Bulletin No. 1998–45

Agency decision

Ask Donna

What actually matters in this document.

Text

IRB 1998-45

11/4/98 3:23 PM

Page 1

Internal Revenue

bulletin

Bulletin No. 1998–45

November 9, 1998

HIGHLIGHTS

OF THIS ISSUE

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

SPECIAL ANNOUNCEMENT

EMPLOYEE PLANS

Announcement 98–102, page 28.

T.D. 8788, page 6.

REG–109708–97, page 29.

The Eleventh Annual Institute on Current Issues in International Taxation, co-sponsored with The George Washington

University, will be held on December 10 and 11, 1998, at

the J.W. Marriott Hotel in Washington, DC.

INCOME TAX

Rev. Rul. 98–52, page 4.

Federal rates; adjusted federal rates; adjusted federal

long-term rate, and the long-term exempt rate. For

purposes of sections 1274, 1288, 382, and other sections

of the Code, tables set forth the rates for November 1998.

Finding Lists begin on page 31.

Department of the Treasury

Internal Revenue Service

These documents contain interim rules governing the Newborns’ and Mothers’ Health Protection Act of 1996 (NMHPA).

The interim rules provide guidance to employers, group

health plans, health insurance issuers, participants, and beneficiaries relating to new requirements for hospital lengths of

stay in connection with childbirth.

EXEMPT ORGANIZATIONS

Announcement 98–101, page 27.

A list is provided of organizations now classified as private

foundations.

IRB 1998-45

11/4/98 3:23 PM

Page 2

The IRS Mission

and by applying the tax law with integrity and fairness to

all.

Provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities

Statement of Principles

of Internal Revenue

Tax Administration

The Service also has the responsibility of applying and

administering the law in a reasonable, practical manner.

Issues should only be raised by examining officers when

they have merit, never arbitrarily or for trading purposes.

At the same time, the examining officer should never hesitate to raise a meritorious issue. It is also important that

care be exercised not to raise an issue or to ask a court to

adopt a position inconsistent with an established Service

position.

The function of the Internal Revenue Service is to administer the Internal Revenue Code. Tax policy for raising revenue

is determined by Congress.

With this in mind, it is the duty of the Service to carry out that

policy by correctly applying the laws enacted by Congress;

to determine the reasonable meaning of various Code provisions in light of the Congressional purpose in enacting them;

and to perform this work in a fair and impartial manner, with

neither a government nor a taxpayer point of view.

Administration should be both reasonable and vigorous. It

should be conducted with as little delay as possible and

with great courtesy and considerateness. It should never

try to overreach, and should be reasonable within the

bounds of law and sound administration. It should, however, be vigorous in requiring compliance with law and it

should be relentless in its attack on unreal tax devices and

fraud.

At the heart of administration is interpretation of the Code. It

is the responsibility of each person in the Service, charged

with the duty of interpreting the law, to try to find the true

meaning of the statutory provision and not to adopt a

strained construction in the belief that he or she is “protecting the revenue.” The revenue is properly protected only

when we ascertain and apply the true meaning of the statute.

IRB 1998-45

11/4/98 3:23 PM

Page 3

Introduction

The Internal Revenue Bulletin is the authoritative instrument

of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service

and for publishing Treasury Decisions, Executive Orders, Tax

Conventions, legislation, court decisions, and other items of

general interest. It is published weekly and may be obtained

from the Superintendent of Documents on a subscription

basis. Bulletin contents of a permanent nature are consolidated semiannually into Cumulative Bulletins, which are sold

on a single-copy basis.

dures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances

are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application

of the tax laws, including all rulings that supersede, revoke,

modify, or amend any of those previously published in the

Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements

of internal practices and procedures that affect the rights

and duties of taxpayers are published.

Part II.—Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A,

Tax Conventions, and Subpart B, Legislation and Related

Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to

these subjects are contained in the other Parts and Subparts. Also included in this part are Bank Secrecy Act Administrative Rulings. Bank Secrecy Act Administrative Rulings

are issued by the Department of the Treasury’s Office of the

Assistant Secretary (Enforcement).

Revenue rulings represent the conclusions of the Service on

the application of the law to the pivotal facts stated in the

revenue ruling. In those based on positions taken in rulings

to taxpayers or technical advice to Service field offices,

identifying details and information of a confidential nature

are deleted to prevent unwarranted invasions of privacy and

to comply with statutory requirements.

Part IV.—Items of General Interest.

With the exception of the Notice of Proposed Rulemaking

and the disbarment and suspension list included in this part,

none of these announcements are consolidated in the Cumulative Bulletins.

Rulings and procedures reported in the Bulletin do not have

the force and effect of Treasury Department Regulations,

but they may be used as precedents. Unpublished rulings

will not be relied on, used, or cited as precedents by Service

personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and proce-

The first Bulletin for each month includes a cumulative index

for the matters published during the preceding months.

These monthly indexes are cumulated on a semiannual basis

and are published in the first Bulletin of the succeeding semiannual period, respectively.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.

IRB 1998-45

11/4/98 3:23 PM

Page 4

Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

Section 42.—Low-Income

Housing Credit

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of

November 1998. See Rev. Rul. 98–52, on this page.

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of

November 1998. See Rev. Rul. 98–52, on this page.

Section 280G.—Golden

Parachute Payments

Federal short-term, mid-term, and long-term

rates are set forth for the month of November 1998.

See Rev. Rul. 98–52, on this page.

Section 382.—Limitation on Net

Operating Loss Carryforwards

and Certain Built-In Losses

Following Ownership Change

The adjusted federal long-term rate is set forth

for the month of November 1998. See Rev. Rul.

98–52, on this page.

Section 412.—Minimum Funding

Standards

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of

November 1998. See Rev. Rul. 98–52, on this page.

Section 467.—Certain Payments

for the Use of Property or

Services

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of

November 1998. See Rev. Rul. 98–52, on this page.

Section 468.—Special Rules

for Mining and Solid Waste

Reclamation and Closing Costs

Section 482.—Allocation of

Income and Deductions Among

Taxpayers

Section 1274.—Determination

of Issue Price in the Case of

Certain Debt Instruments Issued

for Property

(Also Sections 42, 280G, 382, 412, 467, 468, 482,

483, 642, 807, 846, 1288, 7520, 7872.)

Federal short-term, mid-term, and long-term

rates are set forth for the month of November 1998.

See Rev. Rul. 98–52, on this page.

Section 483.—Interest on

Certain Deferred Payments

The adjusted applicable federal short-term,

mid-term, and long-term rates are set forth for the

month of November 1998. See Rev. Rul. 98–52, on

this page.

Section 642.—Special Rules for

Credits and Deductions

Federal short-term, mid-term, and long-term

rates are set forth for the month of November 1998.

See Rev. Rul. 98–52, on this page.

Section 807.—Rules for Certain

Reserves

The adjusted applicable federal short-term,

mid-term, and long-term rates are set forth for the

month of November 1998. See Rev. Rul. 98–52, on

this page.

Section 846.—Discounted

Unpaid Losses Defined

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of

November 1998. See Rev. Rul. 98–52, on this page.

Federal rates; adjusted federal rates;

adjusted federal long-term rate, and

the long-term exempt rate. For purposes

of sections 1274, 1288, 382, and other

sections of the Code, tables set forth the

rates for November 1998.

Rev. Rul. 98–52

This revenue ruling provides various

prescribed rates for federal income tax

purposes for November 1998 (the current

month.) Table 1 contains the short-term,

mid-term, and long-term applicable federal rates (AFR) for the current month for

purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the

short-term, mid-term, and long-term adjusted applicable federal rates (adjusted

AFR) for the current month for purposes

of section 1288(b). Table 3 sets forth the

adjusted federal long-term rate and the

long-term tax-exempt rate described in

section 382(f). Table 4 contains the appropriate percentages for determining the

low-income housing credit described in

section 42(b)(2) for buildings placed in

service during the current month. Finally,

Table 5 contains the federal rate for determining the present value of an annuity, an

interest for life or for a term of years, or a

remainder or a reversionary interest for

purposes of section 7520.

REV. RUL. 98–52 TABLE 1

Applicable Federal Rates (AFR) for November 1998

Period for Compounding

Short-Term

AFR

110% AFR

120% AFR

130% AFR

November 9, 1998

Annual

Semiannual

Quarterly

Monthly

4.47%

4.92%

5.37%

5.83%

4.42%

4.86%

5.30%

5.75%

4.40%

4.83%

5.27%

5.71%

4.38%

4.81%

5.24%

5.68%

1998–45 I.R.B.

IRB 1998-45

11/4/98 3:23 PM

Page 5

REV. RUL. 98–52 TABLE 1 (Continued)

Applicable Federal Rates (AFR) for November 1998

Period for Compounding

Annual

Semiannual

Quarterly

Monthly

Mid-Term

AFR

110% AFR

120% AFR

130% AFR

150% AFR

175% AFR

4.51%

4.97%

5.42%

5.88%

6.80%

7.96%

4.46%

4.91%

5.35%

5.80%

6.69%

7.81%

4.44%

4.88%

5.31%

5.76%

6.63%

7.74%

4.42%

4.86%

5.29%

5.73%

6.60%

7.69%

Long-Term

AFR

110% AFR

120% AFR

130% AFR

5.10%

5.62%

6.14%

6.66%

5.04%

5.54%

6.05%

6.55%

5.01%

5.50%

6.00%

6.50%

4.99%

5.48%

5.98%

6.46%

REV. RUL. 98–52 TABLE 2

Adjusted AFR for November 1998

Period for Compounding

Annual

Semiannual

Quarterly

Monthly

Short-term

adjusted AFR

3.30%

3.27%

3.26%

3.25%

Mid-term

adjusted AFR

3.88%

3.84%

3.82%

3.81%

Long-term

adjusted AFR

4.65%

4.60%

4.57%

4.56%

REV. RUL. 98–52 TABLE 3

Rates Under Section 382 for November 1998

Adjusted federal long-term rate for the current month

4.65%

Long-term tax-exempt rate for ownership changes during the current month (the highest of the

adjusted federal long-term rates for the current month and the prior two months.)

5.02%

REV. RUL. 98–52 TABLE 4

Appropriate Percentages Under Section 42(b)(2) for November 1998

Appropriate percentage for the 70% present value low-income housing credit

8.12%

Appropriate percentage for the 30% present value low-income housing credit

3.48%

REV. RUL. 98–52 TABLE 5

Rate Under Section 7520 for November 1998

Applicable federal rate for determining the present value of an annuity, an interest for life or a

term of years, or a remainder or reversionary interest

1998–45 I.R.B.

5.4%

November 9, 1998

IRB 1998-45

11/4/98 3:23 PM

Page 6

Section 1288.—Treatment of

Original Issue Discount on TaxExempt Obligations

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month

of November 1998. See Rev. Rul. 98–52, page 4.

Section 7520.—Valuation Tables

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month

of November 1998. See Rev. Rul. 98–52, page 4.

Section 7872.—Treatment of

Loans With Below-Market

Interest Rates

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month

of November 1998. See Rev. Rul. 98–52, page 4.

Section 9811.—Standards

Relating to Benefits for Mothers

and Newborns

26 CFR 54.9811–1: Standards relating to benefits

for mothers and newborns (temporary).

T.D. 8788

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 54

DEPARTMENT OF LABOR

Pension and Welfare Benefits

Administration

29 CFR Part 2590

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Health Care Financing

Administration

45 CFR Parts 144, 146, and

148

Interim Rules For Group Health

Plans and Health Insurance

Issuers Under the Newborns’ and

Mothers’ Health Protection Act

AGENCIES: Internal Revenue Service,

Department of the Treasury; Pension and

Welfare Benefits Administration, Department of Labor; Health Care Financing

Administration, Department of Health

and Human Services.

November 9, 1998

ACTION: Interim rules with request for

comments.

SUMMARY: This document contains interim rules governing the Newborns’ and

Mothers’ Health Protection Act of 1996

(NMHPA). The interim rules provide

guidance to employers, group health

plans, health insurance issuers, and participants and beneficiaries relating to new

requirements for hospital lengths of stay

in connection with childbirth. The rules

contained in this document implement

changes to the Employee Retirement Income Security Act of 1974 (ERISA) and

the Public Health Service Act (PHS Act)

made by NMHPA, and changes to the Internal Revenue Code of 1986 (Code) enacted as part of the Taxpayer Relief Act of

1997 (TRA ’97). Interested persons are

invited to submit comments on the interim rules for consideration by the Department of the Treasury, the Department

of Labor, and the Department of Health

and Human Services (Departments) in developing final rules.

DATES: Effective Date: The interim

rules are effective January 1, 1999.

Applicability Dates: Group market

rules. The interim rules for the group market apply to group health plans and group

health insurance issuers for plan years beginning on or after January 1, 1999.

Individual market rules. The interim

rules for the individual market apply with

respect to health insurance coverage offered, sold, issued, renewed, in effect, or

operated in the individual market on or

after January 1, 1999.

Comment Date. Written comments on

these interim rules are invited and must be

received by the Departments on or before

January 25, 1999.

ADDRESSES: Written comments

should be submitted with a signed original and three copies (except for electronic

submissions to the Internal Revenue Service (IRS)) to any of the addresses specified below. For convenience, comments

may be addressed to any of the Departments, except that comments relating primarily to the individual market regulations should be addressed to the

Department of Health and Human Services (HHS). Any comment that is submitted to any Department will be shared

with the other Departments.

Comments to the IRS can be addressed

to:

CC:DOM:CORP:R (REG–109708–97)

Room 5228

Internal Revenue Service

POB 7604, Ben Franklin Station

Washington, DC 20044

In the alternative, comments may be

hand-delivered between the hours of 8

a.m. and 5 p.m. to:

CC:DOM:CORP:R (REG–109708–97)

Courier’s Desk

Internal Revenue Service

1111 Constitution Avenue, NW

Washington DC 20224

Alternatively, comments may be transmitted electronically via the IRS Internet site

at: http://www.irs.ustreas.gov/prod/tax_

regs/ comments.html

Comments to the Department of Labor

can be addressed to:

U.S. Department of Labor

Pension and Welfare Benefits

Administration

200 Constitution Avenue NW, Room

N-5669

Washington, DC 20210

Attention: NMHPA Comments

Alternatively, comments may be hand-delivered between the hours of 9 a.m. and 5

p.m. to the same address.

Comments to HHS can be addressed to:

Health Care Financing Administration

Department of Health and Human

Services

Attention: HCFA-2892-IFC

P.O. Box 26688

Baltimore, MD 21207

In the alternative, comments may be

hand-delivered between the hours of 8:30

a.m. and 5 p.m. to either:

Room 309-G

Hubert Humphrey Building

200 Independence Avenue, SW

Washington, DC 20201

Room C5-09-26

7500 Security Boulevard

Baltimore, MD 21244-1850

All submissions to the IRS will be open

to public inspection and copying in room

1621, 1111 Constitution Avenue, NW,

Washington, DC from 9 a.m. to 4 p.m.

All submissions to the Department of

Labor will be open to public inspection

1998–45 I.R.B.

IRB 1998-45

11/4/98 3:23 PM

Page 7

and copying in the Public Documents

Room, Pension and Welfare Benefits Administration, U.S. Department of Labor,

Room N-5638, 200 Constitution Avenue,

NW, Washington, DC from 8:30 a.m. to

5:30 p.m. All submissions to HHS will be

open to public inspection and copying in

room 309-G of the Department of Health

and Human Services, 200 Independence

Avenue, SW, Washington, DC from 8:30

a.m. to 5 p.m.

FOR FURTHER INFORMATION

CONTACT: Amy Scheingold Turner,

Pension and Welfare Benefits Administration, Department of Labor, at (202) 2194377; Suzanne Long, Health Care Financing Administration, Department of Health

and Human Services, at (410) 786-1565;

or Russ Weinheimer, Internal Revenue

Service, Department of the Treasury, at

(202) 622-4695.

SUPPLEMENTARY INFORMATION:

Customer Service Information: Individuals interested in obtaining a copy of

the Department of Labor’s booklet entitled “Questions and Answers: Recent

Changes in Health Care Law,” which includes information on NMHPA, may call

the following toll-free number: 1-800998-7542. Information on NMHPA and

other recent health care laws is also available on the Department of Labor’s website (www.dol.gov/dol/pwba) and the Department of Health and Human Services’s

website (www.hcfa.gov).

A. Background

The Newborns’ and Mothers’ Health

Protection Act of 1996 (NMHPA) (Pub.

L. 104–204) was enacted on September

26, 1996 to provide protections for mothers and their newborn children with regard to hospital lengths of stay following

childbirth.1 In section 602 of NMHPA,

Congress declared its findings that:

(1) the length of post-delivery hospital stay should be based on the

unique characteristics of each

1NMHPA adds to protections already established

under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) (Pub. L. 104–191).

