Compliance with regulatory standards for health insurance has been impacted heavily in the wake of the new Health Insurance Portability and Accountability Act of 1996.

HIPAA puts another layer of compliance requirements over and above those for mandated benefits, preferred provider organization networks, rating structures, and other health insurance related issues.

The bottom line: A health insurance product today cannot be marketed in a state until it is filed with, and approved by, the state insurance department. The health insurer must develop its products in a manner that will comply with all the regulatory requirements of the individual states and not the federal government.

This can be a complicated and time-consuming process, even for those who have compliance and filing experience.

Filing a health insurance product involves more than pulling it off a shelf, attaching a company logo to it, and mailing it to the insurance departments.

First, representatives of marketing, underwriting, systems administration, and claims management should meet and discuss the product’s design, pricing and specifications (the product development phase).

Once the product specifications are developed, the policy form, riders, applications, and certificate (if it is a group product) need to be drafted. These new documents should incorporate policy provisions which comply with recent changes in health insurance laws, such as updating pre-existing conditions limitations, conversion provisions, or mandated benefit levels.

The company should also review state variations of its previous products prior to filing.

The policy’s schedule of benefits should be reviewed to determine compliance with state minimum and maximum benefit levels. Exclusions and limitations should be reviewed for compliance with prohibited provisions and unfair trade practices. Claims provisions should be reviewed for payment of claims requirements. And even general provisions should be reviewed for compliance with state law.

In addition, the insurer must comply with HIPAA’s federal requirements: portability, affordability, and tax qualification for long term care products, and the new state requirements that expand HIPAA on the state level with each state’s own special requirements.

Product preparation and review for group health products differs from those procedures used for individual products.

Mandated benefits may vary by the make-up of the group, its size, and marketing strategy. (Note: Individual product requirements differ from group in the level of mandated benefits and marketing strategy.)

Small employer group products have additional requirements that involve each state’s risk retention requirements and the level of participation (risk assuming carrier or reinsuring carrier) of the insurer. The small group carrier must then draft forms to participate in a state’s guarantee issue program. All of these forms must be submitted and approved at or prior to a small group product approval.

After the product is drafted, it must pass the Flesch readability test with an acceptable score. A score of 45 or more determines that the document is written in plain, easy to read language that the average 6th grader can understand.

The forms must return to the drafting phase if the score is too low. (A score of 50 or more will satisfy the readability requirements in all 50 states and the District of Columbia.)

Although preparation of state variations can be time-consuming, we have found it is better to do the homework up front and include any special language or provisions needed for state compliance and then submit it to the states for approval rather than the other way around. That’s because this may save delays in negotiations with the state insurance department policy review examiners, and result in a faster approval.

Once you have a product ready to be filed with the state insurance departments, you can expect at least 15 percent within 30 days; approximately 50 percent within 60 days; and the majority of the states to approve it within 90 days.

Some of the more difficult states (New Jersey, New York and Texas) may drag the review period out to six months or longer, depending on the department’s initial response to your filing.

To get a product approved in 50 states within six months, the company compliance personnel should devote full attention to the one product filing and respond to the insurance department on a timely basis. Otherwise delays in responding to state objections will delay the approval process.

HIPAA has not changed the filing and approval process but has certainly complicated the preparation of the forms and filings and may be the cause of delays in getting a new product to market.