Civil Service Federal Employees Federal Employees Federal Employees

Retirement Group Life Health Benefits Retirement

System Insurance Program System

United States

Office of Personnel Management

Retirement and Insurance Service

Benefits Administration Letter

Number: 97-208 Date: September 25, 1997 

Subject: New legislation affecting the FEHB Program

Purpose The purpose of this letter is to explain how the Health Insurance

Portability and Accountability Act of 1996 (HIPAA), enacted

August 21, 1996, affects the Federal Employees Health Benefits

(FEHB) Program.

HIPAA regulations The Office of Personnel Management (OPM) does not administer

this new law. Regulations governing the portability and

accessibility provisions were published jointly in the Federal

Register on April 8, 1997, by the Departments of Treasury,

Labor, and Health and Human Services (62 FR 16894).

Limitations on

 exclusions due to pre-

 existing conditions

Under HIPAA, the definition for "group health plan" applies to

the FEHB Program and the definition for "health insurance

issuer" applies to FEHB carriers. "Plans" and "issuers" cannot

impose exclusions for preexisting conditions for more than 12

months (18 months for late enrollments). The exclusions can

only be applied if the person had services or treatment related to

the condition in the previous 6 months. Also, if the person had

prior health coverage, the length of the exclusion period is

reduced by the length of the prior "creditable coverage." If there

is a break in coverage of 63 days or more, any coverage before

the break is not "creditable coverage." (State law can provide a

longer break.)

Currently, the FEHB Program has only some very minor

preexisting condition exclusions, and will have none beginning in

1998. Therefore, the limitations on exclusions affect FEHB

enrollees mainly when they leave Federal service for private

sector employment. Family members who lose FEHB coverage
 

Civil Service Federal Employees Federal Employees Federal Employees

Retirement Group Life Health Benefits Retirement

System Insurance Program System

may also be affected.
3

Certification

 requirements

The HIPAA law and regulations provide for certifications of old

coverage so that the plan/issuer extending new coverage will

know whether the person is subject to an exclusion (if the

plan/issuer imposes one) and, if so, how long the exclusion can

last.

Under HIPAA, either the plan or the issuer may make the

certifications. The Office of Personnel Management (OPM) is

requiring the FEHB carriers to make the certifications of

coverage when an enrollee or family member loses FEHB

coverage. (See attached Carrier Letter 97-31.) These

certifications must certify the ending date of coverage and either

that the person has been covered for 18 months or give date

coverage began if there is less than 18 months of coverage.

OPM is requiring carriers to issue the certifications whenever

coverage terminates or is cancelled, whether it is regular

coverage, or coverage under the TCC (temporary continuation of

coverage) or spouse equity provisions. Carriers are not required

to issue certificates when an enrollee changes to another FEHB

plan. However, if the enrollment terminates in less than 18

months, the carrier may need to contact the old plan in order to

certify FEHB Program coverage.

Enrollees and family members may request a certification even if

they have already received one. The carriers must respond to

such requests for up to 2 years after the date coverage was lost.

Effective dates Although HIPAA is not fully effective for the FEHB Program

until January 1, 1998, certification requirements apply to loss of

coverage occurring after June 30, 1996. For losses of coverage

occurring July 1, 1996, through September 30, 1996,

certifications are required upon written request. For losses of

coverage occurring from October 1, 1996, through May 31,

1997, carriers may, instead of sending certifications, notify

enrollees and family members that they may have a certification

upon request. For losses of coverage occurring on and after June

1, 1997, automatic certifications are required.

Waiting periods Under HIPAA, health benefits coverage before a "significant

break in coverage" (generally 63 days) is not counted as

"creditable coverage" for reducing a pre-existing condition

exclusion period. "Waiting periods" (that is, any period that

must pass before a newly-eligible employee can participate in an
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employer's health plan) are not counted in determining the length

of a break in coverage. However, a "waiting period" is not

"creditable coverage" in itself. Instead, the new carrier looks

back from the first day of the "waiting period" to determine

whether there is additional coverage ending not more than 62

days earlier. Therefore, the HIPAA certificates showing less

than 18 months of coverage must include waiting period

information.

In the FEHB Program, an employee is eligible to enroll the day

he or she enters on duty in a position that is not excluded from

coverage; however, the election to enroll does not become

effective until the first day of the pay period after the employing

office receives it. The period from the day the employee was

eligible to enroll until the day before the effective date of the

enrollment is a "waiting period" for this purpose. 

Under the FEHB Program, a "waiting period" occurs when an

employee enrolls--

C during the initial enrollment period based on a new

appointment;

C upon reappointment following a break in service

exceeding 3 days, or

C upon return to pay status following a termination of

coverage related to leave without pay.

If an employee chooses not to enroll at that time and later enrolls

based on some other event (such as an open season), there is no

waiting period for the purpose of HIPAA certification. 