Among other things, HIPAA provides that a group

health plan and a group health insurance issuer may

not impose any preexisting condition exclusion relating to pregnancy as a preexisting condition.

1998–45 I.R.B.

mother and her newborn child, taking into consideration the health of

the mother, the health and stability of

the newborn, the ability and confidence of the mother and the father to

care for their newborn, the adequacy

of support systems at home, and the

access of the mother and her newborn to appropriate follow-up health

care; and (2) the timing of the discharge of a mother and her newborn

child from the hospital should be

made by the attending provider in

consultation with the mother.

Provisions substantially similar to those

in NMHPA were later added to the Internal Revenue Code of 1986 (Code) by the

Taxpayer Relief Act of 1997 (TRA ’97)

(Pub. L. 105–34), which was enacted on

August 5, 1997. All references hereafter

to “NMHPA” include the relevant provisions of TRA ’97.

NMHPA was incorporated into the administrative framework established by

Titles I and IV of the Health Insurance

Portability and Accountability Act of

1996 (HIPAA) (Pub. L. 104–191). 2

These titles of HIPAA include substantially similar changes to the Internal Revenue Code, the Employee Retirement Income Security Act (ERISA), and the

Public Health Service Act (PHS Act) relating to group health plans and issuers of

group health insurance coverage.3 Certain other provisions in Titles I and IV of

HIPAA amended only ERISA or only the

PHS Act. In particular, the PHS Act, as

amended by HIPAA, contains provisions

governing health insurance issued to

small groups and health insurance sold in

the individual market. The regulations

implementing these provisions added by

2NMHPA amended Chapter 100 of Subtitle K of

the Code, Part 7 of Subtitle B of Title I of the Employee Retirement Income Security Act (ERISA),

and Title XXVII of the Public Health Service Act

(PHS Act).

3The terms group health plan and health insurance issuer are defined in Code section 9832(a) and

(b)(2), ERISA.section 733(a) and (b)(2), and PHS

Act section 2791(a) and (b)(2). The term group

health insurance coverage is defined in ERISA section 733(b)(4) and PHS Act section 2791(b)(4).

Generally, any health insurance coverage that does

not meet the definition of group health insurance

coverage is individual coverage even if State law

treats the coverage as group coverage for other purposes. The terms individual health insurance coverage and invididual market are defined in PHS Act

section 2791(b)(5) and (e)(1).

HIPAA were made available to the public

on April 1, 1997 and published in the

Federal Register on April 8, 1997. The

group market regulations were issued

jointly by the Secretaries of the Treasury,

Labor, and Health and Human Services

(HHS) (62 F.R. 16894). The individual

market regulations were issued only by

HHS (62 F.R. 16985). See also 62 F.R.

31669–31670 and 31690–31696 (June 10,

1997) (containing technical corrections to

both the group market and individual

market regulations).

NMHPA applies to health coverage in

the large and small group markets, and in

the individual market. The Secretaries of

the Treasury, Labor, and HHS share jurisdiction over the NMHPA provisions.

These provisions are substantially similar,

except as follows:

• The NMHPA provisions in the Code

generally apply to all group health

plans (including church plans) other

than governmental plans, but they do

not apply to health insurance issuers.

The NMHPA provisions in the Code

do not contain the requirement that a

plan provide the special notice that is

required under the NMHPA provisions

in ERISA and the PHS Act. An employer or plan that fails to comply with

the NMHPA provisions in the Code

may be subject to an excise tax under

section 4980D of the Code.

• The NMHPA provisions in ERISA

generally apply to all group health

plans other than governmental plans

and church plans. These provisions

also apply to health insurance issuers

that offer health insurance in connection with such group health plans.

Generally, the Secretary of Labor enforces the provisions of NMHPA in

ERISA, except that no enforcement

action may be taken by the Secretary

against issuers. However, individuals

may generally pursue actions against

issuers under ERISA and, in some circumstances, under State law.

• The NMHPA provisions in the PHS

Act generally apply to health insurance issuers and to certain State and

local governmental plans. States, in

the first instance, enforce the PHS Act

with respect to issuers. Only if a State

does not substantially enforce any provisions under its insurance laws will

HHS enforce the provisions, through

November 9, 1998

IRB 1998-45

11/4/98 3:23 PM

Page 8

the imposition of civil money penalties. HHS has primary enforcement

authority with respect to State and

local governmental plans.

The interim rules being issued today by

the Secretaries of the Treasury, Labor, and

HHS have been developed on a coordinated basis by the Departments. In addition, these interim rules take into account

comments received by the Departments in

response to the request for public comments on NMHPA published in the Federal Register on June 26, 1997 (62 F.R.

34604). Except to the extent needed to

reflect the statutory differences described

above, the interim rules of each Department are substantively identical. However, there are certain nonsubstantive differences, including certain stylistic

differences in language and structure to

conform to conventions used by a particular Department. These differences have

been minimized and any differences in

wording (other than those reflecting differences in the NMHPA statutory provisions described above) are not intended to

create any substantive difference. Finally,

the individual market regulations are issued solely by HHS.

B. Overview of NMHPA and the

Interim Rules

The general rule for hospital lengths

of stay

NMHPA and the interim rules provide

a general rule under which a group health

plan and a health insurance issuer may not

restrict mothers’ and newborns’ benefits

for a hospital length of stay in connection

with childbirth to less than 48 hours following a vaginal delivery or 96 hours following a delivery by cesarean section.4

The general rule requires plans and issuers providing benefits for hospital

lengths of stay in connection with childbirth to cover the minimum length of stay

for all deliveries. The interim rules provide that the determination of whether an

admission is in connection with childbirth

is a medical decision to be made by the attending provider. An example clarifies

that delivery does not have to occur inside

a hospital in order for an admission to be

4The interim rules use the term “vaginal delivery” to clarify that all vaginal deliveries, whether

with complications or without complications, are

subject to the 48-hour length-of-stay requirement.

November 9, 1998

“in connection with childbirth.” NMHPA

and the interim rules permit an exception

to the 48-hour (or 96-hour) general rule if

the attending provider decides, in consultation with the mother, to discharge the

mother or her newborn earlier.

Many commenters asked whether the

length of stay should be calculated from

the time of delivery. Under the interim

rules, when delivery occurs in the hospital, the stay begins at the time of delivery

(or in the case of multiple births, at the

time of the last delivery). When delivery

occurs outside the hospital, the stay begins at the time the mother or newborn is

admitted.

An attending provider is an individual

who is licensed under applicable State

law to provide maternity or pediatric care

and who is directly responsible for providing such care to a mother or newborn

child. Therefore, a plan, hospital, managed care organization, or other issuer is

not an attending provider. However, a

nurse midwife or a physician assistant

may be an attending provider if licensed

in the State to provide maternity or pediatric care in connection with childbirth.

Prohibitions

As noted above, an exception to the 48hour (or 96-hour) general rule applies if

the attending provider decides, in consultation with the mother, to discharge the

mother or newborn earlier. NMHPA and

the interim rules prohibit certain practices

to ensure that this exception will not result in early discharges that could adversely affect the health or well-being of

the mother or newborn.

Specifically, with respect to mothers,

NMHPA provides that a group health plan

or health insurance issuer may not deny a

mother or her newborn child eligibility or

continued eligibility to enroll or renew

coverage under the terms of the plan or

policy solely to avoid the NMHPA requirements, or provide monetary payments or rebates to a mother to encourage

her to accept less than the minimum protections available under NMHPA. The interim rules clarify that such prohibited

payments include payments-in-kind.

However, an example in the interim rules

clarifies that a plan or issuer does not violate this prohibition by providing afterdischarge, follow-up services to a mother

and newborn discharged early if those

services are not more than what the

mother and newborn would have received

if they had stayed in the hospital the full

48 hours (or 96 hours).

In addition, with respect to benefit restrictions, NMHPA and the interim rules

provide that a plan or issuer may not restrict the benefits for any portion of a 48hour (or 96-hour) hospital length of stay

in a manner that is less favorable than the

benefits provided for any preceding portion of the stay. This prohibition includes

certain types of precertification requirements, discussed below in the Authorization and precertification section.

Finally, with respect to attending

providers, NMHPA provides that a plan or

issuer may not penalize, or otherwise reduce or limit the reimbursement of, an attending provider because the provider furnished care to a mother or newborn in

accordance with NMHPA, or provide

monetary or other incentives to an attending provider to induce the provider to furnish care to a mother or newborn in a

manner inconsistent with NMHPA. The

interim rules clarify this prohibition in

four ways. First, the prohibition applies

to both direct and indirect incentives to attending providers. Second, penalties

against an attending provider include taking disciplinary action against or retaliating against the attending provider. Third,

the term “compensation” is used in the interim rules rather than the term “reimbursement” to clarify that all forms of remuneration to attending providers are

included in the prohibition, and to avoid

any confusion that otherwise could result

from the fact that the term “reimbursement” has a narrower meaning in some

insurance contexts. Fourth, the statutory

phrase “to induce” is interpreted to include providing any incentive that could

induce an attending provider to furnish

care inconsistent with NMHPA and the

interim rules (whether or not a specific attending provider is actually induced to

furnish care inconsistent with NMHPA

and the interim rules).

Construction

NMHPA and the interim rules apply

only to group health plans and health insurance issuers that provide benefits for a

hospital stay in connection with childbirth. NMHPA and the interim rules do

not require plans and issuers to provide

1998–45 I.R.B.

IRB 1998-45

11/4/98 3:23 PM

Page 9

these benefits.5 In addition, NMHPA and

the interim rules do not prevent plans or

issuers from imposing deductibles, coinsurance, or other cost-sharing measures

for health benefits relating to hospital

stays in connection with childbirth as long

as the cost-sharing for any portion of a

hospital stay subject to the general rule is

not less favorable to mothers and newborns than that imposed on any preceding

portion of the stay. Thus, for example,

with respect to a 48-hour hospital stay, the

coinsurance for the second 24 hours cannot be greater than that for the first 24

hours.

With respect to health insurance coverage offered in the individual market,

NMHPA and the interim rules apply to all

health insurance coverage, and are not

limited in their application to coverage

that is provided to eligible individuals, as

defined in section 2741(b) of the PHS

Act.

Authorization and precertification

NMHPA and the interim rules contain

three provisions that affect authorization

and precertification for hospital lengths of

stay in connection with childbirth.

• Under paragraph (a) of the interim

rules (relating to hospital length of

stay), a group health plan or a health

insurance issuer may not require a

physician or other health care provider

to obtain authorization from the plan or

issuer to prescribe a hospital length of

stay that is subject to the general rule.

5While NMHPA and the interim rules do not require plans and issuers to provide coverage for hospital stays in connection with childbirth, other legal

requirements may apply, including Title VII of the

Civil Rights Act of 1964 (Title VII). Title VII prohibits discrimination on the basis of sex, including

because of pregnancy, childbirth, or related medical

conditions. 42 U.S.C. 2000e-(k). The Equal Employment Opportunity Commission (EEOC) has

commented, by letter dated July 28, 1997, that,

“[u]nder Title VII, women affected by pregnancy,

childbirth, or related medical conditions must be

treated the same as individuals affected by other

medical conditions. This applies to all aspects of

employment, including employer-provided health

insurance benefits. . . . Thus, Title VII prohibits a

plan from excluding hospital stay benefits in connection with childbirth if the plan provides hospital

stay benefits in connection with other medical conditions.” EEOC is the federal agency responsible for

enforcing Title VII and other federal equal employment opportunity laws. Questions regarding Title

VII should be directed to the EEOC.

1998–45 I.R.B.

• Under paragraph (b) of the interim

rules (relating to prohibitions), a plan

or issuer may not restrict benefits for

part of a stay subject to the general

rule in a way that is less favorable than

a prior portion of the stay. Under an

example in the interim rules, a plan or

issuer is precluded from requiring a

covered individual to obtain precertification for any portion of a hospital

stay that is subject to the general rule

if precertification is not required for

any preceding portion of the stay.

However, the interim rules do not prevent a plan or issuer from requiring

precertification for any portion of a

stay after 48 hours (or 96 hours), or

from requiring precertification for an

entire stay.

• In addition, under paragraph (c) of the

interim rules (containing rules of construction), a plan or issuer may not increase an individual’s coinsurance for

any later portion of a 48-hour (or 96hour) hospital stay. An example illustrates that plans and issuers may vary

cost-sharing in certain circumstances,

provided the cost-sharing rate is consistent throughout the 48-hour (or 96hour) hospital length of stay.

Compensation of attending provider

NMHPA and the interim rules do not

prevent a group health plan or a health insurance issuer from negotiating with an

attending provider the level and type of

compensation for care furnished in accordance with the interim rules (including

the prohibitions section).

Applicability in certain States

There is an exception to the NMHPA

requirements for health insurance coverage in certain States. 6 Specifically,

NMHPA and the interim rules do not

apply with respect to health insurance

coverage if there is a State law7 that meets

any of the following criteria:

6The term State includes the 50 States, the Dis-

trict of Columbia, Puerto Rico, the Virgin Islands,

American Samoa, Guam, Wake Island, the Northern

Mariana Islands, and the Canal Zone (i.e., the areas

and installations in the Republic of Panama made

available to the United States pursuant to the

Panama Canal Treaty of 1977 and related agreements, until December 31, 1999.)

7 Generally, under Part 7 of ERISA and Title

XXVII of the PHS Act, a State law that “prevents

• the State law requires health insurance

coverage to provide at least a 48-hour

(or 96-hour) hospital length of stay in

connection with childbirth,

• the State law requires health insurance

coverage to provide for maternity and

pediatric care in accordance with

guidelines established by the American College of Obstetricians and Gynecologists, the American Academy of

Pediatrics, or any other established

professional medical association, or

• the State law requires that decisions

regarding the appropriate hospital

length of stay in connection with

childbirth be left entirely to the attending provider in consultation with the

mother. The interim rules clarify that

State laws that require the mother to

consent to the decision made by the attending provider satisfy this criterion.

Although this NMHPA exception applies with respect to insured group health

plans, it does not apply with respect to a

group health plan to the extent the plan

provides benefits for hospital lengths of

stay in connection with childbirth other

than through health insurance coverage.8

Notice requirements under ERISA and

the PHS Act

ERISA background. ERISA generally

requires that participants in, and beneficiaries receiving benefits under, a group

health plan be furnished a summary plan

description (SPD) to apprise them of their

rights and obligations under the plan.

ERISA and its implementing regulations

prescribe what is to be included in the

SPD, and the manner in which participants and beneficiaries are to be notified

of any “material modification” to the

the application of” those provisions is preempted by

section 731(a)(1) of ERISA and sections 2723(a)(1)

and 2762(a)(1) of the PHS Act. However, NMHPA

specifies that State laws that meet the statutory criteria will apply even though they might otherwise

“prevent the application of” the NMHPA requirements. See section 711(f) of ERISA and sections

2704(f) and 2751(c) of the PHS Act.

8In conducting an economic analysis of the interim rules, the Department of Labor and HHS conducted a preliminary review of State laws to determine the applicability of NMHPA’s requirements in

each State. This discussion, in section D of this preamble, includes a list of the States in which the Departments of Labor and HHS assumed, solely for the

purpose of the economic analysis, that NMHPA’s requirements apply.

November 9, 1998

IRB 1998-45

11/4/98 3:23 PM

Page 10

terms of the plan or any change in the information required to be included in the

SPD. A summary description of a material modification is generally required to

be furnished not later than 210 days after

the end of the plan year in which the

change is adopted. A summary of any

material reduction in covered services or

benefits is generally required to be furnished not later than 60 days after adoption of the change.

NMHPA changes to ERISA and the

PHS Act. The NMHPA amendments to

ERISA added section 711(d), which requires that the imposition of the NMHPA

requirements is to be treated as a material

modification to the plan, except that the

summary description of the modification

must be provided by not later than 60

days after the first day of the first plan

year in which the requirements apply.

NMHPA also amended both the group

and individual market provisions of title

XXVII of the PHS Act to apply the

ERISA notice requirement to certain entities not otherwise subject to ERISA.

The Department of Labor published interim regulations implementing section

711(d) of ERISA on April 8, 1997 (62

F.R. 16979), issued separately from the

HIPAA regulations published on the same

date.

Section 2704(d) of the PHS Act requires nonfederal governmental plans to

comply with the notice requirement contained in section 711(d) of ERISA as if

that section applied to the plan. Similarly,

section 2751(b) of the PHS Act requires a

health insurance issuer in the individual

market to comply with the notice requirement in section 711(d) of ERISA as if that

section applied to the issuer and as if the

issuer were a group health plan.

The NMHPA interim rules published

today include the notice provisions applicable under the PHS Act. They are

based on the requirements contained in

the Department of Labor’s original notice

regulations, but have been adapted for

two reasons. First, changes were made to

accommodate the Departments’ interpretations of NMHPA’s substantive requirements as contained in these interim rules.

