To: All Insurance Producers, Insurance Companies, Hospital or
Medical Service Corporations, and Health Maintenance
Organizations Writing Health Insurance in the State of Alaska
Re: Notice of Changes in Alaska Statutes Relating to the
Health Insurance Portability and Accountability Act of 1996 (HIPAA)
This bulletin outlines the major changes to the Alaska
Insurance Code that respond to the new federal requirements for
health insurance enacted under the Health Insurance Portability
and Accountability Act of 1996 (HIPAA). Alaska’s approach to
these requirements is set out in AS 21.54, AS 21.55, and AS
21.56. Although interim federal regulations have been
issued implementing HIPAA, final federal regulations will not be
promulgated for several months and may materially change from
the interim regulations. The Division of Insurance will issue
future informational bulletins as necessary to address important
state or federal regulatory or legislative developments related
Applicability and Scope
All health care insurers are subject to federal and state
HIPAA provisions. Health care insurers include insurance
companies, hospital and medical service corporations, fraternals,
HMOs, and MEWAs (see AS 21.54.500(27)).
The group market for health insurance is defined to include
employers with two or more employees. The group market
provisions are in AS 21.54, AS 21.56, and AS 21.86.
Note in particular AS 21.12.050, AS 21.54.500(15) - (17),
(19), and (28) that define health care insurance, health benefit
plans, health care insurance plans, health care insurers, and
large and small employers.
The individual market for health insurance includes all
coverage offered to an individual outside of the group market.
The individual market reforms are in AS 21.55. Individual
guaranteed renewability provisions are in 42 U.S.C.
300gg-42 of the federal law and will be enforced in Alaska.
The HIPAA provisions for both the individual and group
markets do not apply to excepted benefit plans – generally
supplemental or limited benefit plans (see AS 21.54.160
for a complete description).
With the limited exception in regard to mental health benefit
parity, the group market provisions summarized below become
effective for plan years beginning on or after July 1, 1997. A
plan year is defined in the federal interim regulations as the
plan year designated in the policy. In most cases, this means
that the group provisions become effective for an existing group
plan upon renewal on or after July 1, 1997.
The individual market provisions become effective on or after
July 1, 1997.
All form filings for individual health insurance coverage
must incorporate the guaranteed renewability provisions as
required under 42 U.S.C. 300gg-42 of the federal law. These
provisions apply to all in force policies as well as to new
issues on or after July 1, 1997. Existing policies must be
administered according to these provisions on or after July 1,
1997, regardless of whether or not the provisions have been
incorporated into the policies as of July 1, 1997. All
individual policy forms must be amended to conform to the
guaranteed renewability provisions and filed with the division
for approval before January 1, 1998.
Overinsurance and eligibility for Medicare may no longer be
used to terminate or nonrenew a policy, insurers may want to add
a provision to their policy forms that reduces benefits to the
extent they are provided under Medicare or otherwise. If an
insurer adds such a provision to the revised contract, it must
be filed for approval with the division in conjunction with the
amendment to conform to the guaranteed renewability provisions
as stated above.
Group Insurance Policies
All form filings for group health insurance coverage must
incorporate the required HIPAA provisions as outlined below and
as prescribed in AS 21.54, 55, and 86.
Existing contracts must be administered in accordance with
these group provisions at plan renewal regardless of whether or
not the provisions have been incorporated into the existing
contracts as of July 1, 1997. Existing contracts must be amended
to conform with the HIPAA provisions and filed for approval with
the division before January 1, 1998.
Major Legislative Changes
Small Employer Market
Definition of a Small Employer
A small employer is now defined as an employer with an average
of at least two but not more than 50 employees on business days
during the year and that employs at least two employees on the
first day of a health benefit plan year. Note that there is no
longer a requirement that the majority of the employees be
employed in Alaska.
Preexisting Condition Provision
Pregnancy and genetic information in the absence of the
condition can no longer be considered preexisting conditions.
Also, a prudent person requirement for determining whether a
condition was preexisting is no longer allowed.
Credit for Prior Coverage
Qualifying previous coverage and rules for reducing the
preexisting condition waiting period for such coverage have been
significantly modified. Qualifying previous coverage is now
termed creditable coverage and is defined in
AS 21.54.500(7). Although the definition of creditable
coverage does not include individual health care insurance
plans, federal law requires that they be considered creditable
coverage and the federal definition will be enforced in Alaska.
