1768 Federal Register / Vol. 62, No. 8 / Monday, January 13, 1997 / Notices

‘‘Reviewer Guidance for a Premarket

Notification Submission for Blood

Establishment Computer Software.’’ A

premarket notification (510(k)) is an

application submitted to FDA under

section 510(k) of the Federal Food,

Drug, and Cosmetic Act (the act) (21

U.S.C. 360(k)), to demonstrate that the

medical device to be marketed is

substantially equivalent to a legally

marketed device that was or is currently

on the U.S. market.

In a March 31, 1994, letter sent to

manufacturers of blood establishment

computer software, FDA stated that

software products used in the

manufacture or maintenance of data for

blood and blood components are

devices under section 201(h) of the act

(21 U.S.C. 321(h)) because these

products aid in the prevention of

disease by identifying unsuitable donors

and by preventing the release of

unsuitable blood and blood components

for transfusion or for further

manufacturing use. The original date for

submissions was March 31, 1995, but

after careful evaluation of the needs

expressed by the software

manufacturers and the impact of the

initiative on blood establishments, FDA

concluded that a 1-year extension to

March 31, 1996, was warranted. FDA

notified known manufacturers of blood

establishment computer software of the

extension, by letter, the text of which

was published in the Federal Register of

October 3, 1995 (60 FR 51802). The

reviewer guidance was presented and

discussed at the Blood Products

Advisory Committee meeting held on

June 20, 1996.

The content and format required for a

510(k) submission may be found in 21

CFR part 807. FDA intends that the

guidance document will be used as a

supplement to the ‘‘Reviewer Guidance

for Computer Controlled Medical

Devices Undergoing 510(k) Review,’’

issued by the Center for Devices and

Radiological Health on August 29, 1991.

The reviewer guidance announced in

this notice contains a description of the

content and format that a reviewer

should expect in a 510(k) submission for

blood establishment computer software.

As with other guidance documents,

FDA does not intend this document to

be all-inclusive. Moreover, not all

information may be applicable to all

situations. The reviewer guidance

document is intended to provide

information and does not set forth

requirements. Although this guidance

document does not create or confer any

rights for or on any person and does not

operate to bind FDA or the public, it

does represent the agency’s current

thinking on the review of premarket

notification submissions for blood

establishment computer software.

Interested persons may submit to the

Dockets Management Branch (address

above) written comments on the

reviewer guidance document. Two

copies of any comments are to be

submitted, except that individuals may

submit one copy. Comments and

information are to be identified with the

docket number found in brackets in the

heading of this document. The guidance

document and received comments are

available for public examination in the

office above between 9 a.m. and 4 p.m.,

Monday through Friday.

FDA anticipates revising the reviewer

guidance document periodically, in

response to comments received or to

reflect advancements in blood

establishment computer software.

Dated: December 31, 1996.

William K. Hubbard,

Associate Commissioner for Policy

Coordination.

[FR Doc. 97–715 Filed 1–10–97; 8:45 am]

BILLING CODE 4160–01–F

Health Care Financing Administration

[BPD–882–N]

Notification Procedures for States

Implementing ‘‘Alternative

Mechanisms’’ in the Individual Health

Insurance Market

AGENCY: Health Care Financing

Administration (HCFA), HHS.

ACTION: Notice.

SUMMARY: This notice generally

describes the statutory provisions under

section 111 of the Health Insurance

Portability and Accountability Act of

1996 (HIPAA) that guarantee availability

of individual health insurance coverage

to certain individuals with prior group

coverage. It also provides procedural

guidance for States that intend to

implement an alternative mechanism

under section 111 of HIPAA. Finally,

this notice describes the statutory

provisions that will apply in a State that

does not implement an acceptable

alternative mechanism.

This notice does not establish new

policy or requirements.

FOR FURTHER INFORMATION CONTACT:

Gertrude Saunders of the Insurance

Reform Implementation Task Force

(IRITF), (410) 786–5888 or e-mail

(iritf@hcfa.gov).

ADDRESSES: All correspondence

regarding this notice should be

submitted to the following address:

HCFA, Bureau of Policy Development,

Office of Chronic Care and Insurance

Policy, Insurance Reform

Implementation Task Force, S–LL–17,

Attention: Marc Thomas, 7500 Security

Boulevard, Baltimore, Maryland 21244–

1850.

SUPPLEMENTARY INFORMATION:

I. Background—Summary of Recent

Legislation

The Health Insurance Portability and

Accountability Act of 1996 (HIPAA,

Pub. L. 104–191) was enacted on August

21, 1996. HIPAA amended the Public

Health Service (PHS) Act to provide for,

among other things, improved access,

portability, and renewability of health

insurance in both the group and

individual health insurance markets.

Group health plans are regulated, in

part, by the Federal government under

the Employee Retirement Income

Security Act of 1974 (ERISA) and the

Internal Revenue Code and, to the

extent they purchase insurance, in part,

by the States under State insurance law.

Policies sold in the individual health

insurance market are regulated by the

States. This notice pertains to only the

individual market changes made by

section 111 of HIPAA.

Section 2741 of the PHS Act, as added

by section 111 of HIPAA, essentially

gives a State two options to ensure that

‘‘eligible individuals’’ have access to the

individual health insurance market.