A revision of the notice provisions applicable to plans subject to ERISA recently

was published in the Federal Register in

order to accommodate these interpretations. 63 F.R. 48372 (September 9,

November 9, 1998

1998). Second, the statute provides that

covered individuals in both the individual

and group markets (in group health plans

subject to either ERISA or the PHS Act)

be notified of their rights under NMHPA.

While there are fundamental differences

in the types of entities regulated under

ERISA as compared to the PHS Act, and

in the structure of the two Acts, the Departments are coordinating their work on

these two regulations to ensure that affected individuals will receive the same

disclosure of rights, adapted as appropriate to take into account the different

contexts.

Substance of the PHS Act notice requirements—In the group market. Section 2704 of the PHS Act applies the

NMHPA requirements to group health

plans that are subject to the group market

provisions of Part A of Title XXVII of the

PHS Act. The only group health plans

that are subject to the PHS Act are nonfederal governmental plans, which are not

directly subject to any ERISA requirements. In addition, these plans may elect

to be exempt from most of the requirements of Title XXVII, including the

NMHPA requirements, with respect to

self-insured benefits. Section 2704(d)

states that a group health plan subject to

the PHS Act “shall comply with the notice

requirement under section 711(d) of

[ERISA] with respect to the requirements

of this section as if such section applied to

such plan.”

These interim rules interpret section

2704(d) of the PHS Act to require that

nonfederal governmental plans that provide benefits for hospital lengths of stay

in connection with childbirth, and that are

subject to the NMHPA requirements, provide participants and beneficiaries with a

statement describing those requirements.

The statement must be included in the

plan document that provides a description

of plan benefits to participants and beneficiaries and must be furnished to participants and beneficiaries not later than 60

days after the first day of the first plan

year beginning on or after the effective

date of these interim rules.9 The interim

9Although the specific requirements of these interim rules therefore apply for plan years beginning

on or after January 1, 1999, the underlying statutory

requirement went into effect for plan years beginning on or after January 1, 1998, the effective data of

NMHPA.

rules set forth the language that must be

used by plan administrators to satisfy the

notice requirement for group health plans

subject to the PHS Act.

In the individual market. Section

2751(a) of the PHS Act applies the

NMHPA requirements to health insurance

issuers in the individual market. Section

2751(b) states that a health insurance issuer subject to the individual market provisions of the PHS Act “shall comply with

the notice requirement under section

711(d) of [ERISA] with respect to [the

NMHPA requirements] as if such section

applied to such issuer and such issuer

were a group health plan.” Issuers in the

individual market are not subject to any

federal requirements comparable to disclosure of a “summary plan description”

under ERISA, although they may be subject to similar State law requirements. In

addition, the concept of a “plan year”

does not apply in the individual market,

and the effective date of the NMHPA requirements is not tied to a plan year. Accordingly, the requirements of these interim rules apply to health insurance

coverage “offered, sold, issued, renewed,

in effect, or operated” in the individual

market on or after the effective date of

these interim rules.10

These interim rules interpret section

2751(b) of the PHS Act to require that issuers of individual health insurance coverage that includes benefits for hospital

lengths of stay in connection with childbirth must include a statement in the insurance contract describing the NMHPA

requirements, and, not later than 60 days

after the effective date of the interim

rules, provide covered individuals with a

rider or equivalent document that gives

notice of the NMHPA requirements. The

interim rules set forth the language that

must be used in an insurance contract (or

rider) to satisfy the notice requirement

added by NMHPA.

Effective dates

Group market. NMHPA applies to

group health plans and group health insurance issuers for plan years beginning on

10Although the specific requirements of these interim rules therefore apply on or after January 1,

1999, the underlying statutory requirement went into

effect January 1, 1998, the effective data of

NMHPA.

1998–45 I.R.B.

IRB 1998-45

11/4/98 3:23 PM

Page 11

or after January 1, 1998. The interim

rules for the group market apply to group

health plans and group health insurance

issuers for plan years beginning on or

after January 1, 1999.

Individual market. NMHPA applies to

health insurance coverage offered, sold,

issued, renewed, in effect, or operated in

the individual market on or after January

1, 1998. The interim rules for the individual market apply to health insurance coverage offered, sold, issued, renewed, in

effect, or operated in the individual market on or after January 1, 1999.

C. Interim Rules and Request for

Comments

Section 9833 of the Code (formerly

section 9806), section 734 of ERISA (formerly section 707), and section 2792 of

the PHS Act authorize the Secretaries of

the Treasury, Labor, and HHS to promulgate any interim final rules that they determine are appropriate to carry out the

provisions of Chapter 100 of Subtitle K of

the Code, Part 7 of Subtitle B of Title I of

ERISA, and Title XXVII of the PHS Act,

which include the NMHPA provisions.

The Departments have determined that interim final rules are appropriate because

there is a need to define the substance of

the federal requirements and the scope of

their applicability in anticipation of the

1999 plan year.

Many commenters have asked the Departments to clarify certain NMHPA provisions. For example, the Departments

have been asked when the 48-hour (or 96hour) stay begins, and whether the requirements apply only after birth in a hospital. In addition, NMHPA does not apply

to health insurance coverage if there is a

State law that meets certain criteria outlined in the NMHPA exception. Currently, there are many States that have

such laws meeting the NMHPA exception. Commenters have asked the Departments to clarify the applicability of federal law in these States as well as in other

States that do not have a law meeting

NMHPA’s criteria.

On June 26, 1997 the Departments of

Labor and HHS issued a Request for Information (RFI) inviting comments on the

NMHPA provisions. After consideration

of the many comments received in response to the Departments’ RFI and in

light of the outstanding questions relating

1998–45 I.R.B.

to the substance and applicability of

NMHPA, the Departments have determined that it is appropriate to issue interim final rules at this time to ensure that

group health plans and health insurance

issuers have timely guidance before they

prepare their open season materials in anticipation of the 1999 plan year. (More

than one half of plans begin their fiscal

years on January 1.) Written comments

on these interim rules are invited.

D. Executive Order 12866, Effect of

the Statute, and Paperwork

Reduction Act—The Departments

of Labor and HHS

Executive Order 12866

Executive Order 12866 requires agencies to assess all costs and benefits of

available regulatory alternatives, and when

regulation is necessary, to select regulatory

approaches that maximize net benefits (including potential economic, environmental, public health and safety effects; distributive impacts; and equity). Section 3(f) of

Executive Order 12866 requires agencies

to prepare a regulatory impact analysis for

any rule that is deemed a “significant regulatory action” according to specified criteria. This includes whether the rule may

have an annual effect on the economy of

$100 million or more or certain other specified effects, or whether the rule raises

novel legal or policy issues arising out of

the President’s priorities.

The Office of Management and Budget

(OMB) has determined this to be a major

rule, as well as an economically significant regulatory action under Section 3(f)

of Executive Order 12866. The estimated

impact of NMHPA on insured costs is in

the range of $130 million to $200 million.

The following analysis was conducted by

the Departments of Labor and Health and

Human Services.

The interim rules, for the most part,

mirror the statutory provisions, which are

largely self-executing. While the interim

rules make interpretations or clarifications to some of the statutory provisions,

none of these has a significant economic

impact. The effect of the statute is addressed below.

Effect of the statute

NMHPA was passed in response to a

finding by the Congress that group health

plans and health insurance issuers tend to

limit benefits for hospital lengths of stay

in connection with childbirth. The main

intent of the law was to ensure that adequate care is provided to mothers and

their newborns during the first few critical

days following birth. The Congress was

concerned that the decision to discharge

the mother and newborn was being driven

by the financial motivations of plans and

issuers, rather than the medical interests

of the patient.

NMHPA was modeled after guidelines

developed by the American College of

Obstetricians and Gynecologists (ACOG)

and the American Academy of Pediatrics

(AAP). NMHPA allows the attending

provider, in consultation with the mother,

to make hospital length of stay decisions,

rather than the plan or issuer. Although

mothers and their newborns are not obligated to stay in the hospital for any period

of time following delivery, plans and issuers must now cover at least 48 hours

following a vaginal delivery and at least

96 hours following a delivery by cesarean

section unless the attending provider, in

consultation with the mother, decides to

discharge earlier.

Many believe that the minimum length

of stay requirements of 48 hours for a

vaginal delivery and 96 hours for a cesarean section will have a positive impact

on the overall health and well-being of

mothers and newborns. The longer stays

will allow health care providers sufficient

time to screen for metabolic and genetic

disorders in newborns. It will also permit

time to provide parental education to

mothers and to assess their ability to care

for their newborn.

Although some services performed in

an inpatient hospital setting may be effectively provided in other settings, such as

clinics or physicians’ offices, not all

women have had access to the full range

of appropriate follow-up care. NMHPA

ensures that many women and newborns

with health coverage will now be provided an acceptable level of postpartum

care.

Many States11 have enacted laws that

prescribe benefits for hospital lengths of

11 For purposes of Part 7 of ERISA and Title

XXVII of the PHS Act (including the NMHPA provisions), the term State includes the 50 States, the

District of Columbia, Puerto Rico, the Virgin Islands, American Samoa, Guam, Wake Island, the

November 9, 1998

IRB 1998-45

11/4/98 3:23 PM

Page 12

stay in connection with childbirth.

NMHPA provides that the federal

NMHPA requirements do not apply with

respect to health insurance coverage12 if

there is a State law that satisfies one or

more of the following criteria: (1) requires such coverage to provide for at

least a 48-hour hospital length of stay following a vaginal delivery and at least a

96-hour length of stay following a delivery by cesarean section, (2) requires such

coverage to provide for maternity and pediatric care in accordance with guidelines

established by the American College of

Obstetricians and Gynecologists, the

American Academy of Pediatrics, or other

established professional medical associations, or (3) requires, in connection with

such coverage for maternity care, that the

hospital length of stay for such care is left

to the decision of (or is required to be

made by) the attending provider in consultation with the mother.

Accordingly, the federal NMHPA requirements do not apply to insured plans

(and partially-insured plans, to the extent

benefits for hospital lengths of stay in

connection with childbirth are provided

through insurance coverage) in States in

which a State law meets one or more of

the above criteria. Moreover, the federal

NMHPA requirements do not apply to issuers (both in the group market and the

individual market) in States in which

State law meets one or more of the above

criteria. However, the federal NMHPA

requirements apply to self-insured plans

(and partially-insured plans, to the extent

benefits for hospital lengths of stay in

Northern Mariana Islands, and the Canal Zone (i.e.,

the areas and installations in the Republic of Panama

made available to the United States pursuant to the

Panama Canal Treaty of 197 and related agreements,

until December 31, 1999.)

12 The term health insurance coverage means

“benefits consisting of medical care (provided directly, through insurance or reimbursement, or otherwise and including any items and services paid for

as medical care) under any hospital or medical service policy or certificate, hospital or medical service

plan contract, or health maintenance organization

contract offered by a health insurance issuer.”

ERISA section 733(b)(1) and PHS Act section

2791(b)(1). The term health insurance issuer means

“an insurance company ,insurance service, or insurance organization . . . which is licensed to engage in

the business of insurance in a State and which is

subject to State law which regulates insurance. . . .

Such term doe snot include a group health plan.”

ERISA section 733(b)(2) and PHS Act section

2791(b)(2).

November 9, 1998

connection with childbirth are provided

other than through insurance coverage),

regardless of State law.

According to a chart developed by the

National Association of Insurance Commissioners for a hearing in September

1997 before the House Committee on

Ways and Means, Subcommittee on

Health, many States already had provisions in their laws or regulations prescribing benefits for hospital lengths of stay in

connection with childbirth before the enactment of NMHPA. Subsequently, for

purposes of this discussion of the Effect

of the Statute, the Departments performed

a preliminary review of State laws as of

July 1, 1998.13 As a result of this review,

it is estimated that 40 States have laws

that appear to meet the criteria specified

in NMHPA. These States are as follows:

Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, the District of Columbia, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky,

Louisiana, Maine, Maryland, Massachusetts, Minnesota, Missouri, Montana,

Nevada, New Hampshire, New Jersey,

New Mexico, New York, North Carolina,

North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina,

South Dakota, Tennessee, Texas, Virginia,

Washington, and West Virginia.

Accordingly, in these 40 States, only

church plans, self-insured private-sector

employer-sponsored group health plans,14

and self-insured nonfederal governmental

plans 15 will be affected by NMHPA.

Based on data from the March 1996 Cur13In conducting the review, the Departments considered State statutes, regulations, rules, bulletins,

and case law. However, the review did not take into

account other State actions that should be considered when making a legal determination regarding

whether a State law meets the criteria specified in

NMHPA.

14Hereafter, other private-sector employer-sponsored group health plans are referred to as ERISA

plans.

15The term nonfederal government plan means a

governmental plan that is not a federal government

plan. PHS Act section 2791(d)(8)(C). The term governmental plan generally means a plan established or

maintained for its employees by the government of

the United States, by the government of any State or

political subdivision thereof, or by any agency or instrumentally of any of the foregoing. PHS Act section 2791(d)(8)(A). The term federal governmental

plan means a governmental plan established or maintained for its employees by the government of the

United States or by any agency or instrumentally of

such government. PHS Act section 2791(d)(8)(B).

rent Population Survey and other sources,

Price Waterhouse has estimated that there

are approximately 270,000 self-insured

ERISA plans covering 53 million individuals. In addition, based on data from the

March 1996 Current Population Survey

and other sources, Price Waterhouse estimated that there are approximately

30,000 self-insured nonfederal governmental plans covering 18 million individuals.16

NMHPA will also affect insured ERISA

plans, insured church plans, insured nonfederal governmental plans, and issuers in

the individual market in States that do not

have a law meeting one or more of the criteria specified in NMHPA. For purposes

of this review of the Effect of the Statute,

the Departments performed a preliminary

review of State laws as of July 1, 1998.

As a result of this review, it is estimated

that the federal NMHPA requirements will

apply to health insurance coverage in 18

States. 17 These States are as follows:

Delaware, Hawaii, Idaho, Michigan, Mississippi, Nebraska, Oregon, Utah, Vermont, Wisconsin, Wyoming, Puerto Rico,

the Virgin Islands, American Samoa,

Guam, Wake Island, the Northern Mariana

Islands, and the Canal Zone (i.e., the areas

and installations in the Republic of

Panama made available to the United

States pursuant to the Panama Canal

Treaty of 1977 and related agreements,

until December 31, 1999).

Based on data from the March 1996

Current Population Survey and other

sources, Price Waterhouse estimated that

there are approximately 2.5 million insured ERISA plans, 145,000 insured nonfederal governmental plans, and 1,000 issuers in the individual market. For a

variety of reasons, these totals cannot be

broken down by State. These reasons in16 Sponsors of self-insured nonfederal govern-

mental plans can elect to have their plans exempted

from most of the requirements of Title XXVII of the

PHS Act, including the NMHPA requirements, with

respect to self-insured benefits. To date, fewer than

600 sponsors have elected to have their plans exempted in whole or in part, and at least some of

these plans have chosen to be exempt from

NMHPA. This means the number of self-insured

nonfederal governmental plans affected by NMHPA

will be less than the 30,000 plans cited above.

17The federal NMHPA provisions appear to apply

in these 18 States because either the State has not

enacted any law that meets the NMHPA criteria or

the State has incorporated the federal NMHPA requirements by reference.

1998–45 I.R.B.

IRB 1998-45

11/4/98 3:23 PM

Page 13

clude a lack of detailed data at the State

level and inconsistencies in how data are

reported, both within and across States.

In addition, the complexities and volatility of today’s health care environment, the

segmentation of the health care markets,

and the rapid increase in various forms of

managed care arrangements make it difficult to define and track such plans.18

The Congressional Budget Office

(CBO) did not estimate costs for implementing NMHPA, passed by the Congress

in September 1996. However, CBO estimated the costs for implementing S.969,

the Senate version of NMHPA. While

there are several differences between

S.969 and the final joint legislation19, the

CBO estimates for implementing S. 969

are the only relevant cost data available,

and can be used as a baseline estimate for

the cost impact of NMHPA.

After making adjustments to reflect the

effects of State laws in effect at the time

of their estimates, CBO concluded that

about 900,000 insured births a year have

shorter hospital lengths of stay than the

minimum lengths of stay provided under

NMHPA. CBO assumed that some of

these births would result in an additional

inpatient day, and some would receive a

follow-up visit. Some mothers would still

choose to go home before the full time allowed by NMHPA, while others are already receiving a timely follow-up visit

and therefore would not incur any additional costs. CBO estimated that inpatient

hospital days would increase by approximately 400,000 days and follow-up care

would increase by approximately 200,000

visits annually.

CBO estimated that the additional utilization due to the implementation of S.

