[Federal Register Volume 73, Number 203 (Monday, October 20, 2008)]
[Rules and Regulations]
[Pages 62410-62429]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-24666]



[[Page 62409]]

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Part III





Department of the Treasury





Internal Revenue Service



26 CFR Part 54



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Department of Labor





Employee Benefits Security Administration

29 CFR Part 2590



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Department of Health and Human Services





Centers for Medicare & Medicaid Services

45 CFR Parts 144, 146, and 148



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Final Rules for Group Health Plans and Health Insurance Issuers Under 
the Newborn and Mothers, Health Protection Act; Final Rule

  Federal Register / Vol. 73, No. 203 / Monday, October 20, 2008 / 
Rules and Regulations  

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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 54

[TD 9427]
RIN 1545-BG82

DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2590

RIN 1210-AA63

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

45 CFR Parts 144, 146, and 148

RIN 0938-AI17


Final 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; 
Employee Benefits Security Administration, Department of Labor; Centers 
for Medicare & Medicaid Services, Department of Health and Human 
Services.

ACTION: Final rules.

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SUMMARY: This document contains final rules for group health plans and 
health insurance issuers concerning hospital lengths of stay for 
mothers and newborns following childbirth, pursuant to the Newborns' 
and Mothers' Health Protection Act of 1996 and the Taxpayer Relief Act 
of 1997.

DATES: Effective Date: These final regulations are effective December 
19, 2008.
    Applicability Dates: Group market rules. These final regulations 
for the group market apply to group health plans and group health 
insurance issuers for plan years beginning on or after January 1, 2009.
    Individual market rules. These final regulations 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, 2009.

FOR FURTHER INFORMATION CONTACT: Amy Turner or Beth Baum, Employee 
Benefits Security Administration, Department of Labor, at (202) 693-
8335; Russ Weinheimer, Internal Revenue Service, Department of the 
Treasury, at (202) 622-6080; or Adam Shaw, Centers for Medicare & 
Medicaid Services, Department of Health and Human Services, at (877) 
267-2323 extension 61091.
    Customer service information: Individuals interested in obtaining 
copies of Department of Labor publications concerning health care laws 
may request copies by calling the EBSA Toll-Free Hotline at 1-866-444-
EBSA (3272) or may request a copy of CMS's publication entitled 
``Protecting Your Health Insurance Coverage'' by calling 1-800-633-
4227. These regulations as well as other information on the Newborns' 
and Mothers' Health Protection Act and other health care laws are also 
available on the Department of Labor's Web site (http://www.dol.gov/ebsa), including the interactive web pages, Health Elaws.

SUPPLEMENTARY INFORMATION:

I. Background

    The Newborns' and Mothers' Health Protection Act of 1996 (Newborns' 
Act), Public Law 104-204, was enacted on September 26, 1996. The rules 
contained in this document implement changes made to the Employee 
Retirement Income Security Act of 1974 (ERISA) and the Public Health 
Service Act (PHS Act) made by the Newborns' Act, and parallel changes 
to the Internal Revenue Code of 1986 (Code) enacted as part of the 
Taxpayer Relief Act of 1997 (TRA '97). The Newborns' Act was enacted to 
provide protections for mothers and their newborn children with regard 
to hospital lengths of stay following childbirth. Interim final rules 
implementing the group and individual market provisions of the 
Newborns' Act were published in the Federal Register on October 27, 
1998 (63 FR 57546) (the interim final rules).
    These regulations being published today in the Federal Register 
finalize the interim final rules. The final regulations implementing 
the group market provisions of the Newborns' Act are issued jointly by 
the Secretaries of the Treasury, Labor, and HHS.\1\ The individual 
market final regulations are issued solely by HHS.\2\
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    \1\ 26 CFR 54.9811-1, 29 CFR 2590.711, 45 CFR 146.130.
    \2\ 45 CFR 148.170.
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II. Overview of the Regulations

    Section 9811 of the Code, section 711 of ERISA, and sections 2704 
and 2751 of the PHS Act (the Newborns' Act provisions) 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. The interim final rule--
     Provided that the attending provider makes the 
determination that an admission is in connection with childbirth;
     Determined when the hospital stay begins for purposes of 
application of the general rule;
     Provided 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;
     Clarified the application of authorization and 
precertification requirements with respect to the 48-hour (or 96-hour) 
stay;
     Explained the application of benefit restrictions and 
cost-sharing rules with respect to the 48-hour (or 96-hour) stay;
     Clarified the prohibitions with respect to a plan or 
issuer offering mothers incentives or disincentives to encourage less 
than the 48-hour (or 96-hour) stay;
     Clarified the prohibitions against incentives and 
penalties with respect to attending providers; and
     Included the statutory notice provisions under ERISA and 
the PHS Act. In general, these final regulations do not change the 
interim final rules. However, the text of these final regulations 
incorporates a clarifying statement from the preamble of the interim 
final rules that the definition of attending provider does not include 
a plan, hospital, managed care organization, or other issuer. The text 
also makes a small clarification with respect to state law 
applicability.
    In addition, these final regulations make minor clarifications to 
the notice requirements for nonfederal governmental plans. The interim 
final rules specified that the notice of post-childbirth 
hospitalization benefits must be included in the plan document that 
described plan benefits to participants and beneficiaries. These final 
regulations specify that any notice a nonfederal governmental plan must 
provide under these regulations can be included either in the plan 
document that describes benefits, or in the type of document the plan 
generally uses to inform participants and beneficiaries of plan benefit 
changes. These final regulations also specify that any time a plan 
distributes one or both of these documents after providing the initial 
notice, the applicable statement must

[[Page 62411]]

appear in one or both of these documents.

Hospital Length of Stay

    The interim final rules and these final regulations provide that 
when a 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) rather than at the time of admission or onset of labor. Also, 
the interim final rules and these final regulations provide that when a 
delivery occurs outside of the hospital, the stay begins at the time 
the mother or newborn is admitted (rather than at the time of 
delivery).
    Some comments expressed concern that this rule somehow required 
birthing centers or other non-hospital facilities to extend the right 
to stay to more than 24 hours. These comments noted that such extended 
stays may violate local regulations or otherwise conflict with the 
operations of such facilities. The statute and these final regulations 
do not require hospitals or other facilities to provide particular 
lengths of stay, but instead require group health plans and health 
insurance issuers to provide benefits for particular hospital lengths 
of stay.
    A comment recommended that if a delivery was planned for outside of 
a hospital, any following admission in response to complications 
resulting from that delivery should be excluded from the provisions 
providing for particular lengths of stay. These final regulations do 
not distinguish between a delivery that was planned for outside of the 
hospital and other deliveries occurring outside of a hospital.

Definition of Attending Provider

    The mandatory coverage period provisions are not violated if the 
attending provider, in consultation with the mother, decides to 
discharge the mother or newborn earlier. Under the interim final rules 
and these final regulations, the attending provider is defined by a 
functional analysis of state licensure rules and the actual performance 
of care. Under this definition, the attending provider is restricted to 
an individual who is licensed under applicable state law to provide 
maternal or pediatric care and who is directly responsible for 
providing such care to a mother or newborn child. While the preamble to 
the interim final rules noted that this definition could include a 
nurse midwife or physician assistant, the regulation itself does not 
provide a list of titles or positions that qualify as attending 
providers.
    Some comments requested that additional titles, such as pediatric 
nurse practitioners, or nurse practitioners, be specifically mentioned 
in the definition. While positions with these titles may meet the 
definition in many cases, as noted above, the language of the 
regulation takes a functional approach and does not provide a list of 
titles or positions that qualify as attending providers. This 
functional approach is more useful in addressing who the attending 
provider is on an ongoing basis, as specific position titles and 
responsibilities may vary from location to location as well as over 
time.
    It was also suggested that the text of the final regulations 
incorporate a clarifying statement from the preamble of the interim 
final rules that the definition of attending provider does not include 
a plan, hospital, managed care organization, or other issuer. These 
final regulations adopt this suggestion.

