to the
continuation coverage that is mandated under Federal law (COBRA) or a
similar program under State law (sometimes referred to as ``mini-
COBRA''). An individual, however, is not required to accept a
``conversion'' policy that may be available when continuation coverage
ends, and should be careful about doing so. Continuation coverage meets
the criterion of coverage for both the individual and group markets. An
individual who accepts a conversion policy, however, maintains
eligibility only for the group market and forfeits the right to be an
``eligible individual,'' for the individual market. This is so because
the statute provides no portability from one individual policy to
another. A conversion policy is an individual policy, not a group
policy, even though prior group coverage is a prerequisite to
qualifying for the conversion policy.
Residency requirements. We wish to clarify that States may
not require a specific period of residency for HIPAA protected eligible
individuals, however, States may require that an HIPAA eligible
individual be a State resident to be eligible for protection under
applicable State law.
2. State Flexibility
States are given the flexibility either to enforce the Federal
requirements set forth in Sec. 148.120, or to implement an alternative
mechanism, under State law, that achieves the statutory mandate of
providing eligible individuals with access to individual health
insurance, or comparable coverage, without preexisting condition
exclusions. The statute provides that if States notify the Secretary no
later than April 1, 1997, with supporting information, that they intend
to implement an alternative mechanism by January 1, 1998, they will be
presumed to be implementing a mechanism as of July 1, 1997 (the
effective date of the statute). Alternative mechanisms are discussed in
section II.F. of this preamble.
If a State chooses to enforce the Federal guaranteed availability
requirements (sometimes referred to as the ``Federal fallback''
requirements), the provisions of Sec. 148.120 apply, and must be
enforced by the State under State law. If the State implements neither
an alternative mechanism, nor the Federal fallback requirements, we
will implement the Federal fallback provisions in that State and will
enforce those requirements using the penalty provisions specified in
Secs. 148.200 and 148.202.
B. Alternative Coverage Under the Federal Fallback Provisions
In accordance with Sec. 148.120(c), if the Federal fallback
provisions are in effect in a State, an issuer that offers health
insurance coverage in the individual market in that State may elect to
limit coverage by making only two policies available to eligible
individuals.
1. Limitation of Policy Forms--General
The issuer may limit the individual market coverage it offers as
long as it offers two different policy forms. Both policy forms must be
designed for, made generally available to, actively marketed to, and
enroll both eligible and other individuals, and meet one of two
requirements regarding policy forms described in Sec. 148.120(c)(2) and
(c)(3).
The statute creates an ambiguity when it indicates that policy
forms that have different cost-sharing arrangements or different riders
must be considered different policy forms. It is our understanding that
this is inconsistent with State law definitions of a policy form, which
refer to a contract form that is filed with the State, which has a
number assigned to it, and which may have more than one cost-sharing
arrangement. Since the statute does not define ``policy form,'' we
believe the statutory intent was to leave the definition to State law.
However, we also believe the intent of the statutory requirement of
two different policy forms was to ensure that eligible individuals
would have some choice of coverage and/or cost for that coverage.
Because differences in levels of cost sharing in out-of-pocket spending
are among the most important determinants of price, for Federal
enforcement purposes, we would interpret this statutory provision to
mean that significant differences in deductibles or other significantly
[[Page 16988]]
different cost-sharing arrangements provide sufficient choice.
2. Most Popular Policies
Under Sec. 148.120(c)(2), the health insurance issuer may choose to
offer the policy forms for individual health insurance coverage with
the largest, and the second largest, premium volume of all similar
policy forms offered by the issuer in the State, or applicable
marketing or service area, for the period involved. In the absence of
applicable State standards, ``premium volume'' means earned premiums
for the last reporting year. In the absence of applicable State
standards, the last reporting year is the period from October 1 through
September 30 of the preceding year. Blocks of business closed under
applicable State law are not included in calculating premium volume.
3. Representative Policy Forms
Under Sec. 148.120(c)(3), the health insurance issuer may choose,
instead, to offer a lower-level and higher-level coverage policy form.
Each of these policy forms must meet the requirements of
Sec. 148.120(c)(3)(ii), which state that issuers must include benefits
substantially similar to other individual health insurance coverage
offered by the issuer in the State; and must be covered under a method
described in Sec. 148.120(c)(3)(ii)(D) pertaining to risk adjustment,
risk spreading, risk spreading mechanism, or financial subsidization;
and must meet all applicable State requirements.
In a State that chooses to enforce the Federal fallback provisions
instead of an alternative mechanism, the issuer must provide the
appropriate state authorities with any documentation required by the
State (Sec. 148.120(c)(5)(i)). In a State where we enforce the
individual market provisions, the issuer must provide us with
documentation that we determine to be necessary
(Sec. 148,120(c)(5)(ii)). The following is an example of what we would
expect to be a minimum level of documentation:
(A) Issuer name, address, and explanation of corporate and company
structure.
(B) Information on all products offered by the issuer in the
individual market.
(C) If the issuer elects the option for--
(i) The most popular policies, data on premium volumes of all
policy forms offered by the issuer in the individual market; or
(ii) Representative coverage, data, assumptions, and methods used
to calculate the actuarial values of the two representative policy
forms.
(D) Explanation of how the issuer is complying with the provisions
of HIPAA.
(E) List of all products the issuer is making or will make
available to eligible individuals and an explanation of how the issuer
will inform eligible individuals of these policy forms, with copies of
all marketing material.
(F) Description of risk spreading and financial subsidization
mechanism.
For policy forms already being marketed as of July 1, 1997 (the
effective date of the Federal fallback provisions), the issuer must
submit the information to HCFA no later than September 1, 1997. For
other policy forms, the issuer must submit the information 90 days
before the beginning of the calendar year in which the issuer wants to
market the policy form.
4. Special Rules for Network Plans
An issuer that offers coverage in the individual market through a
network plan may require that eligible individuals live, reside, or
work within the service area for the plan (Sec. 148.120(d)). An issuer
may also deny coverage if it has demonstrated the following, if
required, to the appropriate State authority:
It does not have the capacity to deliver services
adequately to additional individual enrollees because of the volume of
current group contract holders and enrollees, and to current individual
enrollees. In addition, the issuer must not offer any coverage in the
individual market within that service area for a period of 180 days
after the coverage is denied.
It uniformly denies coverage to an individual without
regard to any health status-related factor or whether the individual is
an eligible individual.
5. Application of Financial Capacity Limits
A health insurance issuer may deny coverage in the individual
market to an eligible individual if the issuer has demonstrated the
following, if required, to the applicable State authority
(Sec. 148.120(e)(1)):
It does not have the financial reserves necessary to
underwrite additional coverage.
It uniformly denies coverage to an individual without
regard to any health status-related factor or whether the individual is
an eligible individual.
In those States under Federal enforcement of the individual market
provisions, the demonstration of a lack of capacity to provide
services, or a lack of financial capacity, must be made to us rather
than the State (Sec. 148.120(e)(2)). The issuer must not deny coverage
to any eligible individual until 30 days after we receive and do not
reject the required information. We are currently developing reporting
requirements for this information and we request comments regarding
criteria that would be fair to all issuers, and at the same time
promote the intent of the law to guarantee access to health insurance
coverage for all eligible individuals.
An issuer that denies coverage in any service area is provided in
Sec. 148.120(e)(1), as prohibited from offering that coverage in the
individual market for a period of 180 days after the later of the date
coverage is denied or the issuer demonstrates to the applicable State
authority (if required under applicable State law) that the issuer has
sufficient financial reserves to underwrite additional coverage. A
State may apply the 180 day suspension described in Sec. 148.120(e)(3)
on a service-area-specific basis.
6. Dependent Coverage
In general, if an issuer offers policies in the individual market
that provide dependent coverage, the issuer may apply a preexisting
condition exclusion, as allowed under applicable State law, to
dependents who are not eligible individuals (Sec. 148.120(f)). However,
the issuer may not apply a preexisting condition exclusion on certain
children who have less than 18 months creditable coverage but are
protected from an exclusion under the group market rules of Part 146.
These children are dependents who were enrolled as a dependent
under a group health plan within 30 days of birth, adoption, or
placement for adoption and have not had a significant break in
coverage. We believe that the statute did not intend to eliminate this
protection for children who could not have been enrolled any earlier
(that is, before birth, adoption, or placement for adoption), and thus
could not possibly have aggregated 18 months of creditable coverage.
7. Construction of Provisions
The regulation clarifies several areas that are not affected by
this regulation (Sec. 148.120(g)). A health insurance issuer offering
health insurance coverage only in connection with group health plans,
or only through one or more bona fide associations, or both, is not
required to offer that type of coverage in the individual market.
Similarly, an issuer that only offers a conversion policy in connection
with a group health plan is not considered to be an issuer offering
individual health insurance coverage. The premium amount that an issuer
charges for coverage in the individual
[[Page 16989]]
market is only restricted by applicable State law. An issuer offering
coverage in the individual market is not prohibited from establishing
premium discounts or rebates, or modifying applicable copayments or
deductibles, in return for adherence to programs of health promotion
and disease prevention. Also, issuers are not required to reopen blocks
of business that have been closed under applicable State law, and an
issuer in the individual market is not required to offer a family
coverage option with any policy form unless State law requires the
issuer to do so.
In addition, if an issuer elects to sell coverage to an individual
who is not an eligible individual, the issuer may apply a preexisting
condition exclusion period as permitted under State law. The HIPAA
group rules relating to reduction of preexisting condition exclusion
periods do not apply in the individual market unless a State chooses to
apply them.
8. Broad Preclusion of Preexisting Condition Exclusions for Eligible
Individuals
The individual market provisions (Sec. 148.120(a)(2)) preclude an
issuer from imposing on an eligible individual a preexisting condition
exclusion as defined under section 2701(b)(1)(A) of the PHS Act. That
definition is very broad, including any limitation relating to a
condition based on the fact that the condition was present before the
date of enrollment under the coverage, whether or not any medical
advice, diagnosis, care, or treatment was recommended or received
before that date.
9. Treatment of Coverage Under the Federal Employee Health Benefit Plan
(FEHBP)
Federal employees are not subject to COBRA, but they may elect
Federal Employee Temporary Continuation Coverage (TCC). This
continuation coverage, like COBRA, is considered group coverage. While
the individual is under the continuation coverage, the individual is
still eligible for group coverage until that coverage has been
exhausted. Therefore, the individual does not qualify as an eligible
individual in the individual market by simply failing to exhaust TCC.
C. Guaranteed Renewability
Section 148.122 requires that a health insurance issuer providing
individual health insurance coverage to an individual, renew or
``continue in force'' the coverage at the option of the individual.
``Continue in force'' means that the issuer maintains the same policy
form that the individual purchased. The requirements in this section
apply to all individuals purchasing health insurance coverage in the
individual market, not only eligible individuals.
A health insurance issuer may nonrenew or discontinue health
insurance coverage of an individual in the individual market only for
the following reasons: nonpayment of premiums, fraud, termination of
plan, movement outside service area, and cessation of association
membership. If coverage is terminated based on movement outside the
service area and cessation of association membership, coverage must be
terminated uniformly without regard to the health status-related factor
of any covered individuals. Health status-related factor is defined in
Sec. 144.103 (definitions for the group and individual health insurance
markets.)
Becoming eligible for Medicare by reason of age or otherwise is not
a basis for nonrenewal or termination of an individual's health
insurance coverage in the individual market, because it is not included
in the statute's specifically defined list of permissible reasons for
nonrenewal. If permitted by State law, however, policies that are sold
to individuals before they attain Medicare eligibility may contain
coordination of benefit clauses that exclude payment under the policy
to the extent that Medicare pays.