969 would have resulted in an aggregate

increase in insured costs of 0.06 percent

for all employment-based and individually purchased health plans. CBO assumed that, in response to the increase in

premiums, employers and individuals

may choose to reduce coverage or drop

18See, for example, Chollet, D.J., Kirk, A.M. and

Ermann, R.D. (1997). Mapping Insurance Markets:

The Group and Individual Insurance Markets in 26

Sates. Washington: The Alpha Center.

19S. 969 contained provisions for post-delivery

follow-up care, or home health visits. In addition,

the costs provided by CBO assumed an implementation date of January 1, 1997, rather than January 1,

1998.

1998–45 I.R.B.

benefits. Although some plans may make

slight reductions in overall benefits to offset this minimal increase in cost, the Departments believe that virtually no employers will drop health coverage entirely

or drop coverage for hospital stays in connection with childbirth. After taking behavioral responses into account, CBO estimated that employer contributions for

health insurance would only rise by about

0.02 percent and most of that increase

likely would be passed back to employees

in the form of reduced wages.

Applying the same 0.06 percent increase to the cost of health insurance for

covered employees of nonfederal governmental plans would raise expenditures.

However, CBO assumed that most of

these costs would be passed back to

employees.

Apart from increased benefit costs for

their employees, States may face additional costs for enforcing NMHPA’s requirements on issuers of health insurance

in the group and individual markets. Because States currently regulate the private-sector health insurance market, CBO

assumed that the increase in costs would

be marginal. However, in cases where

States fail to implement NMHPA or their

own laws meeting the criteria specified in

NMHPA, the federal government assumes

enforcement authority. Depending on the

need for federal enforcement, some of the

aforementioned costs may be shifted to

the federal government.

Although the CBO estimates for implementing S. 969 can be used as a baseline

for determining the cost impact of

NMHPA, they must be updated to reflect

the enactment in several additional States

of laws or regulations meeting the criteria

specified in NMHPA and for the elimination of post-delivery follow up care. Adjusting the CBO estimates for 28 States

that had laws that met the criteria specified in NMHPA at the time of NMHPA’s

enactment, reduces the number of people

directly affected by NMHPA. Approximately 60 percent of people covered by

insured ERISA plans and therefore subject to State laws, are in the 28 States that

had enacted laws prior to NMHPA.

With fewer people affected, the assumed increase in utilization is also

lower, which should translate into a

smaller increase in aggregate health care

costs. However, as discussed previously,

S. 969 had a provision for follow-up visits

in place of an additional inpatient day.

CBO assumed that about one-third of the

additional utilization would be follow-up

visits, and that the cost of a follow-up

visit is only about one-fourth the cost of a

post-delivery hospital day.

Based on those assumptions, if all of

those who would have chosen a follow-up

visit under S. 969 elected to remain in the

hospital for an additional day, the estimated aggregate increase in insured costs

would be 0.07 percent, slightly higher

than the CBO estimate. If, however,

mothers and physicians determine that

some of the follow-up care is unnecessary, and that less than the minimum hospital length of stay is necessary, some of

the additional costs will not be incurred.

If none of the follow-up visits were converted to additional inpatient days, the estimated aggregate increase in insured

costs would be 0.04 percent. Therefore,

the impact of NMHPA on insured costs is

in the 0.04 to 0.07 percent range, or $130

million to $200 million (1996 dollars).

It should be noted that since the enactment of NMHPA, twelve additional States

have enacted laws or regulations meeting

the criteria specified in NMHPA. These

laws apply to an additional 25 percent of

those in fully insured health insurance

plans. While some of these States passed

legislation in direct response to the federal law, other States had already considered hospital lengths of stay for childbirth, but without final passage of

legislation. Thus, the estimates of the

statutory impacts, as of the date of enactment, probably overstate the direct impact

of NMHPA.

Paperwork Reduction Act

The interim rules contain no new information collection requirements that are

subject to review and approval by OMB

under the Paperwork Reduction Act of

1995 (Pub. L. 104–13, 44 U.S.C. Chapter

35). The agencies reported the information collection burdens associated with

NMHPA in the interim rules (Interim

Rules Amending ERISA Disclosure Requirements for Group Health Plans) implementing section 711(d) of ERISA that

were published in the Federal Register

on April 8, 1997 (62 F.R. 16979). OMB

approved these information collection re-

November 9, 1998

IRB 1998-45

11/4/98 3:23 PM

Page 14

quirements under OMB control number

1210–0039. Subsequently, the agencies

published the OMB control number in the

Federal Register at 62 F.R. 36205 (July

7, 1997).

In addition, the group and individual

market notification requirements for

group health plans under section 2704(d),

and issuers under 2751(b) of the PHS Act,

are not considered “information” as defined in 5 CFR 1320.3(c)(2) and are

therefore not subject to the Paperwork

Reduction Act of 1995. In particular, 5

CFR 1320.3(c)(2) states that “the public

disclosure of information originally supplied by the federal government to the recipient for the purpose of disclosure to the

public is not included within the definition” of a collection of information.

E. Regulatory Flexibility Act,

Unfunded Mandates Reform Act

of 1995, and Small Business

Regulatory Enforcement Fairness

Act of 1995

Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA)

(5 U.S.C. 601 et seq) requires that, whenever an agency is required to publish a

general notice of proposed rulemaking,

the agency shall prepare and make available for public comment an initial regulatory flexibility analysis. The analysis describes the impact of the rule on small

entities and identifies any significant alternatives to the rule which accomplish

the stated objectives of the applicable law

and which would minimize the impact on

small entities. For purposes of the RFA,

States and individuals are not considered

small entities. Small employers and small

group health plans are considered small

entities.

Since these rules are being issued as interim final rules and not as a Notice of

Proposed Rulemaking (NPRM), the RFA

does not apply and a regulatory flexibility analysis is not required. Nonetheless,

the Departments have considered the

likely impact of the rules on small entities

and believe that the rules will not have a

significant impact on a substantial number of small entities for the following reasons: 1) the major provisions of the rules

mirror the statutory provisions, which are

largely self-executing and do not afford

the Departments substantial discretion to

November 9, 1998

exercise regulatory flexibility; 2) the interpretations or clarifications to the statutory provisions that are made by these

rules are minor and will not have a significant impact; and 3) because most States

have laws that apply in place of the

NMHPA standards, in those States the interim rules will not apply to insurance issuers, which are subject to State law, and

will have no impact on group health plans

that purchase insurance in those States.

Therefore the main impact of these rules

will be on group health plans that self-insure. Because small plans are more likely

to purchase State-regulated insurance

than to self-insure, they will be less likely

to be affected by these rules.

Although, for the reasons stated, we believe that these rules will not have a significant impact on small entities, specific

data that would permit a complete evaluation of the impact on small entities is not

currently available. Therefore, the Departments invite interested persons to submit comments on the impact of these rules

on small entities for consideration in the

development of the final rules implementing NMHPA. Consistent with the RFA,

the Departments also encourage the public to submit comments on alternative

rules that will accomplish the stated purpose of NMHPA and minimize the impact

on small entities.

Unfunded Mandates Reform Act of 1995

The Unfunded Mandates Reform Act

of 1995 (UMRA, Pub. L. 104–4) requires

agencies to prepare several analytic statements before proposing any rules that

may result in annual expenditures of $100

million by State, local, and Indian tribal

governments or the private sector. These

rules are not subject to the UMRA because they are interim rules. However,

consistent with the policy embodied in the

UMRA, the interim rules have been designed to be the least burdensome alternative for State, local, tribal governments,

and the private sector.

Small Business Regulatory Enforcement

Fairness Act of 1996

The Administrator of the Office of Information and Regulatory Affairs of

OMB has determined that this is a major

rule for purposes of the Small Business

Regulatory Enforcement Fairness Act of

1996 (5 U.S.C. 801 et seq.) (SBREFA).

In general, SBREFA provides, among

other things, that a federal agency must

submit all rules for full Congressional review. Pursuant to SBREFA, Congress has

60 session days to review and approve or

disapprove a major rule. The Secretaries

have determined that the effective date of

these interim rules is January 1, 1999.

Because the effective date of these interim rules is more than 60 days after publication in the Federal Register and receipt by Congress, the requirements of

SBREFA have been satisfied with respect

to these rules.

Statutory Authority

The Department of the Treasury temporary rule is adopted pursuant to the authority contained in section 7805 and in

section 9833 of the Code (26 U.S.C.

7805, 9833), as added by HIPAA (Pub. L.

104–191, 110 Stat. 1936) and amended by

TRA ’97 (Pub. L. 105–34, 111 Stat. 788).

The Department of Labor interim final

rule is adopted pursuant to the authority

contained in sections 505, 711, 734 of

ERISA (29 U.S.C. 1135, 1181, and 1194),

as added by HIPAA (Pub. L. 104–191,

110 Stat. 1936) and amended by NMHPA

(Pub. L. 104–204, 110 Stat. 2935), and

Secretary of Labor’s Order No. 1–87, 52

F.R. 13139, April 21, 1987.

The HHS interim final rule is adopted

pursuant to the authority contained in sections 2701 through 2763, 2791, and 2792

of the PHS Act (42 U.S.C.300gg through

300gg–63, 300gg–91, and 300gg–92), as

added by HIPAA (Pub. L. 104–191, 110

Stat. 1936) and amended by NMHPA

(Pub. L. 104–204, 110 Stat. 2935).

* * * * *

Adoption of Amendments to the

Regulations

Internal Revenue Service

26 CFR Chapter I

Accordingly, 26 CFR Part 54 is amended

as follows:

PART 54—PENSION EXCISE TAXES

Paragraph 1. The authority citation for

part 54 is amended by adding an entry for

§54.9811–1T in numerical order to read

in part as follows:

Authority: 26 U.S.C. 7805 * * *

1998–45 I.R.B.

IRB 1998-45

11/4/98 3:23 PM

Page 15

Section 54.9811–1T also issued under

26 U.S.C. 9833. * * *

Par. 2. Section 54.9801–1T is amended

by:

1. Revising paragraph (a).

2. Revising the first sentence of paragraph (c).

The revisions read as follows:

§54.9801–1T Basis and scope

(temporary).

(a) Statutory basis. Sections 54.9801–

1T through 54.9801–6T, 54.9802–1T,

54.9811–1T, 54.9812–1T, 54.9831–1T,

and 54.9833–1T (portability sections) implement Chapter 100 of Subtitle K of the

Internal Revenue Code of 1986.

* * * * *

Public Health Service Act and Employee

Retirement Income Security Act. Sections

2701, 2702, 2704, 2705, 2721, and 2791

of the Public Health Service Act and sections 701, 702, 703, 711, 712, 732, and

733 of the Employee Retirement Income

Security Act of 1974 impose requirements

similar to those imposed under Chapter

100 of Subtitle K with respect to health

insurance issuers offering group health insurance coverage. * * *

* * * * *

Par. 3. In §54.9801–2T, the introductory text is revised to read as follows:

§54.9801–2T Definitions (temporary).

Unless otherwise provided, the definitions in this section govern in applying

the provisions of §§54.9801–1T through

54.9801–6T, 54.9802–1T, 54.9811–1T,

54.9812–1T, 54.9831–1T, and 54.9833–

1T.

* * * * *

Par. 4. Section 54.9811–1T is added to

read as follows:

§54.9811–1 Standards relating to

benefits for mothers and newborns

(temporary).

(a) Hospital length of stay—(1) General rule. Except as provided in paragraph (a)(5) of this section, a group health

plan that provides benefits for a hospital

length of stay in connection with child-

1998–45 I.R.B.

birth for a mother or her newborn may not

restrict benefits for the stay to less than —

(i) 48 hours following a vaginal delivery; or

(ii) 96 hours following a delivery by

cesarean section.

(2) When stay begins—(i) Delivery in a

hospital. If delivery occurs in a hospital,

the hospital length of stay for the mother

or newborn child begins at the time of delivery (or in the case of multiple births, at

the time of the last delivery).

(ii) Delivery outside a hospital. If delivery occurs outside a hospital, the hospital length of stay begins at the time the

mother or newborn is admitted as a hospital inpatient in connection with childbirth.

The determination of whether an admission is in connection with childbirth is a

medical decision to be made by the attending provider.

(3) Examples. The rules of paragraphs

(a)(1) and (2) of this section are illustrated

by the following examples. In each example, the group health plan provides benefits for hospital lengths of stay in connection with childbirth and is subject to the

requirements of this section, as follows:

Example 1. (i) A pregnant woman covered under

a group health plan goes into labor and is admitted

to the hospital at 10 p.m. on June 11. She gives birth

by vaginal delivery at 6 a.m. on June 12.

(ii) In this Example 1, the 48-hour period described in paragraph (a)(1)(i) of this section ends at

6 a.m. on June 14.

Example 2. (i) A woman covered under a group

health plan gives birth at home by vaginal delivery.

After the delivery, the woman begins bleeding excessively in connection with the childbirth and is admitted to the hospital for treatment of the excessive

bleeding at 7 p.m. on October 1.

(ii) In this Example 2, the 48-hour period described in paragraph (a)(1)(i) of this section ends at

7 p.m. on October 3.

Example 3. (i) A woman covered under a group

health plan gives birth by vaginal delivery at home.

The child later develops pneumonia and is admitted

to the hospital. The attending provider determines

that the admission is not in connection with childbirth.

(ii) In this Example 3, the hospital length-of-stay

requirements of this section do not apply to the

child’s admission to the hospital because the admission is not in connection with childbirth.

(4) Authorization not required—(i) In

general. A plan may not require that a

physician or other health care provider

obtain authorization from the plan, or

from a health insurance issuer offering

health insurance coverage under the plan,

for prescribing the hospital length of stay

required under paragraph (a)(1) of this

section. (See also paragraphs (b)(2) and

(c)(3) of this section for rules and examples regarding other authorization and

certain notice requirements.)

(ii) Example. The rule of this paragraph (a)(4) is illustrated by the following

example:

Example. (i) In the case of a delivery by cesarean

section, a group health plan subject to the requirements of this section automatically provides benefits

for any hospital length of stay of up to 72 hours. For

any longer stay, the plan requires an attending

provider to complete a certificate of medical necessity. The plan then makes a determination, based on

the certificate of medical necessity, whether a longer

stay is medically necessary.

(ii) In this Example, the requirement that an attending provider complete a certificate of medical

necessity to obtain authorization for the period between 72 hours and 96 hours following a delivery by

cesarean section is prohibited by this paragraph

(a)(4).

(5) Exceptions—(i) Discharge of

mother. If a decision to discharge a

mother earlier than the period specified in

paragraph (a)(1) of this section is made by

an attending provider, in consultation

with the mother, the requirements of paragraph (a)(1) of this section do not apply

for any period after the discharge.

(ii) Discharge of newborn. If a decision to discharge a newborn child earlier

than the period specified in paragraph

(a)(1) of this section is made by an attending provider, in consultation with the

mother (or the newborn’s authorized representative), the requirements of paragraph (a)(1) of this section do not apply

for any period after the discharge.

(iii) Attending provider defined. For

purposes of this section, attending

provider means an individual who is licensed under applicable State law to provide maternity or pediatric care and who

is directly responsible for providing maternity or pediatric care to a mother or

newborn child.

(iv) Example. The rules of this paragraph (a)(5) are illustrated by the following example:

Example. (i) A pregnant woman covered under a

group health plan subject to the requirements of this

section goes into labor and is admitted to a hospital.

She gives birth by cesarean section. On the third

day after the delivery, the attending provider for the

mother consults with the mother, and the attending

provider for the newborn consults with the mother

regarding the newborn. The attending providers authorize the early discharge of both the mother and

November 9, 1998

IRB 1998-45

11/4/98 3:23 PM

Page 16

the newborn. Both are discharged approximately 72

hours after the delivery. The plan pays for the 72hour hospital stays.

(ii) In this Example, the requirements of this

paragraph (a) have been satisfied with respect to the

mother and the newborn. If either is readmitted, the

hospital stay for the readmission is not subject to

this section.

quired under paragraph (a) of this section

in a manner that is less favorable than the

benefits provided for any preceding portion of the stay.

(ii) Example. The rules of this paragraph (b)(2) are illustrated by the following example:

(b) Prohibitions—(1) With respect to

mothers—(i) In general. A group health

plan may not —

(A) Deny a mother or her newborn

child eligibility or continued eligibility to

enroll or renew coverage under the terms

of the plan solely to avoid the requirements of this section; or

(B) Provide payments (including payments-in-kind) or rebates to a mother to

encourage her to accept less than the minimum protections available under this

section.

(ii) Examples. The rules of this paragraph (b)(1) are illustrated by the following examples. In each example, the group

health plan is subject to the requirements

of this section, as follows:

Example. (i) A group health plan subject to the

requirements of this section provides benefits for

hospital lengths of stay in connection with childbirth. In the case of a delivery by cesarean section,

the plan automatically pays for the first 48 hours.

With respect to each succeeding 24-hour period, the

participant or beneficiary must call the plan to obtain precertification from a utilization reviewer, who

determines if an additional 24-hour period is medically necessary. If this approval is not obtained, the

plan will not provide benefits for any succeeding 24hour period.

