Health Insurance Portability and Accountability Act (HIPAA) of 1996: Overview and Guidance on Frequently Asked Questions

Publication Date: January 2005

Publisher: Library of Congress. Congressional Research Service

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Research Area: Health

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Abstract:

The Health Insurance Portability and Accountability Act (HIPAA) of 1996 (P.L. 104-191), provided for changes in the health insurance market. It guaranteed the availability and renewability of health insurance coverage for certain employees and individuals, and limited the use of preexisting condition restrictions. The Act created federal standards for insurers, health maintenance organizations (HMOs), and employer-provided health plans, including those that self-insure. It permitted, however, substantial state flexibility for compliance with the requirements on insurers.

HIPAA also included tax provisions relating to health insurance. It permitted a limited number of small businesses and self-employed individuals to contribute to tax-advantaged medical savings accounts (MSAs) established in conjunction with high-deductible health insurance plans. It increased the deduction for health insurance that self-employed taxpayers may claim. In addition, it allowed long-term care expenses to be treated like deductible medical expenses and clarified the tax treatment of long-term care insurance.

Finally, the Act included administrative simplification and privacy provisions instructing the Secretary of HHS to issue standards addressing the electronic transmission of health information and the privacy of personally identifiable medical information.

Since the passage of HIPAA, there have been subsequent amendments. In 1996, new provisions required group health plans and insurers to cover minimum hospital stays for maternity care and for a limited period, to provide parity in certain mental health benefits. Parity was later extended for one year. In 1998, a provision was passed requiring health plans that cover mastectomy to also offer reconstructive breast surgery. Amendments have also increased the tax deduction for premiums paid by self-employed taxpayers.

The Act, as amended, continues to generate numerous questions. What kinds of policies does it cover? Does it help people who are currently uninsured? Does it help people with preexisting medical conditions? How does it affect health insurance premiums? How do its requirements interact with the Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage? Answers to those questions, as well as other commonly asked questions, are provided, as well as descriptions of each of the major sections of HIPAA.

Some of the answers provided may not be definitive. This is because, in some cases, final regulations have not yet been promulgated. Other regulations, such as those defining the administrative simplification provisions, remain under development. In addition, the answers to many questions about the requirements on the individual health insurance market depend upon particular state responses to the Act. For some provisions, states were allowed the choice of implementing the HIPAA requirements ("the federal fallback") or establishing acceptable alternative mechanisms.