Issuers who decide to discontinue offering a particular type or all
coverage in the individual market are subject to certain requirements
outlined in Sec. 148.122 (d) and (e). Issuers discontinuing all
coverage in the individual market are prohibited from issuing coverage
in the market and State involved for 5 years following the date of
discontinuation of the last coverage policy not renewed
(Sec. 148.122(f)).
Issuers may modify the health insurance coverage for a policy form
only at the time of coverage renewal, if the modification is consistent
with State law and effective uniformly for all individuals with that
policy form (Sec. 148.122(g)).
In the case of health insurance coverage made available by a health
insurance issuer in the individual market to individuals only through
one or more associations, the reference to an ``individual'' is deemed
to include a reference to the association (Sec. 148.122(h)).
D. Certification of Coverage
Section 148.124 specifies that an issuer in the individual market
must provide a certificate of creditable coverage, and, if required,
make certain other disclosures regarding an individual's coverage under
an individual policy. In general, the certificates and disclosure
requirements are substantially identical to the relevant provisions of
Sec. 146.115 that apply to health insurance coverage offered by issuers
in the group market. The preamble accompanying the group market
regulation published elsewhere in this Federal Register explains these
procedures in detail. The certificates and other disclosure of
information are intended to enable individuals to avoid or reduce
preexisting condition exclusions included under subsequent group health
insurance coverage the individual may obtain.
The following model is different from the model certificate in the
group market regulation. The individual market model certificate
provides for the date that the substantially completed application was
received from the policyholder. This date tolls the significant break
period.
Certificate of Individual Health Insurance Coverage
* IMPORTANT--This certificate provides evidence of your health
coverage. You may need to furnish this certificate if you become
eligible under a group health plan that excludes coverage for
medical conditions you have before you enroll, if medical advice,
diagnosis, care, or treatment is recommended or received for the
condition during the 6 months before you enroll in the new plan. If
you become covered under another group health plan, check with the
plan administrator to see if you need to provide this certificate.
You may also need this certificate to establish your right to buy
coverage for yourself or your family, with no exclusion for previous
medical conditions, if you are not covered under a group health
plan.
1. Date of this certificate: __________
2. Name of policyholder: __________
3. Identification number of policyholder: __________
4. Name of any dependents to whom this certificate applies:
__________
5. Name, address, and telephone number of issuer responsible for
providing this certificate:
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6. For further information, call: __________
7. If all individual(s) identified in items 2 and 4 have at
least 18 months of creditable coverage (disregarding periods of
coverage before a 63-day break), check here ______ and skip items 8
and 9.
8. Date coverage began: __________
9. Date that a substantially completed application was received
from the policyholder: __________
10. Date coverage ended: __________ (or check here if coverage
is continuing as of the date of this certificate:__________)
[[Page 16990]]
Note: Separate certificates will be furnished if information is
not identical for the policyholder and each dependent.
Individuals have the right to receive a certificate automatically
(an automatic certificate) when they lose coverage under an individual
policy. A certificate must also be provided upon a request by, or on
behalf of, an individual no later than 24 months after coverage ceases.
The certificate must be provided at the earliest time that an issuer,
acting in a reasonable and prompt fashion, can provide the certificate.
The certificate must also be provided consistent with State law.
An issuer of an individual policy is required, to the same extent
as an issuer of insurance in the group market, to prepare certificates
with respect to the coverage of any of the individual's dependents that
are covered under the individual policy. During a transitional period
until July 1, 1998, an issuer may satisfy its obligation to provide a
written certificate regarding the coverage of a dependent of a
policyholder by providing the name of the policyholder covered by the
policy and specifying the type of coverage as family coverage. If
requested to provide a certificate related to a dependent, however, the
issuer must make reasonable efforts to obtain and provide the name of
the dependent.
For certain types of creditable coverage, including under a State
health benefits risk pool, a public health plan, and section 5(e) of
the Peace Corps Act, the statute does not identify a particular entity
that is responsible for providing a certificate. However, any issuer
that provides coverage in connection with those programs must provide
certificates.
E. Determination of an Eligible Individual
An issuer is potentially subject to civil money penalties if it
denies coverage, or applies a preexisting condition exclusion to, an
eligible individual, unless it can show that it did not know, or
exercising reasonable diligence could not have known, of the violation.
Section 148.126 specifies that the issuer is responsible for
determining whether an applicant is an eligible individual, and must
exercise reasonable diligence in making this determination. An issuer
could, for example, include questions on the application form that
would be designed to elicit information that would indicate that the
applicant may be an eligible individual.
An individual seeking to establish that he or she is an eligible
individual may not have a certificate of creditable coverage that
establishes 18 months of creditable coverage, and that the most recent
period of creditable coverage is in a group health plan. The individual
has the same right to demonstrate periods of creditable coverage as in
the group market. Thus the issuer must take into account all
information that the individual presents, and must treat the individual
as having furnished a certificate if the individual attests to the
period of creditable coverage, the individual presents relevant
corroborating evidence of some creditable coverage during the period,
and the individual cooperates with the issuer's efforts to verify the
individual's coverage.
F. State Flexibility
1. Alternative Mechanism
If a State implements an alternative mechanism as described in
Sec. 148.128, the State does not have to enforce the ``Federal
fallback'' provisions for guaranteed availability, although it must
still enforce the guaranteed renewability provisions set forth in
Sec. 148.122. Although the law recognizes diversity among the States by
allowing for an alternative mechanism, there are minimum requirements
for an alternative mechanism. Under Sec. 148.128, an alternative
mechanism must meet the following requirements:
Provide a choice of health insurance coverage to all
eligible individuals.
Not impose any preexisting condition exclusions and
affiliation periods for coverage of an eligible individual.
Include at least one policy form of coverage that is
comparable to either one of the following:
+ Comprehensive health insurance coverage offered in the individual
market in the State.
+ A standard option of coverage available under the group or individual
health insurance laws of the State.
Implement one of the following:
+ The National Association of Insurance Commissioners (NAIC) Small
Employer and Individual Health Insurance Availability Model Act, as it
applies to individual health insurance coverage, and as revised in
State regulations to meet all the requirements of Part 148 of this rule
and Part 144 published elsewhere in this Federal Register with the
group market rules.
+ The Individual Health Insurance Portability Model Act, as adopted on
June 3, 1996, and revised in State regulations to meet all the
requirements of Part 148 of this rule and Part 144 published elsewhere
in this Federal Register with the group market rules.
+ A qualified high-risk pool that provides for the following:
--Health insurance coverage (or comparable coverage) to all
eligible individuals that does not impose any preexisting condition
exclusion or affiliation periods with respect to this coverage for all
eligible individuals.
--Premium rates and covered benefits for that coverage consistent
with standards included in the NAIC Model Health Plan for Uninsurable
Individuals Act in effect on August 21, 1996, and revised in State
regulations to meet all the requirements of Part 148 of this rule and
Part 144 published elsewhere in this Federal Register with the group
market rules.
+ Another mechanism--
--That provides for risk adjustment, risk spreading, or a risk-
spreading mechanism (among issuers or policies of an issuer) or
otherwise provides for some financial subsidization for eligible
individuals, including through assistance to participating issuers, or
--Under which each eligible individual is provided a choice of all
individual health insurance coverage otherwise available.
2. Permissible Forms of Mechanisms
A private or public individual health insurance mechanism (such as
a health insurance coverage pool or program, mandatory group conversion
policy, guaranteed issue of one or more plans of individual health
insurance coverage, or open enrollment by one or more health insurance
issuers), or combination of these mechanisms, that is designed to
provide access to health benefits for individuals in the individual
market in the State, may constitute an acceptable alternative
mechanism.
3. Transition Rules for Establishing an Acceptable Alternative
Mechanism
We presume a State to be implementing an acceptable alternative
mechanism as of July 1, 1997, if the State submits a notice and
required information that meets the notice and information requirements
for an acceptable alternative mechanism described in Sec. 148.128(c),
no later than April 1, 1997, and we do not make a determination within
90 days (except as provided in Sec. 148.128(e)(3)(ii) for suspensions
of the review period) that the State will not be implementing a
[[Page 16991]]
mechanism reasonably designed to be an acceptable alternative mechanism
as of January 1, 1998. To assist States in meeting the April 1, 1997,
statutory deadline for notifying HCFA and submitting the necessary
information, HCFA will consider postmark dates, special delivery
service dates or other such dates as the date of receipt.
4. Delay Permitted for Certain States
If a State notifies us that its legislature is not meeting in a
regular session between August 21, 1996, and August 20, 1997, our
presumption that the State is implementing an acceptable alternative
mechanism will continue until July 1, 1998, if the State meets the
notice and information requirements in Sec. 148.128(d).
5. General Rules for Establishing an Alternative Mechanism
A State that chooses to implement an acceptable alternative
mechanism must submit the notice and supporting information specified
in Sec. 148.128(e). After receiving the information, if we do not make
a preliminary determination as described in Sec. 148.128(e)(2), within
90 days of receiving the State's information (except as provided in
Sec. 148.128(e)(3)(ii), that the mechanism is not accepted, the
(proposed) alternative mechanism is presumed to be an acceptable
alternative mechanism. If we do make a preliminary determination, after
consultation with the chief executive officer of the State, that an
alternative mechanism is not acceptable, we will notify the State, in
writing, of the consequences of failing to implement an acceptable
alternative mechanism and permit the State a reasonable opportunity to
modify the mechanism or adopt another mechanism. In determining a
reasonable opportunity, we will take into consideration a State's
legislative calendar and process. If after taking all of these actions,
our final determination is that a State's alternative mechanism is not
an acceptable mechanism or the State is not substantially enforcing an
acceptable mechanism, we will notify the State, in writing, as provided
in Sec. 148.128(e)(4)(ii).
A State may request that we notify it, after reviewing the material
submitted, if we did not make a preliminary determination that the
mechanism is not an acceptable alternative mechanism
(Sec. 148.128(e)(4)).
6. Suspension of Review Period
If we notify a State of our need for additional information or
further discussions on its submission, we will suspend the review
period, as described in Sec. 148.128(e)(3)(ii) until the State provides
the necessary information. If the State chooses not to provide the
necessary information or our discussions with the State cannot be
concluded satisfactorily, we may make a preliminary determination that
the mechanism is not an acceptable alternative mechanism.
7. Review Criteria
The law gives States substantial flexibility in devising
alternative mechanisms. If a State chooses to submit a proposed
alternative mechanism, the State determines what to submit. We must,
however, be able to determine whether the mechanism is designed to
ensure that eligible individuals are given the required access to
insurance coverage. Our review will focus on results for eligible
individuals. Our main concern is that the State submission show the
analysis and the reasoning behind the design of the proposed
alternative mechanism, and a reasonable assessment of the likelihood
that the mechanism will achieve the legislative objectives. These
requirements are described in Sec. 148.128(g).
8. Continued Application and Effective Dates
A State must provide information necessary for us to review its
mechanism's implementation every 3 years, or before implementing any
significant change, to continue to be presumed to have an acceptable
alternative mechanism (Sec. 148.128(f)). We suggest that a State inform
us of any significant change to its alternative mechanism 120 days
before implementing the change.
For alternative mechanisms submitted after April 1, 1997, if we do
not make a preliminary determination within the review period, the
alternative mechanism is effective 90 days after the end of the 90-day
review period (except as provided in Sec. 148.128(e)(3)(ii).
9. Limitation on HCFA's Authority
We do not make a preliminary or final determination on any basis
other than that a mechanism is not considered an acceptable alternative
mechanism or is not being implemented by the State (Sec. 148.128(h)).