Under the first option, assuming there is

appropriate authority in State law, the

State may simply enforce the Federal

statutory provisions that require all

issuers who offer coverage in the

individual market to make all their

individual policies available to all

eligible individuals on a guaranteed

basis, without preexisting condition

exclusions. (These provisions are

commonly referred to as the ‘‘Federal

default’’ provisions.) If the State chooses

this option, individual issuers may elect

to impose certain limitations on the

policies that they are required to offer

under the Federal default provisions.

(For additional information on these

limitations see section VIII of this

notice.)

Under the second option, States may

choose to implement an ‘‘alternative

mechanism’’ to ensure that eligible

individuals have access to the

individual health insurance market or

comparable coverage. States that choose

this option must submit to us a timely

notice with sufficient documentation to

enable us to determine whether it is an

acceptable alternative mechanism. (This

process is discussed in more detail

under section VI of this notice, which

includes the address for written

submissions.)
Federal Register / Vol. 62, No. 8 / Monday, January 13, 1997 / Notices 1769

II. Preemption

Section 2762 of the PHS Act specifies

that the Federal statutory provisions

pertaining to health insurance issuers in

the individual market generally do not

preempt State regulation of individual

insurance. Nevertheless, if the State

standards and requirements prevent the

application of a Federal requirement,

the statute preempts the State standards

and requirements and the Federal

requirements prevail.

Accordingly, the State standards and

requirements must ensure at a minimum

that every eligible individual in the

State is provided access to coverage that

comports with Federal requirements.

The State standards may not depart

from the Federal requirements in a way

that diminishes this minimum coverage.

The State, however, is permitted to

adopt standards that expand the number

of individuals who are protected. For

example, as discussed below, an eligible

individual must have an aggregate of at

least 18 months of ‘‘creditable

coverage,’’ with no breaks in coverage

that exceed 62 days. The same concept

of creditable coverage is used in section

2701 of the PHS Act, which limits the

use of preexisting condition exclusions

in the group market. Under section

2723(b)(2)(iii) of the PHS Act, States

may permit breaks in coverage that

exceed 62 days. If the State adopts this

provision in the group market, it would

not be precluded from applying the

same rule in the individual market,

since it would potentially extend

coverage to people whose breaks in

coverage would otherwise exclude them

from the definition of an eligible

individual.

Section 2762 of the PHS Act also

specifies that nothing in the individual

market provisions of HIPAA shall be

construed to affect or modify the

provisions of section 514 of ERISA,

which preempts State regulation of

employee welfare benefit plans,

including group health plans, except

through the regulation of insurance.

III. Federal Definitions

The individual market rules of HIPAA

provide health insurance protection to

an ‘‘eligible individual.’’ This term is

defined in section 2741(b) of the PHS

Act. It includes an individual who

meets all of the following criteria:

• The individual has aggregate

periods of ‘‘creditable coverage’’ (as

defined in section 2701(c) of the PHS

Act) totaling 18 or more months at the

time the individual seeks individual

market coverage. In general, under

section 2701(c) of the PHS Act, multiple

periods of coverage are aggregated only

if there has been no more than a 62-day

break between periods of creditable

coverage.

• The individual’s most recent

creditable coverage must have been

provided under a group health plan

(including a governmental plan or

church plan), as defined under section

2791 of the PHS Act, or health

insurance offered in connection with

that plan.

• The individual is not eligible for

coverage under a group health plan, is

not eligible for Medicare or Medicaid

coverage, and does not have other

health insurance coverage.

• The termination of the individual’s

most recent health plan coverage is not

related to nonpayment of premiums or

fraud, as described in sections

2712(b)(1) or (b)(2) of the PHS Act.

• The individual must have elected

any continuation coverage offered by an

employer plan under the Consolidated

Omnibus Budget Reconciliation Act of

1985 (COBRA, Pub. L. 99–272) or under

a similar State requirement, and must

have exhausted that coverage. (Federal

COBRA provisions only apply to plans

of an employer that normally employed

at least 20 employees on a typical

business day in the preceding calendar

year. In some cases, there are State

requirements similar to COBRA that

require continuation coverage for

insurance policies not subject to the

Federal COBRA provisions.)

‘‘Group health plan’’ is defined in

section 2791(a)(1) of the PHS Act to

mean an employee welfare benefit plan

(as defined in section 3(1) of ERISA) to

the extent that the plan provides

medical care (as defined below),

including items and services paid for as

medical care to employees or their

dependents (as defined under the terms

of the plan) directly or through

insurance, reimbursement, or otherwise.

‘‘Health insurance coverage’’ is

defined in section 2791(b)(1) of the PHS

Act to mean benefits consisting of

medical care (provided directly, through

insurance or reimbursement, or

otherwise and including items and

services paid for as medical care) under

any hospital or medical service policy

or certificate, hospital, or medical

service plan contract, or health

maintenance organization contract

offered by a health insurance issuer.

‘‘Health insurance issuer’’ is defined

in section 2791(b)(2) of the PHS Act as

an insurance company, insurance

service, or insurance organization

(including a health maintenance

organization, as defined in section

2791(b)(3) of the PHS Act) which is

licensed to engage in the business of

insurance in the State and which is

subject to State laws that regulate

insurance. The term ‘‘health insurance

issuer’’ does not include a group health

plan.

‘‘Individual health insurance

coverage’’ is defined in section

2791(b)(5) of the PHS Act to mean

health insurance coverage offered to

individuals in the individual market,

but does not include short-term limited

duration insurance.

