The MSA Page

Portability Requirements

(Title I, Subtitles A and B)

Creditable Coverage & Preexisting Conditions
Coverage Certification

Creditable Coverage & Preexisting Conditions

Define creditable coverage. On page 3 of the narrative description, what is meant by "short term and limited coverage" being included? Also on page 4? Are regulations developed for determining classes and categories of coverage.

    The bill requires group health plans to credit the length of the aggregate period of prior creditable coverage against any preexisting condition limitation period, unless there was a break in coverage under a group health plan that was longer than a 63-day period. Creditable coverage includes coverage of the individual under a group health plan (including a governmental or church plan), health insurance coverage (either group or individual insurance), Medicare, Medicaid, military-sponsored health care, a program of the Indian Health Service, a state high risk pool, the FEHBP, a public health plan as defined in regulations, and Peace Corps coverage.

    An individual would establish a creditable coverage period through presentation of certifications describing previous coverage, or through other procedures specified in regulations to carry out this provision.

    The narrative description of the bill prepared by congressional staff reports that it was the intent of the conferees that creditable coverage includes short-term, limited coverage.

    The latter, however, is neither defined nor stated in the bill.

    One method of satisfying the requirement of crediting previous coverage is to do so without regard to the specific benefits covered during the period. An alternative method of crediting prior coverage based on coverage of benefits within each of several classes or categories of benefits is allowed by the bill but will be subject to regulation. Regulations required by the bill have not yet been written, as explained elsewhere.

Assume that the initial plan had high deductible and now individual moves to lower deductible. How does one deal with this? Do they exclude low deductible coverage for the preexisting condition? Is the exclusion period still only limited to 6 months anyway? Can they deny the lower deductible coverage and only be forced to provide like coverage?

    There are two methods of determining credit for creditable coverage. The first is to do so without regard to the specific benefits covered during the period of creditable coverage.

    This means that differences in benefit structures, deductibles and other provisions would not be considered in determining coverage under the new plan. An alternative method of crediting prior coverage based on coverage of benefits within each of several classes or categories of benefits is allowed by the bill but will be subject to regulation.

    The alternate method was included to account for significant differences in benefits. For example, a prescription drug benefit could be considered a difference in a class of benefits. Similarly, significant differentials in deductibles could be considered differences in classes of benefits, but the alternative method would not apply to small differences in deductibles, such as $250 versus $200. The alternative method would not apply for differences in specific services or treatments.

    The allowable preexisting condition limitation period is 12 months for conditions present during the six-month period prior to coverage (6/12). For late enrollees, the exclusion period is increased to 18 months. The 12-month period only need to be satisfied once for people who maintain continuous coverage. In the case of an exclusionary period for a difference in classes of benefits, the 6/12 standard applies.

    Regulations required by the bill have not yet been written, as explained elsewhere.

H.R. 3103 seems to establish two ways to determine creditable coverage periods: (1) without regard to specific benefits covered during the period; and (2) according to several classes or categories of benefits, as specified in regulations. This raises a number of questions:

(a) How are the classes or categories of benefits going to be defined?

    Classes or categories of benefits will represent significant differences between plans, such as a prescription drug benefit or a large deductible difference. This will be defined further in regulation.

(b) Does a company operating under alternative (1) have to guarantee issue its available plans regardless of the content of the prior coverage?

    Alternative (1) credits previous coverage without regard to the specific benefits covered during the period of creditable coverage. Subject to the creditable period of previous coverage, a person coming into a plan that operates under this alternative would have the full coverage of the new plan.

(c) What happens in the case of a company operating under alternative (2) when neither of its available plans matches up with the prior coverage's benefit structure?

    This question first assumes that the employer makes more than one plan available to employees. If it could truly be determined that the structural differences between current and previous coverage are so broad as to preclude comparison, perhaps a new pre-ex period would be applied for the entire plan. However, this is clearly not the intent of the law, which does not assume that such differences will actually exist.

(d) Are any minimal standards going to be attached to the qualified coverage designation?

    There are none prescribed in the bill or called for in regulations.

H.R. 3103 indicates that the alternative method would not apply for differences in specific services or treatment. Does this mean that a person could qualify for comprehensive coverage even though his previous coverage was limited to expenses incurred in the hospital?

    We do not believe this is the case. If the previous coverage was limited to expenses incurred in a hospital and the new plan includes coverage for outpatient care, this would represent a different category or class of benefits, not just a difference of specific services or treatments.

What is meant by "significant differentials in deductibles?" How about differences in coinsurance levels? Differences in policy maximums? Per cause vs. all cause deductibles?

