Good morning, Mr. Chairman, members of the Committee. Thank you
for inviting me to speak with you this morning.
The Health Insurance Portability and Accountability Act of 1996
(HIPAA) enhances the "portability" of health insurance, allowing
many workers to maintain insurance coverage if they lose or leave
their jobs. The Department of Health and Human Services, through
the Health Care Financing Administration (HCFA), has a
significant role in the implementation of this law, and we
applaud this committee and the bipartisan effort in Congress for
passing this very important piece of legislation.
The implementation of the insurance reform provisions of HIPAA
will require HCFA to assume new roles in relationship to State
regulation of health insurance and health coverage. These new
roles are entirely consistent with our commitment to improve
access to health insurance for all Americans. We have been
engaged in a series of meetings with States, insurers, advocacy
groups, and the public as we prepare to implement the law. We
welcome the challenges this work brings to us, and we took
forward to successful and timely implementation.
Today, my testimony will focus on the process of promulgating the
insurance reform provisions relating to HIPAA.
WORKING WITH OTHER DEPARTMENTS
The Departments of Labor, Treasury, and Health and Human Services
share the implementation of the law regarding health coverage
offered through employment-related group plans. I am pleased
to report that we have been working together very effectively.
HIPAA's portability provisions provide for overlapping
responsibilities for the three Departments. In other areas, each
of the Departments has somewhat different jurisdictions and
authorities. For example, the Department of the Treasury is
responsible for the provisions relating to tax treatment of
group plans, while the Department of Labor is responsible for the
regulations governing group health plans under ERISA- The
Department of Health and Human Services, through HCFA, has
jurisdiction over the portability provisions affecting the States
and governmental sponsored group health plans.
HIPAA requires the Secretaries of the three Departments to issue
regulations to carry out the portability provisions by April 1,
1997. Congress set this time-frame to ensure that the group-to-
group and individual to group portability protections be in place
as soon as possible. We are working diligently to meet these
HIPAA also requires the Departments to execute a Memorandum of
Understanding (MOU). We have been working towards a formal MOU.
We are very aware that the initial regulation is just the
beginning of the work, and the hard parts are going to be the
interpretation and enforcement that follow. We have found that
the regulation process has been very valuable in familiarizing
ourselves with the other agencies' practices and protocols. We
believe it is important to complete the regulations, and then use
the experience gained in that process to develop the MOU.
Public comments will also be received and taken into account as
part of the review of the implementation of HIPAA's provisions
that will be made by OMB under EO 12866. All three Departments
began meeting on a regular basis immediately after the passage of
HIPAA. Interagency teams now work with each other several days a
week, and we have found that working together and making
decisions by consensus is both challenging and educational.
COMMENT SOLICITATION - DECEMBER 30, 1996 NOTICE
We realized very early in the process that it would be important
to obtain input from States, insurance regulators, employers,
insurers, consumers, and their associations. Our initial
meetings with some groups convinced us that an opportunity for
comment should be made available to a broader spectrum of
interested parties. As a result, the three Departments published
a solicitation of comments notice in the Federal Register on
December 30, 1996. Comments were due by February 3, 1997, and
now we are analyzing these comments. This notice has been very
productive in highlighting issues that are of special concern to
various sectors of the public.
WORKING WITH THE STATES
As I have stated earlier, HIPAA requires HCFA to assume new roles
in relationship to State regulation of health insurance and
health coverage. Therefore, we have been working closely with
the States and the National Association of Insurance
Commissioners (NAIC) in promulgating the regulations. Also, we
have met with many state groups, such as the National Governors'
Association, and the American Public Welfare Association's
National Association of State Medicaid Directors. We are
grateful for the time and effort that many State people have
spent in educating us.
GROUP INSURANCE MARKET
We recognize that the responsibility for overseeing the actions
of the insurers offering coverage in the group market rests with
the States, not DHHS. The States have the expertise and depth of
experience necessary to successfully fulfill this role.
The NAIC has been working to identify the changes in their model
laws and regulations that would be needed to conform to the HIPAA
provisions. They have assembled a significant body of advice for
States, which they have shared with us. We expect that through
this input, as well as through our April 1 regulations, the
States and insurance industry will achieve timely and effective
implementation of the law.
It is important to note that the States are not required to send
us their updated group market laws or regulations, and we have no
authority to approve or disapprove them. Although we have the
authority to intervene if a State is not substantially enforcing
a provision of the law, we intend to work closely with States to
minimize the chance of this happening.
Let me now explain HCFA's role in implementing the regulations
for the individual market.
INDIVIDUAL INSURANCE MARKET
HIPAA incorporates provisions in the Public Health Service Act
that assure access to the individual insurance market, on a
guaranteed issue, guaranteed renewal basis, without preexisting
condition exclusions, for certain "eligible individuals", as
defined in the law. The implementation of these provisions is
the sole responsibility of the Department of Health and Human
Services, and will be administered by HCFA- However, the
implementation of these provisions is closely tied to the
certification of creditable coverage as provided for in the
shared Department provisions on group-group portability. Thus,
HCFA is developing these regulations in close association with
the interagency working group.
In drafting the individual market provisions, Congress deferred
to the States in the regulation of insurance, and afforded the
States great flexibility. We believe this is appropriate since
there are great differences among States and their rules for the
In the individual market regulations, we will emphasize that the
states have a choice -- to implement an alternative mechanism or
to implement the Federal provisions. As in the group market, we
will formulate the rules with an open process.
STATE ALTERNATIVES IN THE INDIVIDUAL MARKET
As I mentioned earlier, States have the option to choose to
implement an alternative for their individual market. However,
due to the effective dates and deadlines in the law, the States
cannot wait for our regulations to be issued to develop
alternative mechanisms to assure group to individual portability
in the individual market. The law is effective on July 1, 1997,
and our regulations are due for publication on April 1, 1997.
Therefore, a State can submit a notice to us by April 1, 1997
indicating the State's intent to implement an alternative,
including detailed description of its proposed mechanism and its
implementation plan. States must implement their alternative by
January 1, 1999.
Recognizing that the States have many questions about the law and
the information needed to review an alternative, we issued a
notice on January 13, 1997, offering guidance as to how to
proceed in the absence of regulations. This notice clearly
expressed substantial flexibility in both documentation and in
the range of mechanisms that we would view as acceptable, while
at the same time strongly noting our commitment to assuring that
eligible individuals have access to coverage within the terms of
Again, Mr. Chairman and Members of the Committee, this law helps
many workers and families keep health insurance when they change
or leave their jobs. HCFA is committed to working with the other
Departments to meet the statutory implementation deadlines. You
have asked, Mr. Chairman, if there is anything you can do to
help. At this point, I am pleased to say that there are no
legislative changes needed for initial implementation. We will
continue to listen to and work with the States, the public, and
other affected parties with respect to the health insurance
portability provisions in the group and individual markets.
We congratulate you for passing this bipartisan legislation, and
we hope that Congress will continue the effort to improve the
availability and affordability of health insurance in the United
Again, thank you for this opportunity to appear before you. I
would be happy to answer any questions you may have.