Section 2791(a)(2) of the PHS Act

defines ‘‘medical care’’ as amounts paid

for the diagnosis, cure, mitigation,

treatment, or prevention of disease, or

amounts paid for the purpose of

affecting any structure or function of the

body; including transportation primarily

for and essential to the medical care and

insurance covering the medical care.

IV. Alternative Mechanisms; Minimum

Requirements

Although the law recognizes diversity

among the States by allowing for

alternative mechanisms, there are

minimum requirements for alternative

mechanisms. Under section 2744(a)(1)

of the PHS Act, an alternative

mechanism must meet the following

requirements:

• Provide a choice of health

insurance coverage to all eligible

individuals.

• Not impose any preexisting

condition exclusions on eligible

individuals.

• Include at least one policy form of

coverage that is comparable to either

one of the following:

+ Comprehensive health insurance

coverage offered in the individual

market in the State.

+ A standard option of coverage

available under the group or

individual health insurance laws in

the State.

• Implement one of the following:

+ The National Association of Insurance

Commissioners (NAIC) Small

Employer and Individual Health

Insurance Availability Model Act, as

it applies to individual health

insurance coverage, or the Individual

Health Insurance Portability Model

Act, as adopted on June 3, 1996.

+ A qualified high-risk pool that

provides for the following:

—Health insurance coverage (or

comparable coverage) to all eligible

individuals that does not impose any

preexisting condition exclusion with

respect to this coverage for all eligible

individuals.

—Premium rates and covered benefits

for that coverage consistent with

standards included in the NAIC

Model Health Plan for Uninsurable
1770 Federal Register / Vol. 62, No. 8 / Monday, January 13, 1997 / Notices

Individuals Act in effect on August

21, 1996.

+ Another mechanism—

—That provides for risk adjustment, risk

spreading, or a risk-spreading

mechanism (among issuers or policies

of issuers) or otherwise provides for

some financial subsidization for

eligible individuals, including

through assistance to participating

issuers, or

—Under which each eligible individual

is provided a choice of all individual

health insurance coverage otherwise

available.

If a State adopts into law or regulation

any provisions from the NAIC Model

Acts cited in section 2744 of the PHS

Act, it must verify that none of the

Model Acts would prevent the

application of a requirement of the PHS

Act, and therefore be preempted. Since

those Model Acts predate the enactment

of HIPAA, they do not fully conform

with HIPAA requirements that apply to

eligible individuals. The NAIC is

currently analyzing these Model Acts to

provide guidance to States in

identifying revisions that would

conform with the provisions of the PHS

Act. (See later discussion in section

VI.C.3. of this notice.)

State options for ensuring that eligible

individuals have access to the

individual health insurance market are

illustrated in the chart below.

BILLING CODE 4120–01–P
Federal Register / Vol. 62, No. 8 / Monday, January 13, 1997 / Notices 1771

BILLING CODE 4120–01–C
1772 Federal Register / Vol. 62, No. 8 / Monday, January 13, 1997 / Notices

V. Presumption of an Acceptable

Alternative Mechanism

An acceptable alternative mechanism

includes a private or public individual

health insurance mechanism that is

designed to provide access to health

benefits for individuals in the

individual market in the State in

accordance with section 2744 of the

PHS Act. Examples of an acceptable

alternative mechanism may include a

health insurance coverage pool or

program, a mandatory group conversion

policy, guaranteed issue of one or more

plans of individual health insurance

coverage, open enrollment by one or

more health insurance issuers, or a

combination of these mechanisms that

meet at least the minimum standards

under section 2744.

A. State Submission by April 1, 1997

A State is presumed to be

implementing an acceptable alternative

mechanism as of July 1, 1997, if, by not

later than April 1, 1997, the Chief

Executive Officer (generally the

Governor) of the State notifies us that

the State has enacted or intends to enact

any necessary legislation as of January

1, 1998, and provides us with the

information necessary to review the

mechanism and its implementation (or

proposed implementation), and, if,

within 90 days after receiving the State’s

submission, we do not disapprove it as

described in section VII.B. of this notice.

(If we notify the State of our need for

additional information or further

discussions on its submission, we will

suspend the review period until the

State provides the necessary

information or participates in the

necessary discussions. If the State

chooses not to provide the necessary

information or our discussions with the

State cannot be concluded satisfactorily,

we may disapprove the State’s

submission.) The State must provide

information necessary for us to review

the mechanism’s implementation every

3 years to continue to be presumed to

have an acceptable alternative

mechanism.

B. State Submission After April 1, 1997

A State may presume that we have

accepted its proposed alternative

mechanism if—

• After April 1, 1997, the State

submits notice and sufficient

documentation (see section VI of this

notice) for either an initial proposed

alternative mechanism or revisions to an

already submitted proposed alternative

mechanism, and

• We make no determination

disapproving the mechanism within 90

days (or a longer period if we suspended

the 90-day review period awaiting

additional information or to conduct

further discussion with the State).

After an additional 90 days, the State

may presume its alternative mechanism

to be an acceptable alternative

mechanism. (For further information on

future adoptions and revisions see

section VI.D.5. of this notice.)

