Interim Rules For Group Health Plans & Health Insurance Issuers
Under the Newborns' & Mothers' Health Protection Act AGENCIES:
Internal Revenue Service, Department of the Treasury; Pension &
Welfare Benefits Administration, Department of Labor; Health Care
Financing Administration, Department of Health & Human Services.

DEPARTMENT OF THE TREASURY
Internal Revenue Service 26 CFR Part 54 TD 8788 RIN 1545-AV52 

DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration 29 CFR Part 2590 RIN
1210-AA63

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration 45 CFR Parts 144, 146, and 148
RIN 0938-AI17

TITLE: Interim Rules For Group Health Plans and Health Insurance
Issuers Under the Newborns' and Mothers' Health Protection Act

AGENCIES: Internal Revenue Service, Department of the Treasury;
Pension and Welfare Benefits Administration, Department of Labor;
Health Care Financing Administration, Department of Health and Human
Services.

ACTION: Interim rules with request for comments.

SUMMARY: This document contains interim rules governing the
Newborns' and Mothers' Health Protection Act of 1996 (NMHPA). The
interim rules provide guidance to employers, group health plans,
health insurance issuers, and participants and beneficiaries
relating to new requirements for hospital lengths of stay in
connection with childbirth. The rules contained in this document
implement changes to the Employee Retirement Income Security Act of
1974 (ERISA) and the Public Health Service Act (PHS Act) made by
NMHPA, and changes to the Internal Revenue Code of 1986 (Code)
enacted as part of the Taxpayer Relief Act of 1997 (TRA '97).

Interested persons are invited to submit comments on the interim
rules for consideration by the Department of the Treasury, the
Department of Labor, and the Department of Health and Human Services
(Departments) in developing final rules.

DATES: Effective Date: The interim rules are effective January 1,
1999.

Applicability Dates: Group market rules. The interim rules for the
group market apply to group health plans and group health insurance
issuers for plan years beginning on or after January 1, 1999.

Individual market rules. The interim rules for the individual market
apply with respect to health insurance coverage offered, sold,
issued, renewed, in effect, or operated in the individual market on
or after January 1, 1999.

Comment Date. Written comments on these interim rules are invited
and must be received by the Departments on or before January 25,
1999.

ADDRESSES: Written comments should be submitted with a signed
original and three copies (except for electronic submissions to the
Internal Revenue Service (IRS)) to any of the addresses specified
below. For convenience, comments may be addressed to any of the
Departments, except that comments relating primarily to the
individual market regulations should be addressed to the Department
of Health and Human Services (HHS). Any comment that is submitted to
any Department will be shared with the other Departments.

Comments to the IRS can be addressed to:

CC:DOM:CORP:R (REG-109708-97)

Room 5228
Internal Revenue Service
POB 7604, Ben Franklin Station
Washington, DC 20044

In the alternative, comments may be hand-delivered between the hours
of 8 a.m. and 5 p.m. to:

CC:DOM:CORP:R (REG-109708-97)
Courier's Desk
Internal Revenue Service
1111 Constitution Avenue, NW.

Washington DC 20224
Alternatively, comments may be transmitted electronically via the
IRS Internet site at:

http://www.irs.ustreas.gov/prod/tax_regs/comments.html Comments to
the Department of Labor can be addressed to:

U.S. Department of Labor
Pension and Welfare Benefits Administration
200 Constitution Avenue NW., Room N-5669
Washington, DC 20210
Attention: NMHPA Comments

Alternatively, comments may be hand-delivered between the hours of 9
a.m. and 5 p.m. to the same address.

Comments to HHS can be addressed to:

Health Care Financing Administration
Department of Health and Human Services
Attention: HCFA-2892-IFC
P.O. Box 26688
Baltimore, MD 21207

In the alternative, comments may be hand-delivered between the hours
of 8:30 a.m. and 5 p.m. to either:

Room 309-G
Hubert Humphrey Building
200 Independence Avenue, SW.

Washington, DC 20201
or
Room C5-09-26
7500 Security Boulevard
Baltimore, MD 21244-1850

All submissions to the IRS will be open to public inspection and
copying in room 1621, 1111 Constitution Avenue, NW., Washington, DC
from 9 a.m. to 4 p.m. All submissions to the Department of Labor
will be open to public inspection and copying in the Public
Documents Room, Pension and Welfare Benefits Administration, U.S.
Department of Labor, Room N-5638, 200 Constitution Avenue, NW.,
Washington, DC from 8:30 a.m. to 5:30 p.m. All submissions to HHS
will be open to public inspection and copying in room 309-G of the
Department of Health and Human Services, 200 Independence Avenue,
SW., Washington, DC from 8:30 a.m. to 5 p.m.

FOR FURTHER INFORMATION CONTACT: Amy Scheingold Turner, Pension and
Welfare Benefits Administration, Department of Labor, at (202)
219-4377; Suzanne Long, Health Care Financing Administration,
Department of Health and Human Services, at (410) 786-1565; or Russ
Weinheimer, Internal Revenue Service, Department of the Treasury, at
(202) 622-4695.

SUPPLEMENTARY INFORMATION:

Customer Service Information: Individuals interested in obtaining a
copy of the Department of Labor's booklet entitled "Questions and
Answers: Recent Changes in Health Care Law," which includes
information on NMHPA, may call the following toll-free number:
1-800-998-7542..NMHPA adds to protections already established under
the Health Insurance 1 Portability and Accountability Act of 1996
(HIPAA) (Pub. L. 104-191). Among other things, HIPAA provides that a
group health plan and a group health insurance issuer may not impose
any preexisting condition exclusion relating to pregnancy as a
preexisting condition.

Information on NMHPA and other recent health care laws is also
available on the Department of Labor's website
(www.dol.gov/dol/pwba) and the Department of Health and Human
Services's website (www.hcfa.gov).

A. Background

The Newborns' and Mothers' Health Protection Act of 1996 (NMHPA)
(Pub. L. 104- 204) was enacted on September 26, 1996 to provide
protections for mothers and their newborn children with regard to
hospital lengths of stay following childbirth. In section 602 of
NMHPA, 1 Congress declared its findings that:

(1) the length of post-delivery hospital stay should be based on the
unique characteristics of each mother and her newborn child, taking
into consideration the health of the mother, the health and
stability of the newborn, the ability and confidence of the mother
and the father to care for their newborn, the adequacy of support
systems at home, and the access of the mother and her newborn to
appropriate follow-up health care; and (2) the timing of the
discharge of a mother and her newborn child from the hospital should
be made by the attending provider in consultation with the mother.

Provisions substantially similar to those in NMHPA were later added
to the Internal Revenue Code of 1986 (Code) by the Taxpayer Relief
Act of 1997 (TRA '97) (Pub. L. 105-34), which was enacted on August
5, 1997. All references hereafter to "NMHPA" include the relevant
provisions of TRA '97.

NMHPA was incorporated into the administrative framework established
by Titles I and IV of the Health Insurance Portability and
Accountability Act of 1996 (HIPAA) (Pub. L. 104-.NMHPA amended
Chapter 100 of Subtitle K of the Code, Part 7 of Subtitle B of 2
Title I of the Employee Retirement Income Security Act (ERISA), and
Title XXVII of the Public Health Service Act (PHS Act).

The terms group health plan and health insurance issuer are defined
in Code 3 section 9832(a) and (b)(2), ERISA section 733(a) and (b)
(2), and PHS Act section 2791(a) and (b)(2). The term group health
insurance coverage is defined in ERISA section 733(b)(4) and PHS Act
section 2791(b)(4). Generally, any health insurance coverage that
does not meet the definition of group health insurance coverage is
individual coverage even if State law treats the coverage as group
coverage for other purposes. The terms individual health insurance
coverage and individual market are defined in PHS Act section
2791(b)(5) and (e)(1). 191). These titles of HIPAA include
substantially similar changes to the Internal Revenue Code, 2 the
Employee Retirement Income Security Act (ERISA), and the Public
Health Service Act (PHS Act) relating to group health plans and
issuers of group health insurance coverage. Certain other 3
provisions in Titles I and IV of HIPAA amended only ERISA or only
the PHS Act. In particular, the PHS Act, as amended by HIPAA,
contains provisions governing health insurance issued to small
groups and health insurance sold in the individual market. The
regulations implementing these provisions added by HIPAA were made
available to the public on April 1, 1997 and published in the
Federal Register on April 8, 1997. The group market regulations were
issued jointly by the Secretaries of the Treasury, Labor, and Health
and Human Services (HHS) (62 FR 16894). The individual market
regulations were issued only by HHS (62 FR 16985). See also 62 FR
31669 - 31670 and 31690 - 31696 (June 10, 1997) (containing
technical corrections to both the group market and individual market
regulations).

NMHPA applies to health coverage in the large and small group
markets, and in the individual market. The Secretaries of the
Treasury, Labor, and HHS share jurisdiction over the NMHPA
provisions. These provisions are substantially similar, except as
follows:

The NMHPA provisions in the Code generally apply to all group health
plans (including church plans) other than governmental plans, but
they do not apply to health insurance issuers. The NMHPA provisions
in the Code do not contain the requirement that a plan provide the
special notice that is required under the NMHPA provisions in ERISA
and the PHS Act. An employer or plan that fails to comply with the
NMHPA provisions in the Code may be subject to an excise tax under
section 4980D of the Code.

The NMHPA provisions in ERISA generally apply to all group health
plans other than governmental plans and church plans. These
provisions also apply to health insurance issuers that offer health
insurance in connection with such group health plans. Generally, the
Secretary of Labor enforces the provisions of NMHPA in ERISA, except
that no enforcement action may be taken by the Secretary against
issuers. However, individuals may generally pursue actions against
issuers under ERISA and, in some circumstances, under State law.

The NMHPA provisions in the PHS Act generally apply to health
insurance issuers and to certain State and local governmental plans.
States, in the first instance, enforce the PHS Act with respect to
issuers. Only if a State does not substantially enforce any
provisions under its insurance laws will HHS enforce the provisions,
through the imposition of civil money penalties. HHS has primary
enforcement authority with respect to State and local governmental
plans.

The interim rules being issued today by the Secretaries of the
Treasury, Labor, and HHS have been developed on a coordinated basis
by the Departments. In addition, these interim rules take into
account comments received by the Departments in response to the
request for public comments on NMHPA published in the Federal
Register on June 26, 1997 (62 FR 34604)..The interim rules use the
term "vaginal delivery" to clarify that all vaginal 4 deliveries,
whether with complications or without complications, are subject to
the 48-hour length-of-stay requirement.

Except to the extent needed to reflect the statutory differences
described above, the interim rules of each Department are
substantively identical. However, there are certain nonsubstantive
differences, including certain stylistic differences in language and
structure to conform to conventions used by a particular Department.
These differences have been minimized and any differences in wording
(other than those reflecting differences in the NMHPA statutory
provisions described above) are not intended to create any
substantive difference. Finally, the individual market regulations
are issued solely by HHS.

B. Overview of NMHPA and the Interim Rules

The general rule for hospital lengths of stay

NMHPA and the interim rules provide a general rule under which a
group health plan and a health insurance issuer may not restrict
mothers' and newborns' benefits for a hospital length of stay in
connection with childbirth to less than 48 hours following a vaginal
delivery or 96 hours following a delivery by cesarean section. The
general rule requires plans and issuers providing 4 benefits for
hospital lengths of stay in connection with childbirth to cover the
minimum length of stay for all deliveries. The interim rules provide
that the determination of whether an admission is in connection with
childbirth is a medical decision to be made by the attending
provider. An example clarifies that delivery does not have to occur
inside a hospital in order for an admission to be "in connection
with childbirth." NMHPA and the interim rules permit an exception to
the 48- hour (or 96-hour) general rule if the attending provider
decides, in consultation with the mother, to discharge the mother or
her newborn earlier.

