Health Insurance Standards: Implications of New Federal Law for Consumers, Insurers, Regulators

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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).
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.


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