The federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) requires that most group health plans comply with requirements limiting pre-existing condition exclusion periods, allowing special enrollment periods, and prohibiting discrimination against individuals based on their health status. State and local governmental employers operating self-funded group health insurance plans frequently elect to exempt their plans from many of these requirements, and the law allows them to do so simply by filing an annual exemption notice with the Centers for Medicaid and Medicare Services (CMS).
45 C.F.R. § 146.180 provides that a self-funded non-federal governmental plan may elect to exempt its plan from any or all of the following requirements:
1. Limitations on pre-existing condition exclusion periods.
2. Special enrollment periods for individuals and dependents.
3. Prohibitions against discriminating against individual participants and beneficiaries based on health status.
4. Standards relating to benefits for mothers and newborns.
5. Parity in limits to mental health benefits.
6. Required coverage for reconstructive surgery following a mastectomy.
Not surprisingly, state and local health plans frequently take advantage of some or all of these exemptions. CMS estimated in 1997 that the above exemption provisions would affect 3,500-5,000 non-federal governmental plans. See 62 Fed. Reg. 16927 (April 8, 1997). By 2002, CMS had received elections covering “fewer than 2000” entities. See 67 Fed. Reg. 48810 (July 26, 2002).
For example, the Employees Retirement System of Texas (ERS) has elected to exempt HealthSelect of Texas from HIPAA provisions 2 and 3 above. ERS administers the insurance plans for Texas higher education employees. Therefore, higher education employees and retirees “who do not enroll themselves and their dependents in HealthSelect during their initial period of eligibility may be subject to evidence of insurability requirements if they wish to enroll at a later date.” See http://www.ers.state.tx.us/Insurance/InsSB01/HIPAA.htm. This can be a real problem for dependants of employees. Consider the following scenario. A professor at the University of Houston reasonably decides not to purchase coverage for his wife within the first 31 days of his employment because her employer presently covers her at a lower cost. She subsequently leaves her job. She may not at that time be eligible for coverage by HealthSelect if she does not meet the evidence of insurability requirements, e.g. because she has recently had a health condition requiring treatment. HIPAA does not provide her with “portability” of her insurance coverage simply because her husband works for a governmental employer. Ironically, the government would vigorously support and enforce her right to coverage under the husband’s group insurance plan if he worked for a private employer.
Rick Casey recently reported a typical case in his Houston Chronicle column. A man previously covered by his wife’s insurance joined his school district employer’s health plan after his wife lost her job. When he sought reimbursement for a kidney stone operation, the school district refused coverage because the kidney stones were a “pre-existing condition.” See Rick Casey, Kidney stones and the $78K loophole, Houston Chronicle (Aug. 13, 2003). Individuals considering governmental employment or health insurance by a non-federal governmental entity need to carefully examine the extent to which such plans have “opted-out” of HIPAA.