[Senate Report 108-390]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 779
108th Congress                                                   Report
                                 SENATE
 2d Session                                                     108-390

======================================================================



 
         THE HIPAA RECREATIONAL INJURY TECHNICAL CORRECTION ACT

                                _______
                                

                October 7, 2004.--Ordered to be printed

                                _______
                                

    Mr. Gregg, from the Committee on Health, Education, Labor, and 
                   Pensions, submitted the following

                              R E P O R T

                         [To accompany S. 423]

    The Committee on Health, Education, Labor, and Pensions to 
which was referred the bill (S. 423) to promote health care 
coverage parity for individuals participating in legal 
recreational activities or legal transportation activities, 
having considered the same, reports favorably thereon with an 
amendment in the nature of a substitute and recommends that the 
bill (as amended) do pass.

                                CONTENTS

                                                                   Page
  I. Purpose and summary of the legislation...........................1
 II. Background and need for legislation..............................2
III. Legislative history and votes in committee.......................3
 IV. Explanation of bill and committee views..........................3
  V. Cost estimate....................................................5
 VI. Regulatory impact statement......................................6
VII. Application of law to the legislative branch.....................6
VIII.Section-by-section analysis......................................6

 IX. Changes in existing laws.........................................7

               I. Purpose and Summary of the Legislation

    The legislation is a technical clarification intended to 
protect individuals in a group health plan from facing 
discrimination solely as a result of their participation in a 
legal mode of transportation or a legal recreational activity, 
such as motorcycling, skiing, snowmobiling, all terrain 
vehicle-riding, horseback riding, and other similar activities.
    The legislation achieves this purpose by prohibiting a 
group health plan and a health insurance issuer in the group 
market from denying benefits otherwise provided under the plan 
or coverage for the treatment of an injury solely because such 
injury resulted from the participation of the individual in a 
legal mode of transportation or a legal recreational activity.
    The legislation amends the Employee Income Retirement and 
Security Act of 1974 (ERISA), the Public Health Service Act, 
(PHSA), and the Internal Revenue Code (IRC).
    The non-discrimination provisions of HIPAA, including the 
amendments made to those provisions by this legislation, apply 
only to the group health insurance market.

                II. Background and Need for Legislation

    The Health Insurance Portability and Accountability Act 
(HIPAA) of 1996 included provisions designed to protect 
individuals enrolled in a group health plan from discrimination 
based on health status-related factors. Discrimination under 
HIPAA relates to eligibility for enrollment and premiums. 
Specifically a group health plan or insurance issuer may not 
establish rules for eligibility (including continued 
eligibility) of any individual under the plan based on health 
status. Moreover, HIPAA states that a group health plan and an 
insurance issuer may not require any individual to pay a 
premium which is greater than such premium or contribution for 
a similarly situated individual enrolled in the plan on the 
basis of such individual's health status.
    HIPAA defines health status to include a variety of 
factors, including health status, medical condition (including 
both physical and mental illness), claims experience, receipt 
of health care, medical history, genetic information, and 
evidence of insurability (including conditions arising out of 
acts of domestic violence).
    The HIPAA conference report states that inclusion of 
evidence of insurability in the definition of health status was 
intended to ensure, among other things, that individuals are 
not excluded from health care coverage due to their 
participation in activities such as motorcycling, snowmobiling, 
all terrain vehicle-riding, horseback riding, skiing and other 
similar activities.
    In January 2001, the Department of Health and Human Service 
(HHS), the Department of Labor (DOL), and the Internal Revenue 
Service (IRS) issued interim final regulations pertaining to 
discrimination in group health insurance (Federal Register, 
vol. 66, No. 66, January 8, 2001, pages 1378-1420). The rules 
confirm that a plan and issuer cannot deny enrollment based on 
an individual's participation in certain activities. However, 
the regulations go on to state that it is permissible for a 
plan or issuer to deny benefits if an individual is injured as 
a result of participating in such an activity. This is 
sometimes referred to as HIPAA's ``source of injury'' rule.
    Under this interpretation, for instance, a plan cannot 
exclude from coverage an individual who participates regularly 
in bungee jumping as a form of recreation. However, if the 
individual is injured while bungee jumping, the plan can deny 
claims based on the ``source'' of the individual's injury, 
bungee jumping.
    This permissible activity is limited, however, under the 
departments' interpretation of source of injury. The 
regulations state that plans cannot deny benefits using the 
source of injury rule if the injury results from a medical 
condition or domestic violence. A common example would be plan 
provisions excluding coverage for self-inflicted injuries or 
injuries resulting from suicide attempts. If these injuries are 
the result of a medicalcondition (such as depression) the plan 
would be prohibited from denying benefits based on the source of injury 
rule.
    The regulations distinguish between a denial in enrollment 
versus a denial of benefits. In addition, the regulations 
distinguish between different sources of injury--those that 
result from a medical condition or domestic violence versus all 
other sources of injury.
    This interpretation is not consistent with Congressional 
intent. Moreover, these regulatory distinctions result in 
potentially contradictory and unintended policy that could have 
significant implications for the public's health, the 
recreational and transportation industries, as well as 
insurance coverage, and public attitudes about the value of 
insurance coverage. The technical clarification contained in 
this legislation is needed to alleviate these problems.