Many commenters asked whether the length of stay should be
calculated from the time of delivery. Under the interim rules, when
delivery occurs in the hospital, the stay begins at the time of
delivery (or in the case of multiple births, at the time of the last
delivery). When delivery occurs outside the hospital, the stay
begins at the time the mother or newborn is admitted.

An attending provider is an individual who is licensed under
applicable State law to provide maternity or pediatric care and who
is directly responsible for providing such care to a mother or
newborn child. Therefore, a plan, hospital, managed care
organization, or other issuer is not an attending provider. However,
a nurse midwife or a physician assistant may be an attending
provider if licensed in the State to provide maternity or pediatric
care in connection with childbirth.

Prohibitions

As noted above, an exception to the 48-hour (or 96-hour) general
rule applies if the attending provider decides, in consultation with
the mother, to discharge the mother or newborn earlier. NMHPA and
the interim rules prohibit certain practices to ensure that this
exception will not result in early discharges that could adversely
affect the health or well-being of the mother or newborn.

Specifically, with respect to mothers, NMHPA provides that a group
health plan or health insurance issuer may not deny a mother or her
newborn child eligibility or continued eligibility to enroll or
renew coverage under the terms of the plan or policy solely to avoid
the NMHPA requirements, or provide monetary payments or rebates to a
mother to encourage her to accept less than the minimum protections
available under NMHPA. The interim rules clarify that such
prohibited payments include payments-in-kind. However, an example in
the interim rules clarifies that a plan or issuer does not violate
this prohibition by providing after-discharge, follow-up services to
a mother and newborn discharged early if those services are not more
than what the mother and newborn would have received if they had
stayed in the hospital the full 48 hours (or 96 hours).

In addition, with respect to benefit restrictions, NMHPA and the
interim rules provide that a plan or issuer may not restrict the
benefits for any portion of a 48-hour (or 96-hour) hospital length
of stay in a manner that is less favorable than the benefits
provided for any preceding portion of the stay. This prohibition
includes certain types of precertification requirements, discussed
below in the Authorization and precertification section.

Finally, with respect to attending providers, NMHPA provides that a
plan or issuer may not penalize, or otherwise reduce or limit the
reimbursement of, an attending provider because the provider
furnished care to a mother or newborn in accordance with NMHPA, or
provide monetary or other incentives to an attending provider to
induce the provider to furnish care to a mother or newborn in a
manner inconsistent with NMHPA. The interim rules clarify this
prohibition in four ways. First, the prohibition applies to both
direct and indirect incentives to attending providers. Second,
penalties against an attending provider include taking disciplinary
action against or retaliating against the attending provider. Third,
the term "compensation" is used in the interim rules rather than the
term "reimbursement" to clarify that all forms of remuneration to
attending providers are included in the prohibition, and to avoid
any confusion that otherwise could result from the fact that the
term "reimbursement" has a narrower meaning in some insurance
contexts. Fourth, the statutory phrase "to induce" is interpreted to
include providing any incentive that could induce an attending
provider to furnish care inconsistent with.While NMHPA and the
interim rules do not require plans and issuers to provide 5 coverage
for hospital stays in connection with childbirth, other legal
requirements may apply, including Title VII of the Civil Rights Act
of 1964 (Title VII). Title VII prohibits discrimination on the basis
of sex, including because of pregnancy, childbirth, or related
medical conditions. 42 U.S.C. 2000e-(k). The Equal Employment
Opportunity Commission (EEOC) has commented, by letter dated July
28, 1997, that, "[u]nder Title VII, women affected by pregnancy,
childbirth, or related medical conditions must be treated the same
as individuals affected by other medical conditions. This applies to
all aspects of employment, including employer-provided health
insurance benefits. . . . Thus, Title VII prohibits a plan from
excluding hospital stay benefits in connection with childbirth if
the plan provides hospital stay benefits in connection with other
medical conditions." EEOC is the federal agency responsible for
enforcing Title VII and other federal equal employment opportunity
laws. Questions regarding Title VII should be directed to the EEOC.

NMHPA and the interim rules (whether or not a specific attending
provider is actually induced to furnish care inconsistent with NMHPA
and the interim rules).

Construction

NMHPA and the interim rules apply only to group health plans and
health insurance issuers that provide benefits for a hospital stay
in connection with childbirth. NMHPA and the interim rules do not
require plans and issuers to provide these benefits. In addition,
NMHPA and 5 the interim rules do not prevent plans or issuers from
imposing deductibles, coinsurance, or other cost-sharing measures
for health benefits relating to hospital stays in connection with
childbirth as long as the cost-sharing for any portion of a hospital
stay subject to the general rule is not less favorable to mothers
and newborns than that imposed on any preceding portion of the stay.
Thus, for example, with respect to a 48-hour hospital stay, the
coinsurance for the second 24 hours cannot be greater than that for
the first 24 hoU.S. With respect to health insurance coverage
offered in the individual market, NMHPA and the interim rules apply
to all health insurance coverage, and are not limited in their
application to coverage that is provided to eligible individuals, as
defined in section 2741(b) of the PHS Act.

Authorization and precertification

NMHPA and the interim rules contain three provisions that affect
authorization and precertification for hospital lengths of stay in
connection with childbirth.

Under paragraph (a) of the interim rules (relating to hospital
length of stay), a group health plan or a health insurance issuer
may not require a physician or other health care provider to obtain
authorization from the plan or issuer to prescribe a hospital length
of stay that is subject to the general rule.

Under paragraph (b) of the interim rules (relating to prohibitions),
a plan or issuer may not restrict benefits for part of a stay
subject to the general rule in a way that is less favorable than a
prior portion of the stay. Under an example in the interim rules, a
plan or issuer is precluded from requiring a covered individual to
obtain precertification for any portion of a hospital stay that is
subject to the general rule if precertification is not required for
any preceding portion of the stay. However, the interim rules do not
prevent a plan or issuer from requiring precertification for any
portion of a stay after 48 hours (or 96 hours), or from requiring
precertification for an entire stay.

In addition, under paragraph (c) of the interim rules (containing
rules of construction), a plan or issuer may not increase an
individual's coinsurance for any later portion of a 48- hour (or 96-
hour) hospital stay. An example illustrates that plans and issuers
may vary cost-sharing in certain circumstances, provided the cost-
sharing rate is consistent throughout the 48-hour (or 96-hour)
hospital length of stay.

Compensation of attending provider.The term State includes the 50
States, the District of Columbia, Puerto Rico, the 6 Virgin Islands,
American Samoa, Guam, Wake Island, the Northern Mariana Islands, and
the Canal Zone (i.e., the areas and installations in the Republic of
Panama made available to the United States pursuant to the Panama
Canal Treaty of 1977 and related agreements, until December 31,
1999.) Generally, under Part 7 of ERISA and Title XXVII of the PHS
Act, a State law 7 that "prevents the application of " those
provisions is preempted by section 731(a)(1) of ERISA and sections
2723(a)(1) and 2762(a)(1) of the PHS Act. However, NMHPA specifies
that State laws that meet the statutory criteria will apply even
though they might otherwise "prevent the application of" the NMHPA
requirements. See section 711(f) of ERISA and sections 2704(f) and
2751(c) of the PHS Act.

NMHPA and the interim rules do not prevent a group health plan or a
health insurance issuer from negotiating with an attending provider
the level and type of compensation for care furnished in accordance
with the interim rules (including the prohibitions section).

Applicability in certain States There is an exception to the NMHPA
requirements for health insurance coverage in certain States.
Specifically, NMHPA and the interim rules do not apply with respect
to health 6 insurance coverage if there is a State law that meets
any of the following criteria: 7 the State law requires health
insurance coverage to provide at least a 48-hour (or 96-hour)
hospital length of stay in connection with childbirth, the State law
requires health insurance coverage to provide for maternity and
pediatric care in accordance with guidelines established by the
American College of Obstetricians and Gynecologists, the American
Academy of Pediatrics, or any other established professional medical
association, or the State law requires that decisions regarding the
appropriate hospital length of stay in connection with childbirth be
left entirely to the attending provider in consultation with the.In
conducting an economic analysis of the interim rules, the
Departments of Labor 8 and HHS conducted a preliminary review of
State laws to determine the applicability of NMHPA's requirements in
each State. This discussion, in section D of this preamble, includes
a list of the States in which the Departments of Labor and HHS
assumed, solely for the purpose of the economic analysis, that
NMHPA's requirements apply.

mother. The interim rules clarify that State laws that require the
mother to consent to the decision made by the attending provider
satisfy this criterion.

Although this NMHPA exception applies with respect to insured group
health plans, it does not apply with respect to a group health plan
to the extent the plan provides benefits for hospital lengths of
stay in connection with childbirth other than through health
insurance coverage.

Notice requirements under ERISA and the PHS Act

ERISA background. ERISA generally requires that participants in, and
beneficiaries receiving benefits under, a group health plan be
furnished a summary plan description (SPD) to apprise them of their
rights and obligations under the plan. ERISA and its implementing
regulations prescribe what is to be included in the SPD, and the
manner in which participants and beneficiaries are to be notified of
any "material modification" to the terms of the plan or any change
in the information required to be included in the SPD. A summary
description of a material modification is generally required to be
furnished not later than 210 days after the end of the plan year in
which the change is adopted. A summary of any material reduction in
covered services or benefits is generally required to be furnished
not later than 60 days after adoption of the change.

NMHPA changes to ERISA and the PHS Act. The NMHPA amendments to
ERISA

added section 711(d), which requires that the imposition of the
NMHPA requirements is to be treated as a material modification to
the plan, except that the summary description of the modification
must be provided by not later than 60 days after the first day of
the first plan year in which the requirements apply. NMHPA also
amended both the group and individual market provisions of title
XXVII of the PHS Act to apply the ERISA notice requirement to
certain entities not otherwise subject to ERISA.

The Department of Labor published interim regulations implementing
section 711(d) of ERISA on April 8, 1997 (62 FR 16979), issued
separately from the HIPAA regulations published on the same date.

Section 2704(d) of the PHS Act requires nonfederal governmental
plans to comply with the notice requirement contained in section
711(d) of ERISA as if that section applied to the plan.

Similarly, section 2751(b) of the PHS Act requires a health
insurance issuer in the individual market to comply with the notice
requirement in section 711(d) of ERISA as if that section applied to
the issuer and as if the issuer were a group health plan.

The NMHPA interim rules published today include the notice
provisions applicable under the PHS Act. They are based on the
requirements contained in the Department of Labor's original notice
regulations, but have been adapted for two reasons. First, changes
were made to accommodate the Departments' interpretations of NMHPA's
substantive requirements as contained in these interim rules. A
revision of the notice provisions applicable to plans subject to
ERISA recently was published in the Federal Register in order to
accommodate these interpretations. 63 FR 48372 (September 9, 1998).
Second, the statute provides that covered individuals in both the
individual and group markets (in group health plans subject to
either ERISA or the PHS Act) be notified of their rights under
NMHPA. While there are fundamental.Although the specific
requirements of these interim rules therefore apply for plan 9 years
beginning on or after January 1, 1999, the underlying statutory
requirement went into effect for plan years beginning on or after
January 1, 1998, the effective date of NMHPA. differences in the
types of entities regulated under ERISA as compared to the PHS Act,
and in the structure of the two Acts, the Departments are
coordinating their work on these two regulations to ensure that
affected individuals will receive the same disclosure of rights,
adapted as appropriate to take into account the different contexts.

