The Health Insurance Portability and Accountability Act of 1996, known as HIPAA, was passed to protect the health insurance benefits of workers and their families if they change or lose their job. As with most government rules and regulations, it can seem very complicated at first glance. But if you take some time to learn about HIPAA and how it applies to small business owners, it will soon begin to make sense.
Although there are no laws that require employers to offer health benefits to their employees, you will probably want to offer some type of health insurance in order to attract the best employees to your business.
The HIPAA law applies to every employer group health plan that has at least two members who are active and current employees. (Some states have passed legislation reducing that number from two to one. If you are not sure what your state law is concerning HIPAA, check with the local office of the Centers for Medicare and Medicaid Services.)
Specific protections of HIPAA include:
- It limits the use of pre-existing conditions exclusions.
- It will not allow a group health plan to discriminate by denying coverage to an employee or members of their family despite a history of poor health.
- It guarantees that small business owners have the right to purchase group health insurance
- It ensures that either employers or individuals who purchase health insurance have the right to renew the coverage, regardless of any health conditions.
And while HIPAA does offer the above protections, it does NOT:
- require any employer to pay for health coverage for employees or family coverage for their spouses and dependents
- guarantee health coverage for all workers
- stipulate the amount of money an insurer is allowed to charge for health insurance coverage
- require any group health plan to offer specific benefits
- permit people to keep the same health coverage they had in their previous job when they move to a new job
- eliminate all use of pre-existing conditions exclusions
- replace the state as the primary regulator of health insurance
When a small business purchases group health insurance coverage, the insurer should be able to handle all of the HIPAA administration, including collecting employee information and issuing the proper certificates. You can contract out these new certification responsibilities; there are plenty of benefits consulting firms and companies that help employers with COBRA.
HIPAA provisions are imposed upon group health plans and issuers. Eligibility for an individual’s enrollment in a group health plan is determined according to the terms of the health plan and the rules of the issuer, but not according to an individual’s dependent. These rules and terms must comply with all applicable state laws.