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IRS Releases Further Guidance on the COBRA Premium Assistance Subsidy

On March 31, 2009, the Internal Revenue Service (“IRS”) released Notice 2009-27 providing extensive guidance on a number of different areas regarding the COBRA assistance premium subsidy under the American Recovery and Reinvestment Act of 2009 (“ARRA”).  The Notice contains a brief background explanation with fifty-eight (58) questions and answers.  In the Notice, the IRS addresses these following areas:

• What is an involuntary termination?

• Who is an assistance eligible individual?

• How is the COBRA premium assistance subsidy determined?

• What coverages are eligible for the COBRA premium assistance subsidy?

• When does the COBRA premium assistance subsidy begin to apply?

• When does the COBRA premium assistance subsidy end?

• How does the recapture of the COBRA premium assistance subsidy work?

• How does the special enrollment right under ARRA work?

• Who collects the COBRA premium assistance subsidy for those insured plans that are subject to state continuation coverage?

The following explanation will review the important new information provided in each area specified above.

What is an involuntary termination?

Events that would be considered an involuntary termination: Any event will qualify as an involuntary termination if it causes an individual to lose his or her job as a result of “an independent exercise of the unilateral authority of the employer.”  Such termination must not be the result of an employee’s implicit or explicit request. The determination of whether a termination is involuntary is based on all facts and circumstances.  The following events will be considered to be an involuntary termination:

• An employer’s failure to renew an employee’s contract for services at the end of the contract term;

• An employee’s termination for good reason or cause;

• An employee’s layoff, furlough or other suspensions of employment resulting in a loss of health coverage;

• An employee’s termination resulting from his or her absence from work due to illness or disability;

• An employee’s reduction of hours followed by his or her voluntary termination;

• An employee’s retirement if he or she left with the understanding he or she would be terminated;

• An employee’s voluntary termination, if he or she had reasonable knowledge he or she would be terminated;

• A lockout initiated by the employer;

• An employee’s termination in return for a severance package where the employer indicates after the offer period a number of employees will be terminated; and

• An employee’s resignation as a result of a material change in the geographic location of employment for him or her.

Events that will not be considered an involuntary termination: The following events will not be considered involuntary:

• Any events that cause a loss in coverage and eligibility for COBRA but does not result in an employee’s termination of employment.  These events include a divorce or a dependent child ceasing to be a dependent child or the death of an employee or absence from work due to illness or disability.

• Work stoppage resulting from a strike initiated by employees or their representatives.

• An employee’s reduction of hours without a voluntary termination of employment.

Who is an assistance eligible individual?

An individual will be considered assistance eligible individual if he or she is a qualified beneficiary under COBRA as a result of an involuntary termination that occurred on or after September 1, 2008 and on or before December 31, 2009 and he or she elects COBRA coverage.

An individual will be not considered an assistance eligible individual if:

• the involuntary termination occurs before September 1, 2008 or after December 31, 2009, even if the loss of coverage occurs on or after September 1, 2008; and

• the individual’s involuntary termination occurs no later than December 31, 2009, but the loss of coverage occurs after December 31, 2009.

When does a loss of coverage occur for the purpose of the COBRA premium assistance subsidy if an employer provides health coverage to an involuntarily terminated employee on the same terms as for similarly situated active employees after termination?  It will depend on if the employer treats such coverage as deferring the loss of coverage or as part of its obligation to provide COBRA coverage.  If the employer treats such coverage as deferring the loss of coverage, then for purposes of the COBRA premium subsidy, the loss of coverage (and eligibility for Federal COBRA) will be considered to occur when such coverage ends.  If the employer treats such coverage as part of its obligation to provide COBRA coverage, then the loss of coverage is considered when such coverage is first provided.

For an individual to be considered assistance eligible individual, he or she must be covered by a plan that is subject to COBRA coverage requirements under ARRA.

If an individual qualifies, he or she can be an assistance eligible individual more than once.  The individual is entitled to nine (9) months of the COBRA premium assistance subsidy at each occurrence.