Compensation of Attending Provider

    Several comments addressed the provisions in the interim final 
rules that relate to the compensation of physicians and other attending 
providers. These provisions prohibit plans and issuers from penalizing 
attending providers who provide care in accordance with the 
regulations, and prohibit plans and issuers from inducing attending 
providers to provide care in a manner that is inconsistent with the 
regulations. At the same time, the statute specifies that plans and 
issuers are still free to negotiate with attending providers the level 
and type of compensation for care furnished in accordance with the 
regulations.
    The comments requested greater specificity in the final regulations 
for distinguishing between the types of compensation arrangements that 
are permissible under the negotiation provision and those that are 
impermissible under the prohibitions against penalties and inducements. 
One comment suggested that it is clear that a bonus arrangement for 
obstetricians and gynecologists contingent on the percentage of 
discharges within 24 hours would not be permitted. The comment 
requested confirmation that arrangements with a more general focus 
would be permitted, such as a global payment for prenatal care and 
childbirth, or a bonus for a multi-specialty group including 
obstetricians and gynecologists based on the utilization for all 
patients served by the group. Another comment expressed a concern about 
whether capitated arrangements are consistent with the hospital length-
of-stay requirements.
    The Departments devoted considerable resources over a sustained 
period of time to develop rules that provide greater specificity for 
distinguishing between negotiated compensation arrangements that would 
give attending providers an incentive to deliver health care services 
efficiently and arrangements that could give providers an incentive to 
discharge patients in contravention of the statute and regulations. The 
great variety, complexity, and mutability of such arrangements \3\ 
would have required extensive rules that at best were likely to impose 
heavy administrative costs and yet were still of only marginal value in 
clarifying what arrangements would be permissible. For this reason, the 
rules on compensation arrangements for attending providers are adopted 
unchanged from the interim final rules.
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    \3\ Broad classes of examples include fee-for-service, 
capitation, productivity-based salary, incentive contracting, 
blended systems, prospective versus post-service payment, etc. See 
e.g., Theory and Practice in the Design of Physician Payment 
Incentives, James C. Robinson (University of California, Berkley), 
The Milbank Quarterly, Vol. 79, No. 2, 2001; Regulation of Managed 
Care Incentive Payments to Physicians, Stephen Latham (Boston 
University School of Law), 22 Am. J.L. & Med. 399; Blended Payment 
Methods in Physician Organizations Under Managed Care, James C. 
Robinson, JAMA 1999;282:1258-1263; The Alignment and Blending of 
Payment Incentives Within Physician Organizations, JC Robinson, SM 
Shortell, R Li, LP Casalino, T Rundall, Health Services Research Vol 
39, Issue 5, pages 1589-1606, Oct. 2004.
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    The final regulations do not attempt to provide guidance on this 
issue through examples. Certainly the bonus arrangement described in 
one comment, based on the percentage of discharges within 24 hours, 
violates the prohibition against providing inducements for early 
discharge. Such an example is not included in the final regulations to 
avoid the inference that anything less blatant would be permissible. 
Examples of less blatant arrangements could be similarly misleading, 
whether the conclusion was that the arrangement was permissible or 
impermissible, since there are bound to be differences between 
arrangements that would have been described in the regulations and any 
actual arrangement for an attending provider, and in some cases even 
minor differences could change the result.

Authorization and Precertification

    The interim final rules and these final regulations provide, under 
paragraph (a), that 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.

[[Page 62412]]

    Under paragraph (b) of the interim final rules and these final 
regulations, a plan or issuer may not restrict benefits for part of a 
stay that is subject to the general rule in a way that is less 
favorable than a prior portion of the stay. An example in the interim 
final rules and these final regulations illustrates that 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 final 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.
    Under paragraph (c) of the interim final rules and these final 
regulations, 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 in the interim final rules and these final regulations 
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.
    One comment asked whether less favorable cost sharing for the 48-
hour (or 96-hour) stay can be applied to covered individuals who fail 
to give advance notice or notice upon admission for the services or 
providers related to the stay, if such a penalty applies in other 
hospitalization situations. This issue was addressed in Example 2 of 
paragraph (c)(3) of the interim final rules. This example is repeated 
in the final regulations and illustrates that a plan may require 
advance notice for services or providers related to hospital length of 
stay in connection with childbirth, in order for a covered individual 
to obtain more favorable cost sharing under the plan or coverage. Such 
requirements may not be used to deny an individual benefits for any 
portion of the 48-hour (or 96-hour) stay based on a determination of 
medical necessity or appropriateness. Any variance in cost-sharing 
related to compliance with a plan's or an issuer's advance notice 
requirements must be applied consistently throughout the 48-hour (or 
96-hour) stay. Under the principles set forth in the rule and 
illustrated in this example, a plan or issuer could generally apply 
less favorable cost sharing towards the hospital length of stay in 
connection with childbirth of an individual who failed to satisfy the 
plan's advance notice requirements, to the extent permissible under the 
preexisting condition rules in 26 CFR 54.9801-3, 29 CFR 2590.701-3, and 
45 CFR 146.111 and 148.120.\4\
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    \4\ In order to avoid imposing an impermissible preexisting 
condition exclusion, plans and group health insurance issuers that 
require individuals to notify the plan or issuer of pregnancy within 
a certain amount of time (for example, within the first trimester) 
must waive or modify the notice requirement for individuals who 
enroll in the plan after the time notice was required. This also 
applies to individual market issuers with respect to federally 
eligible individuals they are required to enroll.
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Notice Requirements under ERISA and the PHS Act

    This section of the final regulations addresses the Newborns' Act 
notice requirements under ERISA and the PHS Act. The interim final 
rules, and these final regulations, contain different notice provisions 
for ERISA-covered group health plans, nonfederal governmental plans, 
and health insurance issuers in the individual market. ERISA-covered 
group health plans are required to comply with the ERISA notice 
regulations, whether insured or self-insured. Nonfederal governmental 
plans and health insurance issuers in the individual market are 
required to comply with the PHS Act notice regulations. Because there 
are fundamental differences between the types of entities regulated 
under ERISA as compared to the PHS Act, and in the structure of the two 
acts, the notice requirements in the ERISA regulations and PHS Act 
regulations differ.
    Notice Requirements under ERISA. The interim final rules and these 
final regulations require group health plans that are subject to ERISA 
to comply with summary plan description (SPD) disclosure requirements 
at 29 CFR 2520.102-3(u). The SPD rules generally require that 
participants and beneficiaries in a group health plan be furnished an 
SPD to apprise them of their rights and obligations. The rules also 
prescribe the content of the SPD and the manner and timing 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.
    In November 2000, the Department of Labor finalized the SPD content 
regulation (65 FR 70241) requiring that all group health plans 
(including insured plans not subject to the federal Newborns' Act) 
provide language in the SPD that describes the federal or state law 
requirements applicable to the plan or any health insurance coverage 
offered under the plan relating to hospital lengths of stay in 
connection with childbirth for the mother or newborn child. If federal 
law applies in some areas in which the plan operates and state law 
applies in other areas, the SPD should describe the different areas and 
the federal or state law requirements applicable in each. Model 
language for plans subject to the federal Newborns' Act's requirements 
is included in the SPD content regulation. This change became 
applicable as of the first day of the second plan year beginning on or 
after January 22, 2001.
    Some comments asked for clarification about whether the notice can 
be provided through electronic media, as an alternative to traditional 
paper disclosure. Under ERISA, the notice can be provided through 
electronic media if the plan complies with ERISA's electronic 
disclosure rules in 29 CFR 2520.104b-1.
    Some comments requested that the rules require plans to provide 
information to patients and providers regarding who has legal oversight 
with respect to the Newborns' Act and who to contact in the event of a 
violation. However, this concern is already addressed by current 
regulation. Under 29 CFR 2520.102-3(t)(1) of the SPD content rules, 
ERISA plans are required to provide a statement of ERISA rights in the 
SPD. Among other things, this provision requires ERISA-covered plans to 
provide information on the enforcement of a participant or 
beneficiary's rights and who to contact if there are any questions 
about the plan.
    Notice Requirements under the PHS Act. Nonfederal governmental 
plans. The Newborns' Act requires nonfederal governmental plans to 
comply with the Newborns' Act notice requirements under section 711(d) 
of ERISA as if section 711(d) applied to such plans.
    The interim final rules and these final regulations require plans 
that are subject to the federal Newborns' Act requirements to provide a 
notice with specific language describing the federal requirements. 
Under the interim final rules and these final regulations, if federal 
law applies in some areas in which the plan operates and state law 
applies in others, the plan must provide the appropriate notice to each 
participant and beneficiary who is covered by federal law.
    Several comments on the interim final rules objected that specific 
language was required for the disclosure statement, and suggested that 
the regulation instead should have provided guidelines for plans to 
base their own language on (such as language that

[[Page 62413]]

comports with the Department of Labor's sample language). However, 
requiring specific language ensures the substantive adequacy of the 
notices. Additionally, because many plans presumably have already 
incorporated that mandatory language into their documents since the 
effective date of the interim final rules, continuing to require that 
language is the simplest approach.
    As in the interim final rules, these final regulations require 
nonfederal governmental plans to provide notice not later than 60 days 
after the first day of the plan year following the effective date, 
regardless of whether the plan had already provided notice under the 
Department of Labor standards. This takes into account the fundamental 
differences between the nonfederal governmental plans regulated under 
the PHS Act and the types of entities regulated under ERISA. However, 
with respect to the requirement that notice be provided within that 60-
day period, the final regulations include an exception for plans with 
regard to participants and beneficiaries for whom the plan has already 
provided notices in accordance with the interim final regulations that 
are consistent with these final regulations (such as self-insured 
nonfederal governmental plans that are subject to the federal Newborns' 
Act requirements and that have already provided such notices).
    Health insurance issuers in the individual market. The Newborns' 
Act requires health insurance issuers in the individual market to 
comply with the Newborns' Act notice requirements under section 711(d) 
of ERISA as if section 711(d) applied to such issuers. Thus, the 
interim final rules and these final regulations require individual 
market health insurance issuers that provide benefits for hospital 
lengths of stay in connection with childbirth to include, in the 
insurance contract, a rider, or equivalent amendment to the contract, 
specific language that notifies policyholders of their rights under the 
Newborns' Act. The interim final rules and these final regulations also 
require such issuers to provide this notice not later than a specific 
time frame that is within a few months after the effective date of the 
regulations.
    Several comments on the interim final rules objected that specific 
language was required for the disclosure statement and suggested 
instead there should be guidelines for issuers to base their own 
language on. However, requiring specific language ensures the 
substantive adequacy of the notices. Additionally, because issuers 
presumably have already incorporated that language into their documents 
since the effective date of the interim final rules, continuing to 
require that same language is the simplest approach.
    These final regulations retain the notice exception in the interim 
final rules for issuers that are subject only to state insurance law 
requirements regarding hospital lengths of stay following childbirth.

