The 104th Congress recently enacted two new laws that affect social workers in their roles as health and mental health care consumers, providers, case managers, and advocates for reform. These laws are the Health Insurance Portability and Accountability Act and the Mental Health Parity Act, which was attached to the Fiscal Year 1997 appropriations bill for Veterans Affairs-Housing and Urban Development (VA-HUD).
Both bills represent an important step forward in insurance reform, particularly during a congressional session in which the House and Senate leadership devoted much of its attention in health to an attempt to end the Medicaid entitlement to poor women, children, and elderly and disabled people. The bills are also significant because they establish new federal requirements for private health insurance, including plans covered by the Employee Retirement Income Security Act (ERISA) that are not subject to state regulation.
Although important, the reforms contained in both laws are very limited. The primary beneficiaries of the reforms are employees who currently have employer-sponsored health and mental health insurance coverage. The laws do not address the problems of the 40 million Americans who are currently uninsured, nor do they make health insurance coverage more affordable to employers or consumers. Neither law prescribes a standard benefits package, nor do the laws require employers to offer health insurance coverage. For perspective, it is useful to note that the 104th Congress' health insurance reform bill provides far less to encourage increased health insurance coverage than did the more modest proposals considered nearly two years ago during the 103rd Congress' debate on health care reform.
THE HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT
The Health Insurance Portability and Accountability Act of 1996, commonly referred to as the Kassebaum-Kennedy health insurance bill, was signed into law on August 21. The new P.L.104-191 is complex and contains a variety of provisions that are intended to help people obtain and keep private health insurance coverage. Most of the law's provisions become effective July 1, l997.
The law offers portability in health insurance coverage for employees who are covered through employer-sponsored plans and for previously covered individuals who can afford to pay health insurance premiums out of pocket. Eligible individuals must be offered coverage, regardless of health status, and critically-needed limits are imposed on waiting periods for pre-existing conditions. Other positive provisions in the law include an increase in the tax deductibility of the cost of premiums for the self-employed, new tax deductions for long-term care expenses, and provisions for individuals suffering from chronic and terminal illnesses to receive tax-free accelerated death benefits. Negative features of the law include its failure to address affordability or to provide assistance to those who are uninsured, as well as approval of a demonstration program allowing 750,000 tax-deductible medical savings accounts and permission to insurers to sell duplicative policies.
Highlights of major provisions in the new law follow.
Nondiscriminatory Enrollment in Group Insurance Plans
Group health insurance plans cannot consider an individual's current or past health status, including either physical or mental illnesses, in determining eligibility for coverage.
All workers eligible for a plan must be offered enrollment at the same price, regardless of their health status. However, the law does not regulate how much insurers may charge the group as a whole.
A pregnant woman may not be denied coverage for pregnancy-related care just because she is pregnant when she enrolls in the group plan.
Limits on Exclusions for Pre-existing Conditions in Group Insurance Plans
A pre-existing condition is defined as a physical or mental condition for which medical advice, diagnosis, care, or treatment was recommended or received during the six-month period preceding enrollment. Pre-existing conditions caused by domestic violence are to be treated as any other pre-existing condition.
Group health plans may not refuse or limit coverage to a new enrollee with a pre-existing condition beyond 12 months.
Exempted from the 12-month waiting period are pregnancies and medical conditions of newborns and newly adopted children who are enrolled for coverage within 30 days of the birth or adoption.
Portability
If a previously insured employee changes jobs and is employed by a business that offers health insurance coverage, the new health plan must consider previous, continuous coverage for the pre-existing condition in satisfying the 12-month waiting period. (For example, if a worker had continuous group health insurance coverage for asthma for 12 months or longer before changing employment, the new employer's health plan could not impose a waiting period for asthma as a pre-existing condition. If the same worker had satisfied eight months of a waiting period for the pre-existing condition in her former job, the new employer's health plan must credit the eight months toward her waiting period for the pre-existing condition.)
The law does not restrict employers from establishing a routine waiting period before new employees may access benefits. However, the waiting period may not be used by an insurer to declare a break in continuous coverage that would subject the worker to a new 12-month waiting period for a pre-existing condition.
Insurers that sell individual policies are generally required to offer individual coverage to eligible workers who have left an employer-sponsored group health plan, whether through job loss or employment with a business that does not offer group coverage. To be eligible for individual coverage, the worker must be currently ineligible for group coverage, have had 18 months of continuous coverage, and have exhausted coverage available through the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). (In general, COBRA allows individuals who quit or lose their jobs to continue their health insurance coverage for 18 months.)
Guaranteed Availability and Guaranteed Renewability
Insurers that sell policies to small businesses (businesses that employ between two and 50 workers) are generally required to offer group health plans to all small businesses in the state. Insurers may charge more for groups with higher health costs.
Insurers who sell individual policies cannot deny coverage to eligible individuals. However, insurers may limit offers of individual coverage to two insurance policies.
Renewal of both group and individual policies is required, with some exceptions. However, health insurers do not have to renew with the same terms as the previous policy.