(ii) In this Example, the requirement to obtain

precertification for the two 24-hour periods immediately following the initial 48-hour stay is prohibited

by this paragraph (b)(2) because benefits for the latter part of the stay are restricted in a manner that is

less favorable than benefits for a preceding portion

of the stay. (However, this section does not prohibit

a plan from requiring precertification for any period

after the first 96 hours.) In addition, if the plan’s utilization reviewer denied any mother or her newborn

benefits within the 96-hour stay, the plan would also

violate paragraph (a) of this section.

Example 1. (i) A group health plan provides

benefits for at least a 48-hour hospital length of stay

following a vaginal delivery. If a mother and newborn covered under the plan are discharged within

24 hours after the delivery, the plan will waive the

copayment and deductible.

(ii) In this Example 1, because waiver of the copayment and deductible is in the nature of a rebate

that the mother would not receive if she and her newborn remained in the hospital, it is prohibited by this

paragraph (b)(1). (In addition, the plan violates paragraph (b)(2) of this section because, in effect, no copayment or deductible is required for the first portion

of the stay and a double copayment and a deductible

are required for the second portion of the stay.)

Example 2. (i) A group health plan provides

benefits for at least a 48-hour hospital length of stay

following a vaginal delivery. In the event that a

mother and her newborn are discharged earlier than

48 hours and the discharges occur after consultation

with the mother in accordance with the requirements

of paragraph (a)(5) of this section, the plan provides

for a follow-up visit by a nurse within 48 hours after

the discharges to provide certain services that the

mother and her newborn would otherwise receive in

the hospital.

(ii) In this Example 2, because the follow-up

visit does not provide any services beyond what the

mother and her newborn would receive in the hospital, coverage for the follow-up visit is not prohibited

by this paragraph (b)(1).

(2) With respect to benefit restrictions—(i) In general. Subject to paragraph (c)(3) of this section, a group health

plan may not restrict the benefits for any

portion of a hospital length of stay re-

November 9, 1998

(3) With respect to attending providers.

A group health plan may not directly or

indirectly —

(i) Penalize (for example, take disciplinary action against or retaliate against), or

otherwise reduce or limit the compensation of, an attending provider because the

provider furnished care to a participant or

beneficiary in accordance with this section; or

(ii) Provide monetary or other incentives to an attending provider to induce

the provider to furnish care to a participant or beneficiary in a manner inconsistent with this section, including providing

any incentive that could induce an attending provider to discharge a mother or

newborn earlier than 48 hours (or 96

hours) after delivery.

section, the following rules of construction apply:

(1) Hospital stays not mandatory. This

section does not require a mother to —

(i) Give birth in a hospital; or

(ii) Stay in the hospital for a fixed period of time following the birth of her

child.

(2) Hospital stay benefits not mandated. This section does not apply to any

group health plan that does not provide

benefits for hospital lengths of stay in

connection with childbirth for a mother or

her newborn child.

(3) Cost-sharing rules—(i) In general. This section does not prevent a

group health plan from imposing deductibles, coinsurance, or other cost-sharing in relation to benefits for hospital

lengths of stay in connection with childbirth for a mother or a newborn under the

plan or coverage, except that the coinsurance or other cost-sharing for any portion

of the hospital length of stay required

under paragraph (a) of this section may

not be greater than that for any preceding

portion of the stay.

(ii) Examples. The rules of this paragraph (c)(3) are illustrated by the following examples. In each example, the group

health plan is subject to the requirements

of this section, as follows:

Example 1. (i) A group health plan provides

benefits for at least a 48-hour hospital length of stay

in connection with vaginal deliveries. The plan covers 80 percent of the cost of the stay for the first 24hour period and 50 percent of the cost of the stay for

the second 24-hour period. Thus, the coinsurance

paid by the patient increases from 20 percent to 50

percent after 24 hours.

(ii) In this Example 1, the plan violates the rules

of this paragraph (c)(3) because coinsurance for the

second 24-hour period of the 48-hour stay is greater

than that for the preceding portion of the stay. (In

addition, the plan also violates the similar rule in

paragraph (b)(2) of this section.)

Example 2. (i) A group health plan generally

covers 70 percent of the cost of a hospital length of

stay in connection with childbirth. However, the

plan will cover 80 percent of the cost of the stay if

the participant or beneficiary notifies the plan of the

pregnancy in advance of admission and uses whatever hospital the plan may designate.

(ii) In this Example 2, the plan does not violate

the rules of this paragraph (c)(3) because the level of

benefits provided (70 percent or 80 percent) is consistent throughout the 48-hour (or 96-hour) hospital

length of stay required under paragraph (a) of this

section. (In addition, the plan does not violate the

rules in paragraph (a)(4) or (b)(2) of this section.)

(4) Compensation of attending provider. This section does not prevent a

group health plan from negotiating with

an attending provider the level and type of

compensation for care furnished in accordance with this section (including paragraph (b) of this section).

(d) Notice requirement. See 29 CFR

2520.102–3(u) and (v)(2) for rules relating to a notice requirement imposed under

section 711 of the Employee Retirement

1998–45 I.R.B.

IRB 1998-45

11/4/98 3:23 PM

Page 17

Income Security Act of 1974 (29 U.S.C.

1181) on certain group health plans that

provide benefits for hospital lengths of

stay in connection with childbirth.

(e) Applicability in certain States—(1)

Health insurance coverage. The requirements of section 9811 and this section do

not apply with respect to health insurance

coverage offered in connection with a

group health plan if there is a State law

regulating the coverage that meets any of

the following criteria:

(i) The State law requires the coverage

to provide for at least a 48-hour hospital

length of stay following a vaginal delivery and at least a 96-hour hospital length

of stay following a delivery by cesarean

section.

(ii) The State law requires the coverage

to provide for maternity and pediatric care

in accordance with guidelines established

by the American College of Obstetricians

and Gynecologists, the American Academy of Pediatrics, or any other established professional medical association.

(iii) The State law requires, in connection with the coverage for maternity care,

that the hospital length of stay for such

care is left to the decision of (or is required to be made by) the attending

provider in consultation with the mother.

State laws that require the decision to be

made by the attending provider with the

consent of the mother satisfy the criterion

of this paragraph (e)(1)(iii).

(2) Group health plans—(i) Fully-insured plans. For a group health plan that

provides benefits solely through health insurance coverage, if the State law regulating the health insurance coverage meets

any of the criteria in paragraph (e)(1) of

this section, then the requirements of section 9811 and this section do not apply.

(ii) Self-insured plans. For a group

health plan that provides all benefits for

hospital lengths of stay in connection with

childbirth other than through health insurance coverage, the requirements of section 9811 and this section apply.

(iii) Partially-insured plans. For a

group health plan that provides some benefits through health insurance coverage, if

the State law regulating the health insurance coverage meets any of the criteria in

paragraph (e)(1) of this section, then the

requirements of section 9811 and this section apply only to the extent the plan provides benefits for hospital lengths of stay

1998–45 I.R.B.

in connection with childbirth other than

through health insurance coverage.

(3) Preemption provisions under

ERISA. See 29 CFR 2590.711(e)(3) regarding how rules parallel to those under

paragraph (e)(1) of this section relate to

other preemption provisions under the

Employee Retirement Income Security

Act of 1974.

(4) Examples. The rules of this paragraph (e) are illustrated by the following

examples:

Example 1. (i) A group health plan buys group

health insurance coverage in a State that requires

that the coverage provide for at least a 48-hour hospital length of stay following a vaginal delivery and

at least a 96-hour hospital length of stay following a

delivery by cesarean section.

(ii) In this Example 1, the coverage is subject to

State law, and the requirements of section 9811 and

this section do not apply.

Example 2. (i) A self-insured group health plan

covers hospital lengths of stay in connection with

childbirth in a State that requires health insurance

coverage to provide for maternity care in accordance

with guidelines established by the American College

of Obstetricians and Gynecologists and to provide

for pediatric care in accordance with guidelines established by the American Academy of Pediatrics.

(ii) In this Example 2, even though the State law

satisfies the criterion of paragraph (e)(1)(ii) of this

section, because the plan provides benefits for hospital lengths of stay in connection with childbirth

other than through health insurance coverage, the

plan is subject to the requirements of section 9811

and this section.

(f) Effective date. Section 9811 applies to group health plans for plan years

beginning on or after January 1, 1998.

This section applies to group health plans

for plan years beginning on or after January 1, 1999.

Par. 5. In §54.9831–1T, paragraph

(b)(1) is revised to read as follows:

§54.9831–1T Special rules relating to

group health plans (temporary).

* * * * *

(b) Excepted benefits—(1) In general.

The requirements of §§54.9801–1T

through 54.9801–6T, 54.9802–1T,

54.9811–1T, and 54.9812–1T do not apply

to any group health plan in relation to its

provision of the benefits described in paragraph (b)(2), (3), (4), or (5) of this section

(or any combination of these benefits).

* * * * *

Michael P. Dolan,

Deputy Commissioner of

Internal Revenue.

Approved August 14, 1998.

Donald C. Lubick,

Assistant Secretary of

the Treasury.

Pension and Welfare Benefits

Administration

29 CFR Chapter XXV

29 CFR Part 2590 is amended as follows:

PART 2590 —RULES AND

REGULATIONS FOR HEALTH

INSURANCE PORTABILITY AND

RENEWABILITY FOR GROUP

HEALTH PLANS

1. The authority citation for Part 2590

is revised to read as follows:

Authority: Secs. 107, 209, 505, 701–

703, 711, 712, and 731-734 of ERISA (29

U.S.C. 1027, 1059, 1135, 1171–1173,

1181, 1182, and 1191-1194), as amended

by HIPAA (Pub. L. 104–191, 110 Stat.

1936) and NMHPA (Pub. L. 104–204,

110 Stat. 2935), and Secretary of Labor’s

Order No. 1–87, 52 F.R. 13139, April 21,

1987.

Subpart B—Other Requirements

2. § 2590.711 is revised to read as follows:

§ 2590.711 Standards relating to

benefits for mothers and newborns.

(a) Hospital length of stay—(1) General rule. Except as provided in paragraph (a)(5) of this section, a group health

plan, or a health insurance issuer offering

group health insurance coverage, that provides benefits for a hospital length of stay

in connection with childbirth for a mother

or her newborn may not restrict benefits

for the stay to less than —

(i) 48 hours following a vaginal delivery; or

(ii) 96 hours following a delivery by

cesarean section.

(2) When stay begins—(i) Delivery in a

hospital. If delivery occurs in a hospital,

the hospital length of stay for the mother

or newborn child begins at the time of delivery (or in the case of multiple births, at

the time of the last delivery).

(ii) Delivery outside a hospital. If delivery occurs outside a hospital, the hospital length of stay begins at the time the

mother or newborn is admitted as a hospi-

November 9, 1998

IRB 1998-45

11/4/98 3:23 PM

Page 18

tal inpatient in connection with childbirth.

The determination of whether an admission is in connection with childbirth is a

medical decision to be made by the attending provider.

(3) Examples. The rules of paragraphs

(a)(1) and (2) of this section are illustrated

by the following examples. In each example, the group health plan provides benefits for hospital lengths of stay in connection with childbirth and is subject to the

requirements of this section, as follows:

Example 1. (i) A pregnant woman covered under

a group health plan goes into labor and is admitted

to the hospital at 10 p.m. on June 11. She gives birth

by vaginal delivery at 6 a.m. on June 12.

(ii) In this Example 1, the 48-hour period described in paragraph (a)(1)(i) of this section ends at

6 a.m. on June 14.

Example 2. (i) A woman covered under a group

health plan gives birth at home by vaginal delivery.

After the delivery, the woman begins bleeding excessively in connection with the childbirth and is admitted to the hospital for treatment of the excessive

bleeding at 7 p.m. on October 1.

(ii) In this Example 2, the 48-hour period described in paragraph (a)(1)(i) of this section ends at

7 p.m. on October 3.

Example 3. (i) A woman covered under a group

health plan gives birth by vaginal delivery at home.

The child later develops pneumonia and is admitted

to the hospital. The attending provider determines

that the admission is not in connection with childbirth.

(ii) In this Example 3, the hospital length-of-stay

requirements of this section do not apply to the

child’s admission to the hospital because the admission is not in connection with childbirth.

(4) Authorization not required—(i) In

general. A plan or issuer may not require

that a physician or other health care

provider obtain authorization from the

plan or issuer for prescribing the hospital

length of stay required under paragraph

(a)(1) of this section. (See also paragraphs (b)(2) and (c)(3) of this section for

rules and examples regarding other authorization and certain notice requirements.)

(ii) Example. The rule of this paragraph (a)(4) is illustrated by the following

example:

Example. (i) In the case of a delivery by cesarean

section, a group health plan subject to the requirements of this section automatically provides benefits

for any hospital length of stay of up to 72 hours. For

any longer stay, the plan requires an attending

provider to complete a certificate of medical necessity. The plan then makes a determination, based on

the certificate of medical necessity, whether a longer

stay is medically necessary.

(ii) In this Example, the requirement that an attending provider complete a certificate of medical

November 9, 1998

necessity to obtain authorization for the period between 72 hours and 96 hours following a delivery by

cesarean section is prohibited by this paragraph

(a)(4).

(5) Exceptions—(i) Discharge of

mother. If a decision to discharge a

mother earlier than the period specified in

paragraph (a)(1) of this section is made by

an attending provider, in consultation

with the mother, the requirements of paragraph (a)(1) of this section do not apply

for any period after the discharge.

(ii) Discharge of newborn. If a decision to discharge a newborn child earlier

than the period specified in paragraph

(a)(1) of this section is made by an attending provider, in consultation with the

mother (or the newborn’s authorized representative), the requirements of paragraph (a)(1) of this section do not apply

for any period after the discharge.

(iii) Attending provider defined. For

purposes of this section, attending provider means an individual who is licensed

under applicable State law to provide maternity or pediatric care and who is directly responsible for providing maternity

or pediatric care to a mother or newborn

child.

(iv) Example. The rules of this paragraph (a)(5) are illustrated by the following example:

Example. (i) A pregnant woman covered under a

group health plan subject to the requirements of this

section goes into labor and is admitted to a hospital.

She gives birth by cesarean section. On the third

day after the delivery, the attending provider for the

mother consults with the mother, and the attending

provider for the newborn consults with the mother

regarding the newborn. The attending providers authorize the early discharge of both the mother and

the newborn. Both are discharged approximately 72

hours after the delivery. The plan pays for the 72hour hospital stays.

(ii) In this Example, the requirements of this

paragraph (a) have been satisfied with respect to the

mother and the newborn. If either is readmitted, the

hospital stay for the readmission is not subject to

this section.

(b) Prohibitions—(1) With respect to

mothers—(i) In general. A group health

plan, and a health insurance issuer offering group health insurance coverage, may

no—

(A) Deny a mother or her newborn

child eligibility or continued eligibility to

enroll or renew coverage under the terms

of the plan solely to avoid the requirements of this section; or

(B) Provide payments (including payments-in-kind) or rebates to a mother to

encourage her to accept less than the minimum protections available under this

section.

(ii) Examples. The rules of this paragraph (b)(1) are illustrated by the following examples. In each example, the group

health plan is subject to the requirements

of this section, as follows:

Example 1. (i) A group health plan provides

benefits for at least a 48-hour hospital length of stay

following a vaginal delivery. If a mother and newborn covered under the plan are discharged within

24 hours after the delivery, the plan will waive the

copayment and deductible.

(ii) In this Example 1, because waiver of the copayment and deductible is in the nature of a rebate

that the mother would not receive if she and her newborn remained in the hospital, it is prohibited by this

paragraph (b)(1). (In addition, the plan violates paragraph (b)(2) of this section because, in effect, no copayment or deductible is required for the first portion

of the stay and a double copayment and a deductible

are required for the second portion of the stay.)

Example 2. (i) A group health plan provides

benefits for at least a 48-hour hospital length of stay

following a vaginal delivery. In the event that a

mother and her newborn are discharged earlier than

48 hours and the discharges occur after consultation

with the mother in accordance with the requirements

of paragraph (a)(5) of this section, the plan provides

for a follow-up visit by a nurse within 48 hours after

the discharges to provide certain services that the

mother and her newborn would otherwise receive in

the hospital.

(ii) In this Example 2, because the follow-up

visit does not provide any services beyond what the

mother and her newborn would receive in the hospital, coverage for the follow-up visit is not prohibited

by this paragraph (b)(1).

(2) With respect to benefit restrictions—(i) In general. Subject to paragraph (c)(3) of this section, a group health

plan, and a health insurance issuer offering group health insurance coverage, may

not restrict the benefits for any portion of

a hospital length of stay required under

paragraph (a) of this section in a manner

that is less favorable than the benefits provided for any preceding portion of the

stay.