Applicability in States

    The statute and the interim final rules include an exception to the 
Newborns' Act requirements for health insurance coverage in certain 
states. Specifically, the Newborns' Act and the interim final rules do 
not apply with respect to health insurance coverage if there is a state 
law that meets any of the criteria \5\ that follow:
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    \5\ HHS has the responsibility to enforce the federal Newborns' 
Act with regard to issuers in states that do not have one of the 
three types of state laws described in the Newborns' Act. As of the 
publication of these final regulations, the only state in which HHS 
is enforcing the Newborns' Act with respect to issuers is Wisconsin.
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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 to the attending provider in consultation with the mother. The 
interim final rules and these final regulations clarify that state laws 
that require the decision to be made by the attending provider with the 
consent of the mother satisfy this criterion.
    Although this 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. Accordingly, self-insured plans in all states generally are 
required to comply with the federal requirements (except those 
nonfederal governmental plans that have opted out of the PHS Act 
requirements).
    These final regulations repeat the statute and the interim final 
rules with one clarification. With respect to the second criterion 
above (professional guidelines), the statute only addresses the period 
following a vaginal delivery or a caesarean section. Accordingly, 
although guidelines issued by professional medical associations such as 
the American College of Obstetricians and Gynecologists (ACOG) cover a 
spectrum of care both before and after childbirth, the only relevant 
guidelines for this purpose are those pertaining to care following 
childbirth. Therefore, the final rules include an express clarification 
that State law need only require coverage in accordance with 
professional guidelines that deal with care following childbirth. 
Guidelines relating to other issues are not relevant for this purpose.
    One comment to the interim final rules supported the criteria used 
in those rules for determining whether the federal Newborns' Act 
applies in a given state. However, another comment objected to the fact 
that issuers in states that have enacted one of the three types of 
state laws described in the federal Newborns' Act would arguably be 
exempt from several of the federal Act's requirements, such as the 
prohibitions on offering incentives to providers to induce them to 
provide care in a manner inconsistent with the Act. This comment asked 
us to reconsider whether the regulations should provide such a broad 
exception from the federal Act's requirements in such states. The 
statutory language does not require state law to include all the 
federal provisions, such as the anti-incentive provisions, in order for 
health insurance coverage in that state to be excepted from the federal 
requirements. In light of this flexibility, these final regulations 
retain the exception from the interim final rules.

Applicability Date

    These final rules apply to group health plans, and health insurance 
issuers offering group health insurance coverage, for plan years 
beginning on or after January 1, 2009. The final 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, 2009. Until the applicability 
date for this regulation, plans and issuers are required to continue to 
comply with the corresponding sections of the regulations previously 
published in the Federal Register (63 FR 57546) and other applicable 
regulations.

[[Page 62414]]

III. Economic Impact and Paperwork Burden

Summary--Department of Labor and Department of Health and Human 
Services

    The Newborns' Act provisions generally prohibit group health plans 
and group health insurance issuers from limiting hospital lengths of 
stay in connection with childbirth to less than 48 hours for vaginal 
deliveries and 96 hours for cesarean sections and from requiring a 
health care practitioner to obtain preauthorization for such stays. For 
insured coverage, the Newborns' Act allows any state law, meeting one 
of three criteria, to take its place. The Departments have crafted 
these regulations to secure the Act's protections in as economically 
efficient a manner as possible, and believe that the economic benefits 
of the regulations justify their costs.\6\
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    \6\ The Newborns' Act still requires that insured plans disclose 
a notice outlining participants' rights regarding hospital lengths 
of stay related to childbirth. Nonetheless, final regulations 
related to that notice were published separately (see 65 FR 70266, 
Nov. 21, 2000) and so those costs are not included herein.
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    The primary economic benefits associated with securing these 
minimum lengths of stay derive from the reduction in complications 
linked to premature discharge of mothers and newborns. Complications 
that are easily treated and readily identifiable, like excessive 
bleeding and infection in new mothers and dehydration and 
hyperbilirubinemia in their newborns, are common causes for readmission 
following a premature discharge. These complications and the subsequent 
readmissions are expensive and cause avoidable suffering for mothers 
and their newborns.
    By eliminating the need to obtain preauthorization for affected 
stays, the Act provides affected individuals with increased access to 
the health care system. Increased access fosters timelier and fuller 
medical care, better health outcomes, and improved quality of life. 
This is especially true for certain individuals affected by the 
Newborns' Act provisions. For example, lower-income individuals, when 
denied coverage for the full length of stay, are more likely to forego 
care for financial reasons. When adverse health outcomes result, costs 
for the individual and the plan are high. For these individuals 
especially, this requirement is more likely to mean receiving timely, 
quality postnatal care, and living healthier lives.
    Any mandate to increase the richness of health benefits, however, 
adds to the cost of health coverage. Plans can mitigate costs by 
increasing cost-sharing or by reducing non-mandated benefits. This in 
turn shifts the economic burden of the regulation to plan participants, 
and may induce some employers and employees, as well as those in the 
individual insurance market, to drop coverage. The cost of enacting 
federal minimum stay regulation is estimated to fall between $139 and 
$279 million annually.\7\ However, as this constitutes a small fraction 
of one percent of total health care expenditures, it would most likely 
be a small, possibly negligible, factor in most employers' decisions to 
offer health coverage and individuals' decisions to enroll.
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    \7\ The vast majority of this cost is attributable to the impact 
of the statute. ($14 million is the upper bound cost attributable to 
the exercise of regulatory discretion.) Moreover, there are no 
increased costs attributable to any new exercise of regulatory 
discretion in the final rule. Instead, the final rule repeats the 
interpretations of the interim final rule. Any increased costs over 
the 1998 estimate in the interim final rules are attributable to 
economic factors, such as increased cost of care (from 1996 to 2007 
dollars), increased number of births, and increased number of 
participants and beneficiaries covered by self-insured plans to 
which the regulations apply.
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    While the interim final regulations clarified several provisions 
within the statute, this action serves primarily to provide the 
certainty associated with a final rule for the regulated community, as 
well as update the cost of the regulation, adjusting for changes in the 
landscape of the community. Because these regulations are being 
published several years after the Newborns' Act's passage and minimal 
interpretation of the statutory language was required, the regulatory 
implementation costs should be negligible. Costs of the final 
regulation are detailed below in the section entitled ``Unified 
Analysis of Costs and Benefits.'' Benefits of the regulation are also 
discussed in that section at length, although because the benefits 
primarily involve quality of life improvements, the Departments have 
not attempted to quantify them. They do, however, believe them to be 
sufficiently large so as to justify the cost of the regulation.

Executive Order 12866--Department of Labor and Department of Health and 
Human Services

    Under Executive Order 12866, the Departments must determine whether 
a regulatory action is ``significant'' and therefore subject to the 
requirements of the Executive Order and subject to review by the Office 
of Management and Budget (OMB). Under section 3(f), the order defines a 
``significant regulatory action'' as an action that is likely to result 
in a rule (1) having an annual effect on the economy of $100 million or 
more, or adversely and materially affecting a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or state, local or tribal governments or communities (also 
referred to as ``economically significant''); (2) creating serious 
inconsistency or otherwise interfering with an action taken or planned 
by another agency; (3) materially altering the budgetary impacts of 
entitlement grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raising novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in the Executive Order.
    Pursuant to the terms of the Executive Order, it has been 
determined that this action is ``economically significant'' and is 
subject to OMB review under Section 3(f) of the Executive Order. 
Consistent with the Executive Order, the Departments have assessed the 
costs and benefits of this action. The Departments' assessment, and the 
analysis underlying the assessment, is detailed below. The Departments 
performed a comprehensive, unified analysis to estimate the costs and 
benefits attributable to the regulations for purposes of compliance 
with Executive Order 12866, the Regulatory Flexibility Act, and the 
Paperwork Reduction Act.
    These final regulations are needed to provide certainty for the 
affected community, as well as clarify the economic burden that the 
Newborns' Act will place on health plans and their participants. The 
Departments believe that this regulation's benefits will justify its 
costs. This belief is grounded in the assessment of costs and benefits 
that is summarized earlier and detailed below.