How is the COBRA premium assistance subsidy determined?

The COBRA premium assistance subsidy is based on the amount of the COBRA premium that an individual is required to pay.  If the premium charged to the assistance eligible individual is less than the maximum COBRA premium, such amount is used to determine the assistance eligible individual’s 35 percent share.  In determining the amount paid by the assistance eligible individual, payments made on behalf of the individual by another third party (other than the employer) are taken into account and taken into consideration as amounts paid by such individual.  Such other third parties can include a parent, guardian, State agency or charity.

The premium assistance subsidy only applies to the portions of the premium attributable to COBRA coverage for those who are qualified beneficiaries.  A qualified beneficiary will include a spouse or dependent child who was covered at the time of qualified event or a dependent child born to or adopted by the covered employee during the COBRA period.  Any spouse or child added to coverage during the COBRA period will not be considered to a qualified beneficiary.  Lastly, a domestic partner will not be considered a qualified beneficiary.

In determining what portion of the COBRA premium is eligible for the subsidy, the amounts paid for coverage for one or more individuals who are assistance eligible individuals will be allocated first and then the cost of covering non-assistance eligible individuals.  If the cost of covering a non-assistance eligible individual does not add to the cost of covering the assistance individuals, then the cost of covering the non-assistance eligible will be zero and the subsidy will apply to the entire COBRA premium.  If the cost of coverage a non-assistance eligible individual adds to the cost of covering the assistance eligible individual, this incremental cost is ineligible for the subsidy.

If the assistance eligible individual changes coverage during his COBRA period, the COBRA premium assistance subsidy will apply to the new premium, even if higher than the original coverage.

What coverages are eligible for the COBRA premium assistance subsidy?

The COBRA premium assistance subsidy applies to any COBRA coverage of any group health plan, except for health flexible spending accounts.  The term group health plan includes vision-only or dental-only plans and “mini-med plans.”  The subsidy is not available to any coverages offered by an employer for non-health benefits not subject to COBRA coverage, such as group term life insurance benefits.

Retiree health coverage may be treated as COBRA coverage eligible for the subsidy if it does not differ from the coverage provided to active employees.  It does not matter that the cost charged to retirees is greater than the amount charged to active employees.

When does the COBRA premium assistance subsidy begin to apply?

The COBRA premium assistance subsidy applies to the first period of coverage beginning on or after February 17, 2009.  This first period of coverage can be a monthly or shorter period, depending on the period with respect to which premiums are charged by the plan.

When does the COBRA premium assistance subsidy end?

The COBRA premium assistance subsidy will apply until the earliest to occur:

• the first day the assistance eligible individual becomes eligible for other group health care coverage or Medicare,

• nine months after the first day of the first month for which the subsidy applies, or

• the date the individual ceases to be eligible for COBRA coverage.

For someone who eligible for other coverage, such eligibility does not take effect for the purposes of ending the period of COBRA premium assistance subsidy until the first date that coverage could have taken effect.  So if a plan imposes a waiting period, eligibility would not take effect until the end of the waiting period and when coverage would have actually begun.

If a retired employee is offered retiree coverage, such coverage can make such individual ineligible for the subsidy if such coverage is offered under a different group health plan than one offered under COBRA.

An employer is not required to refund the COBRA premium assistance subsidy if the individual fails to provide notice that he or she was covered under another group health plan unless the employer otherwise knew of the eligibility for such coverage.

How does the recapture of the COBRA premium assistance subsidy work?

A plan cannot refuse to provide the COBRA premium assistance subsidy to anyone even if his or her income will be high enough so that the recapture of the subsidy will apply.  A plan can only not apply the subsidy after the individual has elected to permanently waive the subsidy or when the period of the subsidy has ended.

An assistance eligible individual may waive the COBRA premium assistance subsidy by providing the plan with a signed and dated notification (including a reference to a “permanent waiver”).  Once an assistance eligible individual makes such a waiver, he or she may not later reverse the election and may not receive the premium reduction for any future period of COBRA coverage in 2009 or 2010.

