Self-Funded, Non-Federal Governmental Plans

Background

A non-Federal governmental employer that provides self-funded group health plan coverage to its employees (coverage that is not provided through an insurer) may elect to exempt its plan from certain requirements of Title XXVII of the Public Health Service (PHS) Act.

Title XXVII was added to the PHS Act by Title I of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), and has been amended by several subsequent laws, including the Newborns' and Mothers' Health Protection Act of 1996, the Mental Health Parity Act of 1996, the Women's Health and Cancer Rights Act of 1998,  the Mental Health Parity and Addiction Equity Act of 2008, Michelle's Law (2008), and the Patient Protection and Affordable Care Act (Affordable Care Act) (2010).

Prior to enactment of the Affordable Care Act on March 23, 2010, sponsors of self-funded, non-Federal governmental plans were permitted to elect to exempt those plans from (“opt out of”) certain provisions of title XXVII of the PHS Act, with the exception of requirements pertaining to the certification and disclosure of an individual's creditable coverage under the plan, and requirements that prohibit discrimination based on genetic information and apply to group health plans for plan years beginning after May 21, 2009.  This election was authorized under section 2721(b)(2) of the PHS Act, which is now designated as section 2722(a)(2) of the PHS Act (42 USC 300gg-21(a)(2)).

Affordable Care Act

The Affordable Care Act made a number of other changes to Part A of title XXVII with the result that sponsors of self-funded, non-Federal governmental plans can no longer opt out of as many requirements of title XXVII.

Information for self-funded non-Federal governmental plans regarding the amended opt-out provisions is available here (PDF).

The applicability of section 2722(a)(2) is very limited; it applies only to non-Federal governmental plans (those sponsored by State or local government employers).  In addition, it only applies to a plan, or a portion of a plan, that is self-funded (not covered by a health insurance policy).  It does not apply to any other types of employers, whether their plans are insured or self-funded.  Individuals who are considering employment with a non-Federal government employer may wish to inquire of the employer whether its group health plan is self-funded and, if so, whether the employer has elected to exempt its plan from any requirements of title XXVII of the PHS Act.

Also, Section 2722(a)(2) provides no authority for sponsors of self-funded non-Federal governmental plans to exempt their plans from any applicable standards or requirements, related to the transmission, privacy, and security of certain health information that may be established under 42 USC §1320d, et seq. (the Administrative Simplification provisions added by Title II of HIPAA).  However, depending on the size of the non-Federal governmental plan, and how it is administered, it might not meet the definition of a group health plan under 42 USC §1320d(5)(A), and therefore it might not be subject to the Administrative Simplification provisions.

For questions and concerns regarding HIPAA Opt-Outs, please e-mail HIPAAOptOut@cms.hhs.gov.