G. Enforcement
Sections 2741 through 2763 and 2791 of the PHS Act, as implemented
by Part 148 of these regulations, impose requirements on health
insurance issuers that offer coverage in the individual market in a
State. The statute makes clear that it is solely within the discretion
of the States, in the first instance, whether to take on the
responsibility for enforcing those requirements, or whether to leave
enforcement to the Federal government. We anticipate that the States
will choose to enforce the requirements. However, the statute also
makes clear that if a State does not substantially enforce the
requirements, we must enforce them. Section 148.200 sets forth the
procedures that we will follow in the event that a question is raised
about the State's enforcement. The procedures are designed to give the
State every opportunity to show why Federal enforcement is not
required. The regulation also makes clear that the process will not be
triggered unless we are satisfied that there has been a reasonable
effort to exhaust any State remedies. However, if, after giving the
State a reasonable opportunity to enforce, we make a final
determination that a State is not substantially enforcing these
requirements, we will enforce the requirements using the civil money
penalties provided for under Sec. 148.202.
Section 148.202 describes the process for imposing civil money
penalties against issuers that fail to comply with the requirements of
Part 148 requiring them to make coverage available to eligible
individuals, to renew all individual coverage, and to provide
certificates of creditable coverage. If we receive a complaint or other
information that indicates that the issuer is not in compliance with
these requirements, we will give the issuer an opportunity to respond.
If we assess the penalty, which can consist of up to $100 for each day,
for each individual whose rights are violated, the regulation provides
appeal rights.
H. Preemption
Section 2762 of the PHS Act specifies that, in general, State laws
regarding health insurance issuers are not preempted unless they
``prevent the application of'' a requirement of the individual market
rules in Part 148 of this rule or Part 144 published elsewhere in this
Federal Register with the group market rules. Within these
restrictions, however, the conference report makes clear that the
conferees intended ``the narrowest preemption'' of State law, and
indicates that State laws that are ``broader'' than Federal
requirements would not ``prevent the application of'' the HIPAA
requirements.
The statute, however, makes clear that nothing in sections 2741
through 2763 and 2791 of the PHS Act can be construed to affect or
modify the
[[Page 16992]]
provisions of section 514 of ERISA, which limits State regulation of
group health plans.
I. Excepted Benefits
Section 146.145 specifies that certain benefits are excluded from
certain requirements of the group market only if they are provided
under a separate policy, certificate, or contract of insurance, or are
otherwise not an integral part of the plan. Under Sec. 148.220, for
purposes of the individual market, these benefits are excluded if
provided under a separate policy certificate, or contract of insurance.
The term ``integral to a plan'' does not apply in the individual
market.
In addition, in the group market, coverage for only a specified
disease or illness or hospital indemnity or other fixed dollar
indemnity insurance is excepted only if the following applies:
It is provided under a separate policy, certificate, or
contract of insurance.
There is no coordination between the provision of the
benefits and an exclusion of benefits under any group health plan
maintained by the same plan sponsor. (This does not apply in the
individual market.)
The benefits are paid with respect to an event without
regard to whether benefits are provided with respect to the event under
any group health plan maintained by the same plan sponsor. (This does
not apply in the individual market.)
The requirements of Part 148 do not apply to ``excepted benefits,''
which are benefits under one or more (or any combination) of the
following:
Fully excepted benefits--
--Coverage only for accident (including accidental death and
dismemberment);
--Disability income insurance;
--Liability insurance, including general liability insurance and
automobile liability insurance;
--Coverage issued as a supplement to liability insurance;
--Workers' compensation or similar insurance;
--Automobile medical payment insurance;
--Credit-only insurance (for example, mortgage insurance); and
--Coverage for onsite medical clinics.
Other excepted benefits, which are excepted only if they
are provided under a separate policy, certificate, or contract of
insurance--
--Limited scope dental or vision benefits;
--Benefits for long-term care;
--Coverage only for a specified disease or illness (for example, cancer
policies) as long as the policy does not coordinate benefits;
--Hospital indemnity or other fixed indemnity insurance (for example,
$100 per day) as long as the policy does not coordinate benefits;
--Medicare supplemental health insurance, also known as Medigap or
MedSup insurance (as defined in section 1882(g)(1) of the Social
Security Act);
--Supplemental coverage provided under Chapter 55 Title 10 of the
United States Code (also known as CHAMPUS supplemental programs); and
--Similar supplemental coverage provided under a group health plan.
J. Associations in the Individual Market
As we discuss in the preamble to the interim final rules for the
group market rules published elsewhere in this Federal Register, an
association policy that is not offered in connection with an
employment-related group health plan falls under the individual market
provisions of HIPAA, even if a State otherwise regulates it as
``association group'' coverage. In response to the notice published in
the Federal Register on December 30, 1996 (61 FR 68697), we received a
large number of comments relating to coverage under ``college plans,''
which provide association group coverage for students (as distinguished
from employees of a college or university).
The following discussion of college plans, which generally applies
to any association coverage in the individual market, addresses the
commenters' concerns.
College plans are clearly creditable coverage under
Sec. 146.113(a)(1) because they meet the definition of ``health
insurance coverage'' under part 144 of the group market rules.
If an issuer offers student coverage through a ``bona fide
association,'' that meets all six requirements set forth in the
definition of these entities in part 144 of the group market rules, the
issuer benefits because it does not have to make the coverage available
in the individual market to eligible individuals, and does not have to
renew coverage for a student who leaves the association. The student
also benefits because a bona fide association must make the coverage
available to all association members regardless of any health status-
related factors. If the college plan is not a bona fide association,
however, it does have to guarantee coverage to all eligible individuals
in the individual market and must renew the coverage indefinitely at
the option of former students. In addition, State laws may be more
stringent than the Federal definition of bona fide association.
The commenters were concerned that students should be able
to move from coverage under an employment-related group health plan
(through their own or their parents' employment) to a college plan,
between college plans, and from a college plan to individual coverage,
with guaranteed availability and without preexisting condition
exclusions. These concerns cannot be fully addressed under the current
law. Because HIPAA provides for full portability from individual
products to group market coverage, moving from a college plan to a
employer plan presents no problem, since the coverage under the college
plan constitutes creditable coverage that reduces any preexisting
condition exclusion under the group health plan. However, a student
moving from a group health plan to college or other individual coverage
will not qualify for these protections unless he or she qualifies as an
``eligible individual'' as defined in Sec. 148.103. To gain this
status, a student must exhaust any COBRA or State ``mini-COBRA''
continuation coverage available. A child aging out of a parent's
coverage generally qualifies for 36 months of COBRA. This puts the
student in the position of either paying the higher cost of
continuation coverage for the duration of the continuation coverage, or
taking the lower-cost student coverage subject to a preexisting
condition exclusion of any length permitted under State law. HIPAA
places no limits on preexisting condition exclusion in the individual
market for noneligible individuals.
Moreover, HIPPA does not provide any guaranteed availability or
protection against preexisting condition exclusions for students moving
from one individual policy to another. This is true even if the student
originally enrolled in a student plan as an eligible individual, since
that status is applicable only when the student's most recent coverage
is under a group health plan.
III. Regulatory Impact Analysis
Ordinarily, we would include a Regulatory Impact Statement in this
section of the document. We have chosen, however, to address the
economic impact analysis of this regulation in a combined impact
statement contained in the interim final rule for the group market
provisions (BPD-890-IFC). A combined impact analysis has been prepared
because of the close connection between the effects of HIPAA's group
market reforms and the reforms in the individual insurance
[[Page 16993]]
market, and because of the overlap of issuers participating in both the
group and individual market. The regulatory burdens placed on entities
in the group and individual markets are virtually identical in many
respects, notably in the certification process. There are also economic
effects that crossover from one market segment to the other because of
HIPPA provisions, such as the group-to-individual portability
provision, which may have an effect on premiums in either or both
market segments. We believe a single discussion of the economic impact
is the most appropriate means of highlighting the similarities and
discussing the interactions between the two market segments.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
IV. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
We are, however, requesting an emergency review of this notice. In
compliance with the requirement of section 3506(c)(2)(A) of the
Paperwork Reduction Act of 1995, we have submitted to the Office of
Management and Budget (OMB) the following requirements for emergency
review. We are requesting an emergency review because the collection of
this information is needed before the expiration of the normal time
limits under OMB's regulations at 5 CFR, Part 1320. This is necessary
to ensure compliance with section 111 of HIPAA necessary to implement
congressional intent with respect to guaranteeing availability of
individual health insurance coverage to certain individuals with prior
group coverage. We cannot reasonably comply with the normal clearance
procedures because public harm is likely to result because eligible
individuals will not receive the health insurance protections under the
statute.
We are requesting that OMB provide a 30-day public comment period,
from the date of publication, with OMB approval by June 1, 1997 and a
180-day approval. During this 180-day period, we will publish a
separate Federal Register notice announcing the initiation of an
extensive 60-day agency review and public comment period on these
requirements. We will submit the requirements for OMB review and an
extension of this emergency approval.
Type of Information Request: New collection.
Title of Information Collection: Individual Health Insurance.
Reform: Portability from Group to Individual Coverage; Federal
Rules for Access in the Individual Market; State Alternative Mechanisms
to Federal Rules BPD-882-IFC.
Form Number: HCFA-R-205.
Use: These rules ensure access to the individual insurance market
for certain individuals and allows the States to implement their own
program to meet the HIPAA requirements for access to the individual
market. The information collection requirements outlined in this rule
document the record keeping necessary for issuers and States to ensure
individuals receive protection under section 111 of HIPAA.
Frequency: On occasion.
Affected Public: States, businesses or other for profit, not-for-
profit institutions, Federal Government, individuals or households.
Number of Respondents: 1,035.
Total Annual Responses: 3.5 million in 1997; 3 million each in 1998
and 1999;
Total Annual Hours Requested: 335,000 to 586,000 hours in 1997;
384,000 to 882,000 in 1998; and 377,000 to 882,000 in 1999.
Total Annual Cost: $4.9 million to $6.8 million in 1997; $5.1
million to $8.7 million in 1998; and $5.4 million to $8.7 million in
1999.
Sections 148.120, 148.122, 148.124, 148.126, 148.128, 148.200, and
148.202 of this document contain information collection requirements.
As required by section 3504(h) of the Paperwork Reduction Act of 1995,
we have submitted a copy of this document to OMB for its review of
these information collection requirements.
We are soliciting public comment on each of these issues for the
following sections of this document that contain information collection
requirements:
Section 148.120 Guaranteed availability of individual health insurance
coverage to certain individuals with prior group coverage.
States are given the flexibility either to enforce the Federal
requirements set forth in Sec. 148.120, or to implement an alternative
mechanism, under State law, that achieves the statutory mandate of
providing eligible individuals with access to individual health
insurance, or comparable coverage, without preexisting condition
exclusions. However, a State could choose to do nothing, resulting in
Federal enforcement of the individual market regulations under HIPAA.
Thirty States have indicated to us an intent to implement an
alternative mechanism under Sec. 148.128. The information collection
requirements associated with implementing and enforcing the alternative
mechanism are discussed below for Sec. 148.128.
If a State chooses to enforce the Federal guaranteed availability
requirements (sometimes referred to as the ``Federal fall back''
requirements), the provisions of Sec. 148.120 apply, and must be
enforced by the State under State law. Since many of these requirements
are enforced under existing State law, for these instances, they are
exempt from the Paperwork Reduction Act (PRA) as described under 5 CFR
1320.3(b)(3). Although applicable PRA burden will vary by State and
issuer, we anticipate that ten States will be required to review
materials submitted by at most 325 issuers per State on an annual basis
to ensure compliance with the requirements of all products guaranteed
or alternative coverage, which are not currently required under State
laws and regulations. Therefore, the PRA burden imposed under this
option is the time required by the ten States to review the materials
submitted by the issuers. This burden is 1,625 hours based on each of
the ten States reviewing the material for 30 minutes for each issuer on
an annual basis. We estimate the cost associated with this burden to be
$24,375.