Regulatory Flexibility Act--Department of Labor and Department of 
Health and Human Services

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes 
certain requirements with respect to Federal rules that are subject to 
the notice and comment requirements of section 553(b) of the 
Administrative Procedure Act (5 U.S.C. 551 et seq.) and likely to have 
a significant economic impact on a substantial number of small 
entities. Unless an agency certifies that a final rule will not have a 
significant economic impact on a substantial number of small entities, 
section 604 of the RFA requires that the agency present a final 
regulatory flexibility analysis (FRFA) at the time of the publication 
of the notice of final rulemaking describing

[[Page 62415]]

the impact of the rule on small entities. Small entities include small 
businesses, organizations, and governmental jurisdictions.
    Because the 1998 rules were issued as interim final rules and not 
as a notice of proposed rulemaking, the RFA did not apply and the 
Departments were not required to either certify that the rule would not 
have a significant impact on a substantial number of small entities or 
conduct a regulatory flexibility analysis. The Departments nonetheless 
crafted those regulations in careful consideration of effects on small 
entities, and conducted an analysis of the likely impact of the rules 
on small entities. This analysis was detailed in the preamble to the 
interim final rule.
    For purposes of this discussion, the Departments consider a small 
entity to be an employee benefit plan with fewer than 100 participants. 
Pursuant to the authority of section 104(a)(3) of ERISA, the Department 
of Labor has previously issued at 29 CFR 2520.104-20, 2520.104-21, 
2520.104-41, 2520.104-46 and 2520.104b-10, certain simplified reporting 
provisions and limited exemptions from reporting and disclosure 
requirements for small plans, including unfunded or insured welfare 
plans covering fewer than 100 participants and which satisfy certain 
other requirements.
    Further, while some small plans are maintained by large employers, 
most are maintained by small employers. Both small and large plans may 
enlist small third party service providers to perform administrative 
functions, but it is generally understood that third party service 
providers shift their costs to their plan clients in the form of fees. 
Thus, the Departments believe that assessing the impact of this final 
rule on small plans is an appropriate substitute for evaluating the 
effect on small entities. The definition of small entity considered 
appropriate for this purpose differs, however, from a definition of 
small business based on size standards promulgated by the Small 
Business Administration (SBA) (13 CFR 121.201) pursuant to the Small 
Business Act (5 U.S.C. 631 et seq.). The Department of Labor solicited 
comments on the use of this standard for evaluating the impact of the 
proposed regulations on small entities. No comments were received with 
respect to this standard.
    The Departments believe that the final regulation will not have a 
significant economic impact on a substantial number of small entities. 
The direct costs of restricting short stay policies is estimated to 
fall between $15 million and $31 million for small plans which amount 
to a per-participant cost of between nine and nineteen dollars for 
those plans affected, or a small fraction of one percent of total small 
plan expenditures.\8\
---------------------------------------------------------------------------

    \8\ Departments' estimates using the 2005 Medical Expenditures 
Panel Survey Household Component (MEPS-HC), the 2006 Medical 
Expenditures Panel Survey Insurance Component (MEPS-IC) and the 
National Centers for Disease Control and Prevention (CDC) National 
Hospital Discharge Survey: 2005 Annual Summary with Detailed 
Diagnosis and Procedure Data determined that of participants 
affected by the regulation, 11 percent were enrolled in small plans. 
Costs born by small plans were 11 percent of all costs.
---------------------------------------------------------------------------

    The Departments estimate that prior to the Act, 115,000 small plans 
with 1.6 million participants would have restricted lengths of stay in 
connection with childbirth or required preauthorization for such 
stays.\9\ While this represents just 5 percent of all small plans, the 
Departments believe it may represent a substantial number of small 
entities.
---------------------------------------------------------------------------

    \9\ Estimates are based on the 2006 MEPS-IC. It should be noted, 
however, that the Pregnancy Discrimination Act of 1978 allows firms 
with less than 15 employees that offer health insurance to exclude 
maternity care. The 2000 Mercer/Foster Higgins National Survey of 
Employer Sponsored Health Plans found that 7 percent of firms with 
10-24 employees did not offer such benefits, but the survey did not 
examine smaller firms. Rough estimates by the Departments suggest 
that the share of firms with 9 or fewer employees that offer health 
benefits but exclude maternity benefits is 21 percent. As the cost 
of these benefits rises, this share is likely to increase which, 
while having a small effect on the number of participants affected 
by the regulation, might significantly decrease the number of small 
plans affected by the regulation.
---------------------------------------------------------------------------

Paperwork Reduction Act--Department of Labor and Department of Health 
and Human Services

1. Department of Labor
    These 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 Department of 
Labor reported the information collection burdens associated with the 
Newborns' Act 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 the information collection under OMB 
Control Number 1210-0039, expiring on March 31, 2010.
2. Department of Health and Human Services
    These 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). HHS reported the 
information collection burdens associated with the Newborns' Act in the 
interim rules (Information Collection Requirements Referenced in HIPAA 
for the Group Market, Supporting Regulations 45 CFR 146), published in 
the Federal Register on April 8, 1997. These collection requirements 
were approved under OMB Control Number 0938-0702, expiring on August 
31, 2009.

Special Analyses--Department of the Treasury

    Notwithstanding the determinations of the Departments of Labor and 
of Health and Human Services, for purposes of the Department of the 
Treasury it has been determined that this Treasury decision is not a 
significant regulatory action. Therefore, a regulatory assessment is 
not required. It has also been determined that section 553(b) of the 
Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to 
these Treasury regulations, and, because these regulations do not 
impose a collection of information on small entities, a Regulatory 
Flexibility Analysis under the Regulatory Flexibility Act (5 U.S.C. 
chapter 6) is not required. Pursuant to section 7805(f) of the Code, 
the notice of proposed rulemaking preceding these regulations was 
submitted to the Small Business Administration for comment on its 
impact on small business.

Congressional Review Act

    These regulations are subject to the Congressional Review Act 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801 et seq.) and have been transmitted to Congress and 
the Comptroller General for review. These regulations, however, are 
considered a ``major rule,'' as that term is defined in 5 U.S.C. 804, 
because they are likely to result in an annual effect on the economy of 
$100 million or more.

Unfunded Mandates Reform Act

    For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4), as well as Executive Order 12875, these regulations do not 
include any federal mandate that may result in expenditures by state, 
local, or tribal governments,\10\ however, they include mandates which 
may impose an annual burden of $100 million or more on the private 
sector, updated annually for inflation. After applying the most

[[Page 62416]]

current gross domestic product implicit price deflator in 2008, that 
threshold is approximately $130 million.
---------------------------------------------------------------------------

    \10\ Nonfederal governmental plans can opt-out of these 
requirements and it was assumed that those States that had rules in 
place that supplanted the Newborns' Act (that is, all States except 
one) would.
---------------------------------------------------------------------------

Federalism Statement Under Executive Order 13132--Department of Labor 
and Department of Health and Human Services

    Executive Order 13132 outlines fundamental principles of 
federalism. It requires adherence to specific criteria by federal 
agencies in formulating and implementing policies that have 
``substantial direct effects'' on the States, the relationship between 
the national government and States, or on the distribution of power and 
responsibilities among the various levels of government. Federal 
agencies promulgating regulations that have these federalism 
implications must consult with State and local officials, and describe 
the extent of their consultation and the nature of the concerns of 
State and local officials in the preamble to the regulation.
    In the Departments' view, these final regulations have federalism 
implications because they may have substantial direct effects on the 
States, the relationship between the national government and States, or 
on the distribution of power and responsibilities among the various 
levels of government. However, in the Departments' view, the federalism 
implications of these final regulations are substantially mitigated 
because, with respect to health insurance issuers, all but one of the 
States have requirements that prescribe benefits for hospital lengths 
of stay in connection with childbirth that satisfy the Newborns' Act 
hospital length of stay requirements.
    In general, through section 514, ERISA supersedes State laws to the 
extent that they relate to any covered employee benefit plan, but 
preserves State laws that regulate insurance. At the same time, 
however, ERISA prohibits States from regulating a plan as an insurance 
company. HIPAA added a new section to ERISA (as well as to the PHS Act 
and the Code) narrowly preempting State requirements for issuers of 
group health insurance coverage.\11\ HIPAA's conference report states 
that the conferees intended only the narrowest preemption of State laws 
with regard to health insurance issuers. H.R. Conf. Rep. No. 736, 104th 
Cong. 2d Session 205 (1996).
---------------------------------------------------------------------------

    \11\ The Newborns' Act was incorporated into the administrative 
framework established by HIPAA.
---------------------------------------------------------------------------

    The Newborns' Act also added a new section to ERISA (and to the PHS 
Act and the Code) which provides that the federal requirements 
applicable to group health plans and health insurance issuers 
concerning hospital lengths of stay for mothers and newborns following 
childbirth do not apply if State law meets one or more of three 
specific criteria in the statute.\12\ The accompanying conference 
report states that it is the intent of the conferees that States may 
impose more favorable requirements for the treatment of maternity 
coverage under health insurance coverage than required by the Newborns' 
Act. H.R. Conf. Rep. No. 104-812, 104th Cong. 2d Session 88 (1996).
---------------------------------------------------------------------------

    \12\ The federal requirements concerning hospital lengths of 
stay in connection with childbirth do not apply with respect to 
health insurance coverage if state law requires (1) 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) 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) 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.
---------------------------------------------------------------------------