Substance of the PHS Act notice requirements - In the group market.
Section 2704 of the PHS Act applies the NMHPA requirements to group
health plans that are subject to the group market provisions of Part
A of Title XXVII of the PHS Act. The only group health plans that
are subject to the PHS Act are nonfederal governmental plans, which
are not directly subject to any ERISA requirements. In addition,
these plans may elect to be exempt from most of the requirements of
Title XXVII, including the NMHPA requirements, with respect to self-
insured benefits. Section 2704(d) states that a group health plan
subject to the PHS Act "shall comply with the notice requirement
under section 711(d) of [ERISA] with respect to the requirements of
this section as if such section applied to such plan." These interim
rules interpret section 2704(d) of the PHS Act to require that
nonfederal governmental plans that provide benefits for hospital
lengths of stay in connection with childbirth, and that are subject
to the NMHPA requirements, provide participants and beneficiaries
with a statement describing those requirements. The statement must
be included in the plan document that provides a description of plan
benefits to participants and beneficiaries and must be furnished to
participants and beneficiaries not later than 60 days after the
first day of the first plan year beginning on or after the effective
date of these interim rules. The interim rules set forth the
9.Although the specific requirements of these interim rules
therefore apply on or 10 after January 1, 1999, the underlying
statutory requirement went into effect January 1, 1998, the
effective date of NMHPA.

language that must be used by plan administrators to satisfy the
notice requirement for group health plans subject to the PHS Act.

In the individual market. Section 2751(a) of the PHS Act applies the
NMHPA requirements to health insurance issuers in the individual
market. Section 2751(b) states that a health insurance issuer
subject to the individual market provisions of the PHS Act "shall
comply with the notice requirement under section 711(d) of [ERISA]
with respect to [the NMHPA requirements] as if such section applied
to such issuer and such issuer were a group health plan." Issuers in
the individual market are not subject to any federal requirements
comparable to disclosure of a "summary plan description" under
ERISA, although they may be subject to similar State law
requirements. In addition, the concept of a "plan year" does not
apply in the individual market, and the effective date of the NMHPA
requirements is not tied to a plan year.

Accordingly, the requirements of these interim rules apply to health
insurance coverage "offered, sold, issued, renewed, in effect, or
operated" in the individual market on or after the effective date of
these interim rules These interim rules interpret section 2751(b) of
the PHS Act to require that issuers of individual health insurance
coverage that includes benefits for hospital lengths of stay in
connection with childbirth must include a statement in the insurance
contract describing the NMHPA requirements, and, not later than 60
days after the effective date of the interim rules, provide covered
individuals with a rider or equivalent document that gives notice of
the NMHPA requirements. The interim rules set forth the language
that must be used in an insurance contract (or rider) to satisfy the
notice requirement added by NMHPA.

Effective dates

Group market. NMHPA applies to group health plans and group health
insurance issuers for plan years beginning on or after January 1,
1998. The interim rules for the group market apply to group health
plans and group health insurance issuers for plan years beginning on
or after January 1, 1999.

Individual market. NMHPA applies to health insurance coverage
offered, sold, issued, renewed, in effect, or operated in the
individual market on or after January 1, 1998. The interim rules for
the individual market apply to health insurance coverage offered,
sold, issued, renewed, in effect, or operated in the individual
market on or after January 1, 1999.

C. Interim Rules and Request for Comments

Section 9833 of the Code (formerly section 9806), section 734 of
ERISA (formerly section 707), and section 2792 of the PHS Act
authorize the Secretaries of the Treasury, Labor, and HHS to
promulgate any interim final rules that they determine are
appropriate to carry out the provisions of Chapter 100 of Subtitle K
of the Code, Part 7 of Subtitle B of Title I of ERISA, and Title
XXVII of the PHS Act, which include the NMHPA provisions. The
Departments have determined that interim final rules are appropriate
because there is a need to define the substance of the federal
requirements and the scope of their applicability in anticipation of
the 1999 plan year.

Many commenters have asked the Departments to clarify certain NMHPA
provisions. For example, the Departments have been asked when the
48-hour (or 96-hour) stay begins, and whether the requirements apply
only after birth in a hospital. In addition, NMHPA does not apply to
health insurance coverage if there is a State law that meets certain
criteria outlined in the NMHPA exception. Currently, there are many
States that have such laws meeting the NMHPA exception. Commenters
have asked the Departments to clarify the applicability of federal
law in these States as well as in other States that do not have a
law meeting NMHPA's criteria.

On June 26, 1997 the Departments of Labor and HHS issued a Request
for Information (RFI) inviting comments on the NMHPA provisions.
After consideration of the many comments received in response to the
Departments' RFI and in light of the outstanding questions relating
to the substance and applicability of NMHPA, the Departments have
determined that it is appropriate to issue interim final rules at
this time to ensure that group health plans and health insurance
issuers have timely guidance before they prepare their open season
materials in anticipation of the 1999 plan year. (More than one half
of plans begin their fiscal years on January 1.) Written comments on
these interim rules are invited.

D. Executive Order 12866, Effect of the Statute, and Paperwork
Reduction Act - The Departments of Labor and HHS

Executive Order 12866

Executive Order 12866 requires agencies to assess all costs and
benefits of available regulatory alternatives, and when regulation
is necessary, to select regulatory approaches that maximize net
benefits (including potential economic, environmental, public health
and safety effects; distributive impacts; and equity). Section 3(f)
of Executive Order 12866 requires agencies to prepare a regulatory
impact analysis for any rule that is deemed a "significant
regulatory action" according to specified criteria. This includes
whether the rule may have an annual effect on the economy of $100
million or more or certain other specified effects, or whether the
rule raises novel legal or policy issues arising out of the
President's priorities.

The Office of Management and Budget (OMB) has determined this to be
a major rule, as well as an economically significant regulatory
action under Section 3(f) of Executive Order 12866. The estimated
impact of NMHPA on insured costs is in the range of $130 million to
$200 million. The following analysis was conducted by the
Departments of Labor and Health and Human Services.

The interim rules, for the most part, mirror the statutory
provisions, which are largely self-executing.

While the interim rules make interpretations or clarifications to
some of the statutory provisions, none of these has a significant
economic impact. The effect of the statute is addressed below.

Effect of the statute

NMHPA was passed in response to a finding by the Congress that group
health plans and health insurance issuers tend to limit benefits for
hospital lengths of stay in connection with childbirth. The main
intent of the law was to ensure that adequate care is provided to
mothers and their newborns during the first few critical days
following birth. The Congress was concerned that the decision to
discharge the mother and newborn was being driven by the financial
motivations of plans and issuers, rather than the medical interests
of the patient.

NMHPA was modeled after guidelines developed by the American College
of Obstetricians and Gynecologists (ACOG) and the American Academy
of Pediatrics (AAP).

NMHPA allows the attending provider, in consultation with the
mother, to make hospital length of stay decisions, rather than the
plan or issuer. Although mothers and their newborns are not
obligated to stay in the hospital for any period of time following
delivery, plans and issuers must.For purposes of Part 7 of ERISA and
Title XXVII of the PHS Act (including the 11 NMHPA provisions), the
term State includes the 50 States, the District of Columbia, Puerto
Rico, the Virgin Islands, American Samoa, Guam, Wake Island, the
Northern Mariana Islands, and the Canal Zone (i.e., the areas and
installations in the Republic of Panama made available to the United
States pursuant to the Panama Canal Treaty of 1977 and related
agreements, until December 31, 1999.)

The term health insurance coverage means "benefits consisting of
medical care 12 (provided directly, through insurance or
reimbursement, or otherwise and including any items and services
paid for as medical care) under any hospital or medical service
policy or certificate, hospital or medical service plan contract, or
health maintenance organization contract offered by a health
insurance issuer." ERISA section 733(b)(1) and PHS Act section
2791(b)(1). The term health insurance issuer means "an insurance
company, insurance service, or insurance organization now cover at
least 48 hours following a vaginal delivery and at least 96 hours
following a delivery by cesarean section unless the attending
provider, in consultation with the mother, decides to discharge
earlier.

Many believe that the minimum length of stay requirements of 48
hours for a vaginal delivery and 96 hours for a cesarean section
will have a positive impact on the overall health and well-being of
mothers and newborns. The longer stays will allow health care
providers sufficient time to screen for metabolic and genetic
disorders in newborns. It will also permit time to provide parental
education to mothers and to assess their ability to care for their
newborn.

Although some services performed in an inpatient hospital setting
may be effectively provided in other settings, such as clinics or
physicians' offices, not all women have had access to the full range
of appropriate follow-up care. NMHPA ensures that many women and
newborns with health coverage will now be provided an acceptable
level of postpartum care.

Many States have enacted laws that prescribe benefits for hospital
lengths of stay in 11 connection with childbirth. NMHPA provides
that the federal NMHPA requirements do not apply with respect to
health insurance coverage if there is a State law that satisfies one
or more 12.. . . which is licensed to engage in the business of
insurance in a State and which is subject to State law which
regulates insurance . . . . Such term does not include a group
health plan." ERISA section 733(b)(2) and PHS Act section 2791(b)
(2).

of the following criteria: (1) requires such coverage to provide for
at least a 48-hour hospital length of stay following a vaginal
delivery and at least a 96-hour length of stay following a delivery
by cesarean section, (2) requires such coverage to provide for
maternity and pediatric care in accordance with guidelines
established by the American College of Obstetricians and
Gynecologists, the American Academy of Pediatrics, or other
established professional medical associations, or (3) requires, in
connection with such coverage for maternity care, that the hospital
length of stay for such care is left to the decision of (or is
required to be made by) the attending provider in consultation with
the mother.

Accordingly, the federal NMHPA requirements do not apply to insured
plans (and partially-insured plans, to the extent benefits for
hospital lengths of stay in connection with childbirth are provided
through insurance coverage) in States in which a State law meets one
or more of the above criteria. Moreover, the federal NMHPA
requirements do not apply to issuers (both in the group market and
the individual market) in States in which State law meets one or
more of the above criteria. However, the federal NMHPA requirements
apply to self-insured plans (and partially-insured plans, to the
extent benefits for hospital lengths of stay in connection with
childbirth are provided other than through insurance coverage),
regardless of State law.

According to a chart developed by the National Association of
Insurance Commissioners for a hearing in September 1997 before the
House Committee on Ways and Means, Subcommittee on Health, many
States already had provisions in their laws or regulations
prescribing benefits for hospital lengths of stay in connection with
childbirth before the enactment of NMHPA..In conducting the review,
the Departments considered State statutes, regulations, 13 rules,
bulletins, and case law. However, the review did not take into
account other State actions that should be considered when making a
legal determination regarding whether a State law meets the criteria
specified in NMHPA.

Hereafter, other private-sector employer-sponsored group health
plans are referred 14 to as ERISA plans.

The term nonfederal governmental plan means a governmental plan that
is not a 15 federal governmental plan. PHS Act section 2791(d)(8)
(C). The term governmental plan generally means a plan established
or maintained for its employees by the government of the United
States, by the government of any State or political subdivision
thereof, or by any agency or instrumentality of any of the
foregoing. PHS Act section 2791(d)(8)(A). The term federal
governmental plan means a governmental plan established or
maintained for its employees by the government of the United States
or by any agency or instrumentality of such government. PHS Act
section 2791(d)(8)(B).

Subsequently, for purposes of this discussion of the Effect of the
Statute, the Departments performed a preliminary review of State
laws as of July 1, 1998. As a result of this review, it is 13
estimated that 40 States have laws that appear to meet the criteria
specified in NMHPA. These States are as follows: Alabama, Alaska,
Arizona, Arkansas, California, Colorado, Connecticut, the District
of Columbia, Florida, Georgia, Illinois, Indiana, Iowa, Kansas,
Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota,
Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico,
New York, North Carolina, North Dakota, Ohio, Oklahoma,
Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee,
Texas, Virginia, Washington, and West Virginia.

