ALERT: To Wrap or Not to Wrap In Light of Privacy
Many employers are busy planning and preparing for the HIPAA privacy regulations which become applicable on or after April 14, 2003 or 2004, depending on the size of the group health plan. In the past, many employers wrapped all welfare plans into one plan document to reduce their Form 5500 filing requirements. As Employers prepare for the HIPAA privacy regulations, they may want to revisit the practice of wrapping their welfare plans into one plan document prior to the date the HIPAA privacy regulations become effective. The HIPAA privacy regulations apply to group health plans and look to ERISA’s definitions to determine what constitutes a group health plan. If health benefits are incorporated with other welfare benefits in a single wrap plan document, the group health plan may be required to comply with the HIPAA privacy regulations for individually identifiable health information received from other plans such as during enrollment for the group term life and long term disability benefits under the wrap plan. Employers with wrap plan documents may want to consider separating the nonhealth welfare plans such as group term life and long term disability which may obtain individually identifiable health information for underwriting purposes. By unwrapping nonhealth welfare benefits the employer will avoid subjecting individually identifiable health information received in connection with the nonhealth welfare benefits to the HIPAA privacy standards. The HIPAA privacy regulations generally provide that covered entities may not use or disclose protected health information except as authorized by the individual who is the subject of the information or as explicitly permitted by the HIPAA privacy regulations. Protected health information means individually identifiable health information. Among other things, employers must establish policies and procedures to protect and avoid improper disclosure of protected health information. If nonhealth welfare plans are not separated from the wrap around welfare plan, the entire plan may be subject to the privacy requirements increasing the restrictions with which the employer must contend in using the information it obtained for other welfare benefits. If you have any questions, please contact one of the authors listed at the top of this page.
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