Health Insurance Reform: Standards for Electronic Transactions. 4. Health plan


We interpret section 1171(5)(G) of the Act to mean that issuers of long-term care policies are considered health plans for purposes of administrative simplification. We also believe that this provision of the statute gives the Secretary the discretionary authority to include or exclude nursing home fixed-indemnity policies from the definition of a health plan. We specifically requested comments on the impact of HIPAA on the long-term care segment of the health care industry.

a. Comment: The majority who commented on long-term care policies recommended we exclude these policies from the definition of a health plan. Several commenters stated the standard transaction implementation specifications do not meet long term care administrative requirements. The commenters noted that there are fundamental differences between the nature and type of transactions and information required by health plans that pay for long-term care services and those that pay for hospital or physician care. The commenters pointed out that not all long-term care insurance policies pay directly for specific long-term care services. They also stated that the code sets included in the proposed regulation do not adequately meet the needs of long-term care insurance because most documents sent to these companies are narrative “activities of daily living” (ADLs) evaluations, adult “day care” invoices and physician notes.

Moreover, including long-term care only policies within the definition of a health plan would be contrary to the purposes of section 1171 of the Act. It was also stated that for the most part, the long-term care industry is not automated and the costs of developing systems to implement these requirements will be dramatic with little, if any, return. It would increase consumer premiums. Most long-term care claim submissions and payment transactions are between the insured (or a family member) and their insurance companies, without health care providers submitting claims.

One commenter that supported including long-term care policies in the definition of a health plan stated that there have been great strides in the automation of health information in the long-term care industry and it should not be excepted from the standards. Another commenter stated the proposed standards offer the opportunity for all segments of the health care industry to adopt automation and to benefit from such adoption. The standards provide long-term care health care providers with a single method that can be exchanged with all health plans. The commenter stated it would be an unfortunate precedent to except segments of the health care industry from these rules.

Response: The arguments both for and against inclusion of long-term care policies have merit. Since some long term care health care providers bill Medicaid using the UB92, it appears that standard transactions and code sets could be used by long-term care health care providers to bill health plans. In addition, we agree that movement by the industry to these electronic standards would create long term benefits including decreased administrative costs.

We interpret the statute as authorizing the Secretary to exclude nursing home fixed-indemnity policies, not all long-term care policies, from the definition of “health plan,” if she determines that these policies do not provide “sufficiently comprehensive coverage of a benefit” to be treated as a health plan (see section 1171 of the Act). We interpret the term “comprehensive” to refer to the breadth or scope of coverage of a policy. “Comprehensive” policies would be those that cover a range of possible service options. Since nursing home fixed indemnity policies are, by their own terms, limited to payments made solely for nursing facility care, we have determined that they should not be included as health plans for the purposes of this regulation. The Secretary has, therefore, determined that only nursing home fixed-indemnity policies should be excluded from the definition of “health plan.” Issuers of all other long-term care policies are considered to be health plans under this rule.

b. Comment: Several commenters recommended that property and casualty insurance health plans and workers’ compensation health plans be included in the definition of a health plan. It was stated that we should not arbitrarily exclude certain health plans. It was also stated that exclusion will cause undue hardship on health care providers of those specialities that most frequently deal with these health plans, such as orthopedic specialists. It was questioned whether the Bureau of Prisons or state correctional facilities are included in this definition, since they provide or pay for the cost of medical care.

Another commenter stated that if State Workers’ Compensation Programs are allowed to operate with different rules (as they do now) health care providers will be required to maintain multiple systems to accommodate the many variations. Consequently, administrative simplification will not achieve the desired cost savings.

Response: We recognize that non-HIPAA entities such as workers’ compensation programs and property casualty insurance accept electronic transactions from health care providers, however, the Congress did not include these programs in the definition of a health plan under section 1171 of the Act.

The statutory definition of a health plan does not specifically include workers’ compensation programs, property and casualty programs, or disability insurance programs, and, consequently, we are not requiring them to comply with the standards. However, to the extent that these programs perform health care claims processing activities using an electronic standard, it would benefit these programs and their health care providers to use the standard we adopt.

We believe that prisons do not fall within this definition of health plan, as prisons are not “individual or group plans” established for the purpose of paying the cost of health care.

c. Comment: We received two requests to clarify that limited scope dental and vision health plans are not subject to the rule. It was stated that the proposed rule did not specifically indicate that the standards are applicable to these health plans. The limited scope dental health plans provide for annual maximum benefits generally in the $1000-$2000 range and annual benefit payments under limited scope vision health plans rarely exceed a few hundred dollars. The commenters noted that consumers can afford presently to pay for the cost of the annual benefit payments, but if health plans must implement these standards, they will most likely pass on the costs associated with this burden to their enrollees, causing many consumers to drop their coverage.

Response: We believe limited scope dental health plans and limited scope vision health plans meet the definition of health plan and, thus, they are subject to the requirements of this rule. The Congress did not give the Secretary the discretion to treat these health plans differently than other health plans. If a health plan believes it would be cost prohibitive to implement the standards, it has the option of using a health care clearinghouse to transmit and receive the standard transactions.