Accordingly, in these 40 States, only church plans, self-insured
private-sector employer-sponsored group health plans, and self-
insured nonfederal governmental plans will be affected 14 15 by
NMHPA. Based on data from the March 1996 Current Population Survey
and other sources, Price Waterhouse has estimated that there are
approximately 270,000 self-insured ERISA plans.Sponsors of self-
insured nonfederal governmental plans can elect to have their 16
plans exempted from most of the requirements of Title XXVII of the
PHS Act, including the NMHPA requirements, with respect to self-
insured benefits. To date, fewer than 600 sponsors have elected to
have their plans exempted in whole or in part, and at least some of
these plans have chosen to be exempt from NMHPA. This means the
number of self-insured nonfederal governmental plans affected by
NMHPA will be less than the 30,000 plans cited above.

The federal NMHPA provisions appear to apply in these 18 States
because either 17 the State has not enacted any law that meets the
NMHPA criteria or the State has incorporated the federal NMHPA
requirements by reference.

covering 53 million individuals. In addition, based on data from the
March 1996 Current Population Survey and other sources, Price
Waterhouse estimated that there are approximately 30,000 self-
insured nonfederal governmental plans covering 18 million
individuals. 16 NMHPA will also affect insured ERISA plans, insured
church plans, insured nonfederal governmental plans, and issuers in
the individual market in States that do not have a law meeting one
or more of the criteria specified in NMHPA. For purposes of this
review of the Effect of the Statute, the Departments performed a
preliminary review of State laws as of July 1, 1998. As a result of
this review, it is estimated that the federal NMHPA requirements
will apply to health insurance coverage in 18 States. These States
are as follows: Delaware, Hawaii, Idaho, 17 Michigan, Mississippi,
Nebraska, Oregon, Utah, Vermont, Wisconsin, Wyoming, Puerto Rico,
the Virgin Islands, American Samoa, Guam, Wake Island, the Northern
Mariana Islands, and the Canal Zone (i.e., the areas and
installations in the Republic of Panama made available to the United
States pursuant to the Panama Canal Treaty of 1977 and related
agreements, until December 31, 1999).

Based on data from the March 1996 Current Population Survey and
other sources, Price Waterhouse estimated that there are
approximately 2.5 million insured ERISA plans, 145,000.See, for
example, Chollet, D.J., Kirk, A.M. and Ermann, R.D. (1997). Mapping
18 Insurance Markets: The Group and Individual Insurance Markets in
26 States. Washington: The Alpha Center.

S. 969 contained provisions for post-delivery follow-up care, or
home health 19 visits. In addition, the costs provided by CBO
assumed an implementation date of January 1, 1997, rather than
January 1, 1998.

insured nonfederal governmental plans, and 1,000 issuers in the
individual market. For a variety of reasons, these totals cannot be
broken down by State. These reasons include a lack of detailed data
at the State level and inconsistencies in how data are reported,
both within and across States.

In addition, the complexities and volatility of today's health care
environment, the segmentation of the health care markets, and the
rapid increase in various forms of managed care arrangements make it
difficult to define and track such plans.18 The Congressional Budget
Office (CBO) did not estimate costs for implementing NMHPA, passed
by the Congress in September 1996. However, CBO estimated the costs
for implementing S.969, the Senate version of NMHPA. While there are
several differences between S.969 and the final joint legislation ,
the CBO estimates for implementing S. 969 are the only 19 relevant
cost data available, and can be used as a baseline estimate for the
cost impact of NMHPA.

After making adjustments to reflect the effects of State laws in
effect at the time of their estimates, CBO concluded that about
900,000 insured births a year have shorter hospital lengths of stay
than the minimum lengths of stay provided under NMHPA. CBO assumed
that some of these births would result in an additional inpatient
day, and some would receive a follow-up visit.

Some mothers would still choose to go home before the full time
allowed by NMHPA, while others are already receiving a timely
follow-up visit and therefore would not incur any additional costs.
CBO estimated that inpatient hospital days would increase by
approximately 400,000 days and follow-up care would increase by
approximately 200,000 visits annually.

CBO estimated that the additional utilization due to the
implementation of S. 969 would have resulted in an aggregate
increase in insured costs of 0.06 percent for all employment-based
and individually purchased health plans. CBO assumed that, in
response to the increase in premiums, employers and individuals may
choose to reduce coverage or drop benefits. Although some plans may
make slight reductions in overall benefits to offset this minimal
increase in cost, the Departments believe that virtually no
employers will drop health coverage entirely or drop coverage for
hospital stays in connection with childbirth. After taking
behavioral responses into account, CBO estimated that employer
contributions for health insurance would only rise by about 0.02
percent and most of that increase likely would be passed back to
employees in the form of reduced wages.

Applying the same 0.06 percent increase to the cost of health
insurance for covered employees of nonfederal governmental plans
would raise expenditures. However, CBO assumed that most of these
costs would be passed back to employees.

Apart from increased benefit costs for their employees, States may
face additional costs for enforcing NMHPA's requirements on issuers
of health insurance in the group and individual markets. Because
States currently regulate the private-sector health insurance
market, CBO assumed that the increase in costs would be marginal.
However, in cases where States fail to implement NMHPA or their own
laws meeting the criteria specified in NMHPA, the federal government
assumes enforcement authority. Depending on the need for federal
enforcement, some of the aforementioned costs may be shifted to the
federal government.

Although the CBO estimates for implementing S. 969 can be used as a
baseline for determining the cost impact of NMHPA, they must be
updated to reflect the enactment in several additional States of
laws or regulations meeting the criteria specified in NMHPA and for
the elimination of post-delivery follow up care. Adjusting the CBO
estimates for 28 States that had laws that met the criteria
specified in NMHPA at the time of NMHPA's enactment, reduces the
number of people directly affected by NMHPA. Approximately 60
percent of people covered by insured ERISA plans and therefore
subject to State laws, are in the 28 States that had enacted laws
prior to NMHPA.

With fewer people affected, the assumed increase in utilization is
also lower, which should translate into a smaller increase in
aggregate health care costs. However, as discussed previously, S.
969 had a provision for follow-up visits in place of an additional
inpatient day. CBO assumed that about one-third of the additional
utilization would be follow-up visits, and that the cost of a
follow-up visit is only about one-fourth the cost of a post-delivery
hospital day.

Based on those assumptions, if all of those who would have chosen a
follow-up visit under S. 969 elected to remain in the hospital for
an additional day, the estimated aggregate increase in insured costs
would be 0.07 percent, slightly higher than the CBO estimate. If,
however, mothers and physicians determine that some of the follow-up
care is unnecessary, and that less than the minimum hospital length
of stay is necessary, some of the additional costs will not be
incurred. If none of the follow-up visits were converted to
additional inpatient days, the estimated aggregate increase in
insured costs would be 0.04 percent. Therefore, the impact of NMHPA
on insured costs is in the 0.04 to 0.07 percent range, or $130
million to $200 million (1996 dollars).

It should be noted that since the enactment of NMHPA, twelve
additional States have.28 enacted laws or regulations meeting the
criteria specified in NMHPA. These laws apply to an additional 25
percent of those in fully insured health insurance plans. While some
of these States passed legislation in direct response to the federal
law, other States had already considered hospital lengths of stay
for childbirth, but without final passage of legislation. Thus, the
estimates of the statutory impacts, as of the date of enactment,
probably overstate the direct impact of NMHPA.

Paperwork Reduction Act

The interim rules contain no new information collection requirements
that are subject to review and approval by OMB under the Paperwork
Reduction Act of 1995 (Pub. L. 104-13, 44 U.S.C. Chapter 35). The
agencies reported the information collection burdens associated with
NMHPA in the interim rules (Interim Rules Amending ERISA Disclosure
Requirements for Group Health Plans) implementing section 711(d) of
ERISA that were published in the Federal Register on April 8, 1997
(62 FR 16979). OMB approved these information collection
requirements under OMB control number 1210-0039. Subsequently, the
agencies published the OMB control number in the Federal Register at
62 FR 36205 (July 7, 1997).

In addition, the group and individual market notification
requirements for group health plans under section 2704(d), and
issuers under 2751(b) of the PHS Act, are not considered
"information" as defined in 5 CFR 1320.3(c)(2) and are therefore not
subject to the Paperwork Reduction Act of 1995. In particular, 5 CFR
1320.3(c)(2) states that "the public disclosure of information
originally supplied by the federal government to the recipient for
the purpose of disclosure to the public is not included within the
definition" of a collection of information.

E. Regulatory Flexibility Act, Unfunded Mandates Reform Act of 1995,
and Small Business Regulatory Enforcement Fairness Act of 1995

Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq) requires
that, whenever an agency is required to publish a general notice of
proposed rulemaking, the agency shall prepare and make available for
public comment an initial regulatory flexibility analysis. The
analysis describes the impact of the rule on small entities and
identifies any significant alternatives to the rule which accomplish
the stated objectives of the applicable law and which would minimize
the impact on small entities. For purposes of the RFA, States and
individuals are not considered small entities. Small employers and
small group health plans are considered small entities.

Since these rules are being issued as interim final rules and not as
a Notice of Proposed Rulemaking (NPRM), the RFA does not apply and a
regulatory flexibility analysis is not required.

Nonetheless, the Departments have considered the likely impact of
the rules on small entities and believe that the rules will not have
a significant impact on a substantial number of small entities for
the following reasons: 1) the major provisions of the rules mirror
the statutory provisions, which are largely self-executing and do
not afford the Departments substantial discretion to exercise
regulatory flexibility; 2) the interpretations or clarifications to
the statutory provisions that are made by these rules are minor and
will not have a significant impact; and 3) because most States have
laws that apply in place of the NMHPA standards, in those States the
interim rules will not apply to insurance issuers, which are subject
to State law, and will have no impact on group health plans that
purchase insurance in those States. Therefore the main impact of
these rules will be on group health plans that self-insure. Because
small plans are more likely to purchase State-regulated insurance
than to self-insure, they will be less likely to be affected by
these rules.

Although, for the reasons stated, we believe that these rules will
not have a significant impact on small entities, specific data that
would permit a complete evaluation of the impact on small entities
is not currently available. Therefore, the Departments invite
interested persons to submit comments on the impact of these rules
on small entities for consideration in the development of the final
rules implementing NMHPA. Consistent with the RFA, the Departments
also encourage the public to submit comments on alternative rules
that will accomplish the stated purpose of NMHPA and minimize the
impact on small entities.

Unfunded Mandates Reform Act of 1995

The Unfunded Mandates Reform Act of 1995 (UMRA, Pub. L. 104-4)
requires agencies to prepare several analytic statements before
proposing any rules that may result in annual expenditures of $100
million by State, local, and Indian tribal governments or the
private sector.

These rules are not subject to the UMRA because they are interim
rules. However, consistent with the policy embodied in the UMRA, the
interim rules have been designed to be the least burdensome
alternative for State, local, tribal governments, and the private
sector.

Small Business Regulatory Enforcement Fairness Act of 1996

The Administrator of the Office of Information and Regulatory
Affairs of OMB has determined that this is a major rule for purposes
of the Small Business Regulatory Enforcement Fairness Act of 1996 (5
U.S.C. 801 et seq.) (SBREFA). In general, SBREFA provides, among
other things, that a federal agency must submit all rules for full
Congressional review. Pursuant to SBREFA, Congress has 60 session
days to review and approve or disapprove a major rule. The
Secretaries have determined that the effective date of these interim
rules is January 1, 1999.

Because the effective date of these interim rules is more than 60
days after publication in the Federal Register and receipt by
Congress, the requirements of SBREFA have been satisfied with
respect to these rules.

Statutory Authority

The Department of the Treasury temporary rule is adopted pursuant to
the authority contained in section 7805 and in section 9833 of the
Code (26 U.S.C. 7805, 9833), as added by HIPAA (Pub. L. 104-191, 110
Stat. 1936) and amended by TRA '97 (Pub. L. 105-34, 111 Stat. 788).

