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On August 21, 1996, the Health Insurance Portability
and Accountability Act of 1996 (HIPAA) was signed into law (Pub. L.
104-191). HIPAA section 421 makes changes, described below, to three areas
in the continuation coverage rules applicable to group health plans under
the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), as
amended. These three areas relate to the disability extension, the
definition of qualified beneficiary and the duration of COBRA continuation
coverage. These changes are effective beginning January 1, 1997,
regardless of when the event occurs that entitles an individual to COBRA
continuation coverage. |
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Section 421(e) of HIPAA requires group health plans
that are subject to COBRA to notify, by November 1, 1996, individuals who
have elected COBRA continuation coverage of these changes. The department
is issuing this release to apprise employers and plan administrators of
the changes in the continuation coverage rules made by HIPAA and to inform
them of their obligation under HIPAA to notify qualified beneficiaries of
such changes. Such notification must be given to qualified beneficiaries
by November 1, 1996. The following is a discussion of the specific changes
in the continuation coverage rules made by HIPAA. |
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Under current law, if an individual is entitled to COBRA continuation
coverage because of a termination of employment or reduction in hours of
employment, the plan generally is only required to make COBRA continuation
coverage available to that individual for 18 months. However, if the
individual entitled to the COBRA continuation coverage is disabled (as
determined under the Social Security Act) and satisfies the applicable
notice requirements, the plan must provide COBRA continuation coverage for
29 months, rather than 18 months. Under current law, the individual must
be disabled at the time of the termination of employment or reduction in
hours of employment. HIPAA makes changes to the current law to provide
that, beginning January 1, 1997, the disability extension will also apply
if the individual becomes disabled at any time during the first 60 days of
COBRA continuation coverage. HIPAA also makes it clear that, if the
individual entitled to the disability extension has non-disabled family
members who are entitled to COBRA continuation coverage, those non-disabled
family members are also entitled to the 29 month disability extension. |
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Individuals entitled to COBRA continuation coverage are called
qualified beneficiaries. Individuals who may be qualified beneficiaries
are the spouse and dependent children of a covered employee and, in
certain cases, the covered employee. Under current law, in order to be a
qualified beneficiary an individual must generally be covered under a
group health plan on the day before the event that causes a loss of
coverage (such as a termination of employment, or a divorce from or death
of the covered employee). HIPAA changes this requirement so that a child
who is born to the covered employee, or who is placed for adoption with
the covered employee, during a period of COBRA continuation coverage is
also a qualified beneficiary. |
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Under the COBRA rules there are situations in which a group health
plan may stop making COBRA continuation coverage available earlier than
usually permitted. One of those situations is where the qualified
beneficiary obtains coverage under another group health plan. Under
current law, if the other group health plan limits or excludes coverage
for any preexisting condition of the qualified beneficiary, the plan
providing the COBRA continuation coverage cannot stop making the COBRA
continuation coverage available merely because of the coverage under the
other group health plan. HIPAA limits the circumstances in which plans can
apply exclusions for preexisting conditions. HIPAA makes a coordinating
change to the COBRA rules so that if a group health plan limits or
excludes benefits for preexisting conditions but because of the new HIPAA
rules those limits or exclusions would not apply to (or would be satisfied
by) an individual receiving COBRA continuation coverage, then the plan
providing the COBRA continuation coverage can stop making the COBRA
continuation coverage available. The HIPAA rules limiting the
applicability of exclusions for preexisting conditions become effective in
plan years beginning on or after July 1, 1997 (or later for certain plans
maintained pursuant to one or more collective bargaining agreements). |
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As noted above, the department is issuing this release to advise
employers and plan administrators of their obligation to notify, by November
1, 1996, qualified beneficiaries of these statutory changes. The department,
as a matter of enforcement policy, will deem that supplying qualified
beneficiaries with a written copy of the information described above (or
with a copy of this release) constitutes compliance with the notice
requirement in section 421(e) of HIPAA if this information is sent to each
qualified beneficiary by first class mail at the last known address of the
qualified beneficiary by November 1, 1996. |
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