Questions Submitted by the Public, by Date Posted to the Website. Definition of small health plan

11/02/2001

Why has the definition of "small health plan" been changed in the final rule?


11/22/2000:

In the proposed rule, we stated that a small health plan means a group health plan or individual health plan with fewer than 50 participants. It has come to our attention that the Small Business Administration (SBA) promulgates size standards that indicate the maximum number of employees or annual receipts allowed for a concern (13 CFR 121.105) and its affiliates to be considered "small." The size standards themselves are expressed either in number of employees or annual receipts (13 CFR 121.201). The size standards for compliance with programs of other agencies are those for SBA programs which are most comparable to the programs of such other agencies, unless otherwise agreed by the agency and the SBA (13 CFR 121.902). With respect to the insurance industry, the SBA has specified that annual receipts of $5 million is the maximum allowed for a concern and its affiliates to be considered small (13 CFR 121.201). Consequently, the definition of small health plan has been amended to be consistent with SBA requirements.


Why is there an exception for self-administered plans with fewer than 50 participants under the "Group Health Plan" definition if those plans will be brought back into the definition under the catch-all provision of "Health Plan" (16)?

Under the definitions at 45 CFR 160.103, a plan that has 50 or more participants or is administered by an entity other than the employer that established and maintains the plan is covered by the definition of a "Group Health Plan" and is therefore considered a "Health Plan" under subsection (1) of that definition. That would appear to except self-administered plans with fewer than 50 participants. Under the "Health Plan" definition, subsection (16), however, "[any other individual or group plan . . . that provides or pays for the cost of medical care" is included. Why is there an exception for self-administered plans with fewer than 50 participants under the "Group Health Plan" definition if those plans will be brought back into the definition under the catch-all provision of "Health Plan" (16)? Why does the "Group Health Plan" exception exist?


11/22/2000:

The definition of a health plan at 45 CFR 160.103 includes a group health plan. A group health plan is defined in 45 CFR 160.103 as an employee welfare benefit plan (as defined in section 3(1) of ERISA of 1974) that has 50 or more participants or is administered by an entity other than the employer that established and maintains the plan.

There are four combinations of the two components in the group health plan definition. Three of the combinations result in HIPAA requirements being applicable. One combination results in an exception.

HIPAA regulations apply if the employee welfare benefit (ERISA) plan has:

  1. 50 or more participants and is administered by the employer;
  2. 50 or more participants and is administered by an entity other than the employer;
  3. Fewer than 50 participants and is administered by an entity other than the employer.

HIPAA regulations do not apply if the employee welfare benefit (ERISA) plan has:

Fewer than 50 participants and is administered by the employer.

Item 16, under the definition of health plan, includes any individual or group plan, or combination of individual and group plans, that was not named in items 1-15 and that provides or pays for the cost of medical care. The employee welfare benefit plans that have fewer than 50 participants and are administered by the employer, which were excepted from the definition of group health plans, are not brought in as health plans under item 16, because they are neither individual nor group plans (as that term is defined by section 1171(5)(A) of the Social Security Act for the purposes of administrative simplification), nor combinations of individual and group plans.

The exception has the effect of preventing undue regulation on small entities.