If a State implements neither an alternative mechanism, nor the
Federal fall back requirements, we will implement the Federal fall back
provisions in that State and will enforce those requirements using the
penalty provisions specified in Secs. 148.200 and 148.202. We
anticipate that fewer than ten States will rely on Federal enforcement
of the statute. In particular, the only jurisdictions that we believe
[[Page 16994]]
will choose this option are the five U.S. territories.
This section also requires an issuer who elects the alternative
coverage option to document any actuarial calculations necessary to
satisfy State and/or Federal oversight provisions referenced in
Sec. 148.120. Since the majority of issuers rely on automated means of
storing their calculations, we estimate the annual burden for this
record keeping activity to be 25 hours. This is based on the assumption
that it will take approximately 10 issuers per State, in 15 States, on
an annual basis, 10 minutes per issuer, to electronically store and
verify the storage of their calculations. We estimate the cost
associated with this burden to be $375.
Section 148.122 Guaranteed renewability of individual health insurance
coverage.
In this section issuers are only required to report if they are
discontinuing a particular type of coverage or discontinuing all
coverage. This requirement exists in the absence of this regulation
because under current insurance practices, State insurance departments
oversee discontinuance of insurance products in their State as a normal
business practice. Therefore, these information collection requirements
are exempt from the PRA under 5 CFR 1320.3(b)(2) and 5 CFR
1320.3(b)(3). However, under HIPAA, States must review policies during
their oversite process to make sure there is a guarantee renewability
clause in each policy. For the 21 States that currently require
guaranteed renewability, it is our understanding that this is normal
business practice. For the other 34 States, however, we see this State
burden to be about 10 minutes per policy, since States already review
policies for other requirements and this process does not prescribe a
timetable for reviewing the policies. We see this as a total annual
burden of 20,000 hours. We estimate the cost associated with this
burden to be $300,000. If the State identifies a violation and a State
has to take some action, we believe that each State will be required to
initiate fewer than 10 administrative actions on an annual basis
against specific individuals or entities who failed to implement the
Federal guarantee renewability requirements.
Section 148.124 Certification and disclosure of coverage.
Section 148.124 specifies that an issuer in the individual market
must provide a written certificate of creditable coverage, and, if
required, make other certain disclosures regarding an individual's
coverage under an individual policy. In general, the certification and
disclosure requirements are substantially identical to the relevant
provisions of Sec. 146.115 that apply to health insurance coverage
offered by issuers in the group market. The preamble accompanying the
group market regulation explains these procedures in detail. In
general, the certificates from issuers in the individual market and
other disclosure of information are intended to enable individuals to
avoid or reduce preexisting condition exclusions included under
subsequent group health insurance coverage the individual may obtain.
Individuals have the right to receive a certificate automatically
(an automatic certificate) when they lose coverage under an individual
policy. A certificate must also be provided upon a request by, or on
behalf of, an individual for the period not later than 24 months after
coverage ceases. The certificate must be provided at the earliest time
that an issuer, acting in a reasonable and prompt fashion, can provide
the certificate. The certificate must also be provided consistent with
State law.
An issuer of an individual policy is required, to the same extent
as an issuer of insurance in the group market, to prepare certificates
with respect to the coverage of any of the individual's dependents that
are covered under the individual policy.
We anticipate that 3 million individual market-based certificates
will be generated on an annual basis. We are assuming that the majority
of certificates issued in the individual market will require issuers to
find out the application date since many individuals will have less
than 18 months of credible coverage with that issuer.
The range of time estimates, shown in the table below, are based on
discussions with industry individuals. We believe that as a routine
business practice, the issuers' administrative staff have the necessary
information readily available to generate the required certificates. In
addition, we have determined that the majority of issuers have or will
have the capability to automatically computer generate and disseminate
the necessary certification when appropriate.
----------------------------------------------------------------------------------------------------------------
Average time
Total Total (in minutes) Burden hours
Year respondents responses per response (range) Cost (range)
(range)
----------------------------------------------------------------------------------------------------------------
1997............................ 1,000 3,418,052 4.63 263,548 $3,897,932
8.95 509,665 5,716,826
1998............................ 1,000 2,929,759 6.94 338,781 4,542,924
17.11 835,517 8,035,131
1999............................ 1,000 2,929,759 6.81 332,480 4,746,736
17.11 835,517 8,035,131
----------------------------------------------------------------------------------------------------------------
Section 148.126 Determination of an eligible individual.
In this section, issuers may maintain records for those individuals
who they determine are not HIPAA eligible individuals. We estimate this
to be on average less than 50 individuals per the 1,000 issuers
nationwide each year. At 20 minutes per record, this represents an
annual burden of 16,667 hours. We estimate the cost associated with
this burden to be $183,000.
Section 148.128 State flexibility in individual market reforms--
alternative mechanisms.
As explained above, 30 or more States may implement acceptable
alternative mechanisms as allowed under this section. It is estimated
that this reporting burden will range from 33,000 to 38,500 hours
depending on the number of States that choose to submit the required
information. We estimate the cost associated with this burden to be
$495,000 to $577,500.
The information collection requirements associated with submitting
the required documentation outlining a State's alternative mechanism is
currently approved under emergency OMB approval number 0938-0699 which
expires on 07/31/97. The information collection requirements
[[Page 16995]]
currently approved in this section will be re-approved with the
remaining information collection requirements referenced in the HHS PRA
section.
Section 148.200 Enforcement and Section 148.202 Civil money penalties.
We anticipate identifying violations through individual
nonstandardized consumer complaints. Therefore, the complaints
submitted and our enforcement activities do not fall within the
requirements of the PRA, as outlined in 5 CFR 1320.3(c) and 5 CFR
1320.4(a).
We have submitted a copy of this notice to OMB for its review of
these information collections. A notice will be published in the
Federal Register when approval is obtained. Interested persons are
invited to send comments regarding the burden or any other aspect of
these collections of information requirements.
If you comment on these information collection and record keeping
requirements, please mail copies directly to the following addresses:
Health Care Financing Administration, Office of Financial and Human
Resources, Management Planning and Analysis Staff, Room C2-26-17, 7500
Security Boulevard, Baltimore, MD 21244-1850.
Office of Information and Regulatory Affairs, Office of Management and
Budget, Room 10235, New Executive Office Building, Washington, DC
20503, Attn: Allison Herron Eydt, HCFA Desk Officer.
V. Response to Comments
Because of the large number of items of correspondence we normally
receive on Federal Register documents published for comment, we are not
able to acknowledge or respond to them individually. We will consider
all comments we receive by the date and time specified in the DATES
section of this preamble, and, if we proceed with a subsequent
document, we will respond to the comments in the preamble to that
document.
VI. Interim Rules and Request for Comments
Section 2792 of the PHS Act, provides in part, that HHS may
promulgate any interim final rules as they determine are appropriate to
carry out the provisions of the new Part B of the PHS Act. Under
section 553(b) of the Administrative Procedure Act (5 U.S.C. 551 et
seq.), a general notice of proposed rulemaking is not required when the
agency, for good cause, finds that notice and public comment thereon
are impracticable, unnecessary or contrary to the public interest.
These rules are being adopted on an interim basis, rather than as
proposed rules, because the Department has determined that, without
prompt guidance, some members of the regulated community will have
difficulty complying with the HIPAA's certification requirements and
could be in violation of the statute. The Congress expressly intended
that the certification and prior creditable coverage provisions serve
as the mechanism for increasing the portability of health coverage for
individuals. Without the Department's guidance, issuers will likely be
unable to produce the necessary amendments to policy documents
reflecting HIPAA's new requirements, as well as the appropriate
certifications of prior coverage that would eliminate preexisting
condition exclusion periods for eligible individuals. Moreover, without
the Department's prompt guidance, insured individuals will not
understand the benefit to them of having a certificate of prior
coverage to present upon entering the individual health insurance
market and will likely have greater difficulty proving that they are
entitled to health coverage.
HIPAA's portability requirements will affect the regulated
community in the immediate future. HIPAA's certification requirements
are effective for all issuers on June 1, 1997. HIPAA's underlying
requirements concerning establishing periods of prior creditable
coverage and eliminating pre-existing condition exclusions in the
individual market are generally applicable July 1, 1997. Issuers and
individuals will need guidance on how to comply with the new statutory
provisions before this effective date. The rules have been written in
order to ensure that issuers of individual health insurance, as well as
individuals, are provided timely guidance concerning compliance with
these recently enacted amendments to the PHS Act. The rules provide
guidance on these statutory changes, and are being adopted on an
interim basis because the Department finds that issuance of such
regulations in interim final form with a request for comments is
appropriate to carry out the new regulatory structure imposed by HIPAA
on health insurance issuers. In addition, the rules are necessary to
ensure that issuers, as well as individuals, are provided timely
guidance concerning compliance with new and important disclosure
obligations imposed by HIPAA.
Section 2792 of the PHS Act authorizes the Department to issue
regulations necessary to carry out the amendments made by section 111
of HIPAA by April 1, 1997. Issuance of a notice of proposed rule making
with public comment prior to issuing a final rule could delay
significantly the issuance of essential guidance and prevent the
Department from complying with its statutory rulemaking deadline.
Furthermore, although these rules are being adopted on an interim
basis, the Department is inviting interested persons to submit written
comments on the rules for consideration in the development of the final
rules relating to HIPAA. Development of subsequent rules may be issued
in advance of January 1, 1998.
For the foregoing reasons, the Department finds that the
publication of a proposed regulation, for the purpose of notice and
public comment, would be impracticable, unnecessary, and contrary to
the public interest. However, we are providing a 90-day period for
public comment, as indicated at the beginning of this rule.
List of Subjects in 45 CFR Part 148
Administrative practice and procedure, Health care, Health
insurance, Penalties, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, 45 CFR Subtitle A is
amended as set forth below: A new Part 148, consisting of Secs. 148.101
through 148.220, is added to Subchapter B to read as follows:
PART 148--REQUIREMENTS FOR THE INDIVIDUAL HEALTH INSURANCE MARKET
Subpart A--General Provisions
Sec.
148.101 Basis and purpose.
148.102 Scope, applicability, and effective dates.
148.103 Definitions.
Subpart B--Requirements Relating to Access and Renewability of Coverage
148.120 Guaranteed availability of individual health insurance
coverage to certain individuals with prior group coverage.
148.122 Guranteed renewability of individual health insurance
coverage.
148.124 Certification and disclosure of coverage.
148.126 Determination of an eligible individual.
148.128 State flexibility in individual market reforms--alternative
mechanisms.
Subpart C--[Reserved]
Subpart D--Enforcement; Penalties; Preemption
Sec.
148.200 Enforcement by State; determination regarding failure to
enforce.
148.202 Civil money penalties.
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148.210 Preemption.
148.220 Excepted benefits.
Authority: Secs. 2741 through 2763, 2791, and 2792 of the Public
Health Service Act (42 U.S.C. 300gg-41 through 300gg-63, 300gg-91,
and 300gg-92).
Subpart A--General Provisions
Sec. 148.101 Basis and purpose.
This part implements sections 2741 through 2763 and 2791 and 2792
of the PHS Act. Its purpose is to improve access to individual health
insurance coverage for certain eligible individuals who previously had
group coverage, and to guarantee the renewability of all coverage in
the individual market.
Sec. 148.102 Scope, applicability, and effective dates.
(a) Scope and applicability. (1) Individual health insurance
coverage includes all health insurance coverage (as defined in 45 CFR
144.103) that is neither health insurance coverage sold in connection
with an employment-related group health plan, nor short-term, limited
duration coverage as defined in 45 CFR 144.103. In some cases, coverage
that may be considered group coverage under State law (such as coverage
sold through certain associations) is considered individual coverage.
(2) The requirements of this part that pertain to guaranteed
availability of individual health insurance coverage for certain
eligible individuals apply to all issuers of individual health
insurance coverage in a State, unless the State implements an
acceptable alternative mechanism as described in Sec. 148.128. The
requirements that pertain to guaranteed renewability for all
individuals apply to all issuers of individual health insurance
coverage in the State, regardless of whether a State implements an
alternative mechanism.