    Guidance conveying the Newborns' Act hospital length of stay 
requirements was published in the Federal Register on October 27, 1998 
(63 FR 57546). These final regulations clarify and implement the 
statute's minimum standards and do not significantly reduce the 
discretion given the States by the statute. Moreover, the Departments 
understand that all but one State have requirements that prescribe 
benefits for hospital lengths of stay in connection with childbirth 
that satisfy the Newborns' Act requirements.
    The Newborns' Act modified HIPAA's framework to provide that the 
States have primary responsibility for enforcement of the provisions of 
the Newborns' Act as they pertain to issuers, but that the Secretary of 
Health and Human Services must enforce any provision that a State fails 
to substantially enforce. To date, CMS enforces the Newborns' Act 
hospital length of stay requirements in only one State. When exercising 
its responsibility to enforce the Newborns' Act provisions, CMS works 
cooperatively with the State for the purpose of addressing the State's 
concerns and avoiding conflicts with the exercise of State authority. 
CMS has developed procedures to implement its enforcement 
responsibilities, and to afford the States the maximum opportunity to 
enforce the Newborns' Act requirements in the first instance. CMS 
procedures address the handling of reports that States may not be 
enforcing the Newborns' Act requirements, and the mechanism for 
allocating responsibility between the States and CMS. In compliance 
with Executive Order 13132's requirement that agencies examine closely 
any policies that may have federalism implications or limit the 
policymaking discretion of the States, the Department of Labor and CMS 
have consulted and worked cooperatively with affected State and local 
officials.
    For example, the Departments sought and received input from State 
insurance regulators and the National Association of Insurance 
Commissioners (NAIC). The NAIC is a non-profit corporation established 
by the insurance commissioners of the 50 States, the District of 
Columbia, and the four U.S. territories. In most States the insurance 
commissioner is appointed by the governor; in approximately 14 States, 
the insurance commissioner is an elected official. Among other 
activities, it provides a forum for the development of uniform policy 
when uniformity is appropriate. Its members meet, discuss and offer 
solutions to mutual problems. The NAIC sponsors quarterly meetings to 
provide a forum for the exchange of ideas and in-depth consideration of 
insurance issues by regulators, industry representatives and consumers. 
CMS and Department of Labor staff have consistently attended these 
quarterly meetings to listen to the views of the State insurance 
departments.
    In addition, the Departments informally consulted with the NAIC in 
developing the interim final regulations. Through the NAIC, the 
Departments sought and received the input of State insurance 
departments regarding preemption of State laws, applicability of the 
Newborns' Act provisions, and certain insurance industry definitions 
(e.g., attending provider). In general, these final regulations do not 
change the interim final rules. Significantly, the Departments received 
only eleven formal comment letters on the interim final regulation, 
none of which were from or on behalf of the NAIC or any of the States.
    The Departments have also cooperated with the States in several 
ongoing outreach initiatives, through which information is shared among 
federal regulators, State regulators and the regulated community. In 
particular, the Department of Labor has established a Health Benefits 
Education Campaign with more than 70 partners, including CMS, NAIC and 
many business and consumer groups. CMS has sponsored conferences with 
the States--the Consumer Outreach and Advocacy

[[Page 62417]]

conferences in March 1999 and June 2000, and the Implementation and 
Enforcement of HIPAA National State-Federal Conferences in August 1999, 
2000, 2001, 2002, and 2003. Furthermore, both the Department of Labor 
and CMS Web sites offer links to important State Web sites and other 
resources, facilitating coordination between the State and federal 
regulators and the regulated community.
    Throughout the process of developing these regulations, to the 
extent feasible within the specific preemption provisions of HIPAA and 
the Newborns' Act, the Departments have attempted to balance the 
States' interests in regulating health insurance issuers, and Congress' 
intent to provide uniform minimum protections to consumers in every 
State. By doing so, it is the Departments' view that they have complied 
with the requirements of Executive Order 13132.
    Pursuant to the requirements set forth in Section 8(a) of Executive 
Order 13132, and by the signatures affixed to these final regulations, 
the Departments certify that the Employee Benefits Security 
Administration and the Centers for Medicare & Medicaid Services have 
complied with the requirements of Executive Order 13132 for the 
attached Final Regulations for Group Health Plans and Health Insurance 
Issuers Under the Newborns' and Mothers' Health Protection Act (RIN 
1210-AA63 and RIN 0938-AI17), in a meaningful and timely manner.

Unified Analysis of Costs and Benefits

1. Introduction
    The Newborns' Act's provisions generally prohibit group health 
plans and health insurance issuers from: (1) Limiting hospital lengths 
of stay in connection with childbirth to less than 48 hours for vaginal 
deliveries and 96 hours for cesarean sections, and (2) requiring 
preauthorization for the 48/96 hour stays. The primary effect and 
intent of the provision is to reduce postpartum complications 
associated with premature discharge.
    These regulations draw on the Departments' authority to clarify and 
interpret the Newborns' Act's statutory provisions in order to secure 
the protections intended by Congress for newborns and mothers. The 
Departments crafted them to satisfy this mandate in as economically 
efficient a manner as possible, and believe that the economic benefits 
of the regulations justify their costs. This conclusion takes into 
account both the effect of the statute and the impact of the discretion 
exercised in the regulations.
    This regulation is needed to clarify and interpret the Newborns' 
Act provisions under section 711 of ERISA, sections 2704 and 2751 of 
the PHS Act, and section 9811 of the Internal Revenue Code and to 
ensure that group health plans and health insurance issuers subject to 
these rules do not impermissibly restrict benefits or require 
preauthorization for 48-hour or 96-hour hospital lengths of stay in 
connection with childbirth.
2. Costs and Benefits of the Statute
    The Departments provide qualitative assessments of the nature of 
the costs and benefits that are expected to derive from the statutory 
provisions of the Newborns' Act. In addition, the Departments provide 
summaries of any credible, empirical estimates of these effects that 
are available.
    In order to determine how many plan participants could benefit from 
the Newborns' Act provision, the Departments considered the estimated 
2.8 million births in 2005 by women with private health insurance.\13\ 
Of these, approximately 55.0 percent are assumed to be normal, healthy 
deliveries, and therefore eligible for early discharge.\14\ Because 
legislation has been passed in every state but Wisconsin, the 
Departments limited their analysis to participants in self-insured 
group health plans throughout the country and all health plans within 
Wisconsin. Finally, because Health Maintenance Organizations (HMOs) 
have traditionally had more aggressive short-stay policies, the share 
of workers enrolled in HMOs versus commercial plans was taken into 
account as were the share of those plans with short-stay policies.\15\
---------------------------------------------------------------------------

    \13\ Departments' estimate based on the 2005 MEPS-HC and the 
2005 CDC Survey.
    \14\ The CDC reported that of the 4.0 million births in 2005, 
2.2 million, or 55.0 percent of those newborns were categorized as 
without any illness or risk-related diagnosis (e.g. jaundice, 
respiratory distress, disorders relating to short gestation and low 
birth weight). No data are available on whether health of newborns 
varies by mothers' insurance status, although insured mothers are 
more likely to receive prenatal care and this would be expected to 
positively affect the share of ``healthy'' births (see Susan Egerter 
et al., ``Timing of Insurance Coverage and Use of Prenatal Care 
Among Low-Income Women,'' American Journal of Public Health, v. 
92(3): 423-427).
    \15\ Julie A. Gazmararian & Jeffrey Koplan found in, ``Length-
of-Stay After Delivery: Managed Care versus Fee for Service,'' 
Health Affairs, v. 15(4): 74-80, that 35.9 percent of enrollees in 
commercial plans were discharged within one day after delivery 
compared to 57.7 percent from commercial HMOs. The shares of 
individuals enrolled in HMOs at self-insured and fully-insured plans 
were taken from the 2007 Kaiser Family Foundation's Survey of 
Employer Sponsored Insurance.
---------------------------------------------------------------------------

    Based on these assumptions, approximately 328,000 births or roughly 
22 percent of healthy births by privately insured women would be 
affected by the provision.\16\ If each woman then stayed the maximum 
period outlined in the statute, approximately 348,000 additional days 
of hospital care would be required.\17\ Assuming hospitals charge $800 
per day for postpartum care, the annual cost of the provision would be 
$279 million: $1.7 million of which would be attributable to the 
individual market in Wisconsin; the remaining $276.9 million would be 
attributable to the group market in Wisconsin and self-funded plans 
throughout the country. However, because the statute does not require a 
48- or 96-hour stay, but instead gives the decision-making authority to 
the attending physician in consultation with the mother, it is expected 
that not all of these births will result in additional hospital time. 
If only one-half of affected mothers had their stays extended by the 
full amount, the annual cost of the provision would be $139 million, 
less than $1 million of which would be attributable to the individual 
market of Wisconsin.\18\
---------------------------------------------------------------------------

    \16\ The number of women age 10-54 with private insurance was 
estimated using the 2005 MEPS-HC. Fertility rates for different age 
brackets were taken from the 2005 CDC National Hospital Discharge 
Survey and were interacted with the number of privately insured 
women to ascertain the number of births by insured women. This was 
then interacted with the share of infants that were born healthy, as 
reported in the 2005 CDC report, to determine the number of healthy 
births to privately-insured women.
    To restrict the number of privately insured women having healthy 
births to those with ESI, the share of all privately insured women, 
age 10-54, that had ESI was taken from the 2007 March CPS and 
interacted with the above number. To then discern the number of 
births that would be covered by the regulation, the 2006 MEPS-IC was 
used to ascertain the share of employees in ESI that were in self-
insured plans that had maternal coverage. This number was further 
interacted by the share of employees in the share of those employees 
in HMO versus non-HMO health plans as provided by the 2007 Kaiser 
Family Foundation's Employer Health Benefits Survey.
    Interacting all of these numbers results in the 328,000 number 
cited in the text.
    \17\ Based on 1995 discharge rates, approximately 94 percent of 
the 328,000 births required one additional day to meet the maximum 
period outlined by the statute; 6 percent required two additional 
days.
    \18\ The Congressional Budget Office (CBO) analyzed Senate 
proposal S. 969, which was an earlier version of the Newborns' Act. 
CBO estimated 900,000 insured births had stays shorter than the 
minimum specified in the bill, which would result in 400,000 
additional inpatient days and an additional 200,000 additional out-
patient visits at an annual cost of $360 million in 2007 dollars (or 
$800 for each additional day of inpatient care; $200 for outpatient 
care). The Departments' estimate is significantly less, primarily 
due to: (1) A large number of states either clarifying existing 
policies for short-stay deliveries or enacting new ones which 
supersede the federal statute for all but self-insured plans; and 
(2) the CBO estimates included costs for follow-up visits, a 
requirement that was dropped from the federal statute.