How does the special enrollment right under ARRA work?

For any employee who as involuntarily terminated during the period from September 1, 2008, through February 17, 2009, any qualified beneficiary who does not have an election for COBRA coverage on February 17, 2009 has a special enrollment right under ARRA to elect COBRA coverage again.  Such new COBRA coverage begins with the first period of COBRA coverage beginning on or after February 17, 2009.  If a plan bases COBRA coverage on calendar months, the individual’s first period of coverage beginning on or after February 17, 2009 is March 1, 2009 and the COBRA premium assistance subsidy applies for premiums for COBRA coverage beginning on March 1.  This does not change even if the plan otherwise requires individuals who lose coverage before the last day of the month and wish to enroll in COBRA coverage to pay a prorata portion for the first partial month of coverage.

For plans that require that COBRA coverage be paid based on a monthly period from the date of loss of coverage, the first period of coverage is the monthly period corresponding to the day after the loss to the day of the following month corresponding to the day of the loss of coverage.  If an individual’s last day of coverage is October 3, 2008, the period of coverage runs from the fourth of the month to the third of the following month and the first period of coverage on or after February 17, 2009 is the period March 4 through April 3, 2009.

This special enrollment right under ARRA also applies to those individuals who are eligible for the COBRA premium assistance subsidy but still has an open COBRA coverage period.  This means such individual have a choice.  They can elect COBRA under the original election period and have coverage retroactive or instead elect and pay for COBRA coverage under the special election period under ARRA and have COBRA coverage apply for coverage periods on or after February 17, 2009.

The special enrollment period under ARRA only applies to those plans subject to federal COBRA and does not extend to state continuation coverage.  Each state has to make a decision whether to apply this special election period under ARRA.

If at the time of the special enrollment period under ARRA, a special enrollment right under HIPAA under an individual’s spouse’s plan has expired and the individual does not have a right to enroll in that plan until the next open enrollment, such individual will not be treated as being eligible for other group coverage until the next open enrollment.

The first premium payment for coverage under the special enrollment period under ARRA is due no earlier than 45 days after the date on which the election of federal COBRA is made.

Who collects the COBRA premium assistance subsidy for those insured plans that are subject to state continuation coverage?

The only person entitled to be reimbursed for COBRA premium assistance subsidy is the insurer providing the coverage under the group health plan.

Are there any other areas discussed in the notice?

In the background discussion of the notice, the IRS makes the following comments:

• The COBRA premium assistance subsidy will be treated as an employee contribution to the group health plan.

• Any amount of the COBRA premium assistance subsidy recaptured because of an individual’s income will be treated as increase in the individual’s Federal income tax liability.

STIMULUS PACKAGE CONTAINS COBRA SUBSIDY

On February 17, 2009 the President signed into law the American Recovery and Reinvestment Act of 2009.  This law may provide certain individuals you with the opportunity to receive (1) assistance in paying for their COBRA premiums and/or (2) a second chance for electing COBRA coverage even if the individual is not eligible to receive assistance in paying the COBRA premium.  If an individual is eligible for assistance in paying his or her COBRA premium, he or she may only have to pay up to 35% of the monthly cost of his or her premium for group health coverage under COBRA or state continuation coverage.

Who is Eligible for the COBRA Premium Assistance Subsidy?

An individual is eligible for the COBRA Premium Assistance Subsidy if you meet the following conditions:

1)     At any time during the period that begins with September 1, 2008 and ends with December 31, 2009, an individual was involuntarily terminated from employment, other than for gross misconduct with his or her employer and the individual his or her qualified spouse and/or his or her dependent(s) are eligible for COBRA  coverage or state continuation coverage

2)     The individual, his or her qualified spouse or dependent(s) is eligible for COBRA Coverage or state continuation coverage.  The individual cannot be terminated for reasons of gross misconduct.

