Health Insurance Standards

In 1996, Congress passed the Health Insurance Portability and Accountability Act, considered by some to be the most significant federal health insurance legislation in more than a decade. The act guarantees people losing group health coverage, through retirement or other termination of employment, continued access to coverage in the individual market regardless of health status. But consumers attempting to exercise this right have been hindered by carrier practices and pricing or by their own misunderstandings of the law. Many have had difficulty obtaining individual market coverage with guaranteed access rights or faced significantly higher premiums for such coverage; some carriers charge premiums as much as 600 percent higher than standard rates. Other consumers do not realize that the access guarantee applies only to those losing group coverage who meet other eligibility requirements. For example, an individual must apply within 63 days of losing group coverage or the right to coverage is lost. Insurers believe that the act poses an excessive administrative burden, unanticipated consequences, and the potential for consumer abuse. State insurance regulators have encountered their own difficulties in attempting to implement and enforce the act's provisions where they found federal guidance to lack sufficient clarity or detail. Finally, federal regulators face an unexpectedly large regulatory role under the act. In states that have not yet passed legislation to implement the act, the Health and Human Services Department must step in to perform functions similar to those of a state insurance regulator, such as approving insurance products and responding to consumer complaints.

GAO noted that: (1) although HIPAA gives people losing coverage a guarantee of access to coverage in the individual market, consumers attempting to exercise this right have been hindered in some states by carrier practices and pricing and by their own misunderstanding of this complex law; (2) in the 13 states using the federal fallback approach to guaranteed access, some carriers initially discouraged people from applying for the coverage or charge them as much as 140 to 600 percent of the standard rate; (3) many consumers also do not fully understand the eligibility criteria that apply and as a result may risk losing their right to coverage; (4) issuers of health coverage believe certain HIPAA provisions are burdensome to administer, may create unintended consequences, or may be abused by consumers; (5) issuers also fear that HIPAA's guaranteed renewal provision could cause those eligible for Medicare to pay for redundant coverage and hinder carriers' ability to sell products to children and other targeted populations; (6) certain protections for group plan enrollees may create an opportunity for consumer abuse, such as the guarantees of credit for prior coverage, which could give certain enrollees an incentive, when they need medical care, to switch from low-cost, high-deductible coverage to more expensive, low-deductible coverage; (7) state insurance regulators have encountered difficulties implementing and enforcing HIPAA provisions where federal guidance lacks sufficient clarity or detail; (8) federal regulators face an unexpectedly large role under HIPAA, which could strain the Department of Health and Human Service's (HHS) resources and weaken its oversight; (9) in states that do not pass legislation implementing HIPAA provisions, HHS is required to take on the regulatory role; (10) as federal agencies issue more guidance and states and issuers gain more experience with HIPAA, concerns about the clarity of its regulations may diminish; (11) whether unintended consequences will occur is as yet unknown, in part because sufficient evidence has not accumulated; (12) in federal fallback states, premiums for group-to-individual guaranteed access coverage are likely to remain high unless regulations with more explicit risk-spreading requirements are issued at the federal or state level; (13) HHS' ability to meet its growing oversight role may prove inadequate given the current level of resources, particularly if more states cede regulatory authority to the federal government; and (14) in any case, as early challenges are resolved during 1998, other challenges to implementing HIPAA may emerge.