The Department of Labor interim final rule is adopted pursuant to
the authority contained in sections 505, 711, 734 of ERISA (29
U.S.C. 1135, 1181, and 1194), as added by HIPAA (Pub.

L. 104-191, 110 Stat. 1936) and amended by NMHPA (Pub. L. 104-204,
110 Stat. 2935), and Secretary of Labor's Order No. 1-87, 52 FR
13139, April 21, 1987.

The HHS interim final rule is adopted pursuant to the authority
contained in sections 2701 through 2763, 2791, and 2792 of the PHS
Act (42 U.S.C.300gg through 300gg-63, 300gg-91, and 300gg-92), as
added by HIPAA (Pub. L. 104-191, 110 Stat. 1936) and amended by
NMHPA (Pub. L. 104-204, 110 Stat. 2935).

List of Subjects

26 CFR Part 54 Excise taxes, Health insurance, Pensions, Reporting
and recordkeeping requirements.

29 CFR Part 2590 Employee benefit plans, Employee Retirement Income
Security Act, Health care, Health insurance, Reporting and
recordkeeping requirements.

45 CFR Parts 144 and 146.32 Health care, Health insurance, Reporting
and recordkeeping requirements, State regulation of health
insurance.

45 CFR Part 148 Administrative practice and procedure, Health care,
Health insurance, Penalties, Reporting and recordkeeping
requirements.

Adoption of Amendments to the Regulations

Internal Revenue Service

26 CFR Chapter I

Accordingly, 26 CFR Part 54 is amended as follows:

PART 54--PENSION EXCISE TAXES

Paragraph 1. The authority citation for part 54 is amended by adding
an entry for �54.9811-1T in numerical order to read in part as
follows:

Authority: 26 U.S.C. 7805 * * *

Section 54.9811-1T also issued under 26 U.S.C. 9833. * * *

Par. 2. Section 54.9801-1T is amended by:

1. Revising paragraph (a).

2. Revising the first sentence of paragraph (c).

The revisions read as follows:

�54.9801-1T Basis and scope (temporary).

(a) Statutory basis. Sections 54.9801-1T through 54.9801-6T,
54.9802-1T, 54.9811-1T, 54.9812-1T, 54.9831-1T, and 54.9833-1T
(portability sections) implement Chapter 100 of Subtitle K of the
Internal Revenue Code of 1986.

* * * * *

(c) Similar Requirements under the Public Health Service Act and
Employee Retirement Income Security Act. Sections 2701, 2702, 2704,
2705, 2721, and 2791 of the Public Health Service Act and sections
701, 702, 703, 711, 712, 732, and 733 of the Employee Retirement
Income Security Act of 1974 impose requirements similar to those
imposed under Chapter 100 of Subtitle K with respect to health
insurance issuers offering group health insurance coverage. * * *

* * * * *

Par. 3. In �54.9801-2T, the introductory text is revised to read as
follows:

�54.9801-2T Definitions (temporary).

Unless otherwise provided, the definitions in this section govern in
applying the provisions of ��54.9801-1T through 54.9801-6T,
54.9802-1T, 54.9811-1T, 54.9812-1T, 54.9831-1T, and 54.9833-1T.

* * * * *

Par. 4. Section 54.9811-1T is added to read as follows:

�54.9811-1 Standards relating to benefits for mothers and newborns
(temporary).

(a) Hospital length of stay - (1) General rule. Except as provided
in paragraph (a)(5) of this section, a group health plan that
provides benefits for a hospital length of stay in connection with
childbirth for a mother or her newborn may not restrict benefits for
the stay to less than -

(i) 48 hours following a vaginal delivery; or

(ii) 96 hours following a delivery by cesarean section.

(2) When stay begins - (i) Delivery in a hospital. If delivery
occurs in a hospital, the hospital length of stay for the mother or
newborn child begins at the time of delivery (or in the case of
multiple births, at the time of the last delivery).

(ii) Delivery outside a hospital. If delivery occurs outside a
hospital, the hospital length of stay begins at the time the mother
or newborn is admitted as a hospital inpatient in connection with
childbirth. The determination of whether an admission is in
connection with childbirth is a medical decision to be made by the
attending provider.

(3) Examples. The rules of paragraphs (a)(1) and (2) of this section
are illustrated by the following examples. In each example, the
group health plan provides benefits for hospital lengths of stay in
connection with childbirth and is subject to the requirements of
this section, as follows:

Example 1. (i) A pregnant woman covered under a group health plan
goes into labor and is admitted to the hospital at 10 p.m. on June
11. She gives birth by vaginal delivery at 6 a.m. on June 12.

(ii) In this Example 1, the 48-hour period described in paragraph
(a)(1)(i) of this section ends at 6 a.m. on June 14.

Example 2. (i) A woman covered under a group health plan gives birth
at home by vaginal delivery. After the delivery, the woman begins
bleeding excessively in connection with the childbirth and is
admitted to the hospital for treatment of the excessive bleeding at
7 p.m. on October 1.

(ii) In this Example 2, the 48-hour period described in paragraph
(a)(1)(i) of this section ends at 7 p.m. on October 3.

Example 3. (i) A woman covered under a group health plan gives birth
by vaginal delivery at home. The child later develops pneumonia and
is admitted to the hospital. The attending provider determines that
the admission is not in connection with childbirth.

(ii) In this Example 3, the hospital length-of-stay requirements of
this section do not apply to the child's admission to the hospital
because the admission is not in connection with childbirth.

(4) Authorization not required - (i) In general. A plan may not
require that a physician or other health care provider obtain
authorization from the plan, or from a health insurance issuer
offering health insurance coverage under the plan, for prescribing
the hospital length of stay required under paragraph (a)(1) of this
section. (See also paragraphs (b)(2) and (c)(3) of this section for
rules and examples regarding other authorization and certain notice
requirements.) (ii) Example. The rule of this paragraph (a)(4) is
illustrated by the following example:

Example. (i) In the case of a delivery by cesarean section, a group
health plan subject to the requirements of this section
automatically provides benefits for any hospital length of stay of
up to 72 hours. For any longer stay, the plan requires an attending
provider to complete a certificate of medical necessity. The plan
then makes a determination, based on the certificate of medical
necessity, whether a longer stay is medically necessary.

(ii) In this Example, the requirement that an attending provider
complete a certificate of medical necessity to obtain authorization
for the period between 72 hours and 96 hours following a delivery by
cesarean section is prohibited by this paragraph (a)(4).

(5) Exceptions - (i) Discharge of mother. If a decision to discharge
a mother earlier than the period specified in paragraph (a)(1) of
this section is made by an attending provider, in consultation with
the mother, the requirements of paragraph (a)(1) of this section do
not apply for any period after the discharge.

(ii) Discharge of newborn. If a decision to discharge a newborn
child earlier than the period specified in paragraph (a)(1) of this
section is made by an attending provider, in consultation with the
mother (or the newborn's authorized representative), the
requirements of paragraph (a)(1) of this section do not apply for
any period after the discharge.

(iii) Attending provider defined. For purposes of this section,
attending provider means an individual who is licensed under
applicable State law to provide maternity or pediatric care and who
is directly responsible for providing maternity or pediatric care to
a mother or newborn child.

(iv) Example. The rules of this paragraph (a)(5) are illustrated by
the following example:

Example. (i) A pregnant woman covered under a group health plan
subject to the requirements of this section goes into labor and is
admitted to a hospital. She gives birth by cesarean section. On the
third day after the delivery, the attending provider for the mother
consults with the mother, and the attending provider for the newborn
consults with the mother regarding the newborn. The attending
providers authorize the early discharge of both the mother and the
newborn. Both are discharged approximately 72 hours after the
delivery. The plan pays for the 72-hour hospital stays.

(ii) In this Example, the requirements of this paragraph (a) have
been satisfied with respect to the mother and the newborn. If either
is readmitted, the hospital stay for the readmission is not subject
to this section.

(b) Prohibitions - (1) With respect to mothers - (i) In general. A
group health plan may not -

(A) Deny a mother or her newborn child eligibility or continued
eligibility to enroll or renew coverage under the terms of the plan
solely to avoid the requirements of this section; or

(B) Provide payments (including payments-in-kind) or rebates to a
mother to encourage her to accept less than the minimum protections
available under this section.

(ii) Examples. The rules of this paragraph (b)(1) are illustrated by
the following examples. In each example, the group health plan is
subject to the requirements of this section, as follows:

Example 1. (i) A group health plan provides benefits for at least a
48-hour hospital length of stay following a vaginal delivery. If a
mother and newborn covered under the plan are discharged within 24
hours after the delivery, the plan will waive the copayment and
deductible.

(ii) In this Example 1, because waiver of the copayment and
deductible is in the nature of a rebate that the mother would not
receive if she and her newborn remained in the hospital, it is
prohibited by this paragraph (b)(1). (In addition, the plan violates
paragraph (b)(2) of this section because, in effect, no copayment or
deductible is required for the first portion of the stay and a
double copayment and a deductible are required for the second
portion of the stay.) Example 2. (i) A group health plan provides
benefits for at least a 48-hour hospital length of stay following a
vaginal delivery. In the event that a mother and her newborn are
discharged earlier than 48 hours and the discharges occur after
consultation with the mother in accordance with the requirements of
paragraph (a)(5) of this section, the plan provides for a follow-up
visit by a nurse within 48 hours after the discharges to provide
certain services that the mother and her newborn would otherwise
receive in the hospital.

(ii) In this Example 2, because the follow-up visit does not provide
any services beyond what the mother and her newborn would receive in
the hospital, coverage for the follow-up visit is not prohibited by
this paragraph (b)(1).

(2) With respect to benefit restrictions - (i) In general. Subject
to paragraph (c)(3) of this section, a group health plan may not
restrict the benefits for any portion of a hospital length of stay
required under paragraph (a) of this section in a manner that is
less favorable than the benefits provided for any preceding portion
of the stay.

(ii) Example. The rules of this paragraph (b)(2) are illustrated by
the following example:

Example. (i) A group health plan subject to the requirements of this
section provides benefits for hospital lengths of stay in connection
with childbirth. In the case of a delivery by cesarean section, the
plan automatically pays for the first 48 hours. With respect to each
succeeding 24-hour period, the participant or beneficiary must call
the plan to obtain precertification from a utilization reviewer, who
determines if an additional 24-hour period is medically necessary.
If this approval is not obtained, the plan will not provide benefits
for any succeeding 24-hour period.

(ii) In this Example, the requirement to obtain precertification for
the two 24-hour periods immediately following the initial 48-hour
stay is prohibited by this paragraph (b)(2) because benefits for the
latter part of the stay are restricted in a manner that is less
favorable than benefits for a preceding portion of the stay.
(However, this section does not prohibit a plan from requiring
precertification for any period after the first 96 hours.) In
addition, if the plan's utilization reviewer denied any mother or
her newborn benefits within the 96-hour stay, the plan would also
violate paragraph (a) of this section.

(3) With respect to attending providers. A group health plan may not
directly or indirectly -

(i) Penalize (for example, take disciplinary action against or
retaliate against), or otherwise reduce or limit the compensation
of, an attending provider because the provider furnished care to a
participant or beneficiary in accordance with this section; or

(ii) Provide monetary or other incentives to an attending provider
to induce the provider to furnish care to a participant or
beneficiary in a manner inconsistent with this section, including
providing any incentive that could induce an attending provider to
discharge a mother or newborn earlier than 48 hours (or 96 hours)
after delivery.

(c) Construction. With respect to this section, the following rules
of construction apply:

(1) Hospital stays not mandatory. This section does not require a
mother to -

(i) Give birth in a hospital; or

(ii) Stay in the hospital for a fixed period of time following the
birth of her child.