3)     The qualifying event with respect to the COBRA coverage consists of the involuntary termination of the covered employee’s employment and occurred on or after September 1, 2008 and on or before December 31, 2009.

4)     The individual is currently not eligible for coverage under any group health plan as an employee or dependent (other than coverage consisting of only dental, vision, counseling, or referral services, or a combination thereof), coverage under a health reimbursement arrangement or a health flexible spending arrangement or coverage of treatment that is furnished in an on-site medical facility maintained by the employer and that consists primarily of first-aid services, prevention and wellness care, or similar care (or a combination thereof) or is eligible for benefits under Medicare.

5)     The individual ‘s adjusted gross income for federal tax purposes for the taxable year(s) during which he or she receives this assistance will not exceed $145,000 if the individual is single or $290,000 if the individual is married and filing a joint return. (Note: If you are single and your adjusted gross income is between $125,000 and $145,000 or you are married and filing a joint return and your adjusted gross income is between $250,000 and $290,000, part or all of the individual’s  Premium Assistance Subsidy will be taxable. Please note, if an individual does receive COBRA premium assistance subsidy and have income as detailed above, the amount the individual receives will be included in his or her taxable income for the tax year(s) affected.

Remember if an individual is eligible for the COBRA Premium Assistance Subsidy and elects it, such election will disqualify the individual for the Health Coverage Tax Credit. If an individual is eligible for the Health Coverage Tax Credit, which could be more valuable than the Premium Assistance Subsidy, you will have a notification from the IRS.

Even if an individual is not eligible for the COBRA Premium Assistance Subsidy, may the individual, his or her qualified spouse and/or dependents elect COBRA coverage?

Yes. If an individual was involuntarily terminated from employment from his or her employer anytime on or after September 1, 2008 and before February 17, 2009 and are eligible for COBRA coverage, he or she will an another opportunity to elect COBRA coverage again even if he or she, his or her your qualified spouse and/or dependent(s) waived COBRA coverage in the past.

This special enrollment period may not apply to certain state continuation coverages. An individual should check with his or her employer, COBRA administrator or insurance company of details.

What if an individual did not elect COBRA coverage and his or her initial enrollment period has expired?

The individual, his or her qualified spouse and/or dependent(s) will have 60 days from the date of the Special Enrollment Election Notice to elect COBRA coverage again even if he or she eligible for the COBRA Premium Assistance Subsidy.  An individual, his or her qualified spouse and/or dependents may do so by completing the Special Enrollment COBRA Election Form and returning it to employer or COBRA Administrator specified on the notice.  You must pay the initial COBRA premium within a period of time specified in the Notice.

When will the new COBRA coverage start?

If the individual is eligible, his or her coverage under your employer’s group health plan will be effective the later of the first coverage period after the date of enactment (February 17 2009 (March 1, 2009 for calendar month plans) or the date of the individual’s involuntary termination with his or her employer.

When will the new COBRA coverage end?

The individual COBRA coverage will terminate on the earliest of following events to occur:

1)     18 months after his or her original qualifying event date (or the end of coverage period for the standard extensions of coverage under COBRA such as death of the employee, dependent ceases to be eligible for coverage, you are on Military Leave or you become SSA disabled);

2)     The date the individual is covered under any group health plan,

3)     The first day of the month for which the qualified beneficiary’s COBRA premium is not timely paid;

4)      The date the individual’s employer ceases to maintain any group health plan for its employees.

5)     The individual becomes eligible for Medicare.

What will the COBRA premium be under the COBRA Premium Subsidy and how long can the individual receive it?

If an individual is eligible for the COBRA Premium Assistance Subsidy, he or she will be required to pay up to 35% of the normal COBRA premium for the group health plan coverage in which the individual enrolled in under COBRA.  Failure to make the payment within the payment period specified will result in the automatic termination of the COBRA coverage and the individual will not be able to reinstate it at a later date.

