Federal Enforcement in Group and Individual Health Insurance Markets, 71020-71023 [05-23076]

Agencies

• Centers for Medicare & Medicaid Services
• Department of Health and Human Services (hhs)

[Federal Register Volume 70, Number 226 (Friday, November 25, 2005)]
[Rules and Regulations]
[Pages 71020-71023]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-23076]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES (HHS)

Centers for Medicare & Medicaid Services

45 CFR Parts 144, 146, 148, and 150

[CMS-4091-F]
RIN 0938-AN35


Federal Enforcement in Group and Individual Health Insurance 
Markets

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Final rule.

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SUMMARY: This rule makes final an interim final rule that details 
procedures we use for enforcing title XXVII of the Public Health 
Service Act as added by the Health Insurance Portability and 
Accountability Act of 1996, and as amended by the Mental Health Parity 
Act of 1996, the Newborns' and Mothers' Health Protection Act of 1996, 
and the Women's Health and Cancer Rights Act of 1998. Specifically, we 
are responsible for enforcing title XXVII requirements in States that 
do not enact the legislation necessary to enforce those requirements, 
or otherwise fail to substantially enforce the requirements. We are 
also responsible for taking enforcement actions against non-Federal 
governmental plans. The regulation describes the process we use in both 
enforcement contexts. This final rule deletes an appendix to the 
interim rule that listed examples of violations of title XXVII and 
corrects the description of a cross-reference, but makes no substantive 
changes to the interim final rule.

DATES: These regulations are effective on December 27, 2005.

FOR FURTHER INFORMATION CONTACT: David Mlawsky (877) 267-2323, ext. 
61565.

SUPPLEMENTARY INFORMATION

I. Background

    Title I of the Health Insurance Portability and Accountability Act 
of 1996 (HIPAA) created a new title XXVII of the Public Health Service 
(PHS) Act (42 U.S.C. 300gg, et seq.) that requires group health plans 
and health insurance issuers to provide certain guarantees for 
availability and renewability of health coverage in the group and 
individual health insurance markets.
    HIPAA created a series of parallel provisions that were placed in 
the Employee Retirement Income Security Act (ERISA), which is within 
the jurisdiction of the Department of Labor; the Public Health Service 
(PHS) Act, which is within the jurisdiction of the Department of Health 
and Human Services; and the Internal Revenue Code, which is within the 
jurisdiction of the Department of the Treasury. These ``shared 
provisions'' set forth Federal requirements relating to portability of 
and access to group health plan coverage, as well as group health 
insurance coverage provided by issuers. The shared provisions contain 
rules limiting the use of preexisting condition exclusion periods, and 
prohibiting discrimination against participants and beneficiaries based 
on health status.
    Section 104 of Title I of HIPAA requires that the Secretaries of 
the three Departments ensure through an interagency Memorandum of 
Understanding (MOU) that regulations, rulings, and interpretations 
issued by each of the Departments relating to the same matter over 
which two or more departments have jurisdiction, are administered so as 
to have the same effect at all times. Under section 104, the 
Departments, through the MOU, are to provide for coordination of 
policies relating to enforcement of the same requirements in order to 
have a coordinated enforcement strategy that avoids duplication of 
enforcement efforts and assigns priorities in enforcement. The 
Secretaries of the three departments signed and published the MOU in 
1999 (64 FR 70164).
    HIPAA also added certain provisions governing insurance in the 
group and individual markets, and with respect to non-Federal 
governmental plans, which are contained only in the Public Health 
Service Act and are not within the regulatory jurisdiction of the 
Department of Labor or the Department of the Treasury.
    Under section 101(b) of HIPAA the Department of Labor is not 
authorized to enforce any of the portability requirements of part 7 of 
ERISA (the ``shared'' provisions) against a health insurance issuer 
offering health

[[Page 71021]]