(b) Effective date. Except as provided in Sec. 148.124 (certificate
of coverage) and Sec. 148.128 (alternative State-mechanisms), the
requirements of this part apply to health insurance coverage offered,
sold, issued, renewed, in effect, or operated in the individual market
after June 30, 1997, regardless of when a period of creditable coverage
occurs.
Sec. 148.103 Definitions.
Unless otherwise provided, the following definition applies:
Eligible individual means an individual who meets the following
conditions:
(1) The individual has at least 18 months of creditable coverage
(as determined under 45 CFR 146.113) as of the date on which the
individual seeks coverage under this part.
(2) The individual's most recent prior creditable coverage was
under a group health plan, governmental plan, or church plan (or health
insurance coverage offered in connection with any of these plans).
(3) The individual is not eligible for coverage under any of the
following:
(i) A group health plan.
(ii) Part A or Part B of Title XVIII (Medicare) of the Social
Security Act.
(iii) A State plan under Title XIX (Medicaid) of the Social
Security Act (or any successor program).
(4) The individual does not have other health insurance coverage.
(5) The individual's most recent coverage was not terminated
because of nonpayment of premiums or fraud. (For more information about
nonpayment of premiums or fraud, see 45 CFR 146.152(b)(1) and (b)(2).)
(6) If the individual has been offered the option of continuing
coverage under a COBRA continuation provision or a similar State
program, the individual has both elected and exhausted the continuation
coverage.
Subpart B--Requirements Relating to Access and Renewability of
Coverage
Sec. 148.120 Guaranteed availability of individual health insurance
coverage to certain individuals with prior group coverage.
(a) General rule. Except as provided for in paragraph (c) of this
section, an issuer that furnishes health insurance coverage in the
individual market must meet the following requirements with respect to
any eligible individual who requests coverage:
(1) May not decline to offer coverage or deny enrollment under any
policy forms that it actively markets in the individual market, except
as permitted in paragraph (c) of this section concerning alternative
coverage when no State mechanism exists. An issuer is deemed to meet
this requirement if, upon the request of an eligible individual, it
acts promptly to do the following:
(i) Provide information about all available coverage options.
(ii) Enroll the individual in any coverage option the individual
selects.
(2) May not impose any preexisting condition exclusion on the
individual.
(b) Exception. The requirements of paragraph (a) of this section do
not apply to health insurance coverage offered in the individual market
in a State that chooses to implement an acceptable alternative
mechanism described in Sec. 148.128.
(c) Alternative coverage permitted where no State mechanism exists.
(1) If the State does not implement an acceptable alternative mechanism
under Sec. 148.128, an issuer may elect to limit the coverage required
under paragraph (a) of this section if it offers eligible individuals
at least two policy forms that meet the following requirements:
(i) Each policy form must be designed for, made generally available
to, and actively marketed to, and enroll, both eligible and other
individuals.
(ii) The policy forms must be either the issuer's two most popular
policy forms (as described in paragraph (c)(2) of this section) or
representative samples of individual health insurance offered by the
issuer in the State (as described in paragraph (c)(3) of this section).
(2) Most popular policies. The two most popular policy forms means
the policy forms with the largest, and the second largest, premium
volume for the last reporting year, for policies offered in that State.
In the absence of applicable State standards, premium volume means
earned premiums for the last reporting year. In the absence of
applicable State standards, the last reporting year is the period from
October 1 through September 30 of the preceding year. Blocks of
business closed under applicable State law are not included in
calculating premium volume.
(3) Representative policy forms--(i) Definition of weighted
average. Weighted average means the average actuarial value of the
benefits provided by all the health insurance coverage issued by one of
the following:
(A) An issuer in the individual market in a State during the
previous calendar year, weighted by enrollment for each policy form,
but not including coverage issued to eligible individuals.
(B) All issuers in the individual market in a State if the data are
available for the previous calendar year, weighted by enrollment for
each policy form.
(ii) Requirements. The two representative policy forms must meet
the following requirements:
(A) Include a lower-level coverage policy form under which the
actuarial value of benefits under the coverage is at least 85 percent
but not greater than 100 percent of the weighted average.
(B) Include a higher-level coverage policy form under which the
actuarial value of the benefits under the coverage is at least 15
percent greater than the actuarial value of the lower-level coverage
policy form offered by an issuer in that State and at least 100
percent, but not greater than 120 percent of the weighted average.
(C) Include benefits substantially similar to other individual
health
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insurance coverage offered by the issuer in the State.
(D) Provide for risk adjustment, risk spreading, or a risk
spreading mechanism, or otherwise provide some financial subsidization
for eligible individuals.
(E) Meet all applicable State requirements.
(iii) Actuarial value of benefits. The actuarial value of benefits
provided under individual health insurance coverage must be calculated
based on a standardized population, and a set of standardized
utilization and cost factors under applicable State law.
(4) Election. All issuer elections must be applied uniformly to all
eligible individuals in the State and must be effective for all
policies offered during a period of at least 2 years.
(5) Documentation. The issuer must document the actuarial
calculations it makes as follows:
(i) Enforcement by State. In a State that elects to enforce the
provisions of this section in lieu of an alternative mechanism under
Sec. 148.128, the issuer must provide the appropriate State authorities
with the documentation required by the State.
(ii) Enforcement by HCFA. If HCFA acts to enforce the provisions of
this section under Sec. 148.200, the issuer must provide to HCFA,
within the following time frames, any documentation HCFA requests:
(A) For policy forms already being marketed as of July 1, 1997--no
later than September 1, 1997.
(B) For other policy forms--90 days before the beginning of the
calendar year in which the issuer wants to market the policy form.
(d) Special rules for network plans. (1) An issuer that offers
coverage in the individual market through a network plan may take the
following actions:
(i) Specify that an eligible individual may only enroll if he or
she lives, resides, or works within the service area for the network
plan.
(ii) Deny coverage to an eligible individual if the issuer has
demonstrated the following to the applicable State authority (if
required by the State):
(A) It does not have the capacity to deliver services adequately to
additional individual enrollees because of its obligations to provide
services to current group contract holders and enrollees, and to
current individual enrollees.
(B) It uniformly denies coverage to individuals without regard to
any health status-related factor, and without regard to whether the
individuals are eligible individuals.
(iii) Not offer any coverage in the individual market, within the
service area identified for purposes of paragraph (d)(1)(ii) of this
section, for a period of 180 days after the coverage is denied.
(2) In those States in which HCFA is enforcing the individual
market provisions of this part in accordance with Sec. 148.200, the
issuer must make the demonstration described in paragraph (d)(1)(ii) of
this section to HCFA rather than to the State, and the issuer may not
deny coverage to any eligible individual until 30 days after HCFA
receives and approves the information.
(e) Application of financial capacity limits. (1) An issuer may
deny coverage to an eligible individual if the issuer has demonstrated
the following to the applicable State authority (if required by the
State):
(i) It does not have the financial reserves necessary to underwrite
additional coverage.
(ii) It uniformly denies coverage to all individuals in the
individual market, consistent with applicable State law, without regard
to any health status-related factor of the individuals, and without
regard to whether the individuals are eligible individuals.
(2) In those States in which HCFA is enforcing the individual
market provisions of this part in accordance with Sec. 148.200, the
issuer must make the demonstration described in paragraph (e)(1) of
this section to HCFA rather than to the State, and the issuer may not
deny coverage to any eligible individual until 30 days after HCFA
receives and approves the information.
(3) An issuer that denies coverage in any service area according to
paragraph (e)(1) of this section is prohibited from offering that
coverage in the individual market for a period of 180 days after the
later of the date--
(1) The coverage is denied; or
(ii) The issuer demonstrates to the applicable State authority (if
required under applicable State law) that the issuer has sufficient
financial reserves to underwrite additional coverage.
(4) A State may apply the 180-day suspension described in paragraph
(e)(3) of this section on a service-area-specific basis.
(f) Rules for dependents--(1) General rule. If an eligible
individual elects to enroll in individual health insurance coverage
that provides coverage for dependents, the issuer may apply a
preexisting condition exclusion on any dependent who is not an eligible
individual.
(2) Exception for certain children. A child is deemed to be an
eligible individual if the following conditions are met:
(i) The child was covered under any creditable coverage within 30
days of birth, adoption, or placement for adoption (or longer if the
State provides for a longer special enrollment period than required
under 45 CFR 146.117).
(ii) The child has not had a significant break in coverage.
(3) Examples. The following examples illustrate the requirements of
this paragraph (f) for certain children:
Example 1: Individual A had self-only coverage under his
employer's group health plan for five years. A has two children,
ages 11 and 15, but never enrolled in family coverage. A leaves his
job to become self-employed, and qualifies as an eligible individual
because he is not entitled to any continuation coverage, Medicare or
Medicaid, and has no other health insurance coverage. He applies to
Issuer R for coverage in the individual market under a policy with
family coverage that R makes available to eligible individuals. R
must sell A the policy, but he may refuse coverage to A's children,
or may apply a preexisting condition exclusion to them if allowed
under applicable State law, because they did not have prior
creditable coverage, and therefore do not qualify as eligible
individuals.
Example 2: Individual B was also covered under a group health
plan for 5 years before losing his job. He originally had coverage
only for himself and his wife, but 3 months before his employment
ended, his wife had a baby. B took advantage of the special
enrollment period that applied, changed to family coverage, and
enrolled the baby in the group health plan within 20 days.
Immediately after losing his job, B applied to Issuer R for family
converge. B and his wife qualify as eligible individuals, and the
baby is deemed to be an eligible individual even though she has less
than three months of creditable coverage. Therefore R must make the
policy available to all three members of the family, and cannot
impose any preexisting condition exclusions.
(g) Clarification of applicability. (1) An issuer in the individual
market is not required to offer a family coverage option with any
policy form.
(2) An issuer offering health insurance coverage only in connection
with group health plans, or only through one or more bona fide
associations, or both, is not required to offer that type of coverage
in the individual market.
(3) An issuer offering health insurance coverage in connection with
a group health plan is not deemed to be a health insurance issuer
offering individual health insurance coverage solely because the issuer
offers a conversion policy.
(4) This section does not restrict the amount of the premium rates
that an issuer may charge an individual under State law for health
insurance coverage provided in the individual market.
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(5) This section does not prevent an issuer offering health
insurance coverage in the individual market from establishing premium
discounts or rebates, or modifying otherwise applicable copayments or
deductibles, in return for adherence to programs of health promotion
and disease prevention.
(6) This section does not require issuers to reopen blocks of
business closed under applicable State law.
Sec. 148.122 Guaranteed renewability of individual health insurance
coverage.
(a) Applicability. This section applies to all health insurance
coverage in the individual market.
(b) General rules. (1) Except as provided in paragraph (c) of this
section, an issuer must renew or continue in force the coverage at the
option of the individual.
(2) Medicare eligibility or entitlement is not a basis for
nonrenewal or termination of an individual's health insurance coverage
in the individual market.
(c) Exceptions to renewing coverage. An issuer may nonrenew or
discontinue health insurance coverage of an individual in the
individual market based only on one or more of the following:
(1) Nonpayment of premiums. The individual has failed to pay
premiums or contributions in accordance with the terms of health
insurance coverage, including any timeliness requirements.
(2) Fraud. The individual has performed an act or practice that
constitutes fraud or made an intentional misrepresentation of material
fact under the terms of the coverage.
(3) Termination of plan. The issuer is ceasing to offer coverage in
the individual market in accordance with paragraphs (d) and (e) of this
section and applicable State law.