VI. Notification, Documentation, and

Review

A. Notification

Under section 2744(b) of the PHS Act,

except as described below in section

VII.B., a State is presumed to be

implementing an acceptable alternative

mechanism as of July 1, 1997, if, by not

later than April 1, 1997, the Chief

Executive Officer (generally the

Governor) of the State takes the

following two actions:

• Notifies us that the State has

enacted, or intends to enact, by January

1, 1998 (or July 1, 1998 if the State

legislature cannot meet before August

21, 1997) any necessary legislation to

provide for the implementation of a

mechanism reasonably designed to be

an acceptable alternative mechanism as

of January 1, 1998 (or July 1, 1998 if the

State legislature cannot meet before

August 21, 1997).

• Provides us with the information

necessary for us to review the

mechanism and its implementation (or

its proposed implementation).

B. Documentation

Since the law gives States substantial

flexibility in devising alternative

mechanisms, we do not intend that this

notice set forth a checklist of criteria. If

a State chooses to submit a proposed

alternative mechanism, the State must

determine what to submit. We must,

however, be able to determine whether

the mechanism will be both designed

and enforced in a way that will ensure

that eligible individuals are given the

required access to insurance coverage.

Our review will focus on results for

eligible individuals. Our main concern

is that the State submission show the

analysis and the reasoning behind the

design of the proposed alternative

mechanism, and a reasonable

assessment of the likelihood that the

mechanism will achieve the legislative

objectives.

Since time will be of the essence in

reviewing a large volume of submissions

and responding to the States timely, we

recommend that a State provide

summaries and full text of any critical

supporting information (such as the text

(or proposed text) of legislation or

regulations) in its initial State

submission. If we notify the State of our

need for additional information or

further discussions on its submission,

we will suspend the review period until

the State provides the necessary

information or participates in the

necessary discussions. If the State

chooses not to provide the necessary

information or our discussions with the

State cannot be concluded satisfactorily,

we may disapprove the State’s

submission. We discuss disapproval and

the consequences of disapproval in

sections VII.B. and C. of this notice.

The submission must include

sufficient information to provide us

with a reasonable basis for concluding

that the proposed alternative

mechanism meets the requirements

described in section VI.C. of this notice.

Along with a detailed description of the

alternative mechanism and how it will

be implemented and function, we

recommend the State include the

following information:

• Contact Person—The name,

position title, address, and telephone

number of the person to whom we

should address all questions and

contacts concerning the proposed

alternative mechanism.

• State Legislative Calendar—Clear

and prominent identification of needed

State legislative action and the State

legislature’s sessions. We need to know

of any legislative issues affecting a

State’s ability to implement an

alternative mechanism so that we can

determine priorities for reviewing State

submissions. Also, the State should

submit a description of the authority

and procedures it follows for calling a

special or emergency legislative session,

if these exist.

• State Laws and Regulations—A

summary and copies of the full text of

existing State laws and regulations

pertaining to the individual health

insurance market. Laws and regulations

that could be critical to an adequate

analysis include the following:

+ Medical underwriting and rating

restrictions.

+ Restrictions on preexisting condition

exclusions.

+ Guaranteed issue requirements.

+ Solvency requirements.

If a State chooses to implement an

‘‘other mechanism’’ described in section

2744(c)(3) of the Act, we recommend

that the State submit a more detailed

description of the mechanism than it

would if it planned to implement a

mechanism that relies on one of the

three NAIC Model Acts referenced in

section 2744 of the PHS Act. In

particular, unless the State chooses to
Federal Register / Vol. 62, No. 8 / Monday, January 13, 1997 / Notices 1773

provide a choice to eligible individuals

of all individual policies sold in the

State, the State should describe in detail

how the risk associated with serving all

anticipated eligible individuals would

be spread under the mechanism and

how the additional cost associated with

serving this new population would be

subsidized.

The following examples illustrate the

differences in documentation that a

State may submit, based on differences

in the State’s legislation and proposed

alternative mechanism.

• Example 1—State A has already

adopted a comprehensive reform for its

individual health insurance market. The

State now prohibits preexisting

condition limitations on coverage,

provides for guaranteed issue and

guaranteed renewability, and has taken

active steps to ensure the participation

of insurers in the State individual health

insurance market. State A submits, in

addition to its recent law (which was

adopted before August 21, 1996, the

enactment date of HIPAA), two

analyses: the first identifies technical

amendments to make its recent law

consistent with HIPAA; the second

shows that any eligible individual under

HIPAA also would be eligible for the

individual market under the State law.

The State’s submission also shows that

the State’s residency requirements

would not prevent any HIPAA-eligible

individual from entering the individual

market without causing a break in

coverage.

• Example 2—State B has a State

high-risk pool, but that pool has a

significant waiting list or appears to be

entering a ‘‘premium death spiral.’’

State B offers an improved risk pool

legislative and funding package.

Because the financial stability of the

existing risk pool is known to be in

question, State B includes, in

considerable detail, analyses of the

projected revenue, subsidies, and

financial condition of the pool under

the proposed law. State B also specifies

how HIPAA-eligible individuals will be

able to enter the risk pool without

causing a break in coverage.

A State may wish to submit other

information, depending on the extent of

the changes the State is planning and its

relevance to the State’s proposed

alternative mechanism. Some examples

follow:

• Characteristics of the Existing

Individual Market—Analysis of

information relating to the existing

availability and sale of individual health

insurance to the current population of

the State. Examples of this information

might be a description of the policy

forms currently available in the

individual market in the State; numbers

of policies held under each form;

current population of the State;

estimated percentage of that population

currently covered under group plans or

coverage other than individual coverage;

and estimated uninsured population.