(ii) Example. The rules of this paragraph (b)(2) are illustrated by the following example:

Example. (i) A group health plan subject to the

requirements of this section provides benefits for

hospital lengths of stay in connection with childbirth. In the case of a delivery by cesarean section,

the plan automatically pays for the first 48 hours.

With respect to each succeeding 24-hour period, the

participant or beneficiary must call the plan to ob-

1998–45 I.R.B.

IRB 1998-45

11/4/98 3:23 PM

Page 19

tain precertification from a utilization reviewer, who

determines if an additional 24-hour period is medically necessary. If this approval is not obtained, the

plan will not provide benefits for any succeeding 24hour period.

(ii) In this Example, the requirement to obtain

precertification for the two 24-hour periods immediately following the initial 48-hour stay is prohibited

by this paragraph (b)(2) because benefits for the latter part of the stay are restricted in a manner that is

less favorable than benefits for a preceding portion

of the stay. (However, this section does not prohibit

a plan from requiring precertification for any period

after the first 96 hours.) In addition, if the plan’s utilization reviewer denied any mother or her newborn

benefits within the 96-hour stay, the plan would also

violate paragraph (a) of this section.

(3) With respect to attending providers.

A group health plan, and a health insurance issuer offering group health insurance coverage, may not directly or indirectly—

(i) Penalize (for example, take disciplinary action against or retaliate against), or

otherwise reduce or limit the compensation of, an attending provider because the

provider furnished care to a participant or

beneficiary in accordance with this section; or

(ii) Provide monetary or other incentives to an attending provider to induce

the provider to furnish care to a participant or beneficiary in a manner inconsistent with this section, including providing

any incentive that could induce an attending provider to discharge a mother or

newborn earlier than 48 hours (or 96

hours) after delivery.

section, the following rules of construction apply:

(1) Hospital stays not mandatory. This

section does not require a mother to —

(i) Give birth in a hospital; or

(ii) Stay in the hospital for a fixed period of time following the birth of her

child.

(2) Hospital stay benefits not mandated. This section does not apply to any

group health plan, or any group health insurance coverage, that does not provide

benefits for hospital lengths of stay in

connection with childbirth for a mother or

her newborn child.

(3) Cost-sharing rules—(i) In general.

This section does not prevent a group

health plan or a health insurance issuer offering group health insurance coverage

from imposing deductibles, coinsurance,

or other cost-sharing in relation to bene-

1998–45 I.R.B.

fits for hospital lengths of stay in connection with childbirth for a mother or a newborn under the plan or coverage, except

that the coinsurance or other cost-sharing

for any portion of the hospital length of

stay required under paragraph (a) of this

section may not be greater than that for

any preceding portion of the stay.

(ii) Examples. The rules of this paragraph (c)(3) are illustrated by the following examples. In each example, the group

health plan is subject to the requirements

of this section, as follows:

Example 1. (i) A group health plan provides

benefits for at least a 48-hour hospital length of stay

in connection with vaginal deliveries. The plan covers 80 percent of the cost of the stay for the first 24hour period and 50 percent of the cost of the stay for

the second 24-hour period. Thus, the coinsurance

paid by the patient increases from 20 percent to 50

percent after 24 hours.

(ii) In this Example 1, the plan violates the rules

of this paragraph (c)(3) because coinsurance for the

second 24-hour period of the 48-hour stay is greater

than that for the preceding portion of the stay. (In

addition, the plan also violates the similar rule in

paragraph (b)(2) of this section.)

Example 2. (i) A group health plan generally

covers 70 percent of the cost of a hospital length of

stay in connection with childbirth. However, the

plan will cover 80 percent of the cost of the stay if

the participant or beneficiary notifies the plan of the

pregnancy in advance of admission and uses whatever hospital the plan may designate.

(ii) In this Example 2, the plan does not violate

the rules of this paragraph (c)(3) because the level of

benefits provided (70 percent or 80 percent) is consistent throughout the 48-hour (or 96-hour) hospital

length of stay required under paragraph (a) of this

section. (In addition, the plan does not violate the

rules in paragraph (a)(4) or (b)(2) of this section.)

(4) Compensation of attending provider. This section does not prevent a

group health plan or a health insurance issuer offering group health insurance coverage from negotiating with an attending

provider the level and type of compensation for care furnished in accordance with

this section (including paragraph (b) of

this section).

(d) Notice requirement. See 29 CFR

2520.102–3 (u) and (v)(2) (relating to the

disclosure requirement under section

711(d) of the Act).

(e) Applicability in certain States—(1)

Health insurance coverage. The requirements of section 711 of the Act and this

section do not apply with respect to health

insurance coverage offered in connection

with a group health plan if there is a State

law regulating the coverage that meets

any of the following criteria:

(i) The State law requires the coverage

to provide for at least a 48-hour hospital

length of stay following a vaginal delivery and at least a 96-hour hospital length

of stay following a delivery by cesarean

section.

(ii) The State law requires the coverage

to provide for maternity and pediatric care

in accordance with guidelines established

by the American College of Obstetricians

and Gynecologists, the American Academy of Pediatrics, or any other established professional medical association.

(iii) The State law requires, in connection with the coverage for maternity care,

that the hospital length of stay for such

care is left to the decision of (or is required to be made by) the attending

provider in consultation with the mother.

State laws that require the decision to be

made by the attending provider with the

consent of the mother satisfy the criterion

of this paragraph (e)(1)(iii).

(2) Group health plans—(i) Fully-insured plans. For a group health plan that

provides benefits solely through health insurance coverage, if the State law regulating the health insurance coverage meets

any of the criteria in paragraph (e)(1) of

this section, then the requirements of section 711 of the Act and this section do not

apply.

(ii) Self-insured plans. For a group

health plan that provides all benefits for

hospital lengths of stay in connection with

childbirth other than through health insurance coverage, the requirements of section 711 of the Act and this section apply.

(iii) Partially-insured plans. For a

group health plan that provides some benefits through health insurance coverage, if

the State law regulating the health insurance coverage meets any of the criteria in

paragraph (e)(1) of this section, then the

requirements of section 711 of the Act and

this section apply only to the extent the

plan provides benefits for hospital lengths

of stay in connection with childbirth other

than through health insurance coverage.

(3) Relation to section 731(a) of the

Act. The preemption provisions contained in section 731(a)(1) of the Act and

§ 2590.731(a) do not supersede a State

law described in paragraph (e)(1) of this

section.

(4) Examples. The rules of this paragraph (e) are illustrated by the following

examples:

November 9, 1998

IRB 1998-45

11/4/98 3:23 PM

Page 20

Example 1. (i) A group health plan buys group

health insurance coverage in a State that requires

that the coverage provide for at least a 48-hour hospital length of stay following a vaginal delivery and

at least a 96-hour hospital length of stay following a

delivery by cesarean section.

(ii) In this Example 1, the coverage is subject to

State law, and the requirements of section 711 of the

Act and this section do not apply.

Example 2. (i) A self-insured group health plan

covers hospital lengths of stay in connection with

childbirth in a State that requires health insurance

coverage to provide for maternity care in accordance

with guidelines established by the American College

of Obstetricians and Gynecologists and to provide

for pediatric care in accordance with guidelines established by the American Academy of Pediatrics.

(ii) In this Example 2, even though the State law

satisfies the criterion of paragraph (e)(1)(ii) of this

section, because the plan provides benefits for hospital lengths of stay in connection with childbirth

other than through health insurance coverage, the

plan is subject to the requirements of section 711 of

the Act and this section.

(f) Effective date. Section 711 of the

Act applies to group health plans, and

health insurance issuers offering group

health insurance coverage, for plan years

beginning on or after January 1, 1998.

This section applies to group health plans,

and health insurance issuers offering

group health insurance coverage, for plan

years beginning on or after January 1,

1999.

Signed at Washington, DC this 19 day of

October, 1998.

Meredith Miller,

Deputy Assistant Secretary for Policy,

Pension and Welfare Benefits

Administration,

U.S. Department of Labor.

Health Care Financing Administration

45 CFR Subtitle A, Subchapter B

45 CFR Subtitle A, Subchapter B, is

amended as set forth below:

A. Part 144 is amended as follows:

PART 144—REQUIREMENTS

RELATING TO HEALTH

INSURANCE COVERAGE

1. The authority citation for part 144

continues to read as follows:

Authority: Secs. 2701 through 2763,

2791, and 2792 of the Public Health Service Act, 42 U.S.C. 300gg through

300gg–63, 300gg–91, and 300gg–92.

2. Section 144.101 is revised to read as

follows:

November 9, 1998

§ 144.101 Basis and purpose.

Part 146 of this subchapter implements

sections 2701 through 2723 of the Public

Health Service Act (PHS Act, 42 U.S.C.

300gg, et seq.). Its purpose is to improve

access to group health insurance coverage, to guarantee the renewability of all

coverage in the group market, and to provide certain protections for mothers and

newborns with respect to coverage for

hospital stays in connection with childbirth. Part 148 of this subchapter implements sections 2741 through 2763 of the

PHS Act. Its purpose is to improve access

to individual health insurance coverage

for certain eligible individuals who previously had group coverage, to guarantee

the renewability of all coverage in the individual market, and to provide protections for mothers and newborns with respect to coverage for hospital stays in

connection with childbirth. Sections

2791 and 2792 of the PHS Act define

terms used in the regulations in this subchapter and provide the basis for issuing

these regulations, respectively.

3. In § 144.102, paragraph (b) is revised to read as follows:

§ 144.102 Scope and applicability.

* * * * *

(b) The protections afforded under 45

CFR parts 144 through 148 to individuals

and employers (and other sponsors of

health insurance offered in connection

with a group health plan) are determined

by whether the coverage involved is obtained in the small group market, the large

group market, or the individual market.

Small employers, and individuals who are

eligible to enroll under the employer’s

plan, are guaranteed availability of insurance coverage sold in the small group

market. Small and large employers are

guaranteed the right to renew their group

coverage, subject to certain exceptions.

Eligible individuals are guaranteed availability of coverage sold in the individual

market, and all coverage in the individual

market must be guaranteed renewable.

All coverage issued in the small or large

group market, and in the individual market, must provide certain protections for

mothers and newborns with respect to

coverage for hospital stays in connection

with childbirth.

* * * * *

B. Part 146 is amended as follows:

PART 146—REQUIREMENTS FOR

THE GROUP HEALTH INSURANCE

MARKET

1. The authority citation for part 146

continues to read as follows:

Authority: Secs. 2701 through 2763,

2791, and 2792 of the PHS Act (42 U.S.C.

300gg through 300gg–63, 300gg–91, and

300gg–92).

2. In § 146.101, paragraph (a) is revised, paragraphs (b)(2) through (b)(4)

are redesignated as paragraphs (b)(3)

through (b)(5), respectively, and a new

paragraph (b)(2) is added to read as follows:

§ 146.101 Basis and scope.

(a) Statutory basis. This part implements sections 2701 through 2723 of the

PHS Act. Its purpose is to improve access

to group health insurance coverage, to

guarantee the renewability of all coverage

in the group market, and to provide certain protections for mothers and newborns

with respect to coverage for hospital stays

in connection with childbirth. Sections

2791 and 2792 of the PHS Act define

terms used in the regulations in this subchapter and provide the basis for issuing

these regulations, respectively.

(b) * * *

(2) Subpart C. Subpart C of this

part sets forth the requirements that apply

to plans and issuers with respect to coverage for hospital stays in connection with

childbirth. It also sets forth the regulations governing parity between medical/

surgical benefits and mental health benefits in group health plans and health insurance coverage offered by issuers in connection with a group health plan.

* * * * *

Subpart C—Requirements Relating to

Benefits

3. Section 146.130 is added to Subpart

C to read as follows:

§ 146.130 Standards relating to benefits

for mothers and newborns.

(a) Hospital length of stay—(1) General rule. Except as provided in paragraph (a)(5) of this section, a group health

plan, or a health insurance issuer offering

1998–45 I.R.B.

IRB 1998-45

11/4/98 3:23 PM

Page 21

group health insurance coverage, that provides benefits for a hospital length of stay

in connection with childbirth for a mother

or her newborn may not restrict benefits

for the stay to less than —

(i) 48 hours following a vaginal delivery; or

(ii) 96 hours following a delivery by

cesarean section.

(2) When stay begins—(i) Delivery in a

hospital. If delivery occurs in a hospital,

the hospital length of stay for the mother

or newborn child begins at the time of delivery (or in the case of multiple births, at

the time of the last delivery).

(ii) Delivery outside a hospital. If delivery occurs outside a hospital, the hospital length of stay begins at the time the

mother or newborn is admitted as a hospital inpatient in connection with childbirth.

The determination of whether an admission is in connection with childbirth is a

medical decision to be made by the attending provider.

(3) Examples. The rules of paragraphs

(a)(1) and (a)(2) of this section are illustrated by the following examples. In each

example, the group health plan provides

benefits for hospital lengths of stay in

connection with childbirth and is subject

to the requirements of this section, as

follows:

Example 1. (i) A pregnant woman covered under

a group health plan goes into labor and is admitted

to the hospital at 10 p.m. on June 11. She gives birth

by vaginal delivery at 6 a.m. on June 12.

(ii) In this Example 1, the 48-hour period described in paragraph (a)(1)(i) of this section ends at

6 a.m. on June 14.

Example 2. (i) A woman covered under a group

health plan gives birth at home by vaginal delivery.

After the delivery, the woman begins bleeding excessively in connection with the childbirth and is admitted to the hospital for treatment of the excessive

bleeding at 7 p.m. on October 1.

(ii) In this Example 2, the 48-hour period described in paragraph (a)(1)(i) of this section ends at

7 p.m. on October 3.

Example 3. (i) A woman covered under a group

health plan gives birth by vaginal delivery at home.

The child later develops pneumonia and is admitted

to the hospital. The attending provider determines

that the admission is not in connection with childbirth.

(ii) In this Example 3, the hospital length-of-stay

requirements of this section do not apply to the

child’s admission to the hospital because the admission is not in connection with childbirth.

(4) Authorization not required—(i) In

general. A plan or issuer may not require

that a physician or other health care

1998–45 I.R.B.

provider obtain authorization from the

plan or issuer for prescribing the hospital

length of stay required under paragraph

(a)(1) of this section. (See also paragraphs (b)(2) and (c)(3) of this section for

rules and examples regarding other authorization and certain notice requirements.)

(ii) Example. The rule of this paragraph (a)(4) is illustrated by the following

example:

Example. (i) In the case of a delivery by cesarean

section, a group health plan subject to the requirements of this section automatically provides benefits

for any hospital length of stay of up to 72 hours. For

any longer stay, the plan requires an attending

provider to complete a certificate of medical necessity. The plan then makes a determination, based on

the certificate of medical necessity, whether a longer

stay is medically necessary.

(ii) In this Example, the requirement that an attending provider complete a certificate of medical

necessity to obtain authorization for the period between 72 hours and 96 hours following a delivery by

cesarean section is prohibited by this paragraph

(a)(4).

(5) Exceptions—(i) Discharge of

mother. If a decision to discharge a

mother earlier than the period specified in

paragraph (a)(1) of this section is made by

an attending provider, in consultation

with the mother, the requirements of paragraph (a)(1) of this section do not apply

for any period after the discharge.

(ii) Discharge of newborn. If a decision to discharge a newborn child earlier

than the period specified in paragraph

(a)(1) of this section is made by an attending provider, in consultation with the

mother (or the newborn’s authorized representative), the requirements of paragraph (a)(1) of this section do not apply

for any period after the discharge.

(iii) Attending provider defined. For

purposes of this section, attending

provider means an individual who is licensed under applicable State law to provide maternity or pediatric care and who

is directly responsible for providing maternity or pediatric care to a mother or

newborn child.

(iv) Example. The rules of this paragraph (a)(5) are illustrated by the following example:

Example. (i) A pregnant woman covered under a

group health plan subject to the requirements of this

section goes into labor and is admitted to a hospital.

She gives birth by cesarean section. On the third

day after the delivery, the attending provider for the

mother consults with the mother, and the attending

provider for the newborn consults with the mother

regarding the newborn. The attending providers authorize the early discharge of both the mother and

the newborn. Both are discharged approximately 72

hours after the delivery. The plan pays for the 72hour hospital stays.

(ii) In this Example, the requirements of this

paragraph (a) have been satisfied with respect to the

mother and the newborn. If either is readmitted, the

hospital stay for the readmission is not subject to

this section.

(b) Prohibitions—(1) With respect to

mothers—(i) In general. A group health

plan, and a health insurance issuer offering group health insurance coverage, may

not—

(A) Deny a mother or her newborn

child eligibility or continued eligibility to

enroll or renew coverage under the terms

of the plan solely to avoid the requirements of this section; or

(B) Provide payments (including payments-in-kind) or rebates to a mother to

encourage her to accept less than the minimum protections available under this

section.