            III. Legislative History and Votes in Committee

    On February 14, 2003 Senator Collins introduced, for 
herself and Senator Feingold, S. 423 to promote health care 
coverage parity for individuals participating in legal 
recreational activities or legal transportation activities. The 
bill was referred to the Committee on Health, Education, Labor, 
and Pensions. On October 29, 2003 the committee held an 
executive session to consider S. 423.
    During the executive session Senator Gregg introduced, for 
himself and Senator Kennedy, a manager's amendment in the 
nature of a substitute to S. 423. The amendment made technical 
modifications to S. 423 and renamed the bill to the ``HIPAA 
Recreational Injury Technical Correction Act.'' The manager's 
amendment was approved by unanimous voice vote. Immediately 
thereafter, the Committee moved to approve S. 423, as amended, 
by unanimous voice vote.

              IV. Explanation of Bill and Committee Views

    In the committee's view, the interpretation of HIPAA 
adopted by HHS, DOL, and Treasury in publishing the final 
regulations does not reflect Congressional intent and thus 
requires modification. HIPAA's Congressional history included 
language intended specifically to ensure that ``individuals are 
not excluded from health care coverage due to their 
participation in activities such as motorcycling, snowmobiling, 
all terrain vehicle-riding, horseback riding, skiing and other 
similar activities.'' The committee does not believe that, in 
including this history, Congress even contemplated the 
difference in exclusions between enrollment and benefits.
    Moreover, in the committee's view, the regulatory 
interpretation results in contradictory policy. For instance, 
an individual who regularly rides a motorcycle for 
transportation can't be denied coverage. However, if the same 
person is injured in a motorcycle accident, the plan or issuer 
can deny claims based on that person's source of injury, a 
motorcycle accident. In the committee's view, an individual who 
rides a motorcycle and is enrolled in a health plan should also 
be covered for injuries related to legally engaging in this 
activity.
    In addition to the distinction between enrollment and 
benefits, the regulations also draw a distinction between 
sources of injury that may stem from an underlying medical 
condition, such as mental illness, versus all other sources of 
injury. This is another distinction that, in the committee's 
view, was not contemplated by Congress and results in 
unnecessary ambiguity. Moreover, in the committee's view, this 
distinction raises equity concerns.
    In considering this legislation, the committee reviewed a 
sample of group insurance contracts and practices regarding 
source of injury exclusions. In general, the committee found 
very few group contracts that exclude coverage for legal 
recreational activities or legal modes of transportation, such 
as skiing or motorcycling. The committee did find many examples 
of contracts that exclude coverage for extra-hazardous 
activities, such as handling explosives. The committee further 
found that, while not common, some plans may include what they 
consider to be high risk recreational activities, such as 
bungee jumping, among the excluded activities. The committee 
found that such exclusions are more often found in niche 
markets, such as college insurance plans, rather than 
mainstream commercial products. Finally, although the committee 
found no evidence that such exclusions are actually used by 
plans to deny coverage, it lacked the evidence necessary to 
disprove the existence of such practices.
    While the committee did not find widespread denials based 
on source of injury, it is the committee's view that the 
regulatory interpretation by HHS, DOL and Treasury is contrary 
to Congressional intent and not in the best interest of public 
policy. While contracts are most likely to exclude high-risk 
activities, the committee is concerned that, without a 
technical clarification, contract exclusions could include a 
range of sports-related activities from bungee jumping and 
scuba diving to tennis and golf. With obesity increasing as a 
national public health concern, it is the committee's view that 
these regulations send a negative message to consumers about 
the value of pursuing a healthy lifestyle. The committee also 
believes that the regulatory endorsement of source of injury 
denials also sends a negative message to consumers about the 
value of health insurance. Finally, the recreational and 
transportation industries assert that the regulatory 
endorsement of source of injury denials unfairly tarnishes 
their industries, discourages healthy family activities, and 
potentially exposes these industries to increased financial 
liability. The committee concurs.
    The committee acknowledges that in an era of increasing 
health care costs and the uninsured, employers that voluntarily 
offer health benefits face challenges in providing affordable 
health benefits. The committee also recognizes that, in 
interpreting HIPAA, the agencies faced a difficult challenge in 
balancing the rights created by HIPAA, with HIPAA's strong 
statement that nothing in the statute requires a plan to 
provide specific benefits.
    The committee believes that this technical clarification 
does not jeopardize or break precedent with the principles 
inherent in our voluntary health system or HIPAA. It is the 
committee's view that this clarification will have only minimal 
impact on a very limited number of plans. Group health plans 
and issuers will still have broad latitude to design and 
exclude benefits and services. Finally, in limiting the 
clarification to ``legal'' activities, it is the committee's 
intent to give plans the continued ability to protect their 
enrollees against risks and costs associated with illegal 
behavior.