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[[Page 62418]]

    While the Departments estimate that the cost of the NMHPA is as 
much as $279 million annually, health plans are estimated to have spent 
more than $775 billion in 2007 to cover approximately 201.7 million 
privately insured individuals.\19\ Therefore, the upper estimate of the 
costs under the Newborns' Act's provisions represent a very small 
fraction of one percent of total health plan expenditures.
---------------------------------------------------------------------------

    \19\ The Departments' estimate is based on the Office of the 
Actuary at the Centers for Medicare & Medicaid Services (CMS) 
projected measure of total personal health expenditures by private 
health insurance in 2007.
---------------------------------------------------------------------------

    Moreover, the cost of this provision is likely to decline in the 
future, despite increases in overall health care spending. Since the 
statute was passed, there has been a significant increase in the number 
of cesarean births, compared to vaginal births. While traditionally 
cesarean births are associated with higher risk, an increasing number 
of women are now electing to have the procedure.\20\ Women who elect to 
have a cesarean would presumably have a lower risk than those for whom 
the procedure is required and therefore may not require the prescribed 
96-hour recovery period detailed in the statute.\21\ If this trend 
continues, the burden of this statute should lessen.
---------------------------------------------------------------------------

    \20\ The share of all births that are cesarean rose from 20.7 
percent in 1996 to an estimated 31.3 percent in 2005 (CDC (2005). 
``National Hospital Discharge Survey'' Vital and Health Statistics, 
Series 13 (162)). A study by Health Grades Inc. found a 36.6 percent 
increase in the number of ``patient choice'' cesarean sections 
between 2001 and 2003.
    \21\ Most research comparing complication rates of cesarean to 
vaginal births focus on those women who previously had a cesarean 
section, as insufficient data are available to compare initial 
vaginal versus initial elected cesarean deliveries. As such, it is 
difficult to discern how the medically advisable stay of an elected 
cesarean section compares to that of an uncomplicated vaginal birth. 
However, there is much agreement that emergency cesarean sections, 
which typically follow a lengthy labor, are far more dangerous to 
mother and child than the elected variety. Given the Newborns' Act's 
prescribed 96-hour stays for cesarean births when elected cesareans 
comprised a smaller share of all cesareans, it would be reasonable 
to expect that the stays for elected cesareans may fall over time.
---------------------------------------------------------------------------

    The primary statutory economic benefits associated with the 
Newborns' Act's provisions derive from an increase in access to health 
plan coverage for postpartum care and monitoring of mothers and their 
newborns. Individuals without coverage for this care and monitoring are 
less likely to remain in the hospital for fear of incurring expenses 
that must be paid for `out-of-pocket.' Lower-income individuals are 
more likely to forego care not covered by their insurance. Foregoing 
this care and monitoring increases the risk of adverse health outcomes, 
which in turn generates higher medical costs. Much of these costs may 
be shifted to public funding sources (and therefore to taxpayers) or to 
other payers.\22\
---------------------------------------------------------------------------

    \22\ For more information on health choices of lower-income 
individuals, see: Trude, Sally (2003). ``Patient Cost Sharing: How 
Much is Too Much,'' Health System Change Issue Brief, no. 72 
(December).
---------------------------------------------------------------------------

    Foregoing appropriate care can also negatively affect the quality 
of life. Improved access to health coverage for mothers and newborns 
will lead to more appropriate medical care and monitoring, better 
health outcomes, and improved quality of life.\23\ Denied coverage, 
individuals must choose whether to pay for the extra day(s) in the 
hospital and potentially suffer economic hardship or forego the care 
and monitoring, creating a risk of an adverse health outcome. Gaining 
coverage will sometimes mean receiving high quality care and living 
healthier lives.\24\
---------------------------------------------------------------------------

    \23\ For more detailed information, see: O'Brien, Ellen (2003). 
``Employer Benefits from Workers' Health Insurance,'' Milbank 
Quarterly, Vol. 1 No. 1. O'Brien provides an extensive analysis of 
the literature on benefits accruing to employers from offering 
health benefits and the costs to employers of unhealthy employees, 
as well as information on studies demonstrating that poor health may 
be related to lower productivity. In particular, she discusses 
studies that have examined the effects on workplace productivity of 
specific health conditions and shows that poor health reduces 
workers' productivity at work, and that effective health care 
treatments can reduce productivity losses and may even pay for 
themselves in terms of increased productivity.
    \24\ Research on the benefits of longer stays has been somewhat 
mixed. Some studies show short-stays to be correlated with decreased 
follow-up care and increased re-hospitalization, particularly for 
low-income families, which will ultimately increase societal costs 
(for further discussion, see: Galbraith, Alison A. et al. (2003) 
``Newborn Early Discharge Revisited: Are California Newborns 
Receiving Recommended Postnatal Services?'' Pediatrics, vol. 111 
(2): p. 364-371; Lock, Michael & Joel G. Ray. (1999) ``Higher 
Neonatal Morbidity after Routine Hospital Discharge: Are We Sending 
Newborns Home Too Early?'' Canadian Medical Association Journal, 
vol. 161 (3): p. 249-253; Malkin, Jesse D. et al. (2003) 
``Postpartum Length of Stay and Newborn Health: A Cost-Effectiveness 
Analysis,'' Pediatrics, vol. 111 (4): p. 316-322).
    Since the statutes have been in place, other studies have argued 
that higher re-hospitalization rates found in short-stay newborns 
are due to more frequent post-stay evaluations in the four days 
following birth, considered the critical window for ascertaining 
newborn health, as mandated in health plans. Once new regulations 
were passed extending stays, health plans reduced their follow-up 
care policies and newborns were less likely to be examined in the 
days following discharge. This could result in an increase in costs. 
(For further discussion, see: Hyman, David A. (2001) ``What Lessons 
Should We Learn from Drive-Through Deliveries?'' Pediatrics, vol. 
107 (2): 406-408; Madden, Jeanne M. et al. (2002) ``Effects of a Law 
Against Early Postpartum Discharges on Newborn Follow-up, Adverse 
Events, and HMO Expenditures,'' New England Journal of Medicine, 
vol. 347 (25): p. 2031-2038; Madden, Jeanne M. et al. (2004) 
``Length-of-Stay Policies and Ascertainment of Postdischarge 
Problems in Newborns,'' Pediatrics, vol. 113 (1): p. 42-49.)
    The Departments believe, however, that because most of the 
complications of newborns manifest themselves within the immediate 
48 hours following birth, special protection much be given to that 
period. Moreover, since the decision to discharge the patients will 
be made by the doctor, in consultation with the mother, many of the 
concerns posed by those who oppose extended stays will be factored 
into that decision. As such, the Departments believe that the 
Newborns' Act will improve the health and welfare of mothers and 
newborns.
---------------------------------------------------------------------------

    The provisions of the Newborns' Act and its regulation generally 
apply to both group health plans and health insurance issuers. While 
the costs of the Newborns' Act are substantial, economic theory 
predicts that issuers will pass their costs of compliance back to 
plans, and that plans may shift some or all of issuers' and their own 
costs of compliance to participants either through increases in 
premiums, increased cost-sharing, or reducing the richness of non-
mandated health benefits.\25\
---------------------------------------------------------------------------

    \25\ The voluntary nature of the employment-based health benefit 
system in conjunction with the open and dynamic character of labor 
markets make explicit as well as implicit negotiations on 
compensation a key determinant of the prevalence of employee 
benefits coverage. It is likely that 80% to 100% of the cost of 
employee benefits is borne by workers through reduced wages (See for 
example: Jonathan Gruber and Alan B. Krueger, ``The Incidence of 
Mandated Employer-Provided Insurance: Lessons from Workers 
Compensation Insurance,'' Tax Policy and Economy (1991); Jonathan 
Gruber, ``The Incidence of Mandated Maternity Benefits,'' American 
Economic Review, Vol. 84 (June 1994), pp. 622-641; Lawrence H. 
Summers, ``Some Simple Economics of Mandated Benefits,'' American 
Economic Review, Vol. 79, No. 2 (May 1989); Louise Sheiner, ``Health 
Care Costs, Wages, and Aging,'' Federal Reserve Board of Governors 
working paper, April 1999; and Edward Montgomery, Kathryn Shaw, and 
Mary Ellen Benedict, ``Pensions and Wages: An Hedonic Price Theory 
Approach,'' International Economic Review, Vol. 33, No. 1, Feb. 
1992). The prevalence of benefits is therefore largely dependent on 
the efficacy of this exchange. If workers perceive that there is the 
potential for inappropriate denial of benefits they will discount 
their value to adjust for this risk. This discount drives a wedge in 
the compensation negotiation, limiting its efficiency. With workers 
unwilling to bear the full cost of the benefit, fewer benefits will 
be provided. The extent to which workers perceive a federal 
regulation supported by enforcement authority to improve the 
security and quality of benefits, the differential between the 
employers' costs and workers' willingness to accept wage offsets is 
minimized.
---------------------------------------------------------------------------