• Projected Market Impact of the

Alternative Mechanism—The State’s

best estimate of the number of eligible

individuals who will need to be served

under the proposed alternative

mechanism, including a description of

the factors the State considered in

determining the size of the affected

population, how the mechanism will

serve the needs of the affected

population, how much the mechanism

serving this population will cost, and

how those costs will be borne. In

describing its population of eligible

individuals or potentially eligible

individuals in the individual health

insurance market, the State may want to

consider the relative prevalence of

certain groups of individuals in the

State and how the alternative

mechanism will affect the likely number

of individuals eligible for coverage

under the mechanism. For a mechanism

that will rely on State-supported

operations such as risk pools and other

risk-spreading mechanisms, the State

should show the level and source of

funding needed to provide for the needs

of the eligible or potentially-eligible

individuals.

Groups whose relative size may be

large enough to have substantial impact

on the number of eligible, as well as

ineligible, individuals include the

following:

+ Individuals eligible for Medicaid

(especially if the State has a waiver

under section 1115 of the Social

Security Act that expands eligibility

for Medicaid and would thus make

these people ineligible under HIPAA

for transition to the individual

market).

+ Individuals eligible for Medicare.

+ Individuals who are receiving

medical coverage under special

programs such as the Indian Health

Service. These individuals may meet

the definition of an ‘‘eligible

individual,’’ but their eligibility for

coverage under the Indian Health

Service program may make it unlikely

that they would purchase private

health insurance.

+ Individuals who elect and exhaust

their continued group health plan

coverage under COBRA or coverage

under a similar State requirement.

+ Individuals who do not have the

COBRA protection (or similar

protection under a State requirement)

and will be entering the alternative

mechanism directly as an eligible

individual. For example, an

individual whose employer stops

offering health insurance coverage

may be eligible for coverage under the

alternative mechanism without

waiting for the COBRA continuation

period to end.

C. Standard of Review

1. General

We will base our review on certain

principles set forth in the statute and

legislative history. The statute clearly

requires us to make a substantive

determination whether a mechanism is

an ‘‘acceptable alternative mechanism’’

that meets all of the requirements set

forth in the statute. However, while, as

noted in section II of this notice, no

State requirement can prevent the

application of a requirement of HIPAA,

the Conference Report that accompanied

that legislation states that the conferees

intended the narrowest preemption.

This notice describes how we intend to

apply these principles.

2. Statutory Requirements

We will review each State’s

submission to determine whether it

addresses each of the following

requirements:

• Is the mechanism reasonably

designed to provide all eligible

individuals with a choice of health

insurance coverage?

• Does the choice offered to eligible

individuals include at least one policy

form that meets the following

requirements?

+ Is comparable to comprehensive

health insurance coverage offered in

the individual market in the State.

+ Is comparable to a standard option of

coverage available under the group or

individual health insurance laws of

the State.

• Does the mechanism provide access

to coverage for all eligible individuals

within Federal time frames?

• Does the mechanism prohibit

preexisting condition exclusions for all

eligible individuals?

• Is the State implementing one of the

following?

+ The NAIC Small Employer and

Individual Health Insurance

Availability Model Act (Availability

Model), adopted on June 3, 1996.

+ The Individual Health Insurance

Portability Model Act (Portability

Model), adopted on June 3, 1996.

+ A qualified high-risk pool that

provides eligible individuals health

insurance or comparable coverage

without a preexisting condition
1774 Federal Register / Vol. 62, No. 8 / Monday, January 13, 1997 / Notices

exclusion, and with premiums and

benefits consistent with the NAIC

Model Health Plan for Uninsurable

Individuals Act (as in effect August

21, 1996).

+ A mechanism that provides for risk

spreading or provides eligible

individuals with a choice of all

available individual health insurance

coverage.

• Has the State enacted all legislation

necessary for implementing the

alternative mechanism?

+ If not, will the necessary legislation be

enacted by January 1, 1998?

+ If not, is the State legislature meeting

during the 12-month period beginning

August 21, 1996 and ending August

20, 1997?

3. Concern About Using NAIC Models

As discussed previously, while the

statute recommends the use of certain

NAIC Model Acts and references them

by specific adoption dates, these Model

Acts contain certain provisions that are

inconsistent with HIPAA requirements.

If inconsistencies exist, a State must

alter these provisions as they apply to

eligible individuals under HIPAA so

that its mechanism conforms with the

Federal requirements. For example, if a

State uses the Portability Model (which

permits the use of preexisting condition

exclusions and affiliation periods), it

must distinguish between Federallyeligible individuals and all others

served under the State’s rules. As long

as it exempts all Federally-eligible

individuals from any preexisting

condition exclusions or affiliation

periods, the State may still use (with

respect to non-Federally-eligible

individuals in the individual market)

the preexisting condition and affiliation

rules of the Portability Model.

Although the following is not an allinclusive list, we note the following

additional discrepancies between the

NAIC Model Acts and HIPAA

requirements:

• The Portability Model permits only

a 31-day break in coverage for

individuals rather than the 62-day break

permitted by section 2701(c)(2) of the

PHS Act. Federally-eligible individuals

must be given at least the 62-day break

required under section 2701(c)(2).