(ii) Examples. The rules of this paragraph (b)(1) are illustrated by the following examples. In each example, the group

health plan is subject to the requirements

of this section, as follows:

Example 1. (i) A group health plan provides

benefits for at least a 48-hour hospital length of stay

following a vaginal delivery. If a mother and newborn covered under the plan are discharged within

24 hours after the delivery, the plan will waive the

copayment and deductible.

(ii) In this Example 1, because waiver of the copayment and deductible is in the nature of a rebate

that the mother would not receive if she and her newborn remained in the hospital, it is prohibited by this

paragraph (b)(1). (In addition, the plan violates paragraph (b)(2) of this section because, in effect, no copayment or deductible is required for the first portion

of the stay and a double copayment and a deductible

are required for the second portion of the stay.)

Example 2. (i) A group health plan provides

benefits for at least a 48-hour hospital length of stay

following a vaginal delivery. In the event that a

mother and her newborn are discharged earlier than

48 hours and the discharges occur after consultation

with the mother in accordance with the requirements

of paragraph (a)(5) of this section, the plan provides

for a follow-up visit by a nurse within 48 hours after

the discharges to provide certain services that the

mother and her newborn would otherwise receive in

the hospital.

(ii) In this Example 2, because the follow-up

visit does not provide any services beyond what the

mother and her newborn would receive in the hospital, coverage for the follow-up visit is not prohibited

by this paragraph (b)(1).

(2) With respect to benefit restrictions—(i) In general. Subject to para-

November 9, 1998

IRB 1998-45

11/4/98 3:23 PM

Page 22

graph (c)(3) of this section, a group health

plan, and a health insurance issuer offering

group health insurance coverage, may not

restrict the benefits for any portion of a

hospital length of stay required under paragraph (a) of this section in a manner that is

less favorable than the benefits provided

for any preceding portion of the stay.

(ii) Example. The rules of this paragraph (b)(2) are illustrated by the following example:

Example. (i) A group health plan subject to the

requirements of this section provides benefits for

hospital lengths of stay in connection with childbirth. In the case of a delivery by cesarean section,

the plan automatically pays for the first 48 hours.

With respect to each succeeding 24-hour period, the

participant or beneficiary must call the plan to obtain precertification from a utilization reviewer, who

determines if an additional 24-hour period is medically necessary. If this approval is not obtained, the

plan will not provide benefits for any succeeding 24hour period.

(ii) In this Example, the requirement to obtain

precertification for the two 24-hour periods immediately following the initial 48-hour stay is prohibited

by this paragraph (b)(2) because benefits for the latter part of the stay are restricted in a manner that is

less favorable than benefits for a preceding portion

of the stay. (However, this section does not prohibit

a plan from requiring precertification for any period

after the first 96 hours.) In addition, if the plan’s utilization reviewer denied any mother or her newborn

benefits within the 96-hour stay, the plan would also

violate paragraph (a) of this section.

(3) With respect to attending providers.

A group health plan, and a health insurance issuer offering group health insurance coverage, may not directly or indirectly —

(i) Penalize (for example, take disciplinary action against or retaliate against), or

otherwise reduce or limit the compensation of, an attending provider because the

provider furnished care to a participant or

beneficiary in accordance with this section; or

(ii) Provide monetary or other incentives to an attending provider to induce

the provider to furnish care to a participant or beneficiary in a manner inconsistent with this section, including providing

any incentive that could induce an attending provider to discharge a mother or

newborn earlier than 48 hours (or 96

hours) after delivery.

section, the following rules of construction apply:

(1) Hospital stays not mandatory. This

section does not require a mother to —

November 9, 1998

(i) Give birth in a hospital; or

(ii) Stay in the hospital for a fixed period of time following the birth of her

child.

(2) Hospital stay benefits not mandated. This section does not apply to any

group health plan, or any group health insurance coverage, that does not provide

benefits for hospital lengths of stay in

connection with childbirth for a mother or

her newborn child.

(3) Cost-sharing rules—(i) In general.

This section does not prevent a group

health plan or a health insurance issuer offering group health insurance coverage

from imposing deductibles, coinsurance,

or other cost-sharing in relation to benefits for hospital lengths of stay in connection with childbirth for a mother or a newborn under the plan or coverage, except

that the coinsurance or other cost-sharing

for any portion of the hospital length of

stay required under paragraph (a) of this

section may not be greater than that for

any preceding portion of the stay.

(ii) Examples. The rules of this paragraph (c)(3) are illustrated by the following examples. In each example, the group

health plan is subject to the requirements

of this section, as follows:

Example 1. (i) A group health plan provides

benefits for at least a 48-hour hospital length of stay

in connection with vaginal deliveries. The plan covers 80 percent of the cost of the stay for the first 24hour period and 50 percent of the cost of the stay for

the second 24-hour period. Thus, the coinsurance

paid by the patient increases from 20 percent to 50

percent after 24 hours.

(ii) In this Example 1, the plan violates the rules

of this paragraph (c)(3) because coinsurance for the

second 24-hour period of the 48-hour stay is greater

than that for the preceding portion of the stay. (In

addition, the plan also violates the similar rule in

paragraph (b)(2) of this section.)

Example 2. (i) A group health plan generally

covers 70 percent of the cost of a hospital length of

stay in connection with childbirth. However, the

plan will cover 80 percent of the cost of the stay if

the participant or beneficiary notifies the plan of the

pregnancy in advance of admission and uses whatever hospital the plan may designate.

(ii) In this Example 2, the plan does not violate

the rules of this paragraph (c)(3) because the level of

benefits provided (70 percent or 80 percent) is consistent throughout the 48-hour (or 96-hour) hospital

length of stay required under paragraph (a) of this

section. (In addition, the plan does not violate the

rules in paragraph (a)(4) or paragraph (b)(2) of this

section.)

(4) Compensation of attending

provider. This section does not prevent a

group health plan or a health insurance is-

suer offering group health insurance coverage from negotiating with an attending

provider the level and type of compensation for care furnished in accordance with

this section (including paragraph (b) of

this section).

(d) Notice requirement. Except as provided in paragraph (d)(4)of this section, a

group health plan that provides benefits

for hospital lengths of stay in connection

with childbirth must meet the following

requirements:

(1) Required statement. The plan document that provides a description of plan

benefits to participants and beneficiaries

must disclose information that notifies

participants and beneficiaries of their

rights under this section.

(2) Disclosure notice. To meet the disclosure requirement set forth in paragraph

(d)(1) of this section, the following disclosure notice must be used:

Statement of Rights under the Newborns’

and Mothers’ Health Protection Act

Under federal law, group health plans

and health insurance issuers offering group

health insurance coverage generally may

not restrict benefits for any hospital length

of stay in connection with childbirth for the

mother or newborn child to less than 48

hours following a vaginal delivery, or less

than 96 hours following a delivery by cesarean section. However, the plan or issuer

may pay for a shorter stay if the attending

provider (e.g.,your physician, nurse midwife, or physician assistant), after consultation with the mother, discharges the

mother or newborn earlier.

Also, under federal law, plans and issuers may not set the level of benefits or

out-of-pocket costs so that any later portion of the 48-hour (or 96-hour) stay is

treated in a manner less favorable to the

mother or newborn than any earlier portion of the stay.

In addition, a plan or issuer may not,

under federal law, require that a physician

or other health care provider obtain authorization for prescribing a length of stay of

up to 48 hours (or 96 hours). However, to

use certain providers or facilities, or to reduce your out-of-pocket costs, you may

be required to obtain precertification. For

information on precertification, contact

your plan administrator.

(3) Timing of disclosure. The disclosure notice in paragraph (d)(2) of this sec-

1998–45 I.R.B.

IRB 1998-45

11/4/98 3:23 PM

Page 23

tion shall be furnished to each participant

covered under a group health plan, and

each beneficiary receiving benefits under

a group health plan, not later than 60 days

after the first day of the first plan year beginning on or after January 1, 1999.

(4) Exceptions. The requirements of

this paragraph (d) do not apply in the following situations:

(i) Self-insured plans. The benefits for

hospital lengths of stay in connection with

childbirth are not provided through health

insurance coverage, and the group health

plan has made the election described in

§146.180 to be exempted from the requirements of this section.

(ii) Insured plans. The benefits for

hospital lengths of stay in connection with

childbirth are provided through health insurance coverage, and the coverage is

regulated under a State law described in

paragraph (e) of this section.

(e) Applicability in certain States—(1)

Health insurance coverage. The requirements of section 2704 of the PHS Act and

this section do not apply with respect to

health insurance coverage offered in connection with a group health plan if there is

a State law regulating the coverage that

meets any of the following criteria:

(i) The State law requires the coverage

to provide for at least a 48-hour hospital

length of stay following a vaginal delivery and at least a 96-hour hospital length

of stay following a delivery by cesarean

section.

(ii) The State law requires the coverage

to provide for maternity and pediatric care

in accordance with guidelines established

by the American College of Obstetricians

and Gynecologists, the American Academy of Pediatrics, or any other established professional medical association.

(iii) The State law requires, in connection with the coverage for maternity care,

that the hospital length of stay for such

care is left to the decision of (or is required to be made by) the attending

provider in consultation with the mother.

State laws that require the decision to be

made by the attending provider with the

consent of the mother satisfy the criterion

of this paragraph (e)(1)(iii).

(2) Group health plans—(i) Fully-insured plans. For a group health plan that

provides benefits solely through health insurance coverage, if the State law regulating the health insurance coverage meets

1998–45 I.R.B.

any of the criteria in paragraph (e)(1) of

this section, then the requirements of section 2704 of the PHS Act and this section

do not apply.

(ii) Self-insured plans. For a group

health plan that provides all benefits for

hospital lengths of stay in connection with

childbirth other than through health insurance coverage, the requirements of section 2704 of the PHS Act and this section

apply.

(iii) Partially-insured plans. For a

group health plan that provides some benefits through health insurance coverage, if

the State law regulating the health insurance coverage meets any of the criteria in

paragraph (e)(1) of this section, then the

requirements of section 2704 of the PHS

Act and this section apply only to the extent the plan provides benefits for hospital

lengths of stay in connection with childbirth other than through health insurance

coverage.

(3) Relation to section 2723(a) of the

PHS Act. The preemption provisions contained in section 2723(a)(1) of the PHS

Act and § 146.143(a) do not supersede a

State law described in paragraph (e)(1) of

this section.

(4) Examples. The rules of this paragraph (e) are illustrated by the following

examples:

Example 1. (i) A group health plan buys group

health insurance coverage in a State that requires

that the coverage provide for at least a 48-hour hospital length of stay following a vaginal delivery and

at least a 96-hour hospital length of stay following a

delivery by cesarean section.

(ii) In this Example 1, the coverage is subject to

State law, and the requirements of section 2704 of

the PHS Act and this section do not apply.

Example 2. (i) A self-insured group health plan

covers hospital lengths of stay in connection with

childbirth in a State that requires health insurance

coverage to provide for maternity care in accordance

with guidelines established by the American College

of Obstetricians and Gynecologists and to provide

for pediatric care in accordance with guidelines established by the American Academy of Pediatrics.

(ii) In this Example 2, even though the State law

satisfies the criterion of paragraph (e)(1)(ii) of this

section, because the plan provides benefits for hospital lengths of stay in connection with childbirth

other than through health insurance coverage, the

plan is subject to the requirements of section 2704 of

the PHS Act and this section.

(f) Effective date. Section 2704 of the

PHS Act applies to group health plans,

and health insurance issuers offering

group health insurance coverage, for plan

years beginning on or after January 1,

1998. This section applies to group

health plans, and health insurance issuers

offering group health insurance coverage,

for plan years beginning on or after January 1, 1999.

C. Part 148 is amended as follows:

PART 148—REQUIREMENTS FOR

THE INDIVIDUAL HEALTH

INSURANCE MARKET

1. The authority citation for part 148

continues to read as follows:

Authority: Secs. 2741 through 2763,

2791, and 2792 of the Public Health Service Act (42 U.S.C. 300gg–41 through

300gg–63, 300gg–91, and 300gg–92).

2. Section 148.101 is revised to read as

follows:

§ 148.101 Basis and purpose.

This part implements sections 2741

through 2763 and 2791 and 2792 of the

PHS Act. Its purpose is to improve access

to individual health insurance coverage

for certain eligible individuals who previously had group coverage, and to guarantee the renewability of all coverage in the

individual market. It also provides certain protections for mothers and newborns

with respect to coverage for hospital stays

in connection with childbirth.

3. In § 148.102, paragraphs (a) heading,(a)(2), and (b) are revised to read as

follows:

§ 148.102 Scope, applicability, and

effective dates.

(a) Scope and applicability. * * *

(2) The requirements of this part that

pertain to guaranteed availability of individual health insurance coverage for certain eligible individuals apply to all issuers of individual health insurance

coverage in a State, unless the State implements an acceptable alternative mechanism as described in §148.128. The requirements that pertain to guaranteed

renewability for all individuals, and to

protections for mothers and newborns

with respect to hospital stays in connection with childbirth, apply to all issuers of

individual health insurance coverage in

the State, regardless of whether a State

implements an alternative mechanism.

(b) Effective date. Except as provided

in §§148.124 (certificate of coverage),

148.128 (alternative State mechanisms),

November 9, 1998

IRB 1998-45

11/4/98 3:23 PM

Page 24

and 148.170 (standards relating to benefits for mothers and newborns), the requirements of this part apply to health insurance coverage offered, sold, issued,

renewed, in effect, or operated in the individual market after June 30, 1997, regardless of when a period of creditable coverage occurs.

4. A new subpart C is added to read as

follows:

Subpart C—Requirements Related to

Benefits

§ 148.170 Standards relating to

benefits for mothers and newborns.

(a) Hospital length of stay—(1) General rule. Except as provided in paragraph (a)(5) of this section, an issuer offering health insurance coverage in the

individual market that provides benefits

for a hospital length of stay in connection

with childbirth for a mother or her newborn may not restrict benefits for the stay

to less than —

(i) 48 hours following a vaginal delivery; or

(ii) 96 hours following a delivery by

cesarean section.

(2) When stay begins—(i) Delivery in a

hospital. If delivery occurs in a hospital,

the hospital length of stay for the mother

or newborn child begins at the time of delivery (or in the case of multiple births, at

the time of the last delivery).

(ii) Delivery outside a hospital. If delivery occurs outside a hospital, the hospital length of stay begins at the time the

mother or newborn is admitted as a hospital inpatient in connection with childbirth.

The determination of whether an admission is in connection with childbirth is a

medical decision to be made by the attending provider.

(3) Examples. The rules of paragraphs

(a)(1) and (a)(2) of this section are illustrated by the following examples. In each

example, the issuer provides benefits for

hospital lengths of stay in connection with

childbirth and is subject to the requirements of this section, as follows:

Example 1. (i) A pregnant woman covered under

a policy issued in the individual market goes into

labor and is admitted to the hospital at 10 p.m. on

June 11. She gives birth by vaginal delivery at 6

a.m. on June 12.

(ii) In this Example 1, the 48-hour period described in paragraph (a)(1)(i) of this section ends at

6 a.m. on June 14.

November 9, 1998

Example 2. (i) A woman covered under a policy

issued in the individual market gives birth at home by

vaginal delivery. After the delivery, the woman begins bleeding excessively in connection with the

childbirth and is admitted to the hospital for treatment

of the excessive bleeding at 7 p.m. on October 1.

(ii) In this Example 2, the 48-hour period described in paragraph (a)(1)(i) of this section ends at

7 p.m. on October 3.

Example 3. (i) A woman covered under a policy

issued in the individual market gives birth by vaginal delivery at home. The child later develops pneumonia and is admitted to the hospital. The attending

provider determines that the admission is not in connection with childbirth.

(ii) In this Example 3, the hospital length-of-stay

requirements of this section do not apply to the

child’s admission to the hospital because the admission is not in connection with childbirth.

(4) Authorization not required—(i) In

general. An issuer may not require that a

physician or other health care provider

obtain authorization from the issuer for

prescribing the hospital length of stay required under paragraph (a)(1) of this section. (See also paragraphs (b)(2) and

(c)(3) of this section for rules and examples regarding other authorization and

certain notice requirements.)

(ii) Example. The rule of this paragraph (a)(4) is illustrated by the following

example:

Example. (i) In the case of a delivery by cesarean

section, an issuer subject to the requirements of this

section automatically provides benefits for any hospital length of stay of up to 72 hours. For any longer

stay, the issuer requires an attending provider to

complete a certificate of medical necessity. The issuer then makes a determination, based on the certificate of medical necessity, whether a longer stay is

medically necessary.

(ii) In this Example, the requirement that an attending provider complete a certificate of medical

necessity to obtain authorization for the period between 72 hours and 96 hours following a delivery by

cesarean section is prohibited by this paragraph

(a)(4).