(4) Movement outside the service area. For network plans, the
individual no longer resides, lives, or works in the service area of
the issuer, or area for which the issuer is authorized to do business,
but only if coverage is terminated uniformly without regard to any
health status-related factor of covered individuals.
(5) Association membership ceases. For coverage made available in
the individual market only through one or more bona fide associations,
the individual's membership in the association ceases, but only if the
coverage is terminated uniformly without regard to any health status-
related factor of covered individuals.
(d) Discontinuing a particular type of coverage. An issuer may
discontinue offering a particular type of health insurance coverage
offered in the individual market only if it meets the following
requirements:
(1) Provides notice in writing to each individual provided coverage
of that type of health insurance at least 90 days before the date the
coverage will be discontinued.
(2) Offers to each covered individual, on a guaranteed issue basis,
the option to purchase any other individual health insurance coverage
currently being offered by the issuer for individuals in that market.
(3) Acts uniformly without regard to any health status-related
factor of covered individuals or dependents of covered individuals who
may become eligible for coverage.
(e) Discontinuing all coverage. An issuer may discontinue offering
all health insurance coverage in the individual market in a State only
if it meets the following requirements.
(1) Provides notice in writing to the applicable State authority
and to each individual of the discontinuation at least 180 days before
the date the coverage will expire.
(2) Discontinues and does not renew all health insurance policies
it issues or delivers for insurance in the State in the individual
market.
(3) Acts uniformly without regard to any health status-related
factor of covered individuals or dependents of covered individuals who
may become eligible for coverage.
(f) Prohibition on market reentry. An issuer who elects to
discontinue offering all health insurance coverage under paragraph (e)
of this section may not issue coverage in the market and State involved
during the 5-year period beginning on the date of discontinuation of
the last coverage not renewed.
(g) Exception for uniform modification of coverage. An issuer may,
only at the time of coverage renewal, modify the health insurance
coverage for a policy form offered in the individual market if the
modification is consistent with State law and is effective uniformly
for all individuals with that policy form.
(h) Application to coverage offered only through associations. In
the case of health insurance coverage that is made available by a
health insurance issuer in the individual market only through one or
more associations, any reference in this section to an ``individual''
is deemed to include a reference to the association of which the
individual is a member.
Sec. 148.124 Certification and disclosure of coverage.
(a) Applicability--(1) General rule. Except as provided in
paragraph (a)(2) of this section, this section applies to all issuers
of health insurance coverage.
(2) Exception. The provisions of this section do not apply to
issuers of the following types of coverage:
(i) Health insurance coverage furnished in connection with a group
health plan defined in 45 CFR 144.103. (These issuers are regulated
under 45 CFR 146.115 to provide a certificate of coverage.)
(ii) Excepted benefits described in Sec. 148.220.
(b) General rules--(1) Individuals for whom a certificate must be
provided; timing of issuance. A certificate must be provided, without
charge, for individuals and dependents, who are or were covered under
an individual health insurance policy for the following:
(i) Issuance of automatic certificates. An automatic certificate
must be provided within a reasonable time period consistent with State
law after the individual ceases to be covered under the policy.
(ii) Any individual upon request. A request for a certificate may
be made by, or on behalf of, an individual within 24 months after
coverage ends. For example, an entity that provides coverage to an
individual in the future may, if authorized by the individual, request
a certificate of the individual's creditable coverage on behalf of the
individual from the issuer of the individual's prior coverage. After
the request is received, an issuer must provide the certificate
promptly. A certificate must be provided under this paragraph even if
the individual has previously received an automatic certificate under
paragraph (a)(l)(i) of this section.
(2) Form and content of certificate--(i) Written certificate--(A)
General rule. Except as provided in paragraph (b)(2)(i)(B) of this
section, the issuer must provide the certificate in writing (including
any form approved by the HCFA) (B) Other permissible forms. No written
certificate must be provided if the following occurs:
(1) An individual is entitled to receive a certificate.
(2) The individual requests that the certificate be sent to another
plan or issuer instead of to the individual.
(3) The plan or issuer that would otherwise receive the certificate
agrees to accept the information in paragraph (a)(3) of this section
through means other than a written certificate (for example, by
telephone).
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(4) The receiving plan or issuer receives the information from the
sending issuer in the prescribed form within the time periods required
under paragraph (b)(1) of this section.
(ii) Required information. The certificate must include the
following:
(A) The date the certificate is issued.
(B) The name of the individual or dependent for whom the
certificate applies, and any other information necessary for the issuer
providing the coverage specified in the certificate to identify the
individual, such as the individual's identification number under the
policy and the name of the policyholder if the certificate is for (or
includes) a dependent.
(C) The name, address, and telephone number of the issuer required
to provide the certificate.
(D) The telephone number to call for further information regarding
the certificate (if different from paragraph (b)(2)(ii)(C) of this
section).
(E) Either one of the following:
(1) A statement that the individual has at least 18 months (for
this purpose, 546 days is deemed to be 18 months) of creditable
coverage, disregarding days of creditable coverage before a significant
break in coverage as defined in 45 CFR 146.113(b)(2)(iii).
(2) Both the date the individual first sought coverage, as
evidenced by a substantially complete application, and the date
creditable coverage began.
(F) The date creditable coverage ended, unless the certificate
indicates that creditable coverage is continuing as of the date of the
certificate.
(iii) Periods of coverage under a certificate. If any automatic
certificate is provided under paragraph (b)(1)(i) of this section, the
period that must be included on the certificate is the last period of
continuous coverage ending on the date coverage ceased. If an
individual requests a certificate under paragraph (b)(1)(ii) of this
section, a certificate must be provided for each period of continuous
coverage ending within the 24-month period ending on the date of the
request (or continuing on the date of the request). A separate
certificate may be provided for each period of continuous coverage.
(iv) Single certificate permitted for families. An issuer may
provide a single certificate for both an individual and the
individual's dependents if it provides all the required information for
each individual and dependent, and separately states the information
that is not identical.
(v) Model certificate. The requirements of paragraph (b)(2)(ii) of
this section are satisfied if the issuer provides a certificate in
accordance with a model certificate as provided by HCFA.
(vi) Excepted benefits; categories of benefits. No certificate is
required to be furnished with respect to excepted benefits described in
Sec. 148.220. If excepted benefits are provided concurrently with other
creditable coverage (so that the coverage does not consist solely of
excepted benefits), information concerning the benefits may be required
to be disclosed under paragraph (c) of this section.
(3) Procedures--(i) Method of delivery. The certificate is required
to be provided, without charge, to each individual described in
paragraph (b)(1) of this section or an entity requesting the
certificate on behalf of the individual. The certificate may be
provided by first-class mail. If the certificate or certificates are
provided to the individual and the individual's spouse at the
individual's last known address, the requirements of this paragraph
(b)(3) are satisfied with respect to all individuals and dependents
residing at that address. If a dependent does not reside at the
individual's last known address, a separate certificate must be
provided to the dependent at the dependent's last known address. If
separate certificates are provided by mail to individuals and
dependents who reside at the same address, separate mailings of each
certificate are not required.
(ii) Procedure for requesting certificates. An issuer must
establish a procedure for individuals and dependents to request and
receive certificates under paragraph (b)(1)(ii) of this section.
(iii) Designated recipients. If an automatic certificate is
required to be provided under paragraph (b)(1)(i) of this section, and
the individual or dependent entitled to receive the certificate
designates another individual or entity to receive the certificate, the
issuer responsible for providing the certificate may provide the
certificate to the designated party. If a certificate must be provided
upon request under paragraph (b)(1)(ii) of this section, and the
individual entitled to receive the certificate designates another
individual or entity to receive the certificate, the issuer responsible
for providing the certificates must provide the certificate to the
designated party.
(4) Special rules concerning dependent coverage--(i) Reasonable
efforts. An issuer must use reasonable efforts to determine any
information needed for a certificate relating to dependent coverage. If
an automatic certificate must be furnished with respect to a dependent
under paragraph (b)(1)(i) of this section, no individual certificate
must be furnished until the issuer knows (or making reasonable efforts
should know) of the dependent's cessation of coverage under the policy.
(ii) Special rules for demonstrating coverage. If a certificate
furnished by an issuer does not provide the name of any dependent of an
individual covered by the certificate, the individual may, if
necessary, use the procedures described in paragraph (d)(3) of this
section for demonstrating dependent status. An individual may, if
necessary, use these procedures to demonstrate that a child was
enrolled within 30 days of birth, adoption, or placement for adoption,
in which case the child would not be subject to a preexisting condition
exclusion under Sec. 148.120(f)(2).
(iii) Transition rule for dependent coverage before July 1, 1998--
(A) General rule. An issuer that cannot provide the names of dependents
(or related coverage information) for purposes of providing a
certificate of coverage for a dependent may satisfy the requirements of
paragraph (b)(2)(ii)(C) of this section by providing the name of the
policyholder and specifying that the type of coverage provided in the
certificate is for dependent coverage (for example, family coverage or
individual-plus-spouse coverage).
(B) Certificates provided on request. For purposes of certificates
provided on the request of, or on behalf of, an individual under
paragraph (b)(1)(ii) of this section, an issuer must make reasonable
efforts to obtain and provide the names of any dependent covered by the
certificate if the information is requested. If an issuer responsible
for providing a certificate does not provide the name of any dependent
of an individual covered by the certificate, the individual may, if
necessary, use the procedures described in paragraph (d)(3) of this
section for submitting documentation to establish that the creditable
coverage in the certificate applies to the dependent.
(C) Timing. An issuer providing an automatic certificate that does
not contain the name of a dependent must furnish a certificate within
21 days after the individual ceases to be covered under the policy.
(D) Duration. The transitional rules of this paragraph (b)(4)(iii)
are effective for certifications provided with respect to an event
occurring before July 1, 1998.
(E) Optional notice. This paragraph applies to events described in
Sec. 148.124 (b)(4)(ii), that occur on or after October 1, 1996, but
before June 1, 1997. An issuer offering individual health insurance
coverage is deemed to satisfy Sec. 148.124 (b)(1) and (b)(2) if a
notice is
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provided in accordance with the provisions of Sec. 148.124(b)(4)(iii).
(c) Disclosure of coverage to a plan, or issuer, electing the
alternative method of creating coverage--(1) General rule. If an
individual enrolls in a group health plan and the plan or issuer uses
the alternative method of determining creditable coverage described in
45 CFR 146.113(c), the individual provides a certificate of coverage
under paragraph (b) of this section or demonstrates creditable coverage
under paragraph (d) of this section, and the plan or coverage in which
the individual enrolls requests from the prior entity, the prior entity
must disclose promptly to the requesting plan or issuer (``requesting
entity'') the information set forth in paragraph (c)(2) of this
section.
(2) Information to be disclosed. The prior entity must promptly
identify for the requesting entity the categories of benefits and
services used by the individual for which the requesting entity uses
the alternative method of crediting coverage, and any specific
information that the requesting entity requests to determine the
individual's creditable coverage. The prior entity must promptly
disclose to the requesting entity the creditable coverage information.
(3) Charge for providing information. The prior entity furnishing
the information under paragraph (c)(2) of this section may charge the
requesting entity for the reasonable cost of disclosing the
information.
(d) Ability of an individual to demonstrate creditable coverage and
waiting period information--(1) General rule. Individuals may establish
creditable coverage through means other than certificates. If the
accuracy of a certificate is contested or a certificate is unavailable
when needed by the individual, the individual has the right to
demonstrate creditable coverage (and waiting or affiliation periods)
through the presentation of documents or other means. For example, the
individual may make a demonstration if one of the following occurs:
(i) An entity has failed to provide a certificate within the
required time period.
(ii) The individual has creditable coverage but an entity may not
be required to provide a certificate of the coverage.
(iii) The coverage is for a period before July 1, 1996.
(iv) The individual has an urgent medical condition that
necessitates a determination before the individual can deliver a
certificate to the plan.