• The Availability Model contains a

definition of ‘‘qualifying coverage’’ that

excludes coverage under a group health

plan that is regulated under ERISA.

Under HIPAA, however, the definition

of ‘‘creditable coverage’’ clearly

includes coverage under a ‘‘group health

plan,’’ which is defined to include selfinsured plans regulated under ERISA.

• Certain key concepts (for example,

‘‘eligible person,’’ ‘‘preexisting

condition,’’ and ‘‘qualifying coverage’’)

are defined in both the Availability and

Portability Models somewhat differently

than in HIPAA. To the extent that State

law incorporates or plans to incorporate

portions of the Models that use those

terms, the State must ensure that use of

these terms does not prevent the

application of HIPAA protections to

eligible individuals. This may be done

simply by applying special provisions to

those eligible individuals.

• The Availability and Portability

Models also contain residency

requirements that cannot be applied to

HIPAA-eligible individuals.

• If a State uses the NAIC Model

Health Plan for Uninsurable Individuals

Act, certain otherwise acceptable highrisk pool practices such as ‘‘waitlisting’’ individuals or applying

preexisting condition exclusions are not

permitted with respect to HIPAAeligible individuals.

4. Interim Response to Frequently

Asked Questions

We recognize that States would like to

have answers now to questions such as

whether a difference in deductibles

constitutes enough choice or how

comprehensive a policy must be to be

an acceptable offering. However, this

document is a procedural notice and not

a regulation. Until we issue regulations

dealing with these and other issues,

States must make a good faith effort to

interpret the statute as best they can

when proposing an alternative

mechanism before April 1, 1997. Should

any discrepancies later emerge between

a State’s interpretation of the statute and

our interpretation, as expressed in the

interim final rule that we expect to

publish by April 1, 1997, we plan that

the Federal rules will apply

prospectively and will afford a

transition period that will give a State

an adequate opportunity to amend its

mechanism to conform with any new

regulation requirements. We will

include rules on the transition period in

the interim final rule.

D. Notification Procedure

1. Advance Notification Requested

We request that a State notify us in

writing or by e-mail (iritf@hcfa.gov) of

its intent to submit or not to submit an

alternative mechanism. If we do not

hear from a State by February 14, 1997,

we will contact the State to find out its

intention regarding the submission of an

alternative State mechanism. The law

does not create a requirement that States

notify us of their intentions, but

notification will help us plan our work

to meet the statutory deadlines.

If a State does not plan to offer an

alternative mechanism, we request that

the State advise us of its plans to

implement the Federal requirements.

If a State does not plan to offer either

an alternative mechanism, or to

implement the Federal requirements, we

request that the State advise us as soon

as possible so that we may begin action

to implement Federal enforcement of

the Federal requirements in the State.

2. Contents of Notification Package

We request that a State’s submission

be submitted in duplicate and be

accompanied by a cover letter, signed by

the Chief Executive Officer (generally

the Governor) of the State. In addition,

States should include a brief summary

of their legislative calendars and note

any deadlines that are significant to this

review process. We are requesting that

States submit two copies of their

proposed alternative mechanisms to

assist us in timely review of their

submissions. Our regional offices may

assist us in reviewing the States’

submissions and we wish to avoid any

delays that may occur in reproducing

these submissions.

3. Deadline

We must receive all submissions from

the States no later than April 1, 1997 in

order for the State to qualify for the

presumption that it is implementing an

acceptable alternative mechanism as of

July 1, 1997. For official confirmation of

our receipt date, we suggest that States

use the postal certification services of

the United States Post Office.

No later than 90 days after we receive

a State’s proposed alternative

mechanism, we will take at least one of

the following actions:

• Notify the State that we have

accepted its proposed alternative

mechanism. (This notification may be

before the 90-day review period ends.)

• Make no determination concerning

the State’s alternative mechanism;

therefore, the State may presume we

have accepted its alternative

mechanism.

• Forward to the State a request for

additional information or a notification

that we need to discuss further with the

CEO (or his or her designee) the

proposed alternative mechanism. We

expect to make requests for additional

information or initiate discussions as

soon as possible after receiving the

State’s proposed alternative mechanism.

If we notify the State of our need for

additional information or further

discussions on its submission, we will

suspend the review period until the

State provides the necessary

information or participates in the
Federal Register / Vol. 62, No. 8 / Monday, January 13, 1997 / Notices 1775

necessary discussions. If the State

chooses not to provide the necessary

information or our discussions with the

State cannot be concluded satisfactorily,

we may disapprove the State’s

submission. We discuss disapproval and

the consequences of disapproval in

sections VII.B. and C. of this notice. The

State may contact us for information on

implementing the Federal default

requirements.

4. Where To Submit a Package

We request each State submit its

proposed alternative mechanism, in

duplicate, to the following address:

HCFA, Bureau of Policy Development,

Office of Chronic Care and Insurance

Policy, Insurance Reform

Implementation Task Force, S–LL–17,

Attention: Marc Thomas, 7500 Security

Boulevard, Baltimore, Maryland 21244–

1850.

5. Future Adoptions and Revisions

A State with an approved alternative

mechanism may request approval of

revisions to its alternative mechanism.

Similarly, a State operating under the

Federal default provisions may, at any

time, submit a proposed alternative

mechanism. The State should mail its

submission to the above address. We

request that future revisions to already

approved mechanisms be submitted no

earlier than July 1, 1997.

