The Health Law Resource
Posted here on 8-28-96
Summary of Bill, From HCFA
HHS FACT SHEET
August 21, 1996
Contact: HHS Press Office (202) 690-6343
HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT OF 1996
Background: On August 21, 1996, President Clinton signed into law the Health Insurance Portability and Accountability Act of 1996, which includes important new protections for an estimated 25 million Americans (approximately 1 in 10) who move from one job to another, who are self-employed, or who have pre-existing medical conditions. The legislation, which was jointly sponsored by Sen. Edward Kennedy (D-Mass.) and Sen. Nancy Kassebaum (R-Kan.), was approved virtually unanimously by the House and Senate. It is designed to improve the availability of health insurance to working families and their children.
Guaranteed Access for Small Business. Small businesses (50 or fewer employees) are guaranteed access to health insurance. No insurer can exclude an employee or a family member from coverage based on health status.
For example, until now, the owners of the "Good Food Cafe" have been unable to buy insurance for their 25 workers because insurance companies wanted to exclude "Bill Smith" from the policy because he has been diagnosed with cancer. Now all of the employees of "Good Food Cafe" will be able to obtain coverage.
Guaranteed Renewal of Insurance. Once an insurer sells a policy to any individual or group, they are required to renew coverage regardless of the health status of any member of a group.
In other words, if "Mary Jones," one of the employees of "Good Food Cafe," develops a heart condition, the insurance company must renew the Cafe's policy without dropping "Mary" or the Cafe from coverage.
Guaranteed Access for Individuals. People who lose their group coverage (for example, because of loss of employment or change of jobs to a firm without insurance) will be guaranteed access to coverage in the individual market, or states may develop alternative programs to assure that comparable coverage is available to these people. The coverage will be available without regard to health status, and renewal will be guaranteed.
So, if "Mary Jones" leaves her job with the "Good Food Cafe" to take a new job with "Zenith Tool and Die," which does not provide health coverage, Mary will be able to buy private insurance even if she is in poor health.
Pre-existing Conditions. Workers covered by group insurance policies cannot be excluded from coverage for more than 12 months due to a pre-existing medical condition. Such limits can only be placed on conditions treated or diagnosed within the six months prior to their enrollment in an insurance plan. Insurers cannot impose new pre-existing condition exclusions for workers with previous coverage.
Finally, "Mary Jones'" new insurance company can only exclude coverage of her heart condition for a maximum of 12 months. And, this exclusion will be reduced for every month of coverage "Mary" previously had at the "Good Food Cafe."
Enforcement. States have primary responsibility to enforce these protection. If states fail to act, the Secretary of Health and Human Services can impose civil monetary penalties on insurers. The Secretary of Labor will enforce these rules for self-insured (ERISA) plans. The tax code is modified to allow the Secretary of Treasury to impose tax penalties on employers or insurance plans that are out of compliance.
Self-employed Individuals. The current tax deduction for insurance costs of self-employed individuals is gradually increased from 30 percent in 1996 to 80 percent in 2002.
Medical Savings Accounts. From Jan. 1, 1997, to Jan. 1, 2000, firms with 50 or fewer employees and self-employed individuals enrolled in a qualified high deductible health plan can establish tax-favored medical savings accounts, or MSAs. Annual deductibles are $1,500 to $2,250 for individuals and $3,000 to $4,500 for families. Maximum out-of-pocket expenses are $3,000 for individuals and $5,500 for families. The maximum number of MSAs is limited to 750,000 for the 4-year demonstration period.
Fraud and Abuse Control. A new health care fraud and abuse control program is created, to be coordinated by the HHS Office of the Inspector General and the Department of Justice. Funds for this program are appropriated from the Medicare Hospital Insurance (HI) trust fund;
- Establishes the Medicare Integrity Program to be funded through appropriations from the HI trust fund;
- Requires exclusion from Medicare and Medicaid for felony convictions related to health care fraud or controlled substances;
- Creates a program encouraging Medicare beneficiaries to report fraud and abuse and offer suggestions to improve efficiency of the Medicare program, and provides for payment to beneficiaries in certain cases;
- Requires issuance of advisory opinions, additional safe harbors, and fraud alerts regarding the anti-kickback statute;
- Creates a new exception to the anti-kickback statute for certain risk-sharing organizations;
- Expands conditions under which civil monetary penalties and intermediate sanctions can be imposed on HMOs participating in Medicare;
- Establishes a data base of final adverse actions taken against health care providers; and
- Makes knowing and willful transfer of assets to gain Medicaid eligibility subject to criminal penalties.
Long-Term Care Insurance. Minimum federal consumer protection and marketing requirements are established for tax-qualified long-term care insurance policies, including a requirement that insurers start benefit payments when a policy-holder cannot perform at least two "activities of daily living" (i.e., bathing, eating, toileting, transferring, dressing, and incontinence). Subject to certain limitations, clarifies that long-term care insurance premium payments and unreimbursed long-term care services costs are tax deductible as a medical expense, and benefits received under a long-term care insurance contract are excludable from taxable income. Employer sponsored long-term care insurance is to receive the same tax treatment as health insurance.
Medigap Insurance. Revises the notices requirement for health insurance policies that pay benefits without regard to Medicare coverage or other insurance coverage. Long-term care policies are permitted to coordinate with Medicare and other coverage and must disclose any duplication of benefits.
Administrative Simplification. All health care providers and health plans that engage in electronic administrative and financial transactions must use a single set of national standards and identifiers. Electronic health information systems must meet security standards. This should result in more cost-effective electronic claims processing and coordination of benefits.
Health Information Privacy. If Congress does not enact privacy legislation within three years, health care providers, health plans, and health care clearinghouses will be required to follow privacy regulations promulgated by HHS for individually identifiable electronic health information.
Viatical Insurance Settlements. A person who is within 24 months of death can have a portion of their death benefit of a life insurance policy prepaid by the issuing insurance company tax free. Such a person also is allowed to sell his or her life insurance to a viatical settlement company tax free. A chronically-ill individual can sell their life insurance and any long-term care insurance rider tax free; the proceeds of such a sale must be spent on long term care.
Effective Dates. The long term care insurance provisions are effective Jan. 1, 1997. The MSA provisions are effective Dec. 31, 1996. The insurance reform provisions are effective July 1, 1997.
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