(5) Exceptions—(i) Discharge of

mother. If a decision to discharge a

mother earlier than the period specified in

paragraph (a)(1) of this section is made by

an attending provider, in consultation

with the mother, the requirements of paragraph (a)(1) of this section do not apply

for any period after the discharge.

(ii) Discharge of newborn. If a decision to discharge a newborn child earlier

than the period specified in paragraph

(a)(1) of this section is made by an attending provider, in consultation with the

mother (or the newborn’s authorized representative), the requirements of para-

graph (a)(1) of this section do not apply

for any period after the discharge.

(iii) Attending provider defined. For

purposes of this section, attending

provider means an individual who is licensed under applicable State law to provide maternity or pediatric care and who

is directly responsible for providing maternity or pediatric care to a mother or

newborn child.

(iv) Example. The rules of this paragraph (a)(5) are illustrated by the following example:

Example. (i) A pregnant woman covered under a

policy offered by an issuer subject to the requirements of this section goes into labor and is admitted

to a hospital. She gives birth by cesarean section.

On the third day after the delivery, the attending

provider for the mother consults with the mother,

and the attending provider for the newborn consults

with the mother regarding the newborn. The attending providers authorize the early discharge of both

the mother and the newborn. Both are discharged

approximately 72 hours after the delivery. The issuer

pays for the 72-hour hospital stays.

(ii) In this Example, the requirements of this

paragraph (a) have been satisfied with respect to the

mother and the newborn. If either is readmitted, the

hospital stay for the readmission is not subject to

this section.

(b) Prohibitions—(1) With respect to

mothers—(i) In general. An issuer may

not—

(A) Deny a mother or her newborn

child eligibility or continued eligibility to

enroll in or renew coverage solely to

avoid the requirements of this section; or

(B) Provide payments (including payments-in-kind) or rebates to a mother to

encourage her to accept less than the minimum protections available under this

section.

(ii) Examples. The rules of this paragraph (b)(1) are illustrated by the following examples. In each example, the issuer

is subject to the requirements of this section, as follows:

Example 1. (i) An issuer provides benefits for at

least a 48-hour hospital length of stay following a

vaginal delivery. If a mother and newborn covered

under a policy issued in the individual market are

discharged within 24 hours after the delivery, the issuer will waive the copayment and deductible.

(ii) In this Example 1, because waiver of the copayment and deductible is in the nature of a rebate

that the mother would not receive if she and her

newborn remained in the hospital, it is prohibited by

this paragraph (b)(1). (In addition, the issuer violates paragraph (b)(2) of this section because, in effect, no copayment or deductible is required for the

first portion of the stay and a double copayment and

1998–45 I.R.B.

IRB 1998-45

11/4/98 3:23 PM

Page 25

a deductible are required for the second portion of

the stay.)

Example 2. (i) An issuer provides benefits for at

least a 48-hour hospital length of stay following a

vaginal delivery. In the event that a mother and her

newborn are discharged earlier than 48 hours and the

discharges occur after consultation with the mother

in accordance with the requirements of paragraph

(a)(5) of this section, the issuer provides for a follow-up visit by a nurse within 48 hours after the discharges to provide certain services that the mother

and her newborn would otherwise receive in the

hospital.

(ii) In this Example 2, because the follow-up

visit does not provide any services beyond what the

mother and her newborn would receive in the hospital, coverage for the follow-up visit is not prohibited

by this paragraph (b)(1).

(2) With respect to benefit restrictions—(i) In general. Subject to paragraph (c)(3) of this section, an issuer may

not restrict the benefits for any portion of

a hospital length of stay required under

paragraph (a) of this section in a manner

that is less favorable than the benefits provided for any preceding portion of the

stay.

(ii) Example. The rules of this paragraph (b)(2) are illustrated by the following example:

Example. (i) An issuer subject to the requirements of this section provides benefits for hospital

lengths of stay in connection with childbirth. In the

case of a delivery by cesarean section, the issuer automatically pays for the first 48 hours. With respect

to each succeeding 24-hour period, the covered individual must call the issuer to obtain precertification

from a utilization reviewer, who determines if an additional 24-hour period is medically necessary. If

this approval is not obtained, the issuer will not provide benefits for any succeeding 24-hour period.

(ii) In this Example, the requirement to obtain

precertification for the two 24-hour periods immediately following the initial 48-hour stay is prohibited

by this paragraph (b)(2) because benefits for the latter part of the stay are restricted in a manner that is

less favorable than benefits for a preceding portion

of the stay. (However, this section does not prohibit

an issuer from requiring precertification for any period after the first 96 hours.) In addition, if the issuer’s utilization reviewer denied any mother or her

newborn benefits within the 96-hour stay, the issuer

would also violate paragraph (a) of this section.

(3) With respect to attending providers.

An issuer may not directly or indirectly—

(i) Penalize (for example, take disciplinary action against or retaliate against), or

otherwise reduce or limit the compensation of, an attending provider because the

provider furnished care to a covered individual in accordance with this section; or

(ii) Provide monetary or other incentives to an attending provider to induce

1998–45 I.R.B.

the provider to furnish care to a covered

individual in a manner inconsistent with

this section, including providing any incentive that could induce an attending

provider to discharge a mother or newborn earlier than 48 hours (or 96 hours)

after delivery.

section, the following rules of construction apply:

(1) Hospital stays not mandatory. This

section does not require a mother to —

(i) Give birth in a hospital; or

(ii) Stay in the hospital for a fixed period of time following the birth of her

child.

(2) Hospital stay benefits not mandated.

This section does not apply to any issuer

that does not provide benefits for hospital

lengths of stay in connection with childbirth for a mother or her newborn child.

(3) Cost-sharing rules—(i) In general.

This section does not prevent an issuer

from imposing deductibles, coinsurance,

or other cost-sharing in relation to benefits for hospital lengths of stay in connection with childbirth for a mother or a newborn under the coverage, except that the

coinsurance or other cost-sharing for any

portion of the hospital length of stay required under paragraph (a) of this section

may not be greater than that for any preceding portion of the stay.

(ii) Examples. The rules of this paragraph (c)(3) are illustrated by the following examples. In each example, the issuer

is subject to the requirements of this section, as follows:

Example 1. (i) An issuer provides benefits for at

least a 48-hour hospital length of stay in connection

with vaginal deliveries. The issuer covers 80 percent of the cost of the stay for the first 24-hour period and 50 percent of the cost of the stay for the

second 24-hour period. Thus, the coinsurance paid

by the patient increases from 20 percent to 50 percent after 24 hours.

(ii) In this Example 1, the issuer violates the

rules of this paragraph (c)(3) because coinsurance

for the second 24-hour period of the 48-hour stay is

greater than that for the preceding portion of the

stay. (In addition, the issuer also violates the similar

rule in paragraph (b)(2) of this section.)

Example 2. (i) An issuer generally covers 70

percent of the cost of a hospital length of stay in

connection with childbirth. However, the issuer will

cover 80 percent of the cost of the stay if the covered

individual notifies the issuer of the pregnancy in advance of admission and uses whatever hospital the

issuer may designate.

(ii) In this Example 2, the issuer does not violate

the rules of this paragraph (c)(3) because the level of

benefits provided (70 percent or 80 percent) is consistent throughout the 48-hour (or 96-hour) hospital

length of stay required under paragraph (a) of this

section. (In addition, the issuer does not violate the

rules in paragraph (a)(4) or paragraph (b)(2) of this

section.)

(4) Compensation of attending provider. This section does not prevent an issuer from negotiating with an attending

provider the level and type of compensation for care furnished in accordance with

this section (including paragraph (b) of

this section).

(5) Applicability. This section applies

to all health insurance coverage issued in

the individual market, and is not limited

in its application to coverage that is provided to eligible individuals as defined in

section 2741(b) of the PHS Act.

(d) Notice requirement. Except as provided in paragraph (d)(4) of this section,

an issuer offering health insurance in the

individual market must meet the following requirements with respect to benefits

for hospital lengths of stay in connection

with childbirth:

(1) Required statement. The insurance

contract must disclose information that

notifies covered individuals of their rights

under this section.

(2) Disclosure notice. To meet the disclosure requirement set forth in paragraph

(d)(1) of this section, the following disclosure notice must be used:

Statement of Rights under the Newborns’

and Mothers’ Health Protection Act

Under federal law, health insurance issuers generally may not restrict benefits

for any hospital length of stay in connection with childbirth for the mother or

newborn child to less than 48 hours following a vaginal delivery, or less than 96

hours following a delivery by cesarean

section. However, the issuer may pay for

a shorter stay if the attending provider

(e.g., your physician, nurse midwife, or

physician assistant), after consultation

with the mother, discharges the mother or

newborn earlier.

Also, under federal law, issuers may not

set the level of benefits or out-of-pocket

costs so that any later portion of the 48hour (or 96-hour) stay is treated in a manner less favorable to the mother or newborn than any earlier portion of the stay.

In addition, an issuer may not, under

federal law, require that a physician or

November 9, 1998

IRB 1998-45

11/4/98 3:23 PM

Page 26

other health care provider obtain authorization for prescribing a length of stay of

up to 48 hours (or 96 hours). However, to

use certain providers or facilities, or to reduce your out-of-pocket costs, you may

be required to obtain precertification. For

information on precertification, contact

your issuer.

(3) Timing of disclosure. The disclosure notice in paragraph (d)(2) of this

section shall be furnished to the covered

individuals in the form of a copy of the

contract, or a rider (or equivalent amendment to the contract), not later than March

1, 1999.

(4) Exception. The requirements of

this paragraph (d) do not apply with respect to coverage regulated under a State

law described in paragraph (e) of this

section.

(e) Applicability in certain States—(1)

Health insurance coverage. The requirements of section 2751 of the PHS Act and

this section do not apply with respect to

health insurance coverage in the individual market if there is a State law regulating the coverage that meets any of the following criteria:

November 9, 1998

(i) The State law requires the coverage

to provide for at least a 48-hour hospital

length of stay following a vaginal delivery and at least a 96-hour hospital length

of stay following a delivery by cesarean

section.

(ii) The State law requires the coverage

to provide for maternity and pediatric

care in accordance with guidelines established by the American College of Obstetricians and Gynecologists, the American

Academy of Pediatrics, or any other

established professional medical association.

(iii) The State law requires, in connection with the coverage for maternity care,

that the hospital length of stay for such

care is left to the decision of (or is required to be made by) the attending

provider in consultation with the mother.

State laws that require the decision to be

made by the attending provider with the

consent of the mother satisfy the criterion

of this paragraph (e)(1)(iii).

(2) Relation to section 2762(a) of the

PHS Act. The preemption provisions contained in section 2762(a) of the PHS Act

and § 148.210(b) do not supersede a State

law described in paragraph (e)(1) of this

section.

(f) Effective date. Section 2751 of the

PHS Act applies to health insurance coverage offered, sold, issued, renewed, in

effect, or operated in the individual market on or after January 1, 1998. This section applies to health insurance coverage

offered, sold, issued, renewed, in effect,

or operated in the individual market on or

after January 1, 1999.

Dated Aug. 27, 1998.

Nancy-Ann Min DeParle,

Administrator, Health Care

Financing Administration.

Dated Sept. 21, 1998.

Donna E. Shalala,

Secretary, Department of

Health and Human Services.

(Filed by the Office of the Federal Register on

October 26, 1998, 8:45 a.m., and published in the

issue of the Federal Register for October 27, 1998,

63 F.R. 57546)

1998–45 I.R.B.

IRB 1998-45

11/4/98 3:23 PM

Page 27

Part IV. Items of General Interest

Foundations Status of Certain

Organizations

Announcement 98–101

The following organizations have

failed to establish or have been unable to

maintain their status as public charities or

as operating foundations. Accordingly,

grantors and contributors may not, after

this date, rely on previous rulings or designations in the Cumulative List of Organizations (Publication 78), or on the presumption arising from the filing of notices

under section 508(b) of the Code. This

listing does not indicate that the organizations have lost their status as organizations described in section 501(c)(3), eligible to receive deductible contributions.

Former Public Charities. The following

organizations (which have been treated as

organizations that are not private foundations described in section 509(a) of the

Code) are now classified as private foundations:

9th Avenue International Market,

New York, NY

15th Avenue Housing Corporation,

Escondido, CA

24 hours for Children Foundation U S A

Inc., New York, NY

24 Karat Career Development Center,

Chicago, IL

142 Ludlow Street Housing Development

Fund Corporation, New York, NY

258 Cumberland Avenue Inc., West

Paterson, NJ

573 Warren Street HD FC, Brooklyn,

701 Shipley Inc., Wilmington, DE

1290 Scholarship Fund Inc., Milwaukee,

1993 Denver Dynamite Club, Denver,

1995 Vandergrift Centennial Committee

Inc., Vandergrift, PA

1996 United States Precision Figure

Skating Championship Inc., Chicago,

2450 W. Monroe St. Resident

Organization, Chicago, IL

A Bridge to the Arts Inc., Mt. Kisco, NY

A Childs Claim for Survival, Spokane,

A Childs Right Foundation Incorporated,

Cotati, CA

1998–45 I.R.B.

A F T E R Care Unlimited Inc., New

York, NY

A I D to Mankind, Louisville, KY

A Legacy of Care Inc., Columbus, OH

A O A Health Center Inc., Orange, MA

A Plus for Kids Inc., Great Neck, NY

A Second Chance-A Haven for Abuse-NBattered Women & Children,

Philadelphia, PA

A Statue for Roberto, Pittsburgh, PA

A Taste of the Berkshires Inc., Great

Barrington, MA

A Vision for the Community Inc.,

Denver, CO

A Womans Place, Asheville, NC

Abbeville General Hospital Volunteers

Inc., Abbeville, LA

ABC Missions Inc., Rapid River, MI

Aberdeen Community Projects

Committee Inc., Aberdeen, MD

Above and Beyond for Children,

Bedford, TX

Abraham Moyano International

Ministries Inc., Houston, TX

Abundant Harvest Foundation, Marrero,

Abundant Life Support Group, New

Bern, NC

Academy Child Care Center, Cleveland,

Academy of Human Resource

Development Inc., Austin, TX

Accident Prone Man Press and

Publication LTD., Tulsa, OK

Ace Association of Eau Claire Inc.,

Eau Claire, WI

ACF Black Hills Chapter of Professional

Chefs, Deadwood, SD

ACHI Foundation, San Francisco, CA

ACI Fund for Developing Nations

Airports-North American Fund,

Tucson, AZ

Action & Community Training,

Arlington, MA

Action 4 Aids, Miami, FL

Action Not Gridlock Education Fund,

Arlington, VA

Actors Theatre Inc., Virginia Beach, VA

Acupuncture Society of Michigan,

Ann Arbor, MI

Ad Astra Inc., Houston, TX

Ad Hoc Committee for Courts LTD.,

New York, NY

Ada Council for the Arts, Grand Rapids,

Adagio Center Inc., Portland, OR

Adais Inc., Chicago, IL

Adaptive Recreation Inc., Hattiesburg,

Adebara Research Foundation, Staten

Island, NY

Adirondack Community Foundation Inc.,

Rochester, NY

Adopt a Horse Program Inc., Palermo,

Adopt-A-Neighborhood Inc., Racine,

Adopt-A-Spot, St. Thomas, VI

Adoption Knowledge Affiliates, Austin,

Adoration Ministries Inc., Jackson, TN

Adult Attention Deficit Disorder

Awareness, Warren, MI

Adult Literacy Center of Southern West

Virginia, Beckley, WV

Adult Sexual Abuse and Incest Survivors,

Dewitt, IA

Adults and Youth United Development

Association Inc., El Paso, TX

Adults Committed to Inspire

Opportunities Needed for Kids, Simi

Valley, CA

Advances in Mineral Metabolism,

Rochester, MN

Advisory Board to the Michigan City

Police Department DARE Program

Inc., Michigan City, IN

Advocates for Dignity, Westerspring, IL

Aerospace Education of Wisconsin Inc.,

Neenah, WI

Affordable Housing Advocates of Kansas

Association, Topeka, KS

Affordable Housing Alliance Inc., Irvine,

Affordable Housing Inc., Anoka, MN

Afghan Womens Association

International, Hayward, CA

Africa Biodiversity Foundation,

Missoula, MT

African American Chamber of,

Milwaukee, WI

African American Clergy, Portland, OR

African American Community Initiatives

Inc., Minneapolis, MN

African American Institute Inc.,

Birmingham, AL

African American Leaders of Tomorrow,

Seattle, WA

African American Parade Day Committee

Inc., Bloomfield, CT

African American Recruitment Training

and Placement Assn. Inc., Chicago, IL

November 9, 1998

IRB 1998-45

11/4/98 3:23 PM

Page 28

African American Task Force for

Substance Abuse Prevention, Salt Lake

City, UT

African Forum Inc., Austin, TX

African Lawyer Committee for Human

Rights, Washington, DC

Afrikan Free School Inc., New York, NY

Afrinati

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.