Tax Deductions for Premiums of Self-Employed Individuals
Tax deductions for premiums purchased by people who are self-employed would be gradually increased over a 10-year period--40% in 1997, 45% in 1998 through 2002, 50% in 2003, 60% in 2004, 70% in 2005, and 80% in 2006.
Medical Savings Account Demonstration Program
Beginning in 1997, 750,000 medical savings accounts (MSAs) will be made available to employees of firms with 50 or fewer employees and to people who are self-employed.
The four-year MSA program would combine high-deductible health insurance policies with tax-deductible savings accounts. Individuals' deductibles are limited to $1,500 to $2,250; family deductibles are limited to $3,000 to $4,500. Maximum out-of-pocket expenses are limited to $3,000 for individuals and $5,500 for families.
Tax-deductible contributions to MSAs by employers or individuals are limited to 65% of the deductible for individuals and 75% of the deductible for families. Withdrawals from the MSAs for nonhealth expenses will be subject to income tax plus an additional 15% tax unless the withdrawal is made after age 65, death, or disability.
Tax Deductions for Long-Term Care
Long-term care insurance premiums are treated in the same way that health insurance premiums are treated. If the employer pays the premium, the cost is not treated as taxable income for the employee. If the employee pays the premium, it is treated as a deductible medical expense. For self-employed individuals, the premiums would be treated in the same way that the law addresses premiums for health insurance coverage, with a gradual increase in deductibility to 80% by 2006.
The law also establishes requirements for qualified long-term care insurance policies.
Accelerated Death Benefits for Chronic and Terminally Ill People
Terminally ill and chronically ill people will be permitted to receive life insurance benefits through a viatical settlement (the sale or assignment of a life insurance contract to a third party) without paying federal taxes on the benefits. The law does establish a financial cap for chronically ill people to coordinate the tax provisions of long-term care coverage and the viatical settlement.
Although the proceeds from the viatical settlement are not taxed, they can be used to disqualify an individual from a means-tested benefit program, such as Medicaid.
Health Care Fraud and Abuse
A new fraud and abuse control program is authorized to assist the federal government in enforcing antifraud efforts in Medicare, Medicaid, and private health insurance.
Current legal authorities related to civil monetary policies and exclusions from Medicare and Medicaid are strengthened and a new criminal statute, directed at "serious wrongful conduct," is established.
The secretary of the Department of Health and Human Services is required to issue written advisory opinions regarding activities subject to anti-kickback provisions. (The administration opposed this measure.)
Beneficiaries who "knowingly and willingly" transfer assets to qualify for the Medicaid program are subject to fines and jail sentences of up to one year.
Administrative Simplification
The new law standardizes the electronic transfer of health data among providers, insurers, government, and health plans.
State laws regarding privacy protection of medical records are retained. The secretary of the Department of Health and Human Services and the attorney general of the United States are directed to establish federal guidelines to provide for confidentiality of medical records if Congress does not enact a law on privacy and confidentiality within three years.
New penalties for the unauthorized disclosure of personal medical information are established.
Duplicative Health Insurance Policies for Seniors
The new law unfortunately weakens existing disclosure requirements that were designed to warn consumers against insurers selling multiple, unnecessary policies.
Additionally, the law eliminates penalties that were applied to insurance carriers or agents for violations in disclosure between November 5, 1991, and the date of enactment of P.L. 104-191.
MENTAL HEALTH PARITY, TITLE VII OF THE FY 1997 VA-HUD APPROPRIATIONS LAW
On September 26, President Clinton signed into law H.R. 3666, Fiscal Year 1997 Appropriations for the Departments of Veterans Affairs and Housing and Urban Development. The new P.L.104-204 contains a scaled-back version of the mental health parity provision that was originally added to the Senate's Kassebaum-Kennedy bill and dropped in conference. Also attached to the VA-HUD appropriations measure are a requirement that health plans provide minimum 48-hour hospital stays for mothers and their newborns and aid to certain children with spina bifida. The effective date for all three health measures is January 1, 1998.
Title VII of the new law addresses mental health parity. Highlights of the new limited provision follow.
All health plans, including ERISA plans, that provide a mental health benefit must establish equal annual payment limits and lifetime caps for coverage of mental and physical illnesses.
Should the parity provision cause health insurance premiums to increase by more than 1%, the parity requirement will be canceled.
Small businesses, defined as firms employing fewer than 50 employees, are exempt from the parity requirement.
To achieve compliance with the Budget Act, the parity requirement will sunset in five years.
The mental health parity provision contained in P.L.104-204 is limited and applies to a limited number of insured individuals. The provision does not cover substance abuse or chemical dependency benefits, nor does the requirement apply to the Medicare or Medicaid programs. The provision does not require affected businesses to offer a mental health benefit, and insurers may continue to differentiate between mental and physical illnesses with respect to co-payments, deductibles, and benefit design. Nonetheless, the mental health community, including NASW, views the parity provision as a significant win and as a first step toward ending the discriminatory insurance treatment in coverage of mental health services.
Should you have any questions regarding this update, please contact Madeleine Golde at 1-800-638-8799, extension 237, or via e-mail at mgolde@naswdc.org
October 4, 1996