(2) Hospital stay benefits not mandated. This section does not apply
to any group health plan that does not provide benefits for hospital
lengths of stay in connection with childbirth for a mother or her
newborn child.

(3) Cost-sharing rules - (i) In general. This section does not
prevent a group health plan from imposing deductibles, coinsurance,
or other cost-sharing in relation to benefits for hospital lengths
of stay in connection with childbirth for a mother or a newborn
under the plan or coverage, except that the coinsurance or other
cost-sharing for any portion of the hospital length of stay required
under paragraph (a) of this section may not be greater than that for
any preceding portion of the stay.

(ii) Examples. The rules of this paragraph (c)(3) are illustrated by
the following examples. In each example, the group health plan is
subject to the requirements of this section, as follows:

Example 1. (i) A group health plan provides benefits for at least a
48-hour hospital length of stay in connection with vaginal
deliveries. The plan covers 80 percent of the cost of the stay for
the first 24-hour period and 50 percent of the cost of the stay for
the second 24-hour period.

Thus, the coinsurance paid by the patient increases from 20 percent
to 50 percent after 24 hoU.S.

(ii) In this Example 1, the plan violates the rules of this
paragraph (c)(3) because coinsurance for the second 24-hour period
of the 48-hour stay is greater than that for the preceding portion
of the stay. (In addition, the plan also violates the similar rule
in paragraph (b)(2) of this section.)

Example 2. (i) A group health plan generally covers 70 percent of
the cost of a hospital length of stay in connection with childbirth.
However, the plan will cover 80 percent of the cost of the stay if
the participant or beneficiary notifies the plan of the pregnancy in
advance of admission and uses whatever hospital the plan may
designate.

(ii) In this Example 2, the plan does not violate the rules of this
paragraph (c)(3) because the level of benefits provided (70 percent
or 80 percent) is consistent throughout the 48-hour (or 96-hour)
hospital length of stay required under paragraph (a) of this
section. (In addition, the plan does not violate the rules in
paragraph (a)(4) or (b)(2) of this section.)

(4) Compensation of attending provider. This section does not
prevent a group health plan from negotiating with an attending
provider the level and type of compensation for care furnished in
accordance with this section (including paragraph (b) of this
section).

(d) Notice requirement. See 29 CFR 2520.102-3(u) and (v)(2) for
rules relating to a notice requirement imposed under section 711 of
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1181)
on certain group health plans that provide benefits for hospital
lengths of stay in connection with childbirth.

(e) Applicability in certain States - (1) Health insurance coverage.
The requirements of section 9811 and this section do not apply with
respect to health insurance coverage offered in connection with a
group health plan if there is a State law regulating the coverage
that meets any of the following criteria:

(i) The State law requires the coverage to provide for at least a
48-hour hospital length of stay following a vaginal delivery and at
least a 96-hour hospital length of stay following a delivery by
cesarean section.

(ii) The State law requires the coverage to provide for maternity
and pediatric care in accordance with guidelines established by the
American College of Obstetricians and Gynecologists, the American
Academy of Pediatrics, or any other established professional medical
association..41

(iii) The State law requires, in connection with the coverage for
maternity care, that the hospital length of stay for such care is
left to the decision of (or is required to be made by) the attending
provider in consultation with the mother. State laws that require
the decision to be made by the attending provider with the consent
of the mother satisfy the criterion of this paragraph (e)(1)(iii).

(2) Group health plans - (i) Fully-insured plans. For a group health
plan that provides benefits solely through health insurance
coverage, if the State law regulating the health insurance coverage
meets any of the criteria in paragraph (e)(1) of this section, then
the requirements of section 9811 and this section do not apply.

(ii) Self-insured plans. For a group health plan that provides all
benefits for hospital lengths of stay in connection with childbirth
other than through health insurance coverage, the requirements of
section 9811 and this section apply.

(iii) Partially-insured plans. For a group health plan that provides
some benefits through health insurance coverage, if the State law
regulating the health insurance coverage meets any of the criteria
in paragraph (e)(1) of this section, then the requirements of
section 9811 and this section apply only to the extent the plan
provides benefits for hospital lengths of stay in connection with
childbirth other than through health insurance coverage.

(3) Preemption provisions under ERISA. See 29 CFR 2590.711(e)(3)
regarding how rules parallel to those under paragraph (e)(1) of this
section relate to other preemption provisions under the Employee
Retirement Income Security Act of 1974.

(4) Examples. The rules of this paragraph (e) are illustrated by the
following examples:

Example 1. (i) A group health plan buys group health insurance
coverage in a State that requires that the coverage provide for at
least a 48-hour hospital length of stay following a vaginal delivery
and at least a 96-hour hospital length of stay following a delivery
by cesarean section.

(ii) In this Example 1, the coverage is subject to State law, and
the requirements of section 9811 and this section do not apply.

Example 2. (i) A self-insured group health plan covers hospital
lengths of stay in connection with childbirth in a State that
requires health insurance coverage to provide for maternity care in
accordance with guidelines established by the American College of
Obstetricians and Gynecologists and to provide for pediatric care in
accordance with guidelines established by the American Academy of
Pediatrics.

(ii) In this Example 2, even though the State law satisfies the
criterion of paragraph (e)(1)(ii) of this section, because the plan
provides benefits for hospital lengths of stay in connection with
childbirth other than through health insurance coverage, the plan is
subject to the requirements of section 9811 and this section.

(f) Effective date. Section 9811 applies to group health plans for
plan years beginning on or after January 1, 1998. This section
applies to group health plans for plan years beginning on or after
January 1, 1999.

Par. 5. In �54.9831-1T, paragraph (b)(1) is revised to read as
follows:

�54.9831-1T Special rules relating to group health plans
(temporary).

* * * * *

(b) Excepted benefits--(1) In general. The requirements of
��54.9801-1T through 54.9801-6T, 54.9802-1T, 54.9811-1T, and
54.9812-1T do not apply to any group health plan in relation to its
provision of the benefits described in paragraph (b)(2), (3), (4),
or (5) of this section (or any combination of these benefits).

* * * * *

Deputy Commissioner of Internal Revenue

Michael P. Dolan Approved: 8/14/98 Assistant Secretary of the
Treasury Donald C. Lubick.45 Pension and Welfare Benefits
Administration 29 CFR Chapter XXV 29 CFR Part 2590 is amended as
follows:

PART 2590 -RULES AND REGULATIONS FOR HEALTH INSURANCE PORTABILITY
AND RENEWABILITY FOR GROUP HEALTH PLANS

1. The authority citation for Part 2590 is revised to read as
follows:

Authority: Secs. 107, 209, 505, 701-703, 711, 712, and 731-734 of
ERISA (29 U.S.C.

1027, 1059, 1135, 1171-1173, 1181, 1182, and 1191-1194), as amended
by HIPAA (Pub. L.

104-191, 110 Stat. 1936) and NMHPA (Pub. L. 104-204, 110 Stat.
2935), and Secretary of Labor's Order No. 1-87, 52 FR 13139, April
21, 1987.

Subpart B - Other Requirements

2. � 2590.711 is revised to read as follows:

� 2590.711 Standards relating to benefits for mothers and newborns.

(a) Hospital length of stay - (1) General rule. Except as provided
in paragraph (a)(5) of this section, a group health plan, or a
health insurance issuer offering group health insurance coverage,
that provides benefits for a hospital length of stay in connection
with childbirth for a mother or her newborn may not restrict
benefits for the stay to less than -

(i) 48 hours following a vaginal delivery; or

(ii) 96 hours following a delivery by cesarean section.

(2) When stay begins - (i) Delivery in a hospital. If delivery
occurs in a hospital, the hospital length of stay for the mother or
newborn child begins at the time of delivery (or in the case of
multiple births, at the time of the last delivery).

(ii) Delivery outside a hospital. If delivery occurs outside a
hospital, the hospital length of stay begins at the time the mother
or newborn is admitted as a hospital inpatient in connection with
childbirth. The determination of whether an admission is in
connection with childbirth is a medical decision to be made by the
attending provider.

(3) Examples. The rules of paragraphs (a)(1) and (2) of this section
are illustrated by the following examples. In each example, the
group health plan provides benefits for hospital lengths of stay in
connection with childbirth and is subject to the requirements of
this section, as follows:

Example 1. (i) A pregnant woman covered under a group health plan
goes into labor and is admitted to the hospital at 10 p.m. on June
11. She gives birth by vaginal delivery at 6 a.m. on June 12.

(ii) In this Example 1, the 48-hour period described in paragraph
(a)(1)(i) of this section ends at 6 a.m. on June 14.

Example 2. (i) A woman covered under a group health plan gives birth
at home by vaginal delivery. After the delivery, the woman begins
bleeding excessively in connection with the childbirth and is
admitted to the hospital for treatment of the excessive bleeding at
7 p.m. on October 1.

(ii) In this Example 2, the 48-hour period described in paragraph
(a)(1)(i) of this section ends at 7 p.m. on October 3.

Example 3. (i) A woman covered under a group health plan gives birth
by vaginal delivery at home. The child later develops pneumonia and
is admitted to the hospital. The attending provider determines that
the admission is not in connection with childbirth.

(ii) In this Example 3, the hospital length-of-stay requirements of
this section do not apply to the child's admission to the hospital
because the admission is not in connection with childbirth.

(4) Authorization not required - (i) In general. A plan or issuer
may not require that a physician or other health care provider
obtain authorization from the plan or issuer for prescribing the
hospital length of stay required under paragraph (a)(1) of this
section. (See also paragraphs (b)(2) and (c)(3) of this section for
rules and examples regarding other authorization and certain notice
requirements.) (ii) Example. The rule of this paragraph (a)(4) is
illustrated by the following example:

Example. (i) In the case of a delivery by cesarean section, a group
health plan subject to the requirements of this section
automatically provides benefits for any hospital length of stay of
up to 72 hours. For any longer stay, the plan requires an attending
provider to complete a certificate of medical necessity. The plan
then makes a determination, based on the certificate of medical
necessity, whether a longer stay is medically necessary.

(ii) In this Example, the requirement that an attending provider
complete a certificate of medical necessity to obtain authorization
for the period between 72 hours and 96 hours following a delivery by
cesarean section is prohibited by this paragraph (a)(4).

(5) Exceptions - (i) Discharge of mother. If a decision to discharge
a mother earlier than the period specified in paragraph (a)(1) of
this section is made by an attending provider, in consultation with
the mother, the requirements of paragraph (a)(1) of this section do
not apply for any period after the discharge.

(ii) Discharge of newborn. If a decision to discharge a newborn
child earlier than the period specified in paragraph (a)(1) of this
section is made by an attending provider, in consultation with the
mother (or the newborn's authorized representative), the
requirements of paragraph (a)(1) of this section do not apply for
any period after the discharge.

(iii) Attending provider defined. For purposes of this section,
attending provider means an individual who is licensed under
applicable State law to provide maternity or pediatric care and who
is directly responsible for providing maternity or pediatric care to
a mother or newborn child.

(iv) Example. The rules of this paragraph (a)(5) are illustrated by
the following example:

Example. (i) A pregnant woman covered under a group health plan
subject to the requirements of this section goes into labor and is
admitted to a hospital. She gives birth by cesarean section. On the
third day after the delivery, the attending provider for the mother
consults with the mother, and the attending provider for the newborn
consults with the mother regarding the newborn. The attending
providers authorize the early discharge of both the mother and the
newborn. Both are discharged approximately 72 hours after the
delivery. The plan pays for the 72-hour hospital stays.

(ii) In this Example, the requirements of this paragraph (a) have
been satisfied with respect to the mother and the newborn. If either
is readmitted, the hospital stay for the readmission is not subject
to this section.