The rules for determining the period of creditable coverage are
provided in AS 21.54.120. The rules for reducing the preexisting
condition waiting period are provided in AS 21.54.110. The
most significant change is in the rules for counting a period of
creditable coverage which must now use the federally defined
standard method or an allowed alternative method as clarified by
AS 21.56.140 now requires that small employer insurers
guarantee issue all products they actively market to
small employers in the state and must also continue to offer the
Basic and Standard plans. Insurers are not required to offer a
plan that is sold only to association plans to small employers
that are not members of the association. Also, the exemption for
an employer/employee that is out of the insurer’s geographic
service area has changed and is specific to network plans. A
correction that should be noted is in AS 21.56.140(a) where
the phrase "all health care insurance plans the small
employer actively markets" should be "all health care
insurance plans the small employer insurer actively
Insurers must continue to guarantee renewal of all health
care insurance plans. Nonpayment of premiums, fraud, failure to
comply with minimum participation and contribution requirements,
and electing to nonrenew all health care insurance plans are
still exceptions to the guaranteed renewability requirement.
However, there are now specific rules for discontinuing the
offer of particular health plans and for discontinuing
the offer of all health plans to small employers.
Movement outside the insurer’s service area, and cessation of
association membership are new exceptions to the guaranteed
The law specifically allows an insurer to modify a small
employer’s plan at renewal on a uniform basis for all small
employers with the same plan. This is not allowed for large
Note that there are now special guaranteed renewability
provisions for Multiple Employer Welfare Arrangements in AS
Large Employer Market
Health care insurance plans sold to large employer groups are
subject to the same preexisting condition, credit for prior
coverage, and guaranteed renewability provisions as described
above for small employers. These are new requirements for
large employer groups and are in AS 21.54.
Mental Health Parity
AS 21.54.150 establishes rules for the provision of mental
health benefits for large employer health plans. If compliance
with the rules would result in an increase in cost of at least 1
percent for the employer, then the requirements will not apply.
This provision does not become effective until January 1, 1998.
Large and Small Employer Market
Large and small employer health care insurance plans may not
establish rules for eligibility including continued eligibility
and waiting periods under a health plan for an individual or
dependent of an individual based on a health status factor as
defined in AS 21.54.100(a). As a consequence of this provision, "actively
at work" requirements will no longer be permitted to the
extent they violate this requirement.
AS 21.54.100(b) states that insurers may not require
individuals as a condition of enrollment to pay a premium,
contribution or policy fee greater than the premium,
contribution or policy fee for similarly situated individual
enrolled in the plan on the basis of a health status factor.
In order to implement the portability provisions required
under HIPAA, Alaska has modified the eligibility requirements
under the Comprehensive Health Insurance Association (CHIA) to
allow federally defined eligible individuals guaranteed health
insurance coverage through the CHIA. Since Alaska provides that
federally defined eligible individuals are guaranteed coverage
through the CHIA, insurers may continue to underwrite
individual health insurance policies in Alaska.
Federally defined eligible individuals are defined in AS
21.55.500(16) to be those individuals with at least 18 months of
creditable coverage with their most recent coverage from a
group plan, who are not eligible for other health care
insurance coverage, whose most recent coverage was not
terminated due to nonpayment of premium or fraud, and who have
exhausted any available COBRA coverage. A federally defined
eligible individual does not have to satisfy a preexisting
condition waiting period, nor do they need to meet the normal 12
month residency requirement in order to be eligible for coverage
under the CHIA. Note that if an individual is moving to CHIA
from an individual health insurance policy instead of a group
plan, the individual would not be considered a federally defined
Under 42 U.S.C. 300gg-42 of the federal law, all
individual health insurance plans are guaranteed renewable
subject to certain exceptions. These provisions are similar to
the guaranteed renewability provisions in the group market.
Insurers may modify on a policy form basis the health care
insurance coverage if modification is done on a uniform basis
for all individuals with that policy form.
As required under AS 21.54.120, health care insurers must
provide a certification of coverage upon cessation of coverage
or upon request by the individual. These certifications are
intended to enable an individual to satisfy all or a portion of
preexisting condition exclusions by receiving credit for
previous creditable coverage. The certifications must comply
with federal regulations, including form, content, and delivery.
If you have questions regarding the information provided in
this bulletin, SB 104, or the federal HIPAA and
regulations, please contact Katie Campbell at:
Alaska Division of Insurance
P.O. Box 110805
Juneau AK 99811-0805
(907) 465-4607 (phone)
(907) 465-3422 (fax)