The Internal Revenue Service, the Department of Labor and the Department of Health and Human Services recently issued Final Regulations on health insurance portability under the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), effective for plan years beginning on or after July 1, 2005. The Final Regulations essentially follow the Interim Regulations issued in 1997, but make certain changes and clarifications. The following describes the key aspects of the Final Regulations and recommends actions that plan sponsors should take to ensure continued compliance.

Preexisting Condition Exclusions

• The Final Regulations clarify that certain group health plan benefit restrictions are preexisting condition exclusions that must comply with the limitations imposed by HIPAA. Examples of such restrictions include: (i) a plan provision that provides coverage for an accidental injury only if the injury occurred while covered under the plan; (ii) a plan provision that counts against a lifetime limit benefits received under a prior health coverage; and (iii) a plan provision that denies benefits for pregnancy until 12 months after an individual generally becomes eligible for benefits under the plan.
  
  
• The Final Regulations describe the content requirements of the general notice of preexisting condition exclusions and offer sample language that can be used as a starting point to satisfy a group health plan's obligation to provide participants with such notice. The Final Regulations clarify that the general notice must be provided as part of any written application materials distributed by the plan for enrollment. If the plan does not distribute application materials, the notice must be provided by the earliest date following a request for enrollment that the plan, acting in a reasonable and prompt fashion, can provide the notice.

Certificates of Coverage

• The Final Regulations require that group health plans include, as a part of the certificate of creditable coverage provided to individuals when they lose coverage under the plan, an "educational statement" on their HIPAA rights. Model language that will satisfy this requirement is included in the Final Regulations.
  
  
• The Final Regulations clarify that procedures for requesting and receiving certificates of coverage must be in writing.

Definition of Dependent

• The Final Regulations clarify that a group health plan's terms will determine which individuals are eligible for coverage as dependents under the plan.

Excepted Benefits

• The Final Regulations define "limited scope dental benefits" as benefits substantially all of which are for treatment of the mouth and "limited scope vision benefits" as benefits substantially all of which are for treatment of the eye. If benefits meet the definition of limited scope dental or vision benefits, they will not be subject to HIPAA if they either (i) are provided under a separate policy, certificate, or contract of insurance, or (ii) are not an "integral part" of a group health plan. For this purpose, "integral part" means that (i) participants must have the right to elect not to receive coverage for the benefits, and (ii) if a participant elects to receive coverage for the benefits, the participant must pay an additional premium or contribution for that coverage.
  
  
• The Final Regulations clarify that benefits provided under a health flexible spending arrangement are excepted benefits for a class of participants only if other group health plan coverage, not limited to excepted benefits, is made available for the year to the class of participants by reason of their employment and the arrangement is structured so that the maximum benefit payable to any participant in the class for the year cannot exceed two times the participant's salary reduction election under the arrangement for the year, or, if greater, cannot exceed $500 plus the amount of the participant's salary reduction election.

HDHPs and HSAs

• The Final Regulations explain that employer-sponsored high deductible health plans ("HDHPs") generally are subject to the portability requirements of HIPAA and its regulations. Conversely, health savings accounts ("HSAs") generally are not.

What Should Plans Do?

Plan sponsors should take the following actions prior to the effective date of the Final Regulations:

• Review and revise plans to address any impermissible hidden preexisting condition exclusion limitations;
  
  
• Prepare or review and revise the HIPAA initial notice, general enrollment notice, waiver of coverage notice forms, determination of preexisting condition period notices and form of certificate of credible coverage;
  
  
• Prepare written procedures regarding the provision of certificates of credible coverage; and
  
  
• Review dental, vision and flexible spending account arrangements to ensure that they retain their status as excepted benefits under HIPAA.

Only lawyers may properly give you legal assistance related to HIPAA, and the Schiff Hardin lawyers listed below are prepared to provide you with assistance concerning the legal matters spelled out above.