(b) Prohibitions - (1) With respect to mothers - (i) In general. A
group health plan, and a health insurance issuer offering group
health insurance coverage, may not -

(A) Deny a mother or her newborn child eligibility or continued
eligibility to enroll or renew coverage under the terms of the plan
solely to avoid the requirements of this section; or

(B) Provide payments (including payments-in-kind) or rebates to a
mother to encourage her to accept less than the minimum protections
available under this section.

(ii) Examples. The rules of this paragraph (b)(1) are illustrated by
the following examples. In each example, the group health plan is
subject to the requirements of this section, as follows:

Example 1. (i) A group health plan provides benefits for at least a
48-hour hospital length of stay following a vaginal delivery. If a
mother and newborn covered under the plan are discharged within 24
hours after the delivery, the plan will waive the copayment and
deductible.

(ii) In this Example 1, because waiver of the copayment and
deductible is in the nature of a rebate that the mother would not
receive if she and her newborn remained in the hospital, it is
prohibited by this paragraph (b)(1). (In addition, the plan violates
paragraph (b)(2) of this section because, in effect, no copayment or
deductible is required for the first portion of the stay and a
double copayment and a deductible are required for the second
portion of the stay.)

Example 2. (i) A group health plan provides benefits for at least a
48-hour hospital length of stay following a vaginal delivery. In the
event that a mother and her newborn are discharged earlier than 48
hours and the discharges occur after consultation with the mother in
accordance with the requirements of paragraph (a)(5) of this
section, the plan provides for a follow-up visit by a nurse within
48 hours after the discharges to provide certain services that the
mother and her newborn would otherwise receive in the hospital.

(ii) In this Example 2, because the follow-up visit does not provide
any services beyond what the mother and her newborn would receive in
the hospital, coverage for the follow-up visit is not prohibited by
this paragraph (b)(1).

(2) With respect to benefit restrictions - (i) In general. Subject
to paragraph (c)(3) of this section, a group health plan, and a
health insurance issuer offering group health insurance coverage,
may not restrict the benefits for any portion of a hospital length
of stay required under paragraph (a) of this section in a manner
that is less favorable than the benefits provided for any preceding
portion of the stay.

(ii) Example. The rules of this paragraph (b)(2) are illustrated by
the following example:

Example. (i) A group health plan subject to the requirements of this
section provides benefits for hospital lengths of stay in connection
with childbirth. In the case of a delivery by cesarean section, the
plan automatically pays for the first 48 hours. With respect to each
succeeding 24-hour period, the participant or beneficiary must call
the plan to obtain precertification from a utilization reviewer, who
determines if an additional 24-hour period is medically necessary.
If this approval is not obtained, the plan will not provide benefits
for any succeeding 24-hour period.

(ii) In this Example, the requirement to obtain precertification for
the two 24-hour periods immediately following the initial 48-hour
stay is prohibited by this paragraph (b)(2) because benefits for the
latter part of the stay are restricted in a manner that is less
favorable than benefits for a preceding portion of the stay.
(However, this section does not prohibit a plan from requiring
precertification for any period after the first 96 hours.) In
addition, if the plan's utilization reviewer denied any mother or
her newborn benefits within the 96-hour stay, the plan would also
violate paragraph (a) of this section.

(3) With respect to attending providers. A group health plan, and a
health insurance issuer offering group health insurance coverage,
may not directly or indirectly -

(i) Penalize (for example, take disciplinary action against or
retaliate against), or otherwise reduce or limit the compensation
of, an attending provider because the provider furnished care to a
participant or beneficiary in accordance with this section; or

(ii) Provide monetary or other incentives to an attending provider
to induce the provider to furnish care to a participant or
beneficiary in a manner inconsistent with this section, including
providing any incentive that could induce an attending provider to
discharge a mother or newborn earlier than 48 hours (or 96 hours)
after delivery.

(c) Construction. With respect to this section, the following rules
of construction apply:

(1) Hospital stays not mandatory. This section does not require a
mother to -

(i) Give birth in a hospital; or

(ii) Stay in the hospital for a fixed period of time following the
birth of her child.

(2) Hospital stay benefits not mandated. This section does not apply
to any group health plan, or any group health insurance coverage,
that does not provide benefits for hospital lengths of stay in
connection with childbirth for a mother or her newborn child.

(3) Cost-sharing rules - (i) In general. This section does not
prevent a group health plan or a health insurance issuer offering
group health insurance coverage from imposing deductibles,
coinsurance, or other cost-sharing in relation to benefits for
hospital lengths of stay in connection with childbirth for a mother
or a newborn under the plan or coverage, except that the coinsurance
or other cost-sharing for any portion of the hospital length of stay
required under paragraph (a) of this section may not be greater than
that for any preceding portion of the stay.

(ii) Examples. The rules of this paragraph (c)(3) are illustrated by
the following examples. In each example, the group health plan is
subject to the requirements of this section, as follows:

Example 1. (i) A group health plan provides benefits for at least a
48-hour hospital length of stay in connection with vaginal
deliveries. The plan covers 80 percent of the cost of the stay for
the first 24-hour period and 50 percent of the cost of the stay for
the second 24-hour period.

Thus, the coinsurance paid by the patient increases from 20 percent
to 50 percent after 24 hours.

(ii) In this Example 1, the plan violates the rules of this
paragraph (c)(3) because coinsurance for the second 24-hour period
of the 48-hour stay is greater than that for the preceding portion
of the stay. (In addition, the plan also violates the similar rule
in paragraph (b)(2) of this section.) Example 2. (i) A group health
plan generally covers 70 percent of the cost of a hospital length of
stay in connection with childbirth. However, the plan will cover 80
percent of the cost of the stay if the participant or beneficiary
notifies the plan of the pregnancy in advance of admission and uses
whatever hospital the plan may designate.

(ii) In this Example 2, the plan does not violate the rules of this
paragraph (c)(3) because the level of benefits provided (70 percent
or 80 percent) is consistent throughout the 48-hour (or 96-hour)
hospital length of stay required under paragraph (a) of this
section. (In addition, the plan does not violate the rules in
paragraph (a)(4) or (b)(2) of this section.)

(4) Compensation of attending provider. This section does not
prevent a group health plan or a health insurance issuer offering
group health insurance coverage from negotiating with an attending
provider the level and type of compensation for care furnished in
accordance with this section (including paragraph (b) of this
section).

(d) Notice requirement. See 29 CFR 2520.102-3 (u) and (v)(2)
(relating to the disclosure requirement under section 711(d) of the
Act).

(e) Applicability in certain States - (1) Health insurance coverage.
The requirements of section 711 of the Act and this section do not
apply with respect to health insurance coverage offered in
connection with a group health plan if there is a State law
regulating the coverage that meets any of the following criteria:

(i) The State law requires the coverage to provide for at least a
48-hour hospital length of stay following a vaginal delivery and at
least a 96-hour hospital length of stay following a delivery by
cesarean section.

(ii) The State law requires the coverage to provide for maternity
and pediatric care in accordance with guidelines established by the
American College of Obstetricians and Gynecologists, the American
Academy of Pediatrics, or any other established professional medical
association.

(iii) The State law requires, in connection with the coverage for
maternity care, that the hospital length of stay for such care is
left to the decision of (or is required to be made by) the attending
provider in consultation with the mother. State laws that require
the decision to be made by the attending provider with the consent
of the mother satisfy the criterion of this paragraph (e)(1)(iii).

(2) Group health plans - (i) Fully-insured plans. For a group health
plan that provides benefits solely through health insurance
coverage, if the State law regulating the health insurance coverage
meets any of the criteria in paragraph (e)(1) of this section, then
the requirements of section 711 of the Act and this section do not
apply.

(ii) Self-insured plans. For a group health plan that provides all
benefits for hospital lengths of stay in connection with childbirth
other than through health insurance coverage, the requirements of
section 711 of the Act and this section apply.

(iii) Partially-insured plans. For a group health plan that provides
some benefits through health insurance coverage, if the State law
regulating the health insurance coverage meets any of the criteria
in paragraph (e)(1) of this section, then the requirements of
section 711 of the Act and this section apply only to the extent the
plan provides benefits for hospital lengths of stay in connection
with childbirth other than through health insurance coverage.

(3) Relation to section 731(a) of the Act. The preemption provisions
contained in section 731(a)(1) of the Act and � 2590.731(a) do not
supersede a State law described in paragraph (e)(1) of this section.

(4) Examples. The rules of this paragraph (e) are illustrated by the
following examples:

Example 1. (i) A group health plan buys group health insurance
coverage in a State that requires that the coverage provide for at
least a 48-hour hospital length of stay following a vaginal delivery
and at least a 96-hour hospital length of stay following a delivery
by cesarean section.

(ii) In this Example 1, the coverage is subject to State law, and
the requirements of section 711 of the Act and this section do not
apply.

Example 2. (i) A self-insured group health plan covers hospital
lengths of stay in connection with childbirth in a State that
requires health insurance coverage to provide for maternity care in
accordance with guidelines established by the American College of
Obstetricians and Gynecologists and to provide for pediatric care in
accordance with guidelines established by the American Academy of
Pediatrics.

(ii) In this Example 2, even though the State law satisfies the
criterion of paragraph (e)(1)(ii) of this section, because the plan
provides benefits for hospital lengths of stay in connection with
childbirth other than through health insurance coverage, the plan is
subject to the requirements of section 711 of the Act and this
section.

(f) Effective date. Section 711 of the Act applies to group health
plans, and health insurance issuers offering group health insurance
coverage, for plan years beginning on or after January 1, 1998. This
section applies to group health plans, and health insurance issuers
offering group health insurance coverage, for plan years beginning
on or after January 1, 1999..Signed at Washington, DC this 19 day of
October, 1998.

Meredith Miller Deputy Assistant Secretary for Policy, Pension and
Welfare Benefits Administration, U.S. Department of Labor.

Health Care Financing Administration
45 CFR Subtitle A, Subchapter B
45 CFR Subtitle A, Subchapter B, is amended as set forth below:

A. Part 144 is amended as follows:

PART 144--REQUIREMENTS RELATING TO HEALTH INSURANCE COVERAGE

1. The authority citation for part 144 continues to read as follows:

Authority: Secs. 2701 through 2763, 2791, and 2792 of the Public
Health Service Act, 42 U.S.C. 300gg through 300gg-63, 300gg-91, and
300gg-92.

2. Section 144.101 is revised to read as follows:

� 144.101 Basis and purpose.

Part 146 of this subchapter implements sections 2701 through 2723 of
the Public Health Service Act (PHS Act, 42 U.S.C. 300gg, et seq.).
Its purpose is to improve access to group health insurance coverage,
to guarantee the renewability of all coverage in the group market,
and to provide certain protections for mothers and newborns with
respect to coverage for hospital stays in connection with
childbirth. Part 148 of this subchapter implements sections 2741
through 2763 of the PHS Act. Its purpose is to improve access to
individual health insurance coverage for certain eligible
individuals who previously had group coverage, to guarantee the
renewability of all coverage in the individual market, and to
provide protections for mothers and newborns with respect to
coverage for hospital stays in connection with childbirth. Sections
2791 and 2792 of the PHS Act define terms used in the regulations in
this subchapter and provide the basis for issuing these regulations,
respectively.

3. In � 144.102, paragraph (b) is revised to read as follows:

� 144.102 Scope and applicability.

*****

(b) The protections afforded under 45 CFR parts 144 through 148 to
individuals and employers (and other sponsors of health insurance
offered in connection with a group health plan) are determined by
whether the coverage involved is obtained in the small group market,
the large group market, or the individual market. Small employers,
and individuals who are eligible to enroll under the employer's
plan, are guaranteed availability of insurance coverage sold in the
small group market. Small and large employers are guaranteed the
right to renew their group coverage, subject to certain exceptions.
Eligible individuals are guaranteed availability of coverage sold in
the individual market, and all coverage in the individual market
must be guaranteed renewable. All coverage issued in the small or
large group market, and in the individual market, must provide
certain protections for mothers and newborns with respect to
coverage for hospital stays in connection with childbirth.