The individual will continue to receive the COBRA Premium Assistance Subsidy until the earliest date to occur:

1)     The individual becomes eligible for coverage under any group health plan (other than coverage consisting of only dental, vision, counseling, or referral services, or a combination thereof), coverage under a health reimbursement arrangement or a health flexible spending arrangement or coverage of treatment that is furnished in an on-site medical facility maintained by the employer and that consists primarily of first-aid services, prevention and wellness care, or similar care (or a combination thereof) or is eligible for benefits under Medicare.

2)     9 months after either the first day of the first coverage period after enactment (February 17, 2009) (March 1 2009 for calendar month plans) or the first month after enactment that the individual becomes eligible for COBRA coverage.

3)     following the expiration of the maximum period of continuation coverage required (i.e. 18 months, 29 months or 36 months) that would normally apply.

If the individual is not eligible for COBRA Premium Assistance Subsidy, he or she will be required to pay 102% of the COBRA premium.  For state continuation coverage, the premium will be 100% of the premium

What Group Health Plans are eligible for the 35% reduction in premium?

The following plans are eligible for the 35% reduction:

1) Medical Coverage

2) Dental Coverage

3) Vision Coverage

4) Employee Assistance Plans (other than referral only plans)

5) Health Reimbursement Arrangements (HRA’s)

Remember, many state continuation coverages only apply to medical coverage.

Note:  Health Care Flexible Spending Account plans are not eligible for this subsidy.

How does an individual apply for the COBRA Premium Assistance Subsidy?

If an individual are currently enrolled in COBRA coverage and his or her involuntary termination date was on or after September 1, 2008 but on or before December 31, 2009:

An individual must complete an Application for COBRA Premium Assistance Subsidy.  Upon acceptance, the individual will be notified of how much premium you will need to remit and when initial payment is due.  Please note, an individual must continue to make your normal COBRA premium payment until he or she is approved for the COBRA Premium Assistance Subsidy.  Upon approval, any overpayment will be credited towards the individual’s future COBRA premiums.

If an individual is not approved, he or she will be notified of the denial and the reason for denial and the amount of the unreduced COBRA premium.

If an individual is not currently enrolled in COBRA coverage and his or her involuntary termination date was on or after September 1, 2008 but on or before February 16, 2009:

An individual must complete the an Application for the COBRA Premium Assistance Subsidy, the Special Enrollment Election Form and he or she will be informed when he or she must submit your initial premium payment

If the individual is not approved for the COBRA Premium Assistance Subsidy, he or she will be notified of the denial and the reason for the denial and the amount of the unreduced COBRA premium.

Please Note:  Failure to provide the proper notification to the designated representative of the employer may result in the individual’s loss of eligibility for the COBRA Premium Assistance Subsidy, but not of continued COBRA coverage.  All requests must be submitted in writing.  No verbal requests will be accepted.

How does an individual apply for COBRA Coverage if he or she is not eligible for the COBRA Assistance Subsidy, but have been involuntarily terminated?

An individual must complete the Special Enrollment Election Form within 60 days from the date of Special Enrollment Election Notice and he or she will be informed when he or she must submit his or her initial premium payment. Please note, COBRA coverage will not be reinstated and claims will not be paid until receive the full initial premium due is received

How does an individual notify the Plan Administrator of his or her or his or her Dependent’s eligibility for coverage under another group health Plan or Medicare after he or she begins to receive the COBRA Premium Assistance Subsidy?

An individual must notify his or her employer or COBRA Administrator in within 30 days of the first date in which he or she or his or her dependent will be eligible for coverage under another group health plan or Medicare.  The individual must do so in writing and include his or her name, the name of any other covered beneficiaries who are also now covered, the name of the employer that is receiving COBRA coverage from, the name of the group health plan that the individual will now be eligible for coverage under and the date he or she is be eligible.

Note:  Failure of an individual to provide notification of his or her eligibility for coverage under another group health plan or Medicare may result in a penalty of up to 110% of the amount of COBRA Premium Assistance Subsidy that the individual did receive.

What happens if the COBRA premiums that the individual is currently paying are already less than 35% of the total COBRA premium?