E. Continued Presumption for States

Entitled to Statutory Delay

In accordance with section 2744(b) of

the PHS Act, States whose legislatures

do not meet within the 12-month period

beginning August 21, 1996 and ending

August 20, 1997, and that need

legislative authority in order to enact an

acceptable alternative mechanism may

qualify for extended deadlines for

implementing an acceptable alternative

mechanism. To qualify for an extension,

the State must comply with the

following deadlines:

• In order for the State to be entitled

to the presumption that it has an

acceptable alternative mechanism in

effect as of July 1, 1997, the Chief

Executive Officer (generally the

Governor) must notify us by April 1,

1997 about the following:

+ The State legislature has not and will

not meet during the 12-month period

beginning August 21, 1996 and

ending August 20, 1997.

+ The State intends to implement an

alternative mechanism by July 1,

1998.

• In order for the presumption to

continue on and after July 1, 1998, the

State must—

+ Notify us by April 1, 1998 that the

State has enacted any necessary

legislation to provide for

implementation of an acceptable

alternative mechanism as of July 1,

1998, and

+ Provide us with the information

described in this section to enable us

to review the mechanism and its

implementation.

VII. Notification to the State

A. Time Frames

For State submissions received by

April 1, 1997, we will do a preliminary

review to determine whether the

package appears to be complete enough

for us to make a determination. If not,

we will notify the State by telephone

and in writing, and provide the State the

opportunity to submit supplemental

information. We will issue a written

response to each State’s request as soon

as possible, and no later than 90 days

after receipt of the State’s submission.

B. Disapproval

In accordance with section 2744(b)(2)

of the PHS Act, we will review the

information submitted and make a

preliminary determination whether the

State has or has not submitted an

acceptable alternative mechanism.

If our preliminary determination is

that the mechanism is not acceptable,

we will consult with the Chief

Executive Officer (generally the

Governor) of the State, or his or her

designee, and the State Insurance

Commissioner or the Chief Insurance

Regulatory Official of the State. If after

these consultations, we still conclude

that the State’s alternative mechanism is

not acceptable, we will—

• Notify the State of that

determination; and

• Inform the State that if the State

fails to implement an acceptable

alternative mechanism, the Federal

default provisions will take effect.

If we disapprove a State’s proposed

alternative mechanism, we will give the

State a reasonable opportunity to

modify the mechanism (or to adopt

another mechanism).

C. Consequences of Disapproval and

Enforcement Action

If we make a final determination that

(1) the design of a State’s alternative

mechanism is not acceptable or (2) the

State is not substantially enforcing an

otherwise acceptable alternative

mechanism, we will notify the State in

writing of our determination. We will

provide the State with notice that the

requirements of section 2741 of the PHS

Act apply to health insurance coverage

offered in the individual market in the

State, effective as of a date specified in

our notice.

VIII. Alternative Coverage Where There

Is No State Mechanism

In accordance with section 2741(c) of

the PHS Act, if a State is not

implementing an acceptable alternative

mechanism, a health insurance issuer

may elect to limit coverage offered

through the individual market within

prescribed parameters. The issuer may

limit the individual market coverage

offered as long as there are two different

policy forms of coverage offered. Both

policy forms must be designed for, made

generally available to, actively marketed

to, and enroll both eligible and other

individuals, and meet one of two

requirements regarding policy forms

described in section 2741(c)(2) or (c)(3)

of the PHS Act.

Under section 2741(c)(2), the health

insurance issuer must offer the policy

forms for individual health insurance

coverage with the largest, and next to

largest, premium volume of all similar

policy forms offered by the issuer in the

State or applicable marketing or service

area by the issuer in the individual

market for the period involved. Under

section 2741(c)(3), the health insurance

issuer must offer a lower-level coverage

policy form that meets the requirements

of section 2741(c)(3)(B) and a higherlevel coverage policy form that meets

the requirements of section

2741(c)(3)(C). Each of these policy forms

must include benefits substantially

similar to other individual health

insurance coverage offered by the issuer

in the State and each must be covered

under a method described in section

2744(c)(3)(A) pertaining to risk

adjustment, risk spreading, or financial

subsidization.

IX. Information Collection

Requirements

Under the Paperwork Reduction Act

of 1995, agencies are required to provide

60-day notice in the Federal Register

and solicit public comment before a

collection of information requirement is

submitted to the Office of Management

and Budget (OMB) for review and

approval. This notice contains

information collections that are subject

to review by OMB under the Paperwork

Reduction Act of 1995. The title,

description, and respondent description

of the information collections are shown

below with an estimate of the annual

reporting and recordkeeping burden.

Included in the estimate is the time for

reviewing instructions, searching

existing data sources, gathering and

maintaining the data needed, and
1776 Federal Register / Vol. 62, No. 8 / Monday, January 13, 1997 / Notices

collecting and reviewing the collection

of information.

We are, however, requesting an

emergency review of this notice. In

compliance with section 3506(c)(2)(A)

of the Paperwork Reduction Act of 1995,

we have submitted to the OMB the

following information collection for

emergency review. We are requesting an

emergency review because the

collection of this information is needed

before the expiration of the normal time

limits under OMB’s regulations at 5

CFR, part 1320. So that a State does not

have to incur the burden of temporarily

implementing the Federal default

requirements or live under Federal

enforcement of those requirements,

HIPAA requires a State to submit to us

its proposed alternative mechanisms by

April 1, 1997. A State may voluntarily

submit the suggested information

collection referenced in this notice

when it submits its proposed alternative

mechanisms. The description of the

information collection will assist a State

in submitting sufficient information for

our review of its proposed alternative

mechanisms.