* * * * *

B. Part 146 is amended as follows:

PART 146--REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET 1. The
authority citation for part 146 continues to read as follows:

Authority: Secs. 2701 through 2763, 2791, and 2792 of the PHS Act
(42 U.S.C. 300gg through 300gg-63, 300gg-91, and 300gg-92).

2. In � 146.101, paragraph (a) is revised, paragraphs (b)(2) through
(b)(4) are redesignated as paragraphs (b)(3) through (b)(5),
respectively, and a new paragraph (b)(2) is added to read as
follows:

� 146.101 Basis and scope.

(a) Statutory basis. This part implements sections 2701 through 2723
of the PHS Act. Its purpose is to improve access to group health
insurance coverage, to guarantee the renewability of all coverage in
the group market, and to provide certain protections for mothers and
newborns with respect to coverage for hospital stays in connection
with childbirth. Sections 2791 and 2792 of the PHS Act define terms
used in the regulations in this subchapter and provide the basis for
issuing these regulations, respectively.

(b) * * *

(2) Subpart C. Subpart C of this part sets forth the requirements
that apply to plans and issuers with respect to coverage for
hospital stays in connection with childbirth. It also sets forth the
regulations governing parity between medical/surgical benefits and
mental health benefits in group health plans and health insurance
coverage offered by issuers in connection with a group health plan.

*****

Subpart C--Requirements Relating to Benefits

3. Section 146.130 is added to Subpart C to read as follows:

� 146.130 Standards relating to benefits for mothers and newborns.

(a) Hospital length of stay

(1) General rule. Except as provided in paragraph (a)(5) of this
section, a group health plan, or a health insurance issuer offering
group health insurance coverage, that provides benefits for a
hospital length of stay in connection with childbirth for a mother
or her newborn may not restrict benefits for the stay to less than

(i) 48 hours following a vaginal delivery; or

(ii) 96 hours following a delivery by cesarean section.

(2) When stay begins

(i) Delivery in a hospital. If delivery occurs in a hospital, the
hospital length of stay for the mother or newborn child begins at
the time of delivery (or in the case of multiple births, at the time
of the last delivery).

(ii) Delivery outside a hospital. If delivery occurs outside a
hospital, the hospital length of stay begins at the time the mother
or newborn is admitted as a hospital inpatient in connection with
childbirth. The determination of whether an admission is in
connection with childbirth is a medical decision to be made by the
attending provider.

(3) Examples. The rules of paragraphs (a)(1) and (a)(2) of this
section are illustrated by the following examples. In each example,
the group health plan provides benefits for hospital lengths of stay
in connection with childbirth and is subject to the requirements of
this section, as follows:

Example 1. (i) A pregnant woman covered under a group health plan
goes into labor and is admitted to the hospital at 10 p.m. on June
11. She gives birth by vaginal delivery at 6 a.m. on June 12.

(ii) In this Example 1, the 48-hour period described in paragraph
(a)(1)(i) of this section ends at 6 a.m. on June 14.

Example 2. (i) A woman covered under a group health plan gives birth
at home by vaginal delivery. After the delivery, the woman begins
bleeding excessively in connection with the childbirth and is
admitted to the hospital for treatment of the excessive bleeding at
7 p.m. on October 1.

(ii) In this Example 2, the 48-hour period described in paragraph
(a)(1)(i) of this section ends at 7 p.m. on October 3.

Example 3. (i) A woman covered under a group health plan gives birth
by vaginal delivery at home. The child later develops pneumonia and
is admitted to the hospital. The attending provider determines that
the admission is not in connection with childbirth.

(ii) In this Example 3, the hospital length-of-stay requirements of
this section do not apply to the child's admission to the hospital
because the admission is not in connection with childbirth.

(4) Authorization not required

(i) In general. A plan or issuer may not require that a physician or
other health care provider obtain authorization from the plan or
issuer for prescribing the hospital length of stay required under
paragraph (a)(1) of this section. (See also paragraphs (b)(2) and
(c)(3) of this section for rules and examples regarding other
authorization and certain notice requirements.)

(ii) Example. The rule of this paragraph (a)(4) is illustrated by
the following example:

Example. (i) In the case of a delivery by cesarean section, a group
health plan subject to the requirements of this section
automatically provides benefits for any hospital length of stay of
up to 72 hours. For any longer stay, the plan requires an attending
provider to complete a certificate of medical necessity. The plan
then makes a determination, based on the certificate of medical
necessity, whether a longer stay is medically necessary.

(ii) In this Example, the requirement that an attending provider
complete a certificate of medical necessity to obtain authorization
for the period between 72 hours and 96 hours following a delivery by
cesarean section is prohibited by this paragraph (a)(4).

(5) Exceptions

(i) Discharge of mother. If a decision to discharge a mother earlier
than the period specified in paragraph (a)(1) of this section is
made by an attending provider, in consultation with the mother, the
requirements of paragraph (a)(1) of this section do not apply for
any period after the discharge.

(ii) Discharge of newborn. If a decision to discharge a newborn
child earlier than the period specified in paragraph (a)(1) of this
section is made by an attending provider, in consultation with the
mother (or the newborn's authorized representative), the
requirements of paragraph (a)(1) of this section do not apply for
any period after the discharge.

(iii) Attending provider defined. For purposes of this section,
attending provider means an individual who is licensed under
applicable State law to provide maternity or pediatric care and who
is directly responsible for providing maternity or pediatric care to
a mother or newborn child.

(iv) Example. The rules of this paragraph (a)(5) are illustrated by
the following example:

Example. (i) A pregnant woman covered under a group health plan
subject to the requirements of this section goes into labor and is
admitted to a hospital. She gives birth by cesarean section. On the
third day after the delivery, the attending provider for the mother
consults with the mother, and the attending provider for the newborn
consults with the mother regarding the newborn. The attending
providers authorize the early discharge of both the mother and the
newborn. Both are discharged approximately 72 hours after the
delivery. The plan pays for the 72-hour hospital stays.

(ii) In this Example, the requirements of this paragraph (a) have
been satisfied with respect to the mother and the newborn. If either
is readmitted, the hospital stay for the readmission is not subject
to this section.

(b) Prohibitions

(1) With respect to mothers

(i) In general. A group health plan, and a health insurance issuer
offering group health insurance coverage, may not

(A) Deny a mother or her newborn child eligibility or continued
eligibility to enroll or renew coverage under the terms of the plan
solely to avoid the requirements of this section; or

(B) Provide payments (including payments-in-kind) or rebates to a
mother to encourage her to accept less than the minimum protections
available under this section.

(ii) Examples. The rules of this paragraph (b)(1) are illustrated by
the following examples. In each example, the group health plan is
subject to the requirements of this section, as follows:

Example 1. (i) A group health plan provides benefits for at least a
48-hour hospital length of stay following a vaginal delivery. If a
mother and newborn covered under the plan are discharged within 24
hours after the delivery, the plan will waive the copayment and
deductible.

(ii) In this Example 1, because waiver of the copayment and
deductible is in the nature of a rebate that the mother would not
receive if she and her newborn remained in the hospital, it is
prohibited by this paragraph (b)(1). (In addition, the plan violates
paragraph (b)(2) of this section because, in effect, no copayment or
deductible is required for the first portion of the stay and a
double copayment and a deductible are required for the second
portion of the stay.)

Example 2. (i) A group health plan provides benefits for at least a
48-hour hospital length of stay following a vaginal delivery. In the
event that a mother and her newborn are discharged earlier than 48
hours and the discharges occur after consultation with the mother in
accordance with the requirements of paragraph (a)(5) of this
section, the plan provides for a follow-up visit by a nurse within
48 hours after the discharges to provide certain services that the
mother and her newborn would otherwise receive in the hospital.

(ii) In this Example 2, because the follow-up visit does not provide
any services beyond what the mother and her newborn would receive in
the hospital, coverage for the follow-up visit is not prohibited by
this paragraph (b)(1).

(2) With respect to benefit restrictions

(i) In general. Subject to paragraph (c)(3) of this section, a group
health plan, and a health insurance issuer offering group health
insurance coverage, may not restrict the benefits for any portion of
a hospital length of stay required under paragraph (a) of this
section in a manner that is less favorable than the benefits
provided for any preceding portion of the stay.

(ii) Example. The rules of this paragraph (b)(2) are illustrated by
the following example:

Example. (i) A group health plan subject to the requirements of this
section provides benefits for hospital lengths of stay in connection
with childbirth. In the case of a delivery by cesarean section, the
plan automatically pays for the first 48 hours. With respect to each
succeeding 24-hour period, the participant or beneficiary must call
the plan to obtain precertification from a utilization reviewer, who
determines if an additional 24-hour period is medically necessary.
If this approval is not obtained, the plan will not provide benefits
for any succeeding 24-hour period.

(ii) In this Example, the requirement to obtain precertification for
the two 24-hour periods immediately following the initial 48-hour
stay is prohibited by this paragraph (b)(2) because benefits for the
latter part of the stay are restricted in a manner that is less
favorable than benefits for a preceding portion of the stay.
(However, this section does not prohibit a plan from requiring
precertification for any period after the first 96 hours.) In
addition, if the plan's utilization reviewer denied any mother or
her newborn benefits within the 96-hour stay, the plan would also
violate paragraph (a) of this section.

(3) With respect to attending providers. A group health plan, and a
health insurance issuer offering group health insurance coverage,
may not directly or indirectly

(i) Penalize (for example, take disciplinary action against or
retaliate against), or otherwise reduce or limit the compensation
of, an attending provider because the provider furnished care to a
participant or beneficiary in accordance with this section; or

(ii) Provide monetary or other incentives to an attending provider
to induce the provider to furnish care to a participant or
beneficiary in a manner inconsistent with this section, including
providing any incentive that could induce an attending provider to
discharge a mother or newborn earlier than 48 hours (or 96 hours)
after delivery.

(c) Construction. With respect to this section, the following rules
of construction apply:

(1) Hospital stays not mandatory. This section does not require a
mother to

(i) Give birth in a hospital; or

(ii) Stay in the hospital for a fixed period of time following the
birth of her child.

(2) Hospital stay benefits not mandated. This section does not apply
to any group health plan, or any group health insurance coverage,
that does not provide benefits for hospital lengths of stay in
connection with childbirth for a mother or her newborn child.

(3) Cost-sharing rules

(i) In general. This section does not prevent a group health plan or
a health insurance issuer offering group health insurance coverage
from imposing deductibles, coinsurance, or other cost-sharing in
relation to benefits for hospital lengths of stay in connection with
childbirth for a mother or a newborn under the plan or coverage,
except that the coinsurance or other cost-sharing for any portion of
the hospital length of stay required under paragraph (a) of this
section may not be greater than that for any preceding portion of
the stay.

(ii) Examples. The rules of this paragraph (c)(3) are illustrated by
the following examples. In each example, the group health plan is
subject to the requirements of this section, as follows:

Example 1. (i) A group health plan provides benefits for at least a
48-hour hospital length of stay in connection with vaginal
deliveries. The plan covers 80 percent of the cost of the stay for
the first 24-hour period and 50 percent of the cost of the stay for
the second 24-hour period. Thus, the coinsurance paid by the patient
increases from 20 percent to 50 percent after 24 hoU.S.

(ii) In this Example 1, the plan violates the rules of this
paragraph (c)(3) because coinsurance for the second 24-hour period
of the 48-hour stay is greater than that for the preceding portion
of the stay. (In addition, the plan also violates the similar rule
in paragraph (