Department of Civil Service

PA96-13

TO: Participating Agency Health Benefits Administrators
FROM: Employee Benefits Division
SUBJECT: Health Insurance Portability and Accountability Act of 1996
DATE: November 8, 1996

October 21, 1996

Dear COBRA enrollee:

According to our records, you have continuing coverage in a New York State-administered health/dental/vision care benefit program under COBRA, the federal continuation of coverage law.

A new federal law, the Health Insurance Portability and Accountability Act of 1996 (HIPAA), modifies COBRA rules for individuals who become disabled during the period of COBRA continuation coverage and for newborns and adopted children who are added to COBRA continuation coverage.

Beginning January 1, 1997, you or a member of your family may be affected by the following changes to the COBRA rules:

Disability

Currently, former employeeshave the opportunity to maintain COBRA continuation coverage for 18 months, which may be extended to 29 months of coverage if the employee was disabled (under Social Security Act provisions defining disabilities) at the time of the initial COBRA qualifying event.To qualify for this extension to 29 months, the employee must notify the Employee Benefits Division within 60 days of the disability award from Social Security and before the end of the 18-month continuation period.

Under the new HIPAA law, employees and their dependentsmay now be entitled to continuation coverage for 29 months if disabled (under the Social Security Act provisions defining disabilities) either at the time of the initial COBRA qualifying event or at any time during the first 60 days of COBRA continuation coverage.To qualify for this extension, the employee or dependent must notify the Employee Benefits Division within 60 days of the disability award from Social Security and before the end of the 18-month continuation period.

Newborns and New Adoptees

Currently, you may add a newly acquired or newly eligible dependent to your COBRA continuation coverage. However, they are not considered qualified beneficiaries who have COBRA continuation rights apart from yours. Only dependents who were covered at the time of the original COBRA qualifying event are considered qualified beneficiaries with the right to receive up to 36 months of COBRA coverage in the event of a second qualifying event.

Under the new HIPAA law, the definition of a qualified beneficiary under COBRA is expanded. A newborn child or newly adopted child added within the period of COBRA continuation coverage may become eligible to continue COBRA for up to 36 months from the original qualifying event, in the event of a second qualifying event, even though the child was not covered at the time of the initial COBRA qualifying event.

Effective January 1, 1997, if you have or adopt a child during the COBRA continuation period, you may add the child to your coverage as a qualified beneficiary. After January 1, 1997, if you become eligible for Medicare, or die, the child would be eligible to continue COBRA for up to 36 months from the original qualifying event. For a newborn or newly adopted child to be considered a qualified beneficiary in the event of a second qualifying event, program COBRA rules require that the child be added to your COBRA continuation coverage within 30 days of birth or final adoption.

If you have questions, please contact the COBRA Unit of the Employee Benefits Division.

Employee Benefits Division
(518) 457-5754 Albany area
1-800-833-4344 U.S., Canada, Puerto Rico, Virgin Islands
Monday-Friday, 9 am-3 pm Eastern time

NEWSBREAK:
BENEFIT INFORMATION FOR IMMEDIATE CONSIDERATION

HEALTH LEGISLATION REQUIRES COVERAGE CERTIFICATION AND COBRA NOTIFICATION

October 9, 1996

The recently enacted health reform legislation (Health Insurance Portability and Accountability Act of 1996 (HIPAA)) imposes two new administrative requirements that call for quick action by employers. The requirements are certification of health plan coverage and notice of COBRA changes made by the new law. This Newsbreak provides additional information on those requirements, which we previously alerted you to in our releases of late August.

Background of health coverage certification

The new law requires employers-or their insurers-to issue health coverage certification forms to covered individuals for three events:

1. when employer-provided coverage ends/when COBRA coverage begins and
2. (a second time) when COBRA coverage ends and
3. within 24 months of the later of event 1 or event 2 if requested in writing by the covered individual.

Covered individuals will give these certifications of prior coverage to their new employer to reduce the length of any preexisting condition exclusion period in the new employers plan. The certification requirement for events 1 and 2 is automatic: an employer must issue a certification even if the individual does not request it.

Requirements on and after October 1, 1996

The automatic certification requirements apply to events described in 1 and 2 that occur on or after October 1, 1996. However, employers/insurers aren't required to actually issue any certifications until June 1, 1997. But as explained later, employers may want to comply early.

June 1, 1997, requirements

Effective June 1, 1997, employers/insurers must issue certification forms automatically to all individuals who terminated group plan coverage or COBRA coverage on or after October 1, 1996.

Certification events between July 1, 1996, and October 1, 1996

Employers/insurers must issue certifications to individuals who terminated group plan coverage or COBRA coverage between July 1, 1996, and October 1, 1996, only if such individuals make a written request for certification.

