Interim Rules for Group Health Plans and Health Insurance Issuers Under the Newborns' and Mothers' Health Protection Act

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 54

[TD 8788]

RIN 1545-AV52

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

29 CFR Part 2590

RIN 1210-AA63

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

45 CFR Parts 144, 146, and 148

RIN 0938-AI17

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.

ACTION: Interim rules with request for comments.

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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

or

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 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) 219-

4377; 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: 1-800-998-7542. Information on NMHPA and

other recent health care laws is also available on the Department of

Labor website (www.dol.gov/dol/pwba) and the Department of Health and

Human Services' 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\ NMHPA 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.

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

the unique

[[Page 57547]]

characteristics of each 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

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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 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 FR 16894).

The individual market regulations were issued only by HHS (62 FR

16985). See also 62 FR 31669-31670 and 31690-31696 (June 10, 1997)

(containing technical corrections to both the group market and

individual market regulations).

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\2\ NMHPA 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).

\3\ The 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 individual market are defined in PHS Act

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

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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 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 FR 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 ``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.

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\4\ The 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.

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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

[[Page 57548]]

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 48-hour (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 after-discharge, 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 48-hour (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 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.

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\5\ While 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.

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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.

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 96-

hour) 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 96-hour) 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,

[[Page 57549]]

NMHPA and the interim rules do not apply with respect to health

insurance coverage if there is a State law 7 that meets any

of the following criteria:

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\6\ The term State includes the 50 States, the District 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 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.

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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

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\8\ In conducting an economic analysis of the interim rules, the

Departments 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.

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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 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 FR 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 FR 48372 (September 9, 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 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.

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\9\ Although 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 date of

NMHPA.

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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

[[Page 57550]]

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

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\10\ Although 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 date of NMHPA.

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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 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 96-hour) 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 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

[[Page 57551]]

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 States 11 have enacted laws that prescribe benefits

for hospital lengths of stay in connection with childbirth. NMHPA

provides that the federal NMHPA requirements do not apply with respect

to health insurance coverage 12 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.

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\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 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.)

\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

does not include a group health plan.'' ERISA section 733(b)(2) and

PHS Act section 2791(b)(2).

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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 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.

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\13\ In 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.

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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 Current 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

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\14\ Hereafter, other private-sector employer-sponsored group

health plans are referred to as ERISA plans.

\15\ The term nonfederal governmental plan means a governmental

plan that is not a federal governmental 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 instrumentality 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 instrumentality of such government. PHS Act

section 2791(d)(8)(B).

\16\ Sponsors of self-insured nonfederal governmental 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.

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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).

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\17\ The 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.

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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 include a lack of detailed data at the State level and

inconsistencies in how data are reported, both within and across

States. In addition, the

[[Page 57552]]

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

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

R.D. (1997). Mapping Insurance Markets: The Group and Individual

Insurance Markets in 26 States. Washington: The Alpha Center.

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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 legislation,19 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.

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\19\ S. 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.

---------------------------------------------------------------------------

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 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 FR 16979). OMB approved these information collection

requirements under OMB control number 1210-0039. Subsequently, the

agencies published the OMB control number in the Federal Register at 62

FR 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.

[[Page 57553]]

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 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 FR 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).

List of Subjects

26 CFR Part 54

Excise taxes, Health insurance, Pensions, Reporting and

recordkeeping requirements.

29 CFR Part 2590

Employee benefit plans, Employee Retirement Income Security Act,

Health care, Health insurance, Reporting and recordkeeping

requirements.

45 CFR Parts 144 and 146

Health care, Health insurance, Reporting and recordkeeping

requirements, State regulation of health insurance.

45 CFR Part 148

Administrative practice and procedure, Health care, Health

insurance, Penalties, Reporting and recordkeeping requirements.

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 Sec. 54.9811-1T in numerical order to read in

part as follows:

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

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:

Sec. 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.

* * * * *

(c) Similar Requirements under the 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

[[Page 57554]]

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 Sec. 54.9801-2T, the introductory text is revised to

read as follows:

Sec. 54.9801-2T Definitions (temporary).

Unless otherwise provided, the definitions in this section govern

in applying the provisions of Secs. 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:

Sec. 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 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 (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 the

newborn. Both are discharged approximately 72 hours after the

delivery. The plan 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. 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 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

[[Page 57555]]

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

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 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 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 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.

(c) Construction. With respect to this 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 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 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 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

[[Page 57556]]

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 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 Sec. 54.9831-1T, paragraph (b)(1) is revised to read as

follows:

Sec. 54.9831-1T Special rules relating to group health plans

(temporary).

* * * * *

(b) Excepted benefits--(1) In general. The requirements of

Secs. 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).

* * * * *

Approved: August 14, 1998.

Michael P. Dolan,

Deputy Commissioner of Internal Revenue.

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 FR 13139, April 21, 1987.

Subpart B--Other Requirements

2. Section 2590.711 is revised to read as follows:

Sec. 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 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 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 caesarean 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

caesarean 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.

[[Page 57557]]

(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 caesarean 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 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. 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 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 caesarean

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 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 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.

(c) Construction. With respect to this 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 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 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 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,

[[Page 57558]]

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

caesarean 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

Sec. 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:

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 caesarean 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 19th day of October, 1998.

Meredith Miller,

Deputy Assistant Secretary for Policy, Pension and Welfare Benefits

Administration, Department of Labor.

HEALTH CARE FINANCING ADMINISTRATION

45 CFR SUBTITLE A, SUBCHAPTER B

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:

Sec. 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 Sec. 144.102, paragraph (b) is revised to read as follows:

Sec. 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

[[Page 57559]]

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 Sec. 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:

Sec. 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:

Sec. 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 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 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

[[Page 57560]]

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 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. 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 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 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 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 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.

(c) Construction. With respect to this 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 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 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 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 issuer offering group

health insurance coverage from negotiating with an attending provider

the level and type of compensation for care furnished

[[Page 57561]]

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 section 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

Sec. 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 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

Sec. 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:

Sec. 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

[[Page 57562]]

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 Sec. 148.102, paragraphs (a) heading, (a)(2), and (b) are

revised to read as follows:

Sec. 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 Sec. 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 Secs. 148.124

(certificate of coverage), 148.128 (alternative State mechanisms), 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

Sec. 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.

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 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 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

[[Page 57563]]

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 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 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.

(c) Construction. With respect to this 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

[[Page 57564]]

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, an 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 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:

(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

Sec. 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: August 27, 1998.

Nancy-Ann Min DeParle,

Administrator, Health Care Financing Administration.

Dated: September 21, 1998.

Donna E. Shalala,

Secretary, Department of Health and Human Services.

[FR Doc. 98-28442 Filed 10-26-98; 8:45 am]

BILLING CODE 4120-01-P; 4830-01-P; 4510-29-P