SPECIAL HIPAA ALERT

October 15 Extension Deadline Looms for Employer-Sponsored Group Health Plans

By Jason Froggatt and Rebecca Williams

Will you be ready on Wednesday, October 16, 2002, when the transaction and code set regulations of the Health Insurance Portability and Accountability Act (HIPAA) go into effect? If not, you have through Tuesday, October 15, 2002 to file a one-year extension. The Administrative Simplification provisions of HIPAA impose significant regulatory burdens on employers who sponsor group health plans. Although many employer/plan sponsors are becoming aware of the impact of the impending April 14, 2003 HIPAA privacy regulation compliance date, an even more immediate deadline looms for employer/plan sponsors with respect to HIPAA transaction and code sets regulations.

Who has to comply?

The Administrative Simplification provisions of HIPAA, including both the privacy and the transaction and code sets regulations, apply to “covered entities,” including group health plans. This definition applies to a wide range of employee benefit plans, including medical and hospitalization plans, dental plans, vision plans, health flexible spending accounts, and many employee assistance plans. Although employers are not directly covered under the regulations simply because they are employers, employers are indirectly affected because, as plan fiduciaries, they may have an obligation to ensure the compliance of their group health plans with these HIPAA regulations. Even to the extent that the employers are not plan fiduciaries, it makes sense for employers to monitor the compliance of their plans because the plans deliver promised benefits to their employees.

What are the HIPAA transaction and code sets requirements?

The HIPAA transaction and code sets regulations require all covered entities to use standard transactions and code sets when engaging in certain designated transactions electronically. These transactions are specifically defined and generally relate to the payment process including enrollment, eligibility, claims and claims status. Covered group health plans must engage in standard transactions with any entity that makes a request to that effect.

Most group health plans must comply with these rules by October 16, 2002.

We’re not ready, what do we do?

A covered entity may file for a one-year extension (extending the compliance date to October 16, 2003). To obtain the one-year extension, a covered entity must submit an extension request by October 15, 2002.

The U.S. Department of Health & Human Services (DHHS) has released a model form for covered entities to request the extension to comply with these rules. This model form (or a similar form) must be filed with DHHS to obtain the extension. Filing is sufficient to obtain the extension; there is no approval process with respect to the submitted form. Since DHHS has an electronic filing system in operation, the form can be filed electronically. DHHS will send an electronic acknowledgement of an electronic filing. The model form also may be filed by mail. In that case, DHHS will not acknowledge receipt. DHHS recommends that covered entities filing by mail use a return receipt, so they will have proof of filing.

The form can be found at www.cms.gov/hipaa/hipaa2/ASCAForm.asp. The form requires each covered entity to furnish information about its implementation strategy and budget for complying with the transaction and code set rules. It is straightforward and should not take an extensive amount of time to be completed. Bear in mind, however, that this is a government submission so accuracy is important.

What about small health plans?

Small health plans do not have to comply with the HIPAA transaction and code sets regulations until October 16, 2003, so they do not need to file for a one-year extension by October 15, 2002. Small health plans are defined as health plans with less than $5,000,000 in “annual receipts.” The Center for Medicare and Medicaid Services (“CMS”) has recently issued guidance on what constitutes a receipt for the purposes of the small health plan definition. According to CMS, for fully-insured group health plans, “receipts” means total premium payments for the most recently completed fiscal year. For self-insured plans, “receipts” means the total amount paid for health care claims on behalf of the plan during the plan’s last full fiscal year. For group health plans that provide health benefits through a mix of self-insurance and purchased insurance, “receipts” is calculated by adding the receipts from the self-insured portion to the receipts from the insured portion.

Does my plan really need to file?

Employers should make sure an extension is filed on behalf of any group health plans they sponsor, unless the employer is certain its group health plan falls within the small health plan definition. Although many insured plans (and some self-insured plans) may not appear to engage in any transactions to which these rules apply, the current lack of guidance on many issues makes this determination uncertain. (For instance, an employer’s group health plan that does not file for extension may be required to utilize electronic transactions at the request of a plan participant.) In fact, the risk itself is difficult to quantify because of the lack of guidance. At a minimum, group health plans that are not in compliance risk civil penalties. The conservative approach is to file an extension and develop a compliance plan during the next year as more guidance becomes available. This makes even more sense in light of the relatively small amount of cost and effort in filing for an extension.

Does this delay privacy compliance, too?

This extension only applies to the HIPAA transaction and code sets requirements. The compliance date for the HIPAA privacy requirements remains April 14, 2003 for most covered entities (April 14, 2004 for small health plans).

Any questions about this advisory should be directed to:

Jason Froggatt, Seattle, (206) 628 7629, jasonfroggatt@dwt.com
Rebecca Williams, Seattle, (206) 628 7769, beckywilliams@dwt.com

This Employee Benefits Alert is a publication of the Employee Benefits Department of Davis Wright Tremaine LLP. Our purpose in publishing this Alert is to inform our clients and friends of recent developments in employee benefits. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations.

Copyright © 2002, Davis Wright Tremaine LLP.

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