(v) The individual lost a certificate that the individual had
previously received and is unable to obtain another certificate.
(2) Evidence of creditable coverage--(i) Consideration of evidence.
An issuer must take into account all information that it obtains or
that is presented on behalf of an individual to make a determination,
based on the relevant facts and circumstances, whether or not an
individual has 18 months of creditable coverage. An issuer must treat
the individual as having furnished a certificate if the individual
attests to the period of creditable coverage, the individual presents
relevant corroborating evidence of some creditable coverage during the
period, and the individual cooperates with the issuer's efforts to
verify the individual's coverage. For this purpose, cooperation
includes providing (upon the issuer's request) a written authorization
for the issuer to request a certificate on behalf of the individual,
and cooperating in efforts to determine the validity of the
corroborating evidence and the dates of creditable coverage. While an
issuer may refuse to credit coverage if the individual fails to
cooperate with the issuer's efforts to verify coverage, the issuer may
not consider an individual's inability to obtain a certificate to be
evidence of the absence of creditable coverage.
(ii) Documents. Documents that may establish creditable coverage
(and waiting periods or affiliation periods) in the absence of a
certificate include explanations of benefit claims (EOB) or other
correspondence from a plan or issuer indicating coverage, pay stubs
showing a payroll deduction for health coverage, a health insurance
identification card, a certificate of coverage under a group health
policy, records from medical care providers indicating health coverage,
third party statements verifying periods of coverage, and any other
relevant documents that evidence periods of health coverage.
(iii) Other evidence. Creditable coverage (and waiting period or
affiliation period information) may be established through means other
than documentation, such as by a telephone call from the issuer to a
third party verifying creditable coverage.
(3) Demonstrating dependent status. If, in the course of providing
evidence (including a certificate) of creditable coverage, an
individual is required to demonstrate dependent status, the issuer must
treat the individual as having furnished a certificate showing the
dependent status if the individual attests to the dependency and the
period of the status and the individual cooperates with the issuer's
efforts to verify the dependent status.
Sec. 148.126 Determination of an eligible individual.
(a) General rule. Each issuer offering health insurance coverage in
the individual market is responsible for determining whether an
applicant for coverage is an eligible individual as defined in
Sec. 148.103.
(b) Specific requirements. (1) The issuer must exercise reasonable
diligence in making this determination.
(2) The issuer must promptly determine whether an applicant is an
eligible individual.
(3) If an issuer determines that an individual is an eligible
individual, the issuer must promptly issue a policy to that individual.
(c) Insufficient information--(1) General rule. If the information
presented in or with an application is substantially insufficient for
the issuer to make the determination described in paragraph (b)(2) of
this section, the issuer may immediately request additional information
from the individual, and must act promptly to make its determination
after receipt of the requested information
(2) Failure to provide a certification of creditable coverage. If
an entity fails to provide the certificate that is required under this
part or 45 CFR part 146 to the applicant, the issuer is subject to the
procedures set forth in Sec. 148.124(d)(1) concerning an individual's
right to demonstrate creditable coverage.
Sec. 148.128 State flexibility in individual market reforms--
alternative mechanisms.
(a) Waiver of requirements. The requirements of Sec. 148.120, which
set forth Federal requirements for guaranteed availability in the
individual market, do not apply in a State that implements an
acceptable alternative mechanism in accordance with the following
criteria:
(1) The alternative mechanism meets the following conditions:
(i) Offers health insurance coverage to all eligible individuals.
(ii) Prohibits imposing preexisting condition exclusions and
affiliation periods for coverage of an eligible individual.
(iii) Offers an eligible individual a choice of coverage that
includes at least one policy form of coverage that is comparable to
either one of the following:
(A) Comprehensive coverage offered in the individual market in the
State.
(B) A standard option of coverage available under the group or
individual health insurance laws of the State.
[[Page 17001]]
(2) The State is implementing one of the following provisions
relating to risk:
(i) One of the following model acts, as adopted by the NAIC on June
3, 1996, but only if the model has been revised in State regulations to
meet all of the requirements of this part and part 144:
(A) The Small Employer and Individual Health Insurance Availability
Model Act to the extent it applies to individual health insurance
coverage.
(B) The Individual Health Insurance Portability Model Act.
(ii) A qualified high risk pool, which, for purposes of this
section, is a high risk pool that meets the following conditions:
(A) Provides to all eligible individuals health insurance coverage
(or comparable coverage) that does not impose any preexisting condition
exclusion or affiliation periods for coverage of an eligible
individual.
(B) Provides for premium rates and covered benefits for the
coverage consistent with standards included in the NAIC Model Health
Plan for Uninsurable Individuals Act (as in effect as of August 21,
1996), but only if the model has been revised in State regulations to
meet all of the requirements of this part and part 144.
(iii) One of the following mechanisms:
(A) Any other mechanism that provides for risk adjustment, risk
spreading, or a risk-spreading mechanism (among issuers or policies of
an issuer) or otherwise provides for some financial subsidization for
eligible individuals, including through assistance to participating
issuers.
(B) A mechanism that provides a choice for each eligible individual
of all individual health insurance coverage otherwise available.
(b) Permissible forms of mechanisms. A private or public individual
health insurance mechanism (such as a health insurance coverage pool or
program, a mandatory group conversion policy, guaranteed issue of one
or more plans of individual health insurance coverage, or open
enrollment by one or more health insurance issuers), or combination of
these mechanisms, that is designed to provide access to health benefits
for individuals in the individual market in the State, in accordance
with this section, may constitute an acceptable alternative mechanism.
(c) Establishing an acceptable alternative mechanism--transition
rules. HCFA presumes a State to be implementing an acceptable
alternative mechanism as of July 1, 1997 if the following conditions
are met:
(1) By not later than April 1, 1997, as evidenced by a postmark
date, or other such date, the chief executive officer of the State
takes the following actions:
(i) Notifies HCFA that the State has enacted or intends to enact by
not later than January 1, 1998 (unless it is a State described in
paragraph (d) of this section), any legislation necessary to provide
for the implementation of a mechanism reasonably designed to be an
acceptable alternative mechanism as of January 1, 1998.
(ii) Provides HCFA with the information necessary to review the
mechanism and its implementation (or proposed implementation).
(2) HCFA has not made a determination, in accordance with the
procedure in paragraph (e)(4)(1) of this section, that the State will
not be implementing a mechanism reasonably designed to be an acceptable
alternative mechanism as of January 1, 1998.
(d) Delay permitted for certain States. If a State notifies HCFA
that its legislature is not meeting in a regular session between August
21, 1996 and August 20, 1997, HCFA continues to presume until July 1,
1998 that the State is implementing an acceptable alternative
mechanism, if the chief executive officer of the State takes the
following actions:
(1) Notifies HCFA by April 1, 1997, that the State intends to
submit an alternative mechanism and intends to enact any necessary
legislation to provide for the implementation of an acceptable
alternative mechanism as of July 1, 1998.
(2) Notifies HCFA by April 1, 1998, that the State has enacted any
necessary legislation to provide for the implementation of an
acceptable alternative mechanism as of July 1, 1998.
(3) Provides HCFA with the information necessary to review the
mechanism and its implementation (or proposed implementation).
(e) Submitting an alternative mechanism after April 1, 1997--(1)
Notice with information. A State that wishes to implement an acceptable
alternative mechanism must take the following actions:
(i) Notify HCFA that it has enacted legislation necessary to
provide for the implementation of a mechanism reasonably designed to be
an acceptable alternative mechanism, and
(ii) Provide HCFA with the information necessary for HCFA to review
the mechanism and its implementation (or proposed implementation).
(2) If the State takes the actions described in paragraph (e)(1) of
this section, the mechanism is considered to be an acceptable
alternative mechanism unless HCFA makes a preliminary determination
(under paragraph (e)(4)(i) of this section), within the review period
(defined in paragraph (e)(3) of this section), that the mechanism is
not an acceptable alternative mechanism.
(3) Review period--(1) General. The review period begins on the
date the State's notice and information are received by HCFA, and ends
90 days later, not counting any days during which the review period is
suspended under paragraph (e)(3)(ii) of this section.
(ii) Suspension of review period. During any review period, if HCFA
notifies the State of the need for additional information or further
discussion on its submission, HCFA suspends the review period until the
State provides the necessary information.
(4) Determination by HCFA--(i) Preliminary determination. If HCFA
finds after reviewing the submitted information, and after consultation
with the chief executive officer of the State and the chief insurance
regulatory official of the State, that the mechanism is not an
acceptable alternative mechanism, HCFA takes the following actions:
(A) Notifies the State, in writing, of the preliminary
determination.
(B) Informs the State that if it fails to implement an acceptable
alternative mechanism, the Federal guaranteed availability provisions
of Sec. 148.120 will take effect.
(C) Permits the State a reasonable opportunity to modify the
mechanism (or to adopt another mechanism).
(ii) Final determination. If, after providing notice and a
reasonable opportunity for the State to modify its mechanism, HCFA
makes a final determination that the design of the State's alternative
mechanism is not acceptable or that the State is not substantially
enforcing an acceptable alternative mechanism, HCFA notifies the State
in writing of the following:
(A) HCFA's final determination.
(B) That the requirements of Sec. 148.120 concerning guaranteed
availability apply to health insurance coverage offered in the
individual market in the State are effective as of a date specified in
the notice from HCFA.
(iii) State request for early notice. A State may request that HCFA
notify the State before the end of the review period if HCFA is not
making a preliminary determination.
(5) Effective date. If HCFA does not make a preliminary
determination within the review period, the acceptable alternative
mechanism is effective 90 days after the end of the 90-day review
[[Page 17002]]
period described in paragraph (e)(3)(i) of this section.
(f) Continued application. A State alternative mechanism may
continue to be presumed to be acceptable, if the State provides
information to HCFA that meets the following requirements:
(1) If the State makes a significant change to its alternative
mechanism, it provides the information before making a change.
(2) Every 3 years from the later of implementing the alternative
mechanism or implementing a significant change, it provides HCFA with
information.
(g) Review criteria. HCFA reviews each State's submission to
determine whether it addresses all of the following requirements:
(1) Is the mechanism reasonably designed to provide all eligible
individuals with a choice of health insurance coverage?
(2) Does the choice offered to eligible individuals include at
least one policy form that meets one of the following requirements?
(i) Is the policy form comparable to comprehensive health insurance
coverage offered in the individual market in the State?
(ii) Is the policy form comparable to a standard option of coverage
available under the group or individual health insurance laws of the
State?
(3) Does the mechanism prohibit preexisting condition exclusions
for all eligible individuals?
(4) Is the State implementing one of the following:
(i) The NAIC Small Employer and Individual Health Insurance
Availability Model Act (Availability Model), adopted on June 3, 1996,
revised to reflect HIPAA requirements.
(ii) The Individual Health Insurance Portability Model Act
(Portability Model), adopted on June 3, 1996, revised to reflect HIPAA
requirements.
(iii) A qualified high-risk pool that provides eligible individuals
health insurance or comparable coverage without a preexisting condition
exclusion, and with premiums and benefits consistent with the NAIC
Model Health Plan for Uninsurable Individuals Act (as in effect August
21, 1996), revised to reflect HIPAA requirements.
(iv) A mechanism that provides for risk spreading or provides
eligible individuals with a choice of all available individual health
insurance coverage.
(5) Has the State enacted all legislation necessary for
implementing the alternative mechanism?
(6) If the State has not enacted all legislation necessary for
implementing the alternative mechanism, will the necessary legislation
be enacted by January 1, 1998?
(h) Limitation of HCFA's authority. HCFA does not make a
preliminary or final determination on any basis other than a mechanism
is not considered an acceptable alternative mechanism or is not being
implemented.
Subpart C--[Reserved]
Subpart D--Enforcement; Penalties; Preemption
Sec. 148.200 Enforcement by State; determination regarding failure to
enforce.