insurance coverage in connection with a group health plan, although 
individuals covered under ERISA can bring suit against the issuer. 
Also, governmental plans, while they are defined in section 3(32) of 
ERISA, are exempt from ERISA requirements. (See section 4(b)(1) of 
ERISA.) Thus, the scope of the MOU is limited, with respect to 
coordination of enforcement activities, to enforcement of shared 
provisions. Enforcement of these provisions constitutes only a 
relatively small portion of our responsibilities.
    The Newborns' and Mothers' Health Protection Act of 1996 (NMHPA) 
amended the PHS Act and ERISA (with corresponding provisions in the Tax 
Code) to provide protections for mothers and their newborn children 
with regard to the length of hospital stay following childbirth. The 
Mental Health Parity Act of 1996 (MHPA) further amended the PHS Act and 
ERISA (with corresponding provisions in the Tax Code) to provide for 
parity in the application of certain annual and lifetime dollar limits 
on mental health benefits with annual and lifetime dollar limits on 
medical/surgical benefits. The Women's Health and Cancer Rights Act of 
1998 (WHCRA) amended the PHS Act (and ERISA) to provide certain 
protections for patients who elect breast reconstruction in connection 
with a mastectomy. (As used hereafter in this preamble, ``HIPAA'' 
refers to title XXVII of the PHS Act, as added by the Health Insurance 
Portability and Accountability Act of 1996, and later amended by MHPA, 
NMHPA, and WHCRA).
    HIPAA added two preemption provisions to the PHS Act. With respect 
to HIPAA's preexisting condition exclusion rules, and the special 
enrollment rights contained in section 2701 of the PHS Act, State law 
cannot differ in any way from the Federal requirements, except to 
expand the protections in one of several ways specifically permitted by 
the statute. (See section 2723(b) of the PHS Act.) With respect to 
HIPAA's other requirements (except for NMHPA and WHCRA), including the 
non-discrimination provisions in section 2702 of the PHS Act, State 
laws are preempted only to the extent they prevent the application of 
any requirement of HIPAA. (See section 2723(a) of the PHS Act.) In 
addition, the NMHPA does not apply to health insurance issuers in 
States that have certain types of laws regulating coverage for the 
length of post-childbirth hospitalization. WHCRA does not preempt State 
laws in effect on the date of WHCRA's enactment with respect to health 
insurance coverage that requires coverage of at least the coverage of 
reconstructive breast surgery otherwise required under WHCRA.
    HIPAA affirms that the States are the primary regulators of health 
insurance coverage in each State. However, in the event that a State 
either does not enact legislation that meets or exceeds the Federal 
requirements, or if it otherwise fails to substantially enforce the 
HIPAA standards, we enforce the HIPAA requirements that apply to health 
insurance issuers offering coverage within that State.
    We are also responsible for enforcing the HIPAA requirements with 
respect to non-Federal governmental plans. Non-Federal governmental 
plans that self-insure, rather than purchasing health insurance 
coverage may elect exemption from one or more requirements of HIPAA, 
but must comply with requirements regarding certification and 
disclosure of creditable coverage.

II. Provisions of the Interim Final Regulations

Subpart A--General Provisions

Section 150.101 Basis and Scope

    On April 8, 1997, we published regulations to implement HIPAA by 
adding 45 CFR parts 144, 146, and 148. Included in those regulations 
were enforcement provisions. After gaining some experience with direct 
Federal enforcement in some States, we determined that it was necessary 
to provide more detail on the procedures that will be used to enforce 
HIPAA when a State does not do so. Therefore, on August 20, 1999, we 
published interim final regulations (HCFA-2019-IFC) (64 FR 45786) that 
added a new part that revised and expanded the provisions contained in 
Sec.  146.184, Sec.  148.200, and Sec.  148.202. Those sections were 
deleted.
    That new part, 45 CFR part 150, consists of four subparts. Subpart 
A explains the basis and scope of the regulation and presents 
definitions that supplement definitions located in 45 CFR 144.103 and 
148.103. Subpart B describes how we determine whether to assume 
enforcement authority in a State and explains the process for 
transferring authority back to the State. Subpart C describes 
procedures for assessing civil money penalties. Examples of specific 
situations that may trigger the assessment are listed in Appendix A to 
subpart C. Subpart D describes the administrative appeals process.
    We refer the reader to the August 20, 1999, interim final rule with 
comment period for greater detail.

III. Analysis of and Responses to Public Comments

    We received no public comments on the August 20, 1999 interim final 
rule.

IV. Provisions of the Final Regulations

    The provisions of this final rule are identical to the provisions 
of the August 20, 1999, interim final rule with comment period, except 
that we have deleted the appendix to subpart C that listed examples of 
specific situations that may trigger the assessment of civil money 
penalties. We believe the inclusion of that document is unnecessary, in 
light of the fact that assessments are triggered by breaches of the 
provisions within the regulation itself.
    Additionally, in Sec.  150.311(e), the cross-reference made to the 
document described in Sec.  150.307 incorrectly identified that 
document as the notice of intent to assess a penalty. We are correcting 
that cross-reference in 150.311(e) so it references the notice to the 
responsible entity or entities described in Sec.  150.307.

V. Collection of Information Requirements

    This document does not impose information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1995.