    While 74 million individuals are enrolled in group or private 
health plans, only 15 million individuals are enrolled in plans that 
had policies affected by the Newborns' Act. Of these, only 328,000 
individuals are expected to be annually directly impacted and receive 
additional coverage they were previously denied or restricted for 48 or

[[Page 62419]]

96-hour hospital stays following childbirth. Though these benefits are 
received by a small number of plan enrollees, the costs are distributed 
broadly among all plan participants. As a result, the cost of the 
Newborns' Act per individual enrollee is expected to be minimal--
between 9 and 19 dollars per person for those enrolled in affected 
plans.\26\ While it is possible that some enrollees on the margin will 
decline coverage in response to cost increases, the number of those 
acting in such a manner is expected to be negligible. As such, the 
benefits of this statute are believed to justify its costs.
---------------------------------------------------------------------------

    \26\ The total cost of the regulation was calculated by 
estimating the number of additional days in the hospital that short-
stay deliveries would require under the statute. This number was 
then multiplied by $800, to reflect the per day hospitalization cost 
of a mother (this was a CBO number indexed to 2007 dollars). Having 
calculated the total cost of the regulation at $279 million (and a 
lower bound of $139 million), these numbers were then divided by the 
number of participants in affected health plans (a total of 15 
million) to get an upper ($19) and lower bound ($9) of the per-
participant cost of the regulation.
---------------------------------------------------------------------------

3. Costs and Benefits of the Rules Applicable to the Newborns' Act
    The interim final rule clarified when a stay begins under the 
Newborns' Act. Prior to this, private health plans could use the 
expectant mother's admittance time to determine the required stay, an 
assumption that consistently reduced the number of women experiencing 
stays less than those prescribed by the statute by 5 percent.\27\ By 
clarifying this assumption in the interim final rule, the number of 
stays that would have been shorter than 48/96 hours increased by 
approximately 16,000 for all plans, and by approximately 2,000 for 
small plans. This in turn raised the direct costs to health plans by 5 
percent (from $265 to $279 million for the upper bound for all plans 
and from $29 to $31 million for small plans). However, because it can 
take several hours for certain conditions to present themselves, such 
as jaundice and dehydration, the additional hours of hospital 
supervision--gained by generally not using an expectant mother's 
admittance time as the start of a stay--can be critical. Therefore, the 
benefits of this clarification should justify this additional cost.
---------------------------------------------------------------------------

    \27\ Departments' estimate based on the CDC's 2005 Survey, 
Tables 37 and 42. The Departments looked at the share of stays that 
would be labeled ``short'' for both mothers and newborns in 1995 
(before any part of the statute was enforced) and found that the 
share of newborns with a ``short stay'' was 5 percent higher. It was 
therefore assumed that starting the clock at the birth of a child 
would increase the number of ``short stays'' by 5 percent.
---------------------------------------------------------------------------

    The regulation also defines that for births occurring outside of a 
hospital, stays begin once the mother or newborn is admitted as a 
hospital inpatient in connection with childbirth, as defined by the 
attending provider. The Departments lack any firm basis for quantifying 
the number of individuals likely to be affected by this provision, and 
therefore are unable to quantify the increase in costs and benefits. 
However, given the special and narrow circumstances to which this 
provision applies, costs and benefits are expected to be small.

Statutory Authority

    The Department of the Treasury final rule is adopted pursuant to 
the authority contained in sections 7805 and 9833 of the Code (26 
U.S.C. 7805, 9833).
    The Department of Labor final rule is adopted pursuant to the 
authority contained in 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169, 
1181-1183, 1181 note, 1185, 1185a, 1185b, 1191, 1191a, 1191b, and 
1191c, sec. 101(g), Public Law 104-191, 110 Stat. 1936; sec. 401(b), 
Public Law 105-200, 112 Stat. 645 (42 U.S.C. 651 note); Secretary of 
Labor's Order 1-2003, 68 FR 5374 (Feb. 3, 2003).
    The Department of Heath and Human Services 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 amended by Public Law 104-191, 110 Stat. 1936, 
Public Law 104-204, 110 Stat. 2935 and Public Law 105-277, 112 Stat. 
2681-436.

Accounting Statement

    In accordance with OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in the table below, we 
have prepared an accounting statement showing the classification of the 
expenditures associated with the provisions of this final rule. This 
table provides our best estimate for the annual costs associated with 
enacting the federal minimum stay final regulation.

 Accounting Statement: Classification of Estimated Expenditures, CY2008
                              [In millions]
------------------------------------------------------------------------
                                                     Cost estimates
                   Category                    -------------------------
                                                    Low          High
------------------------------------------------------------------------
 Annualized Monetized Costs...................      $139.30      $278.50
------------------------------------------------------------------------

List of Subjects

26 CFR Part 54

    Excise taxes, Health care, Health insurance, Pensions, Reporting 
and recordkeeping requirements.

29 CFR Part 2590

    Continuation coverage, Disclosure, Employee benefit plans, Group 
health plans, Health care, Health insurance, Medical child support, 
Reporting and recordkeeping requirements.

45 CFR Part 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

0
Accordingly, 26 CFR Part 54 is amended as follows:

PART 54--PENSION EXCISE TAXES

0
Paragraph 1. The authority citation for part 54 is amended by adding an 
entry for Sec.  54.9811-1 in numerical order and by removing the entry 
for Sec.  54.9811-1T to read in part as follows:

    Authority: 26 U.S.C. 7805 * * *
    Section 54.9811-1 also issued under 26 U.S.C. 9833. * * *

Sec.  54.9801-1  [Amended]

0
Par. 2. Section 54.9801-1(a) is amended by removing the language 
``54.9811-1T'' and adding ``54.9811-1'' in its place.

[[Page 62420]]

Sec.  54.9801-2  [Amended]

0
Par. 3. In Sec.  54.9801-2, the introductory paragraph before the 
definitions is amended by removing the language ``54.9811-1T'' and 
adding ``54.9811-1'' in its place.

0
Par. 4. Section 54.9811-1 is added to read as follows:


Sec.  54.9811-1  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 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) Facts. 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) Conclusion. 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) Facts. 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) Conclusion. 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) Facts. 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) Conclusion. 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 specified in 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) Facts. 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) Conclusion. 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. Therefore, a plan, hospital, managed care organization, 
or other issuer is not an attending provider.
    (iv) Example. The rules of this paragraph (a)(5) are illustrated by 
the following example:

    Example. (i) Facts. 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) Conclusion. 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) Facts. 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) Conclusion. 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) Facts. 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.

[[Page 62421]]

    (ii) Conclusion. 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 
specified in 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) Facts. 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) Conclusion. 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, the requirement to obtain precertification from the 
plan based on medical necessity for a hospital length of stay within 
the 96-hour period 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 specified in 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) Facts. 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) Conclusion. 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) Facts. 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) Conclusion. 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) for rules relating 
to a disclosure requirement imposed under section 711(d) of ERISA (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 that relate to care 
following childbirth established by the American College of 
Obstetricians and Gynecologists, the American Academy of Pediatrics, or 
any other established professional medical association.
    (iii) The state law requires, in connection with the coverage for 
maternity care, that the hospital length of stay for such care is left 
to the decision of (or is required to be made by) the attending 
provider in consultation with the mother. State laws that require the 
decision to be made by the attending provider with the consent of the 
mother satisfy the criterion of this paragraph (e)(1)(iii).
    (2) Group health plans--(i) Fully-insured plans. For a group health 
plan that provides benefits solely through health insurance coverage, 
if the state law regulating the health insurance coverage meets any of 
the criteria in paragraph (e)(1) of this section, then the requirements 
of section 9811 and this section do not apply.
    (ii) Self-insured plans. For a group health plan that provides all 
benefits for hospital lengths of stay in connection with childbirth 
other than through health insurance coverage, the requirements of 
section 9811 and this section apply.
    (iii) Partially-insured plans. For a group health plan that 
provides some benefits through health insurance coverage, if the state 
law regulating the health insurance coverage meets any of the criteria 
in paragraph (e)(1) of this section, then the requirements of section 
9811 and this section apply only to the extent the plan provides 
benefits for hospital lengths of stay in connection

[[Page 62422]]

with childbirth other than through health insurance coverage.
    (3) Preemption provisions under section 731(a) of ERISA. See 29 CFR 
2590.711(e)(3) for a rule providing that the preemption provisions 
contained in section 731(a)(1) of ERISA and 29 CFR 2590.731(a) do not 
supersede a state law if the state law is described in paragraph (e)(1) 
of 29 CFR 2590.711 (which is substantially similar to paragraph (e)(1) 
of this section).
    (4) Examples. The rules of this paragraph (e) are illustrated by 
the following examples:

    Example 1. (i) Facts. 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) Conclusion. 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) Facts. 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 and 
pediatric care in accordance with guidelines that relate to care 
following childbirth established by the American College of 
Obstetricians and Gynecologists and the American Academy of 
Pediatrics.
    (ii) Conclusion. 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/applicability date. This section applies to group 
health plans for plan years beginning on or after January 1, 2009.