At present, carriers do not have information about when the

waiting period for an enrollee began. Therefore, until the

Standard Form (SF) 2809 (Health Benefits Registration Form)

can be revised, carriers must contact the employing office for

that information in those few instances where a person has less

than 18 months of FEHB coverage. The carrier may request the

information by telephone or email, and the employing office may

respond in the same manner.

Example You reinstated Bruce Benefit 90 days after he resigned from

OPM (in the middle of a pay period) where he had been

employed (and covered under the FEHB Program) for 8 months. 
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Bruce didn't sign up for FEHB coverage until 4 weeks after his

reinstatement. Six months later, Bruce resigns to accept a job in

the private sector. His new employer's health benefit plan has

exclusions for pre-existing conditions. Is he subject to them

because he had a break in coverage of 63 days?

No, Bruce is not subject to the exclusions. First, his FEHB

coverage extended to the end of the pay period at OPM plus 31

days. Second, the 4 weeks that passed before he signed up for

FEHB coverage (plus the time it took for his election to be

effective) are considered a waiting period and don't count toward

a break in coverage. Note, however, that the waiting period

does not count toward the 12-month coverage requirement. (A

requirement that Bruce met by virtue of combining his coverage

at OPM and your agency.

What HIPAA doesn't

do

HIPAA doesn't require plans/issuers to offer any particular

benefits. Therefore, individuals are not guaranteed the same

level of benefits when they move from one employer to another.

HIPAA doesn't affect the waiting periods that some employers

impose before new employees may participate in their health

benefits plans. These waiting periods may be as long as 6

months or more. However, the waiting periods do not count

when determining whether there has been a "significant break" in

coverage.

Individual contracts

Not all Federal employees who leave Federal service and family

members who lose family member status go to work for an

employer who offers group insurance. Some of these former

employees and family members may consider purchasing an

individual insurance contract (other than the conversion contract

that the FEHB law requires carriers to offer to individuals who

lose FEHB coverage involuntarily). Individuals who lose FEHB

coverage can get individual contracts without preexisting

condition exclusion provisions if they:

C have had health coverage for at least 18 months and

have lost group coverage:

C did not have their group coverage terminated because

of fraud or nonpayment of premiums; 

C aren't eligible for TCC (temporary continuation of

coverage) or spouse equity or have exhausted their

TCC coverage; and
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C aren't eligible for coverage under any other group

health plan, including Medicare.

NOTE: The conversion contracts that the FEHB law requires

FEHB carriers to provide have never had exclusion provisions

and are not affected by the HIPAA limitations on exclusions. 

However, conversion contracts aren't group coverage; therefore,

a former employee or family member who chooses to convert

FEHB coverage may be subject to exclusions if he or she later

drops the conversion contract and purchases another individual

contract.

Employing office role The employing office role is small, but important. First, when

former employees and family members ask for certifications,

refer them to their carriers. Second, when carriers ask for

information about an employee's waiting period, respond

promptly.

Inquiries Neither the Office of Personnel Management nor the employing

offices are the source of definitive information about how

HIPAA may affect an individual. Because the law gives

enforcement authority to the States and allows States to impose

more generous conditions than provided by HIPAA, we believe

that the best source of information for an individual is the State

Insurance Commissioner.

Abby L. Block, Chief

Insurance Policy and

 Information Division

Attachment
FEHBP Letter

All Carriers

SUBJECT: Certifications of health benefits coverage.

The purpose of this letter is to alert all carriers to the certification requirements of the Health

Insurance Portability and Accountability Act of 1996 (HIPAA) and to explain how these

requirements are to be met for losses of health benefits coverage under the FEHB Program

that occur through December 31, 1997.

Regulations governing these requirements were published jointly in the Federal Register on

April 8, 1997, by the Departments of the Treasury, Labor, and Health and Human Services

(62 FR 16894). These regulations apply to the FEHB Program just as they do to other group

insurance programs. The Office of Personnel Management (OPM) issued the draft

amendments to the 1998 contracts regarding this legislation with Carrier Letters 97-15A (for

fee-for-service carriers), 97-15B (for community rated carriers), and 97-15C (for experiencerated HMO's), all dated April 15, 1997. These draft amendments require FEHB carriers to

issue the certificates for the 1998 contract year, which begins January 1, 1998.

Carriers also must issue certifications required under the regulations for losses of coverage

occurring before 1998. Generally, the certification requirements apply to loss of coverage

occurring after June 30, 1996. However, certifications are not required on an automatic basis

until June 1, 1997. For losses of coverage occurring July 1, 1996, through September 30,

1996, certifications are required upon written request. For losses of coverage occurring from

October 1, 1996, through May 31, 1997, carriers may, instead of sending certifications, notify

enrollees and family members that they may have a certification upon request. These notices

should have been issued no later than June 1, 1997. For losses of coverage occurring on and

after June 1, 1997, automatic certifications are required.