If an individual is  currently receiving a subsidy from either  his or her employer or any other source such as the Health Care Tax Credit and the subsidy results in your COBRA premium being less than or equal to 35% of the total cost of COBRA premiums, he or she does not need to do anything.  The individual’s premiums will remain the same.

However, if the individual’s current payment agreement ends within 9 months of the date either of coverage after the date of enactment (March 1, 2009 for calendar month plans) or within 9 months of the individual’s COBRA effective date (for involuntary terminations on or after September 1, 2009 but on or before December 31, 2009), the individual may be eligible for the COBRA Premium Assistance Subsidy for the remaining months.

If an individual needs additional information regarding the American Recovery and Reinvestment Act of 2009 or wish to appeal a declined application for the COBRA Premium Assistance Subsidy, he or she can go to: www.dol.gov/COBRA or call 1-866-444-EBSA (3272).

Can an individual enroll in another health plan that costs less money when receiving COBRA coverage?

An employer can decide to allow individuals to select from the current plan(s) available which have a lower monthly premium.  Such individuals will have 90 days from the date of a notice to change his or her current benefit election(s).  The plan with lower premiums may offer less benefits than the individual currently receives.

New Law Increases Requirements Under The HIPAA Privacy Rules For Business Associates

The American Recovery and Reinvestment Act of 2009 (ARRA) approved by Congress on February 13, 2009 and signed into law by the President on February 17, 2009, makes a number of modifications to the Health Insurance Portability and Accountability Act (HIPAA) regarding privacy and security rules.

The legislative changes that affect HIPAA create many new requirements, enforcement provisions and penalties for covered entities, business associates, vendors and others.  Many changes are focused on HIPAA’s privacy and security requirements and will require businesses to change the way they currently do business.  There are significant changes to all Covered Entities (defined under HIPAA as health care providers that conduct certain electronic transactions, health care clearinghouses, and health plans), but are most challenging for Business Associates (individuals or corporate persons that perform ANY function or activity involving the use of Protected Health Information (PHI), who now face a host of new requirements.

Business Associates Required to Comply with HIPAA Privacy and Security Rules

Under HIPAA, Business Associates have been  not directly regulated and have not been subject to HIPAA’s penalty provisions.  Because HIPAA only requires a contract between the Business Associate and the HIPAA-covered entity, the only sanctions Business Associates faced for failure to protect health information was a breach of contract claim.  However, ARRA makes significant changes to the way Business Associates are treated under HIPAA.

ARRA specifies that any entity that engages in health information exchanges or provides data transmission of PHI (including Personal Health Record (PHR) vendors and health information exchanges) is considered a Business Associate.  As such, these entities must enter into a business associate contract with the covered entity and will be subject to ARRA’s civil and criminal penalty provisions.

Additionally, ARRA requires that the administrative, physical and technical safeguards and the policy, procedure and documentation requirements of HIPAA’s security rule apply to Business Associates of a covered entity in the same manner as they apply to the covered entity.  These additional requirements must be incorporated into Business Associate contracts and agreements and include notification provisions for a breach and the application of ARRA’s criminal and civil penalties.   With regard to HIPAA’s privacy rules, Business Associates are prohibited from using or disclosing any PHI in a manner which is not in compliance with the Business Associate contract or agreement required terms under HIPAA.  These changes become effective February 17, 2010 (one year after the enactment of ARRA).

Notice to Individuals of Privacy and Security Breaches

ARRA also imposes certain notification requirements on covered entities and Business Associates in the event of a breach of “unsecured protected health information.”  A breach is defined as “the unauthorized acquisition, access, use, or disclosure of protected health information which comprises the security or privacy of such information, except where an authorized person to whom such information is disclosed would not reasonably have been able to retain such information”.  Unsecured protected health information is defined as protected health information that the covered entity or Business Associate has not secured via standards approved by the Secretary of Health and Human Services (Secretary).