                            V. Cost Estimate

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, December 2, 2003.
Hon. Judd Gregg,
Chairman, Committee on Health Education, Labor, and Pensions,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 423, the HIPAA 
Recreational Injury Technical Correction Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Margaret 
Nowak.
            Sincerely,
                                        Elizabeth Robinson,
                               (For Douglas Holtz-Eakin, Director).
    Enclosure.

S. 423--HIPAA Recreational Injury Technical Correction Act

    S. 423 would modify the Employee Retirement Income Security 
Act, the Public Health Service Act, and the Internal Revenue 
Code. The bill would prohibit a group health plan from denying 
benefits, otherwise provided under the plan, for treatment of 
an injury solely because the injury resulted from participation 
in a legal mode of transportation or legal recreational 
activity. CBO estimates that the bill would have no impact on 
federal outlays. The bill would affect the spending on health 
benefits for firms that provide health insurance and, 
therefore, would affect the share of employees' compensation 
that is tax-advantaged or taxable. At this time, CBO cannot 
estimate the effect on revenues of those changes in the mix of 
compensation.
    The bill contains no intergovernmental mandates as defended 
in the Unfunded Mandates Reform Act (UMRA). State, local, and 
tribal governments operating health care plans for their 
employees would be exempt from the bill's requirements or would 
be able to opt out of the requirements.
    S. 423 contains a private-sector mandate as defined in UMRA 
by requiring that group health plans and health insurance 
providers not deny benefits otherwise provided because of the 
source of injury. Several industry sources indicate that such 
source-of-injury exclusions are rare in the private health care 
market, but they do exist. For such cases the added cost of 
covered care could be considered per case, but data on the 
number of source-of-injury exclusion cases per year is 
unavailable. CBO cannot determine whether the cost of that 
mandate would exceed the threshold specified in UMRA ($120 
million in 2004, adjusted annually for inflation).
    The CBO staff contact is Margaret Nowak. This estimate was 
approved by Peter H. Fontaine, Deputy Assistant Director for 
Budget Analysis.

                    VI. Regulatory Impact Statement

    In accordance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the committee has determined that 
there will be minimal increases in the regulatory burden 
imposed by the bill.

           VII. Application of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1, the Congressional 
Accountability Act (CAA) requires a description of the 
application of this bill to the legislative branch. S. 423 
clarifies protections for individuals in a group health plan 
from facing discrimination solely as a result of their 
participation in a legal mode of transportation or a legal 
recreational activity. With respect to health insurance, the 
provisions of S. 423 would indirectly apply to the Federal 
Employees Health Benefits Program (FEHBP) which contracts with 
insurance issuers and provides coverage to Members and 
employees of the Legislative Branch. The impact of this 
legislation on the (FEHBP) may not be relevant, however, given 
that the FEHBP already has broad non-discrimination rules in 
place.

                   VIII. Section-by-Section Analysis


Section 1. Short title

    Section 1 establishes the short title as the ``HIPAA 
Recreations Injury Technical Correction Act''