The supplemental information published with the regulations includes a model certification and

a model notification that carriers may use in certifying coverage and providing notices under

the FEHB Program. The regulations and supplemental information give detailed information

about making the certifications; however, carriers need the following additional information

about the application of some of the provisions to the FEHB Program:

Temporary continuation of coverage. Under the regulations, certifications are

required when a covered person becomes eligible for Consolidated Omnibus Budget

Reconcilation Act (COBRA) continuation coverage (Part 6 of subtitle B of title I of the
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Employee Retirement Income Security Act of 1974) and when COBRA continuation

coverage ends. The FEHB Program is not subject to COBRA continuation coverage,

although it has similar temporary continuation of coverage (TCC) provisions. We have

concluded that under the FEHB Program, certifications must be made whenever

coverage terminates or is cancelled, whether it is the termination or cancellation of

regular FEHB coverage, coverage under the TCC provisions, or coverage under the

spouse equity provisions. (We have also concluded that covered individuals must

exhaust their TCC eligibility before they can qualify for the protection provided by the

individual market provisions.)

Changing plans within the FEHB Program. The Office of Personnel Management

(OPM) has concluded that it is not necessary for carriers to certify coverage when an

enrollee changes to another plan within the FEHB Program or to automatically notify

the new plan of the period of coverage under the old plan. Instead, when a carrier

must certify coverage for an enrollee or family member who does not have 18 months

of coverage with that carrier, but transferred to that carrier from another FEHB plan,

the certifying carrier must obtain information from the previous carrier that is

sufficient to certify the individual's coverage under the FEHB Program. The carrier

may obtain this information from the old carrier by telephone or email. The name of

the old carrier is shown on the Standard Form (SF) 2809, Health Benefits Registration

Form, on which the enrollee elected the new plan or provided on the file transmitted

by Employee Express.

Waiting periods. Under these regulations, health benefits coverage before a

"significant break in coverage" is not considered "creditable coverage" for reducing a

pre-existing condition exclusion period. Waiting periods (periods of time a new

employee must wait before becoming covered under the employer's group health

program), however, are not considered a break in coverage for this purpose. In the

FEHB Program, an employee is eligible to enroll the day he or she enters on duty in a

position that is not excluded from coverage; however, the election to enroll does not

become effective until the first day of the first pay period following the agency's

receipt of the election. The period from the day the employee was eligible to enroll

through the day before the effective date of the enrollment is a waiting period for this

purpose. At present, carriers do not have information about when the waiting period

for an FEHB enrollee began. Until OPM can revise SF 2809, carriers must contact

employing offices for that information when the enrollee has less than 18 months of

coverage with the certifying carrier and was not covered by another FEHB Plan

immediately before coverage with the certifying carrier began. Carriers may use the

telephone or email to obtain this information. The SF 2809 includes a personnel office

contact and telephone number.

Thirty-one day temporary extension of coverage. In preparing these certificates,

please keep in mind that FEHB Program coverage includes a 31-day temporary

extension of coverage after termination and after family members lose coverage due to

loss of family member status or because the covering enrollment was changed to self

only, but not when an enrollee voluntarily cancels the enrollment. The 31-day 
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temporary extension of coverage must be included as creditable coverage in the

carrier's certification of coverage.

In the FEHB Program, carriers are notified of enrollment terminations by Standard Form (SF)

2810, Notice of Change in Health Benefits Enrollment. They are notified of voluntary

cancellations by SF 2809. Carriers must issue certifications upon receipt of an SF 2810

terminating enrollment or an SF 2809 cancelling enrollment. When a carrier receives an SF

2809 changing an enrollment from self and family to self only, the carrier must provide

certifications for family members of record who lost coverage as a result of the change in the

type of enrollment. Carriers do not issue certifications when an enrollee transfers to a

different payroll office or changes to a different FEHB plan.

Carriers do not generally receive any notice when a child ceases to qualify as a family member

or when the enrollee and spouse divorce. Family members and their birth dates are shown on

the SF 2809 that employees complete in order to enroll in a plan. Carriers may use this

information to determine when a child reaches age 22; however, the information may not be a

part of the automated data base at this time. The HIPAA law and regulations recognize that

carriers may not have the information necessary to make certifications for family members and

have special provisions for dealing with this lack of information through June 30, 1998. See

45 CFR 146.115(a)(5) at 62 FR 16964 for information about certifications for family

members.

If you have questions about certifications of FEHB coverage for HIPAA purposes, you may

call our Information Staff on 202-606-0191 or email us at FEHB@OPM.GOV.

Sincerely,

Frank D. Titus

Assistant Director

 for Insurance Programs
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G:\COMMON\OIP\INS\SEARS\HIPAA.BAL - August 26, 1997