oversight

Internal Revenue Service, Pension and Welfare Benefits Administration, and Health Care Financing Administration: Interim Rules for Health Insurance Portability for Group Health Plans

Published by the Government Accountability Office on 1997-04-24.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Office of the General Counsel


      B-276723

      April 24, 1997

      The Honorable William V. Roth, Jr., Chairman
      The Honorable Daniel P. Moynihan
      Ranking Minority Member
      Committee on Finance
      United States Senate

      The Honorable James M. Jeffords, Chairman
      The Honorable Edward M. Kennedy
      Ranking Minority Member
      Committee on Labor and Human Resources
      United States Senate

      The Honorable Thomas J. Bliley, Jr., Chairman
      The Honorable John D. Dingell
      Ranking Minority Member
      Committee on Commerce
      House of Representatives

      The Honorable William F. Goodling, Chairman
      The Honorable William L. Clay
      Ranking Minority Member
      Committee on Education and the Workforce
      House of Representatives

      The Honorable Bill Archer, Chairman
      The Honorable Charles B. Rangel
      Ranking Minority Member
      Committee on Ways and Means
      House of Representatives

      Subject:   Department of Treasury, Internal Revenue Service; Department of Labor,
                 Pension and Welfare Benefits Administration; and the Department of
                 Health and Human Services, Health Care Financing Administration:
                 Interim Rules for Health Insurance Portability for Group Health Plans

      Pursuant to section 801(a)(2)(A) of title 5, United States Code, this is our report on
      major rules promulgated by Department of Treasury, Internal Revenue Service;


                                                                          GAO/OGC-97-39
Department of Labor, Pension and Welfare Benefits Administration; and the
Department of Health and Human Services, Health Care Financing Administration
(the Departments) entitled, "Interim Rules for Health Insurance Portability
for Group Health Plans" (RIN: 1545-AV05, 1210-AA54, and 0938-AI08). We
received the rules on April 9, 1997. The rules were published in the Federal
Register as interim rules with request for comments on April 8, 1997.
62 Fed. Reg. 16894.

The interim rules govern access, portability, and renewability requirements for
group health plans and issuers of health insurance coverage in connection with
a group health plan. The rules implement changes in the provisions of the
Internal Revenue Code of 1986, the Employee Retirement Income Security Act
of 1974 (ERISA), and the Public Health Service Act which were enacted by the
Health Insurance Portability and Accountability Act of 1996 (HIPAA).

The group market provisions of HIPAA create concurrent jurisdiction for the
Secretaries of Health and Human Services, Labor, and Treasury and include
rules relating to preexisting conditions exclusions, special enrollment rights,
and prohibition of discrimination against individuals based on health status-
related factors. The shared group market provisions in each of the Department's
rule, except as noted in the preamble, are substantially identical.

Enclosed is our assessment of the Departments' compliance with the procedural
steps required by section 801(a)(1)(B)(i) through (iv) of title 5 with respect to the
rules. Our review indicates that the Departments complied with the applicable
requirements.

Our Office has recently performed work relating to this area including "Health
Insurance Portability: Reform Could Ensure Continued Coverage for up to
25 Million Americans" (HEHS-95-257), "Private Health Insurance: Millions Relying
on Individual Market Face Cost and Coverage Trade-offs" (HEHS-97-8), and "Health
Insurance Regulation: Varying State Requirements Affect Cost of Insurance"
(HEHS-96-161).

If you have any questions about this report, please contact James Vickers,
Assistant General Counsel, at (202) 512-8210. The official responsible for GAO




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evaluation work relating to this issue area is William Scanlon, Director, Health
Financing and Systems Issues. Mr. Scanlon can be reached at (202) 512-7114.




Robert P. Murphy
General Counsel

Enclosure

cc: The Honorable Olena Berg
    Assistant Secretary for Pension and
     Welfare Benefits
    Department of Labor

    Ms. Cynthia Grigsby
    Chief, Regulations Unit
    Internal Revenue Service
    Department of the Treasury

    The Honorable Donna E. Shalala
    Secretary of Health and Human Services




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                                                                         ENCLOSURE

      ANALYSIS UNDER 5 U.S.C. § 801(a)(1)(B)(i)-(iv) OF A MAJOR RULE
                               ISSUED BY
      THE DEPARTMENT OF TREASURY, INTERNAL REVENUE SERVICE;
        DEPARTMENT OF LABOR, PENSION AND WELFARE BENEFITS
     ADMINISTRATION; AND THE DEPARTMENT OF HEALTH AND HUMAN
          SERVICES, HEALTH CARE FINANCING ADMINISTRATION
                               ENTITLED
         "INTERIM RULES FOR HEALTH INSURANCE PORTABILITY
                      FOR GROUP HEALTH PLANS"
                  (RIN: 1545-AV05; 1210-AA54; 0938-AI08)

(i) Cost-benefit analysis

The Departments have prepared a combined economic impact analysis for this
interim final rule and the interim final rule issued by the Department of Health and
Human Services, and published the same day in the Federal Register, concerning
individual market provisions because the effects of the reforms and burdens
imposed overlap the same group of issuers. 62 Fed. Reg. 16908-16920.