    The narrative description points out that the difference between a $200 and a $250 deductible does not constitute a separate class or category of benefits. In other words, the difference would need to be greater than this. The same would apply to coinsurance levels. If it could be demonstrated that there is a significant difference in deductible and coinsurance exposure, this would constitute a different class or category of coverage. A per-cause deductible of $500 and a calendar-year deductible of $1000 might be understood as a significant difference.

Within §2701 "creditable coverage" is defined as meaning: (a) a group health plan; (b) health insurance coverage; etc. Please define "health insurance coverage."

    As stated in the bill, "the term 'health insurance coverage' means benefits consisting of medical care (provided directly, through insurance or reimbursement, or otherwise and including items and services paid for as medical care) under any hospital or medical service policy or certificate, hospital or medical service plan contract, or health maintenance organization contract offered by a health insurance issuer."

H.R. 3103 says that the Secretary of Labor shall provide for a process whereby individuals who need to establish creditable coverage for periods before July 1, 1996 may be given credit for creditable coverage for such periods through the presentation of documents or other means. How far back must creditable coverage go?

    The provisions upon which this question is based apply to plan years beginning after June 30, 1997. Since a person only needs 12 months of creditable coverage in order to satisfy the preexisting condition limitations, the need to prove prior creditable coverage only extends back 12 months, or to July 1, 1996. The bill describes a situation where a person may need to prove creditable coverage prior to that date (perhaps in the case of a lapse in coverage less than the 63-day limit). The method for doing so will be specified in regulations.

    According to the bill, if an "individual seeks to establish creditable coverage for any period for which certification is not required because it relates to an event occurring before June 30, 1996 the individual may present other credible evidence of such coverage in order to establish the period of creditable coverage; a group health plan and a health insurance issuer shall not be subject to any penalty or enforcement action with respect to the plan's or issuer's crediting (or not crediting) such coverage if the plan or issuer has sought to comply in good faith with the applicable requirements under the amendments made by this section."

The guarantee issue requirement becomes effective as of July 1, 1997. Can the creditable coverage requirement be met wholly or in part by coverage periods prior to July 1, 1997? Prior to July 1, 1996?

    The answer to both appears to be affirmative for both periods.


Coverage Certification

When do employer-sponsored plans have to start providing coverage certifications? H.R. 3103 says that certifications shall apply to events occurring after June 30, 1996 and that no certifications are required to be provided before June 1, 1997. The conference report says actual certifications need not be issued before October 1, 1996.

    According to the bill, no certification is required to be provided before June 1, 1997. For periods after June 30, 1996, and before October 1, 1996, a certification must be provided only if an individual requests such certification in writing and the individual would otherwise be entitled to such a certification.

After a plan participant leaves an employer-sponsored plan, when does the certification notice have to be given? Within what time frame? Before and/or after COBRA coverage? After giving the certification notice, an employer could be asked to issue another notice if requested?

    Certification is first required when an individual ceases to be covered under the plan or becomes covered under a COBRA continuation provision. Subsequent certification must be given when an individual ceases to be covered under such a provision. The bill clearly states that it would be provided at the time these events occur, in a manner consistent with notices required under COBRA continuation provision. At the request of or on behalf of an individual, certification must be provided if such request comes within 24 months events described above. The certification required is a written certification of the period of creditable coverage under a group plan and COBRA continuation coverage, along with any waiting or affiliation periods under the plan.

Employer-sponsored plans will become subject to the portability law at different times, depending on when their plan year begins. Won't there be a lot of confusion when an individual leaves a plan that is subject to the portability law and enters a new employer-sponsored plan that is not subject to the law? This individual will be given a certificate of coverage from a prior plan and expect that coverage to be credited toward the new employer's preexisting condition provision.

    There are three possible scenarios here. We believe that the individual is entitled to be given credit for creditable coverage when moving from a plan that may or may not be subject to the portability provisions to a plan that is subject to the portability provisions (a portable plan). If a person moves from a non-portable plan to a non-portable plan, it would seem that the aggregate of creditable coverage would be credited when the new plan becomes subject to the portability provisions. The person who moves from a portable to a non-portable plan is certainly caught in a confusing situation. We believe this will be the subject of regulations.

And won't the reverse situation will be equally disturbing to the plan participant? An individual leaves an employer-sponsored plan that is not subject to the portability provisions and joins an employer-sponsored plan that is subject to the portability provisions. The new plan requests certification of prior coverage and the employee will not have anything to provide.

    In this case, the employee should be given a certification because this can only happen after June 30, 1997, at which time the reporting requirements are in effect.

When a plan becomes subject to the portability provision, will health care coverage prior to the effective date be included as an offset against the 12-month maximum exclusion? How far back? For example: A plan has a 24-month preexisting condition period. Will employees who have already satisfied a 12-month preexisting condition exclusion period be eligible for coverage right away, or will they have to wait another 12 months?

