The Portability and Accountability Act Regarding Self-Funded Health Insurance Plans

Part 2, Chapter 6: Self-funded Plans Page 4

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The Portability and Accountability Act, passed in 1996, provides a series of new protections for consumers who are covered by self-funded plans. For example, the act generally requires self-funded plans to notify participants of any significant reduction in benefits within sixty days or to issue a regular plan description every ninety days. The act also generally prohibits self-funded plans and insurance companies from refusing to renew coverage for an individual on the basis of a disability. In addition, both self-funded plans and insurance companies are generally prohibited from imposing rules that discriminate against an individual on the basis of a disability.

In some cases, the Americans with Disabilities Act may also affect the decisions that self-funded plans can make in terms of benefits for an individual with a disability. However, those laws do not appear to prohibit self-funded plans or insurance companies from limiting specific benefits, as long as the limitations apply to all people insured under the plan rather than to a specific individual.

Since self-funded plans are not regulated by state laws or regulations in terms of benefits, they appear to present a unique situation for consumers. However, corporations, unions, associations, and government agencies are not generally required to offer health benefits. Since self-funded plans appear to offer significantly reduced administrative and other costs, they may allow a plan sponsor to offer health benefits in a situation in which the sponsor might otherwise be unable to provide any coverage at all.

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