Generally, the notification of a breach must be provided “without unreasonable delay”, but in no case later than 60 days after the discovery of the breach or when the breach should reasonably have been discovered.  Since the 60 days is the outer limit for notification, if the full 60 day window is used, the covered entity or Business Associate involved in the breach must be prepared to justify their reasons for not providing notification of the breach sooner.  However, notice of a breach may be delayed provided that notification would hinder a criminal investigation and/or injure national security (as determined by a law enforcement official).

For Business Associates that discover a breach, the Business Associate must notify the covered entity of the breach or potential breach and the identify of all individuals affected or potentially affected.  For covered entities, notification must be made to individuals whose unsecured protected health information has been accessed, acquired or disclosed or is reasonably believed to have been accessed, acquired or disclosed as a result of a security or privacy breach.  In general, notification to affected individuals must be sent via first class mail.  However, where a breach involves 10 or more individuals whose contact information is out-of-date or deficient, notification must be posted to the covered entity’s website or published in major print or broadcast media. For a breach that involves 500 or more individuals, the covered entity involved in the breach must also give notice to prominent media outlets in the applicable jurisdiction or state.

Notice of all breaches must be provided to the Secretary.  If the breach affects 500 or more individuals, the covered entity involved in the breach must immediately notify the Secretary.  For breaches that affect less than 500 individuals, the covered entity involved in the breach may notify the Secretary of any breaches on an annual basis.

To the extent possible, all notices must contain:

1. A brief description of what happened, including the date of the breach and the date of the discovery of the breach (if known);

2. A description of the types of unsecured protected health information involved in the breach (e.g., social security number, date of birth);
3. The steps individuals should take to protect themselves from potential harm as a result of the breach;

4. A brief description of what the entity involved is doing to investigate the breach, to mitigate losses and to protect against further breaches; and

5. Contact procedures for individuals to ask questions or receive additional information, including a toll-free telephone number and an e-mail address, web site or postal address.

Expansion of Accounting of Disclosures

ARRA changes the existing limitations on accounting for disclosures of health information to individuals who request the disclosure.  If a covered entity uses or maintains an Electronic Health Record (EHR), then individuals will be allowed to receive an accounting of the disclosures of PHI for treatment, payment and health care operations made from the EHR.  The period of mandated disclosure is limited to the 3 year period prior to the individual’s request.  A reasonable fee may be charged to the requesting individual, provided the fee is not greater than the labor costs involved in complying with the request.

The Secretary is required to adopted regulations that specify the information to be contained in the accountings within 6 months of ARRA’s enactment.  Covered entities that began using EHR prior to January 1, 2009 will be required to provide the accounting upon request effective January 1, 2014.  Covered entities that begin using EHR after January 1, 2009 will be required to provide the accounting upon request effective January 1, 2011.

Mandatory Restrictions on Disclosure of PHI when Requested by Individuals

Under ARRA, individuals are given the right to restrict the disclosure of PHI related to treatment, payment and health care operations provided:

1. The restriction relates to disclosure for purposes of payment or health care operations;

2.  The restriction does not relate to disclosure for purposes of treatment; and

3. The PHI relates only to an item or service for which the provider has already received payment in full.

Right of Individuals to Receive Electronic Records

If a covered entity maintains EHRs that contain PHI, ARRA provides individuals with the right to obtain a copy of their records in an electronic format or to request that the record be transmitted to a third party.  The covered entity may not charge the individual requesting the copies more than the total cost of labor incurred by the entity in transmitting the copies.

Clarification of the Minimum Necessary Standard

Pending additional guidance from the Secretary, a covered entity will be considered to be in compliance with the minimum necessary standard if, to the extent possible, the covered entity limits the disclosure to a limited data set or to the minimum data necessary to accomplish the intended purpose of the disclosure or use of the information.  The Secretary is required to issue guidance within 18 months of ARRA’s enactment.

Increase Use of De-Identifed Information

ARRA requires the Secretary to issue guidance on how covered entities can comply with requirements related to the use of de-identified PHI.  Such guidance must be issued within 1 year of ARRA’s enactment.