(a) General rule--enforcement by State. Except as provided in
paragraph (b) of this section, each State enforces the requirements of
this part with respect to health insurance issuers that issue, sell,
renew, or offer health insurance coverage in the individual market in
the State.
(b) Exception--enforcement by HCFA. HCFA enforces the provisions of
this part with respect to health insurance issuers, using the
procedures described in Sec. 148.202, only in the following
circumstances:
(1) State election. The State chooses not to enforce the Federal
requirements.
(2) State failure to enforce. HCFA determines under paragraph (c)
of this section that a State has failed to substantially enforce the
requirements of this part.
(c) HCFA determination. If HCFA receives information, through a
complaint or any other means, that raises a question about whether a
State is substantially enforcing the requirements of this part, HCFA
follows the following procedures:
(1) Verification of exhaustion. HCFA makes a threshold
determination of whether the individuals affected by the alleged
failure to enforce have made a reasonable effort to exhaust any State
remedies. This may involve informal contact with State officials about
the questions raised.
(2) Notice to the State. If HCFA is satisfied that there is a
reasonable question about whether there has been a failure to
substantially enforce the requirements of this part, HCFA sends, in
writing, the notice described in paragraph (c)(3) of this section, to
the following State officials:
(i) The Governor or chief executive officer of the State.
(ii) The insurance commissioner or chief insurance regulatory
official.
(iii) If the alleged failure involves HMOs, the official
responsible for regulating HMOs, if different than the official listed
in paragraph (c)(2)(ii) of this section.
(3) Form and content of notice. HCFA's written notice to the State
sets forth the following information:
(i) Describes the facts of the specific violations.
(ii) Explains that the consequence of a failure to substantially
enforce the requirements of this part is that HCFA enforces the
requirements in accordance with paragraph (d) of this section.
(iii) Advises the State that it has 45 days to respond to the
notice, unless the time is extended as described in paragraph (c)(4) of
this section, and that the response should include any information that
the State wishes HCFA to consider in making the preliminary
determination described in paragraph (c)(5) of this section.
(4) Extension. HCFA may, for good cause, grant the State an
extension of the time period described in paragraph (c)(3)(iii) of this
section. Examples of good cause include an agreement between HCFA and
the State that there should be a public hearing on the State's
enforcement, or evidence that the State is undertaking expedited
enforcement activities.
(5) Preliminary determination. If, at the end of the 45-day period
for a State to respond to HCFA's notice (and any extension), the State
has not established to HCFA's satisfaction that it is substantially
enforcing the requirements of this part, HCFA takes the following
actions:
(i) Consults with the officials described in paragraph (c)(1) of
this section.
(ii) Notifies the State of HCFA's preliminary determination that
the State has failed to enforce the requirements, and that the failure
is continuing.
(iii) Permits the State a reasonable opportunity to show evidence
of substantial enforcement.
(6) Final determination. If, after providing notice and the
opportunity to enforce the requirements of this part, HCFA finds that
the failure to enforce has not been corrected, HCFA sends the State a
written notice of that final determination. The notice sets forth the
following:
(i) The effective date of HCFA enforcement.
(ii) The mechanism for establishing in the future that it has
corrected the failure, and has begun enforcement. This mechanism
includes transition procedures for ending HCFA's enforcement period.
Sec. 148.202 Civil money penalties.
(a) General rule. If any health insurance issuer that is subject to
HCFA's enforcement authority under Sec. 148.200 fails to comply with
any
[[Page 17003]]
applicable requirement of this part, it may be subject to a civil money
penalty.
(b) Complaint. Any person who is entitled to any right under this
part, and who believes that the right is being denied as a result of an
issuer's failure to comply with the requirements of this part may file
a complaint with HCFA.
(c) Notice to issuer. HCFA sends a written notice to the issuer
that a complaint or other information has been received alleging a
violation of this part. The notice sets forth the following:
(1) A description of the substance of any complaint or other
allegation.
(2) A time frame of 30 days for the issuer to respond with
additional information, which can include the following:
(i) Information refuting that there has been a violation.
(ii) Evidence that the issuer did not know, and exercising
reasonable diligence could not have known, of the violation.
(iii) Evidence of a previous record of compliance.
(d) Notice of assessment. If, based on the information provided in
the complaint, as well as any information submitted by the issuer or
any other parties, HCFA proposes to assess a civil money penalty, HCFA
sends written notice of the assessment to the issuer by certified mail,
return receipt requested. The notice contains the following
information:
(1) The name or names of the individuals with respect to whom a
violation occurred, with relevant identification numbers.
(2) The facts that support the finding of a violation, and the
initial date of the violation.
(3) The amount of the proposed penalty as of the date of the
notice.
(4) The basis for calculating the penalty, including consideration
of prior compliance.
(5) Instructions for responding to the notice, including the
following information:
(i) A specific statement of the issuer's right to a hearing.
(ii) A statement that failure to request a hearing within 30 days
permits the imposition of the proposed penalty, without right of
appeal.
(e) Amount of penalty--(1) Maximum daily penalty. The penalty
cannot exceed $100 for each day, for each individual with respect to
whom a failure occurs.
(2) Standard for calculating daily penalty. In calculating the
amount of the penalty, HCFA takes into account the issuer's previous
record of compliance and the seriousness of the violation.
(3) Limitations on penalties. No civil money penalty is imposed for
the following periods:
(i) A period during which a failure existed, but the issuer did not
know, and exercising reasonable diligence would not have known, that
the failure existed.
(ii) A period occurring immediately after the period during which a
failure existed, but the issuer did not know, and exercising reasonable
diligence would not have known, that the failure existed if the
failure--
(A) Was due to reasonable cause and was not due to willful neglect;
and
(B) Was corrected within 30 days of the first day that the issuer
knew, or exercising reasonable diligence would have known, that the
failure existed.
(iii) The burden is on the issuer to establish to the satisfaction
of HCFA that it did not know, and exercising reasonable diligence could
not have known that the failure existed.
(f) Hearings--(1) Right to a hearing. Any issuer against which a
penalty is assessed may request a hearing by HCFA. The request must be
in writing, and must be postmarked within 30 days after the date HCFA
issues the notice of assessment.
(2) Failure to request a hearing. If no hearing is requested in
accordance with this paragraph (f), the notice of assessment
constitutes a final order that is not subject to appeal.
(3) Parties to the hearing. Parties to the hearing include the
issuer and the party who filed the complaint. HCFA sends an
informational notice to the State.
(4) Initial agency decision. The initial agency decision is made by
an administrative law judge. The decision is made on the record under
section 554 of Title 5, United States Code. The decision becomes a
final and appealable order after 30 days, unless it is modified in
accordance with paragraph (g) of this section.
(5) Review by HCFA. HCFA may modify or vacate the initial agency
decision. Notice of intent to modify or vacate the decision is issued
to the parties within 30 days after the date of the decision by the
administrative law judge.
(g) Judicial review--(1) Filing of action for review. Any issuer
against whom a final order imposing a civil money penalty is entered
may obtain review in the United States District Court for any district
in which the entity is located or the United States District Court for
the District of Columbia by--
(i) Filing a notice of appeal in that court within 30 days from the
date of a final order; and
(ii) Simultaneously sending a copy of the notice of appeal by
registered mail to HCFA.
(2) Certification of administrative record. HCFA promptly certifies
and files with the court the record upon which the penalty was imposed.
(3) Standard of review. The findings of HCFA may not be set aside
unless they are found to be unsupported by substantial evidence, as
provided by section 706(2)(E) of Title 5, United States Code.
(4) Appeal. Any final decision, order, or judgment of the district
court concerning HCFA's review is subject to appeal as provided in
Chapter 83 of Title 28, United States Code.
(h) Failure to pay assessment, maintenance of action--(1) Failure
to pay assessment. If an issuer fails to pay an assessment after it
becomes a final order, or after the court has entered final judgment in
favor of HCFA, HCFA refers the matter to the Attorney General, who
brings an action against the issuer in the appropriate United States
district court to recover the amount assessed.
(2) Final order not subject to review. In an action brought under
paragraph (h)(1) of this section, the validity and appropriateness of
the final order described in paragraph (g)(1)(i) of paragraph (g)(3) of
this section is not subject to review.
(i) Use of penalty funds. (1) Any funds collected under this
section are paid to the Administrator or other office imposing the
penalty.
(2) The funds are available without appropriation and until
expended.
(3) The funds may only be used for the purpose of enforcing the
provisions for which the penalty was imposed.
Sec. 148.210 Preemption.
(a) Scope. (1) This section describes the effect of sections 2741
through 2763 and 2791 of the PHS Act on a State's authority to regulate
health insurance issuers in the individual market. This section makes
clear that States remain subject to section 514 of ERISA, which
generally preempts State law that relates to ERISA-covered plans.
(2) Sections 2741 through 2763 and 2791 of the PHS Act cannot be
construed to affect or modify the provisions of section 514 of ERISA.
(b) Regulation of insurance issuers. The individual market rules of
this part do not prevent a State law from establishing, implementing,
or continuing in effect standards or requirements unless the standards
or requirements prevent the application of a requirement of this part.
[[Page 17004]]
Sec. 148.220 Excepted benefits.
The requirements of this part do not apply to individual health
insurance coverage in relation to its provision of the benefits
described in paragraphs (a) and (b) of this section (or any combination
of the benefits).
(a) Benefits excepted in all circumstances. The following benefits
are excepted in all circumstances:
(1) Coverage only for accident (including accidental death and
dismemberment).
(2) Disability income insurance.
(3) Liability insurance, including general liability insurance and
automobile liability insurance.
(4) Coverage issued as a supplement to liability insurance.
(5) Workers' compensation or similar insurance.
(6) Automobile medical payment insurance.
(7) Credit-only insurance (for example, mortgage insurance).
(8) Coverage for on-site medical clinics.
(b) Other excepted benefits. The requirements of this part do not
apply to individual health insurance coverage described in paragraph
(b)(1) through (b)(6) of this section if the benefits are provided
under a separate policy, certificate, or contract of insurance. These
benefits include the following:
(1) Limited scope dental or vision benefits. These benefits are
dental or vision benefits that are limited in scope to a narrow range
or type of benefits that are generally excluded from benefit packages
that combine hospital, medical, and surgical benefits.
(2) Long-term care benefits. These benefits are benefits that are
either--
(i) Subject to State long-term care insurance laws;
(ii) For qualified long-term care insurance services, as defined in
section 7702B(c)(1) of the Code, or provided under a qualified long-
term care insurance contract, as defined in section 7702B(b) of the
Code; or
(iii) Based on cognitive impairment or a loss of functional
capacity that is expected to be chronic.
(3) Coverage only for a specified disease or illness (for example,
cancer policies), or hospital indemnity or other fixed indemnity
insurance (for example, $100/day) if the policies meet the requirements
of 45 CFR 146.145(b)(4)(ii)(B) and (b)(4)(ii)(C) regarding
noncoordination of benefits.
(4) Medicare supplemental health insurance (as defined under
section 1882(g)(1) of the Social Security Act. 42 U.S.C. 1395ss, also
known as Medigap or MedSup insurance).
(5) Coverage supplemental to the coverage provided under Chapter
55, Title 10 of the United States Code (also known as CHAMPUS
supplemental programs).
(6) Similar supplemental coverage provided to coverage under a
group health plan.
Authority: Secs. 2741 through 2763, 2791, and 2792 of the PHS
Act, 42 U.S.C. 300gg-41 through 300gg-63, 300gg-91, and 300gg-91.
Dated: March 25, 1997.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
Dated: March 25, 1997.
Donna E. Shalala,
Secretary.
[FR Doc. 97-8217 Filed 4-1-97; 12:58 pm]
BILLING CODE 4120-01-M