For group health plans coverage under these rules, the Departments cite estimates
formulated by the Congressional Budget Office which shows the initial yearly cost
(direct cost to the private sector) to be $50 million with 300,000 people covered and
$200 million in subsequent years for limiting the length of preexisting conditions
exclusions to 12 months. For creditable coverage, the CBO estimate is $25 million
for the first year and $100 million per year thereafter.

(ii) Agency actions relevant to the Regulatory Flexibility Act, 5 U.S.C. §§ 603-605,
607 and 609

Since the rules were issued as interim final rules and not as general notices of
proposed rulemaking, the rules are not subject to the Regulatory Flexibility Act.
However, the Departments, in the preamble, invite comments regarding the impact
of the rules on small entities and ways to minimize that impact.

(iii) Agency actions relevant to sections 202-205 of the Unfunded Mandates Reform
Act of 1995, 2 U.S.C. §§ 1532-1535

Since the rules were issued as interim final rules and not as general notices of
proposed rulemaking, the rules are not subject to the Unfunded Mandates Reform
Act of 1995. However, the Departments point out that the rules have been designed
to be the least burdensome alternative for state, local, and tribal governments.
Also, the Departments met and consulted with representatives of these


                                                                     GAO/OGC-97-39
governments, including state insurance commissions, in drafting the rules to give
the states considerable flexibility in complying with HIPAA.

(iv) Other relevant information or requirements under acts and executive orders

Administrative Procedure Act, 5 U.S.C. §§ 551 et seq.

Section 707 of ERISA, Section 9806 of the Internal Revenue code, and Section 2707
of the Public Health Service Act provide that the Secretaries may promulgate any
interim final rules determined to be appropriate to carry out the provisions of
Part B of the act. The Secretaries have determined that there is good cause under
Section 553(b) of the Administrative Procedure Act to not issue a notice of
proposed rulemaking because it would be impracticable, unnecessary, or contrary to
the public interest. The Secretaries have found that without prompt guidance, some
members of the regulated community would have difficulty complying with the
requirements of the HIPAA and insured individuals will not understand the benefit
to them of having a certificate of prior coverage to present upon entering the
individual health insurance market.

However, the Departments are accepting comments on the interim final rule for a
90-day period for consideration in the development of the final rules to be issued
implementing the HIPAA.

Paperwork Reduction Act, 44 U.S.C. §§ 3501-3520

The interim final rules contain information collections subject to review and
approval by the Office of Management and Budget under the Paperwork Reduction
Act.

The Departments have requested emergency review of the collections because the
collection of the information is needed before the expiration of the normal time
limits of the act to assure guaranteeing availability of individual health insurance
coverage to certain individuals with prior group coverage. The Departments are
requesting that OMB provide a 30-day comment period with OMB approval by
June 1, 1997, for a 180-day period. During the 180-day period, the Departments will
publish a notice in the Federal Register initiating a 60-day agency review and public
comment period with submittal to OMB for review and an extension of the
emergency approval to follow.

The notice contained in the preamble to the interim final rule complies with the
requirements of the Paperwork Reduction Act by explaining the need for the
information, the parties affected, and the burden estimates related to the collections
by each Department.



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Statutory authorization for the rule

The Department of Labor's interim rule is adopted pursuant to the authority
contained in Section 707 of the Employee Retirement Income Security Act
(Pub. L. 93-406, 88 Stat. 894; 29 U.S.C. § 1135) as amended by HIPAA
(Pub. L. 104-191; 101 Stat. 1936; 29 U.S.C. § 1181).

The Department of Health and Human Services' interim rule is adopted pursuant to
the authority contained in Sections 2701, 2702, 2711, 2712, 2713, and 2792 of the
Public Health Service Act, as established by HIPAA (Pub. L. 104-191; 42 U.S.C.
§§ 300gg-1 through 300gg-13 and 300gg-92).

The Department of the Treasury's rule is adopted pursuant to 26 U.S.C. §§ 7805,
9801(c)(4), 9801(e)(3), and 9806.

Executive Order No. 12866

The interim rules were found to be "economically significant" regulatory actions
by OMB under Executive Order No. 12866. As such, they were reviewed by OMB
based on the information supplied by the Departments, which included planned
regulatory action documents describing the reason for the rules and an assessment
of the costs and budgetary impact of the rules. OMB approved the rules on
March 27, 1997.




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