Sec.  54.9811-1T  [Removed]

0
Par. 5. Section 54.9811-1T is removed.


Sec.  54.9831-1  [Amended]

0
Par. 6. Section 54.9831-1(b) is amended by removing the language 
``54.9811-1T'' and adding ``54.9811-1'' in its place.

    Approved: September 23, 2008.
Linda E. Stiff,
Deputy Commissioner for Services and Enforcement, Internal Revenue 
Service.
Eric Solomon,
Assistant Secretary of the Treasury (Tax Policy).

Employee Benefits Security Administration

29 CFR Chapter XXV

0
For the reasons set forth above, 29 CFR Part 2590 is amended as 
follows:

PART 2590--RULES AND REGULATIONS FOR GROUP HEALTH PLANS

0
1. The authority citation for Part 2590 continues to read as follows:

    Authority: 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169, 1181-
1183, 1181 note, 1185, 1185a, 1185b, 1191, 1191a, 1191b, and 1191c, 
sec. 101(g), Public Law 104-191, 110 Stat. 1936; sec. 401(b), Public 
Law 105-200, 112 Stat. 645 (42 U.S.C. 651 note); Secretary of 
Labor's Order 1-2003, 68 FR 5374 (Feb. 3, 2003).


0
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) Facts. 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) Conclusion. 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) Facts. 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) Conclusion. 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) Facts. 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) Conclusion. 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 is 
prohibited from requiring that a physician or other health care 
provider obtain authorization from the plan or issuer for prescribing 
the hospital length of stay specified in 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) Facts. 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) Conclusion. 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

[[Page 62423]]

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. Therefore, a plan, hospital, managed care organization, 
or other issuer is not an attending provider.
    (iv) Example. The rules of this paragraph (a)(5) are illustrated by 
the following example:

    Example. (i) Facts. 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) Conclusion. 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) Facts. 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) Conclusion. 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) Facts. 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) Conclusion. 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 
specified in 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) Facts. 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) Conclusion. 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, the requirement to obtain precertification from the 
plan based on medical necessity for a hospital length of stay within 
the 96-hour period 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 specified in 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) Facts. 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

[[Page 62424]]

coinsurance paid by the patient increases from 20 percent to 50 
percent after 24 hours.
    (ii) Conclusion. 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) Facts. 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) Conclusion. 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) (relating to the 
disclosure requirement under section 711(d) of the Act).
    (e) Applicability in certain states--(1) Health insurance coverage. 
The requirements of section 711 of the Act and this section do not 
apply with respect to health insurance coverage offered in connection 
with a group health plan if there is a state law regulating the 
coverage that meets any of the following criteria:
    (i) The state law requires the coverage to provide for at least a 
48-hour hospital length of stay following a vaginal delivery and at 
least a 96-hour hospital length of stay following a delivery by 
cesarean section.
    (ii) The state law requires the coverage to provide for maternity 
and pediatric care in accordance with guidelines that relate to care 
following childbirth 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) Facts. 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) Conclusion. 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) Facts. 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 and 
pediatric care in accordance with guidelines that relate to care 
following childbirth established by the American College of 
Obstetricians and Gynecologists and the American Academy of 
Pediatrics.
    (ii) Conclusion. 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) Applicability date. 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, 2009.

    Signed at Washington, DC this 2nd day of October, 2008.
Bradford P. Campbell,
Assistant Secretary, Employee Benefits Security Administration, U.S. 
Department of Labor.

Adoption of Amendments to the Regulations

DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR SUBTITLE A, SUBCHAPTER B

0
45 CFR subtitle A, subchapter B, is amended as set forth below:

PART 146--REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET

0
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).


0
2. Section 146.130 is revised 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 (2) of this 
section are illustrated by the following examples. In

[[Page 62425]]

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) Facts. 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) Conclusion. 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) Facts. 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) Conclusion. 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) Facts. 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) Conclusion. 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 is 
prohibited from requiring that a physician or other health care 
provider obtain authorization from the plan or issuer for prescribing 
the hospital length of stay specified in 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) Facts. 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) Conclusion. 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. Therefore, a plan, hospital, managed care organization, 
or other issuer is not an attending provider.
    (iv) Example. The rules of this paragraph (a)(5) are illustrated by 
the following example:

    Example. (i) Facts. 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) Conclusion. 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) Facts. 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) Conclusion. 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) Facts. 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) Conclusion. 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 
specified in 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) Facts. 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) Conclusion. 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

[[Page 62426]]

the first 96 hours.) In addition, the requirement to obtain 
precertification from the plan based on medical necessity for a 
hospital length of stay within the 96-hour period 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 specified in 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) Facts. 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) Conclusion. 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) Facts. 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) Conclusion. 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. 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, or that 
notifies participants and beneficiaries of plan benefit changes, 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, 2009. Each time a plan 
distributes one or both of the documents described in paragraph (d)(1) 
to participants and beneficiaries after providing this initial notice, 
the disclosure notice in paragraph (d)(2) must appear in at least one 
of those documents.
    (4) Exceptions. The requirements of this paragraph (d) do not apply 
in the following situations.
    (i) Self-insured plans that have already provided notice. If 
benefits for hospital lengths of stay in connection with childbirth are 
not provided through health insurance coverage, and the group health 
plan has already provided an initial notice that complies with 
paragraphs (d)(1) and (d)(2) of this section, the group health plan is 
not automatically required to provide another such notice to 
participants and beneficiaries who have been provided with the initial 
notice. However, following the effective date of these regulations, 
whenever such a plan provides one or both of the documents described in 
paragraph (d)(1) of this section to participants and beneficiaries, the 
disclosure notice in paragraph (d)(2) of this section must appear in at 
least one of those documents.
    (ii) Self-insured plans that have elected exemption from this 
section. If 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, the group health 
plan is not subject to this paragraph (d).

[[Page 62427]]

    (iii) Insured plans. If 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, the group health plan is not subject to 
this paragraph (d).
    (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 that relate to care 
following childbirth 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) Facts. 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) Conclusion. 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) Facts. 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 and 
pediatric care in accordance with guidelines that relate to care 
following childbirth established by the American College of 
Obstetricians and Gynecologists and the American Academy of 
Pediatrics.
    (ii) Conclusion. 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) Applicability 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, 2009.

PART 148--REQUIREMENTS FOR THE INDIVIDUAL HEALTH INSURANCE MARKET

0
3. 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).


0
4. Section 148.170 is revised to read as follows:


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 (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) Facts. 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) Conclusion. 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) Facts. 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) Conclusion. 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) Facts. 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) Conclusion. 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 is 
prohibited from requiring that a physician or other health care 
provider obtain authorization from the issuer for

[[Page 62428]]

prescribing the hospital length of stay specified in 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) Facts. 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) Conclusion. 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. Therefore, an issuer, plan, hospital, or managed care 
organization is not an attending provider.
    (iv) Example. The rules of this paragraph (a)(5) are illustrated by 
the following example:

    Example. (i) Facts. 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) Conclusion. 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 subject to the requirements of this section may not--
    (A) Deny a mother or her newborn child eligibility or continued 
eligibility to enroll in or renew coverage solely to avoid the 
requirements of this section; or
    (B) Provide payments (including payments-in-kind) or rebates to a 
mother to encourage her to accept less than the minimum protections 
available under this section.
    (ii) Examples. The rules of this paragraph (b)(1) are illustrated 
by the following examples. In each example, the issuer is subject to 
the requirements of this section, as follows:

    Example 1. (i) Facts. 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) Conclusion. 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) Facts. 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) Conclusion. 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 specified in 
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) Facts. 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) Conclusion. 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, the requirement to obtain precertification from the 
issuer based on medical necessity for a hospital length of stay 
within the 96-hour period 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

[[Page 62429]]

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 specified in 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) Facts. 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) Conclusion. 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) Facts. 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) Conclusion. 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 (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 requirements set 
forth in paragraph (d)(1) of this section, the following disclosure 
notice must be used:

Statement of Rights Under the Newborns' and Mothers' Health Protection 
Act

    Under federal law, health insurance issuers generally may not 
restrict benefits for any hospital length of stay in connection with 
childbirth for the mother or newborn child to less than 48 hours 
following a vaginal delivery, or less than 96 hours following a 
delivery by cesarean section. However, the issuer may pay for a 
shorter stay if the attending provider (e.g. , your physician, nurse 
midwife, or physician assistant), after consultation with the 
mother, discharges the mother or newborn earlier.
    Also, under federal law, issuers may not set the level of 
benefits or out-of-pocket costs so that any later portion of the 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) no later than December 19, 2008.
    To the extent an issuer has already provided the disclosure notice 
in paragraph (d)(2) of this section to covered individuals, it need not 
provide another such notice by December 19, 2008.
    (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 that relate to care 
following childbirth 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) Applicability 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, 2009.

    Dated: May 11, 2007.
Leslie V. Norwalk,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: October 30, 2007.
Michael O. Leavitt,
Secretary, Department of Health and Human Services.

    Editorial Note: This document was received in the Office of the 
Federal Register on October 14, 2008.
 [FR Doc. E8-24666 Filed 10-17-08; 8:45 am]
BILLING CODE 4830-01-4510-29-4120-01-P