Section 2. Coverage amendments

    Subsection 2(a) amends ERISA Section 702(a)(3) of the 
Employee Retirement Income Security Act of 1974.
    Subsection (2)(a)(1)--Strikes ``Construction'' and replaces 
with ``Scope.'' Inserts ``Waiting Periods'' as (2)(a)(1)A); and
    Subsection (2)(a)(1)(B)--This subsection amends ERISA 
Section 702(a)(3) to prohibit a group health plan, or a health 
insurance issuer offering group health insurance coverage in 
connection with a group health plan, from denying benefits 
otherwise provided under the plan to an individual who was 
injured solely from participating in a legal mode of 
transportation or a legal recreational activity.
    Subsection (2)(b)--amends Section 2702(a)(3) of the Public 
Health Service Act.
    Subsection (2)(b)(1)--Strikes ``Construction'' and replaces 
with ``Scope.'' Inserts ``Waiting Periods'' as (2)(a)(1)A); and
    Subsection (2)(a)(1)(B)--This subsection amends PHSA 
2702(a)(3) to prohibit a group health plan, or a health 
insurance issuer offering group health insurance coverage in 
connection with a group health plan, from denying benefits 
otherwise provided under the plan to an individual who was 
injured solely from participating in a legal mode of 
transportation or a legal recreational activity.
    Subsection (c)--amends 9802(a)(3) of the Internal Revenue 
Code of 1986.
    Subsection (c)(2)(B)--Limitation on denial of benefits.
    Subsection (2)(c)(1)--Strikes ``Construction'' and replaces 
with ``Scope.'' Inserts ``Waiting Periods'' as (2)(a)(1)A); and
    Subsection (2)(c)(1)(B)--This subsection amends IRC Section 
9802(a)(3) to prohibit a group health plan from denying 
benefits otherwise provided under the plan to an individual who 
was injured solely from participating in a legal mode of 
transportation or a legal recreational activity.

                      IX. Changes in Existing Law

    In compliance with rule XXVI, paragraph 12 of the Standing 
Rules of the Senate, the following provides a print of the 
statute or the part or section thereof to be amended or 
replaced (existing law proposed to be omitted is enclosed in 
black brackets, new matter is printed in italic, existing law 
in which no change is proposed is show in roman).

EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974

           *       *       *       *       *       *       *



SEC. 702. PROHIBITING DISCRIMINATION AGAINST INDIVIDUAL PARTICIPANTS 
                    AND BENEFICIARIES BASED ON HEALTH STATUS.

    (a) In Eligibility To Enroll.--
          (1) In general.--* * *

           *       *       *       *       *       *       *

          (3) [Construction.--For] Scope._
                  (A) Waiting periods._For purposes of 
                paragraph (1), rules for eligibility to enroll 
                under a plan include rules defining any 
                applicable waiting periods for such enrollment.
                  (B) Limitation on denial of benefits.--For 
                purposes of paragraph (2), a group health plan, 
                or a health insurance issuer offering group 
                health insurance coverage in connection with a 
                group health plan, may not deny benefits 
                otherwise provided under the plan or coverage 
                for the treatment of an injury solely because 
                such injury resulted from the participation of 
                the individual in a legal mode of 
                transportation or a legal recreational 
                activity.

           *       *       *       *       *       *       *


PUBLIC HEALTH SERVICE ACT

           *       *       *       *       *       *       *



SEC. 2702. PROHIBITING DISCRIMINATION AGAINST INDIVIDUAL PARTICIPANTS 
                    AND BENEFICIARIES BASED ON HEALTH STATUS.

    (a) In Eligibility To Enroll.--
         (1) In general.--* * *

           *       *       *       *       *       *       *

         (3) [Construction.--For] Scope._
                 (A) Waiting periods._For purposes of paragraph 
                (1), rules for eligibility to enroll under a 
                plan include rules defining any applicable 
                waiting periods for such enrollment.
                 (B) Limitation on denial of benefits.--For 
                purposes of paragraph (2), a group health plan, 
                or a health insurance issuer offering group 
                health insurance coverage in connection with a 
                group health plan, may not deny benefits 
                otherwide provided under the plan or coverage 
                for the treatment of an injury solely because 
                such injury resulted from the participation of 
                the individual in a legal mode of 
                transportation or a legal recreational 
                activity.

           *       *       *       *       *       *       *


INTERNAL REVENUE CODE OF 1986

           *       *       *       *       *       *       *



SEC. 9802. PROHIBITING DISCRIMINATION AGAINST INDIVIDUAL PARTICIPANTS 
                    AND BENEFICIARIES BASED ON HEALTH STATUS.

    (a) In Eligibility To Enroll.--
                 (1) In general.--* * *

           *       *       *       *       *       *       *

                 (3) [Construction.--For] Scope._
                 (A) Waiting periods._For purposes of paragraph 
                (1), rules for eligibility to enroll under a 
                plan include rules defining any applicable 
                waiting periods for such enrollment.
                 (B) Limitation on denial of benefits.--For 
                purposes of paragraph (2), a group health plan 
                may not deny benefits otherwide provided under 
                the plan for the treatment of an injury solely 
                because such injury resulted from the 
                participation of the individual in a legal mode 
                of transportation or a legal recreational 
                activity.

           *       *       *       *       *       *       *


                                  
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