A unique provision of the Health Insurance Portability and Accountability Act (HIPAA) requires that health insurance plans issue Certificates of Creditable Coverage (CCCs) to terminating participants. These CCCs provide proof to a new employer of continuous past health coverage, thereby limiting pre-existing conditions limits that might otherwise be imposed. Since the Medical/Dental/Vision Care FSA is considered a form of health coverage, it is subject to the HIPAA requirement of being documented by CCCs.
Due to regulatory action, however, most Flex Plans are exempt from HIPAA because the FSAs are funded exclusively by salary reduction contributions and the employer offers other group health coverage.
However, current regulations appear to require CCC compliance if:
- Medical FSAs can be funded with employer-provided funds, OR
- Flex Credits are provided that can be used to fund Medical FSAs.
If your Flexible Benefit Plan is not HIPAA-exempt, please remember to provide Certificates of Creditable Coverage to terminating participants in the Medical/Dental/Vision Care FSA.
For those interested in technical detail: On 12/29/97, the IRS, DOL & DHHS issued a clarification of regulations which provides that benefits under a Health FSA are excepted benefits if the maximum benefit payable for the employee under the Health FSA for the year does not exceed two times the employee's salary reduction election under the Health FSA for the year (or, if greater, the amount of the employee's salary reduction election under the Health FSA for the year, plus $500) and the employee has other coverage available under a group health plan of the employer for the year, and the other coverage is not limited to benefits that are excepted benefits.
The rules on HIPAA compliance can be quite technical. Please inquire for further discussion on applicability of HIPAA to your Flex Plan.