However, as previously mentioned, the certification doesn't actually have to be issued until June 1, 1997.

Notification of COBRA changes required by November 1, 1996

For COBRA purposes, the health reform legislation clarifies how to apply the extended coverage for Social Security disabled qualified beneficiaries and introduces new rules both for preexisting condition exclusions and for extending qualified beneficiary status to children born to or adopted by an employee after the start of the COBRA continuation period. Employers must give notice of these changes by November 1, 1996 to all qualified beneficiaries who elected COBRA, and must incorporate the changes into their COBRA notices and SPDs going forward.

In addition, the Pension Simplification Act clarifies COBRA for Medicare-entitlement qualifying events. Although the act doesn't require employers to notify COBRA beneficiaries of the Medicare-entitlement changes, employers may find it advantageous to do so when they inform beneficiaries of the above-mentioned changes.

Examples

1. Employee A terminates employment with employer A on November 15, 1996. Employer A must give employee A a COBRA notice incorporating the changes described earlier. Employer A may also want to give employee A a coverage certification form along with the COBRA notice, but employer A isn't required to issue the certification until June 1, 1997.
2. Employee B died on February 1, 1994. The surviving spouse's COBRA coverage ends on January 31, 1997. Employer B must give the surviving spouse notice of the recently enacted COBRA changes on November 1, 1996. Employer B may want to issue the certification of coverage to the surviving spouse when COBRA coverage terminates on January 31, 1997, but isn't required to do so until June 1, 1997.

Implications

Employers and insurers face substantial administrative burdens in complying with both the newly enacted health coverage certification and COBRA notification requirements. In the case of insured plans, employers are responsible for issuing the certifications in the event that their insurers fail to do so. Employers with insured plans will need to negotiate with their carriers to decide responsibility for issuing the certifications. Employers maintaining self-insured plans have sole responsibility for issuing the required certifications.

Because employers may be required to provide certifications for coverage or terminations of coverage that occur beginning July 1, 1996, and must provide certifications for coverage or terminations of coverage that occur beginning October 1, 1996, we recommend that they keep detailed coverage records, detailed termination-of-coverage records, and detailed COBRA records for the period starting July 1, 1996. Indeed, to avoid a big backlog on June 1, 1997-when certifications for the eight-month October 1, 1996, to May 31, 1997 period must be issued automatically-employers may want to start issuing certifications sooner. They can include such certifications in the COBRA notice package they provide for new qualified beneficiaries.

The Department of Labor may issue regulations or other guidance in advance of the June 1, 1997 deadline and perhaps provide a model certification form as well. However, employers cannot assume that the DOL will act in a timely manner.

Penalties

Violations of the health coverage certification requirements or the COBRA notification requirements may be subject to an excise tax of $100 a day imposed by the IRS or a civil penalty of $100 a day imposed by the DOL. The DOL can also bring an action under ERISA to compel compliance.

PA 96-13

In August, President Clinton signed into law the Health Insurance Portability and Accountability Act of 1996 (HIPAA) which modifies COBRA eligibility requirements.

The law makes some changes in who is considered eligible for the extension of COBRA benefits to 29 months when a qualified beneficiary is disabled under the Social Security Act. It also modifies the rules for a second qualifying event for newborns and adopted children who are added during the COBRA continuation of coverage period. These changes become effective January 1, 1997, and employers are required to notify all COBRA continuees of them by November 1, 1996.

Attached is a notification that the State of New York used for its COBRA enrollees. It may assist you in preparing your required notification to your COBRA enrollees. Use the information presented to draft your notification for your needs. The final determination of whether or not your agency as an employer, is in compliance with the HIPAA is your responsibility.

The Law also mandates some changes to the information that must be provided to employees who terminate employment and to COBRA continuees whose COBRA coverage is ending. After June 1, 1997, termination notices to these individuals must include information on how much "creditable coverage" the individual had under the employer's health plan or COBRA continuation coverage after October 1, 1996. "Creditable coverage" includes coverage under the employer's group health insurance program or COBRA continuation, and may be used by the individual to reduce the duration of preexisting conditions limitations imposed under the individual's new group or individual insurance plan.

To assist you in understanding these changes, we are, with their permission, enclosing a blletin on this topic which was prepared by A. Foster Higgins, the contracted health benefits consultants for the Department of Civil Service, Employee Benefits Division. This information is provided only to make you aware of these new requirements. Because the application of COBRA continuation rules among agencies that participate in NYSHIP varies, we strongly recommend that Participating Agencies obtain advice from a legal advisor in administering provisions of the COBRA law, presently existing or amended.

If you have any questions, please call the PA Unit at (518) 457-5766, 457- 5847 or 485-1186.