VI. Regulatory Impact Statement

    In drafting the interim regulation that this regulation finalizes, 
we had examined the impacts of the interim final regulation as required 
by Executive Order 12866 (September 1993, Regulatory Planning and 
Review), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. 
L. 96-354), the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), 
and Executive Order 13132. We published a Regulatory Impact Statement 
addressing all those impacts in the preamble to the interim regulation 
(64 FR 45786, 45792). This regulation merely finalizes that interim 
final regulation, and makes no substantive changes to it. Therefore, 
that Regulatory Impact Statement applies to this final regulation as 
well, and we refer the reader to it. However, we note that under 
Executive Order 12866 (58 FR 551735, October 4, 1993), the Department 
must determine whether a regulatory action is ``significant'' and 
therefore subject to the requirements of the Executive Order and 
subject to review by the Office of Management and Budget (OMB). Under 
section 3(f), the order defines a ``significant regulatory

[[Page 71022]]

action'' as an action that is likely to result in a rule (1) having an 
annual effect on the economy of $100 million or more, or adversely and 
materially affecting a sector of the economy, productivity, 
competition, jobs, the environment, public health or safety, or State, 
local, or tribal governments or communities (also referred to as 
``economically significant''); (2) creating serious inconsistency or 
otherwise interfering with an action taken or planned by another 
agency; (3) materially altering the budgetary impacts of entitlement 
grants, user fees, or loan programs or the rights and obligations of 
recipients thereof; or (4) raising novel legal or policy issues arising 
out of legal mandates, the President's priorities, or the principles 
set forth in the Executive Order. We have determined that this action 
is not economically significant for the reasons stated in the preamble 
to the interim final regulation. The action also does not create any 
serious inconsistency or interfere with another agency's action or 
planned action, nor does it materially alter any budgetary impacts of 
entitlement grants, user fees, or loan programs or the rights and 
obligations of recipients thereof. Additionally, because this final 
regulation merely keeps in force an interim regulation already in 
effect before the publication of this final regulation, and makes no 
substantive changes to it, this final regulation does not raise any 
novel legal or policy issues.
    We also note that Executive Order 12612 (``Federalism'') has been 
revoked subsequent to the issuance of the interim final regulation, and 
has been replaced by Executive Order 13132 (``Federalism''). Executive 
Order 13132 outlines fundamental principles of Federalism. It requires 
adherence to specific criteria by federal agencies in formulating and 
implementing policies that have ``substantial direct effects'' on the 
States, the relationship between the national government and States, or 
on the distribution of power and responsibilities among the various 
levels of government. Federal agencies promulgating regulations that 
have these federalism implications must consult with State and local 
officials, and describe the extent of their consultation and the nature 
of the concerns of State and local officials in the preamble to the 
regulation.
    In the Department's view, these final regulations have Federalism 
implications because they may have substantial direct effects on the 
States, the relationship between the national government and States, or 
on the distribution of power and responsibilities among the various 
levels of government. This is because the process set forth in these 
regulations impacts the relationship between national government and 
the States. However, in the Department's view, the Federalism 
implications of these final regulations are minimal. This is evidenced 
by the fact that no State submitted any comments on the interim final 
regulations suggesting that the regulations would in fact materially 
impact States' relationship with the national government, or would 
unduly infringe on States' historical function of regulating health 
insurance issuers. Additionally, the Department notes that the PHS Act 
provides that the States may enforce the provisions of title XXVII as 
they pertain to issuers, but that the Secretary of Health and Human 
Services must enforce any provisions that a State fails to 
substantially enforce. Currently, HHS enforces the title XXVII group 
market portability and nondiscrimination provisions in only one State 
\1\ in accordance with that State's specific request to do so. 
Additionally, HHS enforces the NMHPA provisions in title XXVII in one 
State \2\ that has not enacted conforming legislation, and has varying 
levels of direct enforcement responsibility in four States \3\ with 
respect to the WHCRA provisions in title XXVII. In these instances, the 
Department complied with the procedures set forth in the interim final 
regulation (and this regulation) before assuming such enforcement 
responsibilities.\4\ When exercising its responsibilities in this 
regard, HHS works cooperatively with the State for the purpose of 
addressing the State's concerns and avoiding conflicts with the 
exercise of State authority.
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    \1\ Missouri.
    \2\ Wisconsin.
    \3\ Colorado, Massachusetts, Rhode Island, and Wisconsin.
    \4\ Additionally, HHS applied the process set forth in the 
interim final regulation (and in this final regulation) with regard 
to several other States that had not enacted legislation conforming 
to NMHPA, WHCRA and MHPA. Largely as a result of initiating that 
process and working cooperatively with those States, every one of 
them enacted conforming legislation.
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    In compliance with Executive Order 13132's requirements that 
agencies examine closely any policies that may have Federalism 
implications or limit the policymaking discretion of the States, HHS 
has engaged in numerous efforts to consult and work cooperatively with 
affected State and local officials. For example, the Department has 
worked closely with State insurance regulators and the National 
Association of Insurance Commissioners (NAIC). The NAIC is a non-profit 
corporation established by the insurance commissioners of the 50 
States, the District of Columbia, and four U.S. territories. In most 
States the insurance commissioner is appointed by the Governor, in 
approximately 14 States, the insurance commissioner is an elected 
official. Among other activities, it provides a forum for the 
development of uniform policy when uniformity is appropriate. Its 
members meet, discuss and offer solutions to mutual problems. The NAIC 
sponsors quarterly meetings to provide a forum for the exchange of 
ideas and in-depth consideration of insurance issues by regulators, 
industry representatives and consumers. CMS staff have been 
consistently attending these quarterly meetings to listen to the 
concerns of the State Insurance Departments regarding HIPAA enforcement 
and other issues. In addition to the general discussions, committee 
meetings, and task groups, the NAIC sponsors the standing CMS/
Department of Labor meeting on HIPAA issues for members during the 
quarterly conferences. This meeting provides CMS (and the Department of 
Labor) with the opportunity to provide updates on enforcement actions, 
regulations, bulletins, and outreach efforts regarding, among other 
things, title XXVII of the PHS Act.
    The Department has also cooperated with the States in several 
ongoing outreach initiatives, through which information on, among other 
things, title XXVII of the PHS Act, is shared among Federal regulators, 
State regulators, and the regulated community. In particular, CMS has 
sponsored conferences with the States--the consumer Outreach and 
Advocacy conferences in March 1999 and June 2000, and the 
Implementation and Enforcement of HIPAA National State-Federal 
Conferences in August 1999, 2000, 2001, 2002, and 2003. Furthermore, 
CMS websites offer links to important State websites and other 
resources, facilitating coordination between State and federal 
regulators and the regulated community. Throughout the process of 
developing these regulations, to the extent feasible, the Department 
has attempted to balance the States' interests in regulating health 
insurance issuers, and Congress' intent to ensure federal enforcement 
of the provisions of title XXVII in instances where a State fails to 
substantially enforce those provisions.
    Pursuant to the requirements set forth in section 8(a) of Executive 
Order 13132, and by the signatures affixed to these final regulations, 
the Department certifies that the CMS has complied with the 
requirements of Executive

