For example, guarantees of access to coverage for employers apply only in the small-group market, and the individual market guarantee applies only to certain eligible individuals who lose group coverage. HHS is responsible for enforcing HIPAA with respect to insurance carriers in the group and individual markets, but only in states that do not already have similar protections in place or do not enact and enforce laws to implement HIPAA standards. The implementation of HIPAA is ongoing, in part, because the regulations were issued on an “interim final” basis. Among the 13 states using the federal fallback approach, we found that some initial carrier marketing practices may have discouraged HIPAA eligibles from enrolling in products with guaranteed access rights. After the federal fallback provisions took effect, many consumers told state insurance regulators that carriers did not disclose the existence of a product to which the consumers had HIPAA-guaranteed access rights or, when the consumers specifically requested one, the carrier said it did not have such a product available. Issuers of Health Coverage Are Concerned About HIPAA’s Administrative Burden and Possible Unintended Consequences

Issuers of health coverage are concerned about the administrative burden and the unintended consequences of certain HIPAA requirements. Finally, issuers cite some HIPAA provisions that have the potential to be abused by consumers. State Insurance Regulators Say Lack of Sufficient Clarity and Detail in Some HIPAA Regulations Hinders Implementation Efforts

State regulators have encountered difficulties implementing HIPAA provisions in instances in which federal regulations lacked sufficient clarity. discussed earlier, the ambiguity in the risk-spreading requirement for products available to HIPAA-eligible individuals has been cited as a factor contributing to high rates for these products, which in some states range from 140 to 600 percent or more of standard rates. Unexpectedly Large Role for Federal Regulators May Strain Resources, Hamper Oversight

States have the option of enforcing HIPAA’s access, portability, and renewability standards as they apply to fully insured group and individual health coverage. According to HHS officials, the agency as well as the Congress and others assumed HHS would generally not have to perform this role, believing instead that states would not relinquish regulatory authority to the federal government. What could be characterized as “early implementation hurdles,” especially those related to the clarity of federal regulations, may be largely resolved during 1998, as federal agencies issue further regulatory guidance to states and issuers. Moreover, as states and issuers gain experience in implementing HIPAA standards, the intensity of their dissatisfaction may diminish. This situation is likely to continue unless HHS interprets the statute to require (in federal fallback states) more explicit and comprehensive risk-spreading requirements or that states adopt other mechanisms to moderate rates of guaranteed access coverage for HIPAA eligibles. Credit for Prior Coverage (Portability)

Issuers of group coverage must credit an enrollee’s period of prior coverage against their preexisting condition exclusion period. The Health Insurance Portability and Accountability Act of 1996: Early Implementation Concerns (GAO/HEHS-97-200R, Sept. 2, 1997).
Why GAO Did This Study

Pursuant to a congressional request, GAO discussed the implementation of the private insurance market provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA).

What GAO Found

GAO noted that: (1) although HIPAA gives people losing coverage a guarantee of access to coverage in the individual market, consumers attempting to exercise this right have been hindered in some states by carrier practices and pricing and by their own misunderstanding of this complex law; (2) in the 13 states using the federal fallback approach to guaranteed access, some carriers initially discouraged people from applying for the coverage or charge them as much as 140 to 600 percent of the standard rate; (3) many consumers also do not fully understand the eligibility criteria that apply and as a result may risk losing their right to coverage; (4) issuers of health coverage believe certain HIPAA provisions are burdensome to administer, may create unintended consequences, or may be abused by consumers; (5) issuers also fear that HIPAA's guaranteed renewal provision could cause those eligible for Medicare to pay for redundant coverage and hinder carriers' ability to sell products to children and other targeted populations; (6) certain protections for group plan enrollees may create an opportunity for consumer abuse, such as the guarantees of credit for prior coverage, which could give certain enrollees an incentive, when they need medical care, to switch from low-cost, high-deductible coverage to more expensive, low-deductible coverage; (7) state insurance regulators have encountered difficulties implementing and enforcing HIPAA provisions where federal guidance lacks sufficient clarity or detail; (8) federal regulators face an unexpectedly large role under HIPAA, which could strain the Department of Health and Human Service's (HHS) resources and weaken its oversight; (9) in states that do not pass legislation implementing HIPAA provisions, HHS is required to take on the regulatory role; (10) as federal agencies issue more guidance and states and issuers gain more experience with HIPAA, concerns about the clarity of its regulations may diminish; (11) whether unintended consequences will occur is as yet unknown, in part because sufficient evidence has not accumulated; (12) in federal fallback states, premiums for group-to-individual guaranteed access coverage are likely to remain high unless regulations with more explicit risk-spreading requirements are issued at the federal or state level; (13) HHS' ability to meet its growing oversight role may prove inadequate given the current level of resources, particularly if more states cede regulatory authority to the federal government; and (14) in any case, as early challenges are resolved during 1998, other challenges to implementing HIPAA may emerge.