Merritt Personal Lines Manual: Regulation of Health Insurance
There are a number of Federal regulations that affect health insurance coverage. The most important are detailed here.
The Health Insurance Portability and Accountability Act was passed in 1996. It offers some of the most radical changes in health insurance coverage. It applies to everyone in the health coverage process and some of the important provisions are described below in terms of who is affected:
Insurers: Once an insurer sells a policy to any individual or group, it must renew coverage regardless of the health status of any member of a group. Revises the notices requirement for health insurance policies that pay benefits without regard to Medicare coverage or other insurance coverage. Long-term care policies are permitted to coordinate with Medicare and other coverage and must disclose any duplication of benefits.
Minimum federal consumer protection and marketing requirements are established for tax-qualified long-term care insurance policies, including a requirement that insurers start benefit payments when a policyholder cannot perform at least two "activities of daily living" (i.e., bathing, eating, toileting, transferring, dressing and incontinence). Subject to certain limitations, clarifies that long-term care insurance premium payments and unreimbursed long-term care services costs are tax deductible as a medical expense and benefits received under a long-term care insurance contract are excludable from taxable income. Employer sponsored long-term care insurance is to receive the same tax treatment as health insurance.
Small Businesses (50 or fewer employees) are guaranteed access to health insurance. No insurer can exclude an employee or a family member from coverage based on health status. Self-employed individuals enrolled in a qualified high deductible health plan can establish tax-favored medical savings accounts or MSAs. Annual deductibles are $1,500 to $2,250 for individuals and $3,000 to $4,500 for families. Maximum out-of-pocket expenses are $3,000 for individuals and $5,500 for families.
Employees: People who lose their group coverage (for example, because of loss of employment or change of jobs to a firm without insurance) will be guaranteed access to coverage in the individual market or states may develop alternative programs to assure that comparable coverage is available to these people. The coverage will be available without regard to health status and renewal will be guaranteed.
Workers covered by group insurance policies cannot be excluded from coverage for more than 12 months due to a pre-existing medical condition. Such limits can only be placed on conditions treated or diagnosed within the six months prior to their enrollment in an insurance plan. Insurers cannot impose new pre-existing condition exclusions for workers with previous coverage.
Individuals: The current tax deduction for insurance costs of self-employed individuals is gradually increased to 80 percent in 2002 and on.
A person who is within 24 months of death can have a portion of their death benefit of a life insurance policy prepaid by the issuing insurance company tax free. Such a person also is allowed to sell his or her life insurance to a viatical settlement company tax free. A chronically-ill individual can sell their life insurance and any long-term care insurance rider tax free; the proceeds of such a sale must be spent on long term care.