    The example used in this question does not match the provisions of the bill. For plan years that begin after June 30, 1997, the portability and preexisting conditions provisions are in effect. This means that the plan can only have a 12-month preexisting condition limitation. Since credit for prior creditable coverage must be given, if the person had 12 months of previous creditable coverage, the preexisting condition limitation will have been satisfied.

What are nonfederal government plans? What are they and what percentage do they represent in the marketplace?

    The term 'nonfederal governmental plan' means a governmental plan that is not a Federal government plan. This would include state and local government health plans.

Assume someone has an HMO coverage with restriction on by-pass surgery or endarterectornies, or has "centers of excellence" restrictions and the patient has a diagnosis needing endarterectomy and they prefer the results of a surgeon not on their HMO plan, or the HMO is rationing the care by saying that their symptoms don't match their criteria. Can the patient switch to an individual plan outside his employer that is an indemnity plan with more free choice, or even switch employers to one with a better plan, and would the new plan not be able to establish that there is a preexisting condition and have co-pay for the surgery? Or would one category of coverage be able to be set up to avoid covering the HMO's risk? Will a class or category be able to be defined as indemnity coverage vs. capitated coverage? And if so could the indemnity plans avoid guaranteed issue of HMO participants all together?

    As long as a person is eligible for group coverage or continuation benefits, portability into the individual market is not allowed.

    A person who decided to leave a group plan to seek more latitude in the individual market would, most likely, be subject to underwriting and pre-existing condition limitations.

    It is unlikely that coverage would be available for a person with such an existing condition. In other words, such persons would not qualify for guaranteed issue in the individual market as long as they are eligible for group coverage. If a person wanted to switch to an employer with better coverage, he or she would be subject to creditable coverage rules and the aggregate creditable period for pre-existing conditions.

    Further, if the new plan used the alternative method of crediting coverage, the desired treatment might not be immediately available. Indemnity plans cannot "avoid" guaranteed issue of HMO participants if they are eligible for the coverage, but this scenario does not describe an eligible person. It does describe a situation of gaming the system which the bill is designed to prevent.

How does this law coordinate with state portability laws?

    The provisions of H.R. 3103 represent minimum standards for state portability laws. If a state has or enacts standards more stringent than those imposed by this bill, the state standards are not preempted by the federal law. For example, a state may set preexisting conditions limitations at six months with a only three-month look back, and may define continuous coverage as including gaps of 90 days.

If state pre-ex limitations are stricter than federal, do state limitations prevail?

    If a state imposes pre-ex limitations of less than 6months/12months, or continuous coverage lapse allowances greater than 63 days, the state limitations will prevail.

Washington state law permits a 3 month pre-ex for maternity, but the federal law specifies none is permitted. Can a carrier assume that the federal law being more restrictive governs, thus superseding the less restrictive state law? Do the provisions of H.R. 3103 preempt all state laws which are more restrictive than H.R. 3103? How do both of these questions apply to self-funded and to state-regulated health plans? Would the preemption apply only to the stay, or would it also preempt the home visit and well-baby check up?

    H. R. 3103 specifically allows more restrictive state regulations to remain in place. Where H.R. 3103 is more restrictive, however, it will apply in lieu of state law. Such questions are only relevant to state-regulated health plans. State regulations do not apply to self-funded plans. Finally, the new federal law regulating maternity hospital stays does not allow a health plan to impose the option of a 24-hour stay followed by a home visit.

The law says that no preexisting condition provisions may apply to pregnancy. However, some employee benefit publications are saying that a woman must not have a break in coverage for more than 63 days for the preexisting condition exclusion to be waived. What is correct?

    The bill clearly states that a group health plan may not impose any preexisting condition exclusion relating to pregnancy as a preexisting condition. This provision is not qualified by a reference to a 63-day break in coverage. What is affected by such a coverage lapse is the coverage of certain newborns and adopted children.

Are all carriers precluded from applying any pre-existing condition waits in the case of pregnancy? May permitted pre-ex limits be applied for conditions other than pregnancy when pregnant persons enroll in a plan or apply for coverage?

    The law simply states that pregnancy cannot be considered a pre-existing condition. In other words, if the health plan offers pre-natal and maternity benefits, a person who was pregnant at the time of enrollment may not be excluded from receiving these benefits. If an enrollee has a separate pre-existing condition, it may be excluded to the extent allowed by the law.

How will new pre-ex affect people's options to transfer freely from MSA plans to comprehensive coverage?

    There is no such effect on portability. Comprehensive MSA plans differ from any other comprehensive plans in the amount of deductible only. In fact, it is possible that an MSA plan could be more comprehensive than a low-deductible plan.

    Pre-ex is determined by amount of time covered and benefits available, not on the deductible amount.

Who determines which states satisfy the group-to-individual portability provisions?

    The Secretary of HHS will review plans offered for approval by the governors.

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