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Testimony on Health Insurance Portability & Accountability Act by Bruce C. Vladeck, Ph.D.
Administrator, Health Care Financing Administration
U.S. Department of Health and Human Services

Before the Senate Committee on Labor and Human Resources
February 11, 1997


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.


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 goals.

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.


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.


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.


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.


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 individual market.

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.


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 the law.


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 States.

Again, thank you for this opportunity to appear before you. I would be happy to answer any questions you may have.

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