[[Page 71023]]

Order 13132 for the attached final regulation, Federal Enforcement in 
Group and Individual Health Insurance Markets (RIN 09-38-AN35), in a 
meaningful and timely manner.
    In accordance with Executive Order 12866, this regulation was 
reviewed by the Office of Management and Budget.

List of Subjects

45 CFR Parts 144 and 146

    Health care, Health insurance, Reporting and recordkeeping 
requirements.

45 CFR Part 148

    Administrative practice and procedure, Health care, Health 
insurance, Penalties, Reporting and recordkeeping requirements.

45 CFR Part 150

    Administrative practice and procedure, Health care, Health 
insurance, Penalties, Reporting and recordkeeping requirements.

0
Accordingly, for the reasons set forth in the preamble, the interim 
final rule with comment period adding 45 CFR Part 150, Subparts A 
through D, which was published on August 20, 1999, in the Federal 
Register at 64 FR 45786 through 45807, is adopted as a final rule, with 
the following amendments:

PART 150--CMS ENFORCEMENT IN GROUP AND INDIVIDUAL INSURANCE MARKETS

0
1. The authority citation for part 150 continues to read as follows:

    Authority: Secs. 2701 through 2763, 2791, and 2792 of the PHS 
Act (42 U.S.C. 300gg through 300gg-63, 300gg-91, and 300gg-92).


Sec.  150.307  [Amended]

0
2. In Sec.  150.307, paragraph (a) is amended by removing the 
parenthetical ``(See Appendix A to this subpart for examples of 
violations.)''


Sec.  150.311  [Amended]

0
3. In Sec.  150.311, paragraph (e) is amended by removing the phrase 
``of intent to assess a penalty'' and adding in its place the phrase 
``to the responsible entity or entities''.

Appendix A To Subpart C [Removed]

0
4. In Part 150, ``Appendix A To Subpart C Of Part 150--Examples Of 
Violations'' is removed.

    Dated: January 19, 2005.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicare Services.
    Dated: August 15, 2005.
Michael O. Leavitt,
Secretary, Department of Health & Human Services.

    Editorial Note: This document was received at the Federal 
Register on November 17, 2005.
[FR Doc. 05-23076 Filed 11-23-05; 8:45 am]
BILLING CODE 4120-01-U