Enforcement and Penalties

ARRA authorizes the Secretary to conduct periodic audits of covered entities and Business Associates to ensure compliance with HIPAA and ARRA requirement.  The Secretary is also authorized to utilize civil enforcement provisions even if the action in question violated the criminal provisions, provided no criminal conviction is associated with the conduct.

The Secretary is required to impose civil penalties if a violation is due to willful neglect and to formally investigate any complaint if a preliminary investigation indicates the potential of violation due to willful neglect.  For cases involving violations where the individual did not know of the violation or where the individual would not have known of the violation by exercising reasonable diligence, corrective action rather than penalty may still be used.

Under ARRA, criminal enforcement for certain HIPAA violations is not limited to covered entities.  For purposes of criminal enforcement provisions, ARRA provides that “a person (including an employee or other individual)” is considered to have obtained or disclosed individually identifiable health information in violation of HIPAA if such information is maintained by a covered entity and the individual obtained or disclosed such information without authorization.

The Office for Civil Rights will receive any civil monetary penalties (CMPs) or settlements related to HIPAA security-related offenses.  Such funds will be used to fund the further enforcement of ARRA and HIPAA rules and requirements.
States’ Attorney General may bring a civil action under ARRA on behalf of state residents who have been or are threatened to be harmed by a violation to obtain injunctive relief or damages, as well as attorney fees.  Notice must be given to the Secretary and the Secretary is permitted to intervene.  The States’ Attorney General may not bring an action if a federal action by the Secretary is already pending.  These provisions only apply to violations that occur after February 17, 2009 (the date of enactment).

The Comptroller General must submit a report to the Secretary within 18 months of ARRA’s enactment that provides recommendations for determining a reasonable methodology for calculating an appropriate percentage of CMPs or settlements for individuals who have been harmed by a violation of HIPAA or ARRA.  The Secretary is required to issue regulations based on the Comptroller General’s recommendations within 3 years of ARRA’s enactment.

NEW HEALTH CARE LAW REQUIRES ADDITIONAL SPECIAL ENROLLMENT RIGHTS, NOTICE, AND DISCLOSURE OBLIGATIONS FOR EMPLOYER-PROVIDED GROUP HEALTH PLANS

The Children’s Health Insurance Program (CHIP) Reauthorization Act of 2009 extends and expands the State Children’s Health Insurance Program. Under the new law, states are allowed to subsidize premiums for employer-provided group health coverage for eligible children and families. The new law also requires employer-provided group health plans and insurers to permit employees and their dependents that are eligible for coverage but not enrolled in coverage but not enrolled under the plan to enroll if they become ineligible for coverage under Medicaid or a SCHIP. Besides these new additional special enrollment rights, the law provides new notice and disclosure obligations for employers that maintain group health plans.

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Congress Approves Stimulus With COBRA Subsidy

On February 13, the Congress passed the American Recovery and Reinvestment Act of 2009 (the “Act”).  The Act includes tax breaks for businesses and individuals. The Act is now cleared for the President’s signature.

The Act contains a 65% federal subsidy for COBRA premiums for up to 9 months for involuntarily terminated workers and for their families. This subsidy also applies to state health care continuation coverage if required by states for small employers.

To qualify for this premium subsidy, a worker must be involuntarily terminated between Sept. 1, 2008 and Dec. 31, 2009. This subsidy terminates upon offer of any new employer-sponsored health care coverage or upon Medicare eligibility.

This subsidy is also available to workers who were involuntarily terminated between September 1, 2008 and enactment, but failed to initially elect COBRA coverage because it was unaffordable. These workers must be given an additional 60 days to elect COBRA coverage and receive the subsidy. An employers will be required to locate employees laid off since September 1, 2008, who declined COBRA coverage to tell them they have a new right to opt for coverage with the federal government picking up 65% of the premium.

The subsidy is not available to individuals with an annual income exceeding $125,000 or to couples with annual incomes exceeding $250,000. The subsidy is not taxable to the individuals.

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