We are requesting that OMB provide

a 2-day public comment period with a

2-day OMB review period and a 180-day

approval. During this 180-day period,

we will publish a separate Federal

Register notice announcing the

initiation of an extensive 60-day agency

review and public comment period on

these requirements. We will submit the

requirements for OMB review and an

extension of this emergency approval.

Type of Information Request: New

collection.

Title of Information Collection:

Notification Procedures for States

Implementing ‘‘Alternative

Mechanisms’’ in the Individual Health

Insurance Market and Supporting

Notice (BPD–882–N).

Form Number: HCFA–R–202.

Use: To outline the documentation for

States to obtain Federal approval of a

State’s alternative mechanism under

section 111 of HIPAA.

Frequency: On occasion.

Affected Public: States.

Number of Respondents: 55.

Total Annual Responses: 55.

Total Annual Hours Requested:

66,000.

In summary, the information

collection referenced in section VI.

‘‘Notification, Documentation, and

Review’’ provides that each State

electing to implement an alternative

mechanism notify us that the State has

enacted, or intends to enact, any

necessary legislation to provide for the

implementation of a mechanism

reasonably designed to be an acceptable

alternative mechanism and provides us

with the information to review the

mechanism and its implementation (or

proposed implementation).

If a State chooses to submit a

proposed alternative mechanism, the

State must submit sufficient information

to provide us with a reasonable basis for

concluding that the proposed alternative

mechanism meets the criteria described

in section VI.C.2. of this notice. Along

with a detailed description of the

alternative mechanism and how it will

function, we recommend the State

include the name of a contact person,

State Legislative Calendar, and text of

existing State laws and regulations

pertaining to the individual health

insurance market.

If a State chooses to implement an

‘‘other mechanism’’ described in section

2744(c)(3) of the Act, we recommend

that the State submit a more detailed

description of the mechanism than it

would if it planned to implement a

mechanism that relies on one of the

three NAIC Model Acts referenced in

section 2744 of the PHS Act.

To request copies of the proposed

information collections referenced

above, call the Reports Clearance Office

on (410) 786–1325.

The information collections of this

notice are not effective until they have

been approved by the OMB. We have

submitted a copy of this notice to the

OMB for its review of these information

collections. A notice will be published

in the Federal Register when approval

is obtained. Interested persons are

invited to send comments regarding this

burden or any other aspect of these

collections of information, including

any of the following subjects: (1) The

necessity and utility of the information

collection for the proper performance of

the agency’s functions; (2) the accuracy

of the estimated burden; (3) ways to

enhance the quality, utility, and clarity

of the information to be collected; and

(4) the use of automated collection

techniques or other forms of information

technology to minimize the information

collection burden.

Comments on these information

collections may be faxed to Allison

Herron Eydt at 202–395–6974 or mailed

directly to the following address: Office

of Information and Regulatory Affairs,

Office of Management and Budget,

Room 10235, New Executive Office

Building, Washington, DC 20503, Attn:

Allison Herron Eydt, HCFA Desk

Officer. A copy of the comments may be

mailed to the following address: Health

Care Financing Administration, Office

of Financial and Human Resources,

Management Analysis and Planning

Staff, Room C2–26–17, 7500 Security

Boulevard, Baltimore, MD 21244–1850.

X. Waiver of Solicitation of Comments

This notice announces the options a

State has under section 111 of HIPAA to

ensure that eligible individuals have

access to the individual health

insurance market. As has been our

custom, we use general notices, rather

than formal notice and comment

rulemaking procedures, to make these

announcements. In doing so, we

acknowledge that, under the

Administrative Procedure Act,

interpretive rules, general statements of

policy, and rules of agency organization,

procedure or practice are excepted from

the requirements of notice and comment

rulemaking.

This notice does not establish new

policy or requirements beyond those

found in the statute. We are publishing

this notice to assist a State that chooses

to submit a proposed alternative

mechanism under section 111 of

HIPAA. We intend that the information

we have identified in this notice

provide guidance to a State and assist it

in submitting sufficient information to

enable us to approve the State’s

proposed alternative mechanism. We

intend that this information assist a

State to implement timely HIPAA

provisions under its own State

requirements. This would prevent the

need for a State to comply with Federal

requirements and subsequently

transition to the State’s requirements

after we approve a State’s proposed

alternative mechanism. We wish to

avoid an unnecessary burden on the

State.

In accordance with the provisions of

Executive Order 12866, this notice was

reviewed by the Office of Management

and Budget.

Authority: Section 2741 of the Public

Health Service Act.

Dated: December 17, 1996.

Bruce C. Vladeck,

Administrator, Health Care Financing

Administration.

Approved: December 20, 1996.

Donna E. Shalala,

Secretary, Health and Human Services.

[FR Doc. 97–672 Filed 1–10–97; 8:45 am]

BILLING CODE 4120–01–P

Health Resources and Services

Administration

Advisory Council; Notice of Meeting

In accordance with section 10(a)(2) of

the Federal Advisory Committee Act

(Public Law 92–463), announcement is

made of the following National