New Guidance on HIPAA Opt-Out for Self-Funded Nonfederal Governmental Health Plans

New Guidance on HIPAA Opt-Out for
Self-Funded Nonfederal Governmental Health Plans

On Sept. 21, 2010, the Office of Consumer Information and Insurance Oversight in the United States Department of Health and Human Services (HHS) issued guidance with respect to the amendments to the Health Insurance Portability and Accountability Act (HIPAA) "opt-out provision" for self-funded nonfederal governmental health plans made by the Patient Protection and Affordable Care Act (PPACA). The PPACA limits the scope of the HIPAA opt-out provision for plan years beginning on or after Sept. 23, 2010.

Background on HIPAA Opt-Out Provision

Prior to the enactment of the PPACA, sponsors of self-funded nonfederal governmental health plans were permitted to elect an exemption from (or "opt-out" of) certain provisions of HIPAA. Specifically, these plans were able to opt out of compliance with the following requirements:

Limitations on pre-existing condition exclusion periods;
Requirements for special enrollment periods;
Prohibitions against discriminating against individual participants and beneficiaries based on health status (except for provisions added by the Genetic Information Nondiscrimination Act of 2008);
Standards relating to benefits for newborns and mothers;
Parity in the application of certain limits to mental health and substance use disorder benefits (including the requirements imposed by the Mental Health Parity and Addiction Equity Act of 2008);
Required coverage for reconstructive surgery following mastectomies; and
Coverage of dependent students on a medically necessary leave of absence.

Changes Under the PPACA

The PPACA amended the HIPAA opt-out provisions of the Public Health Service Act so that self-funded nonfederal governmental health plans will no longer be able to opt-out of the first three requirements listed above. This change is effective for plan years beginning on or after Sept. 23, 2010 (special effective date rules apply to collectively bargained plans ratified before March 23, 2010, as described in the guidance).

The guidance makes clear that self-funded nonfederal governmental plans will still be able to opt-out of the standards relating to benefits for newborns and mothers, parity in the application of certain limits to mental health and substance use disorder benefits, required coverage for reconstructive surgery following mastectomies, and coverage of dependent students on a medically necessary leave of absence. By way of example, the guidance states that if a self-funded nonfederal governmental plan has a plan year beginning on each Sept. 1, it may still opt-out of all seven of the HIPAA requirements listed above for the plan year beginning Sept. 1, 2010. The plan will not be subject to the new opt-out prohibitions until the plan year that begins Sept. 1, 2011. Conversely, a plan that has a plan year beginning on each Oct. 1 will be subject to the new opt-out prohibitions for the plan year that begins Oct. 1, 2010.

Enforcement Relief for Transition Period

Recognizing that the guidance has come somewhat late for plans that could be affected as early as Oct. 1, 2010, the guidance states that the Department of HHS will not take any enforcement actions with respect to opt-out elections for plan years beginning prior to April 1, 2011, for limitations on pre-existing condition exclusion periods, special enrollment periods, and the prohibitions against discriminating against individual participants and beneficiaries based on health status.

For more information, read the guidance on the HIPAA opt-out provision.

Ice Miller has been tracking the regulations and other guidance issued under the PPACA. You can read about the regulations that have been issued thus far, including the grandfather rule, the adult-child rule, the prohibition on annual and lifetime limits, mandated preventive services, and the internal and external claims review process on Ice Miller's Health Care Reform Web site.

For more information regarding the HIPAA opt-out for self-funded nonfederal governmental plans, or for any other questions regarding how health care reform impacts group health plans, please contact Mary Beth Braitman, Terry A. M. Mumford, Christopher Sears, Tara Sciscoe, Shalina Schaefer, or the Ice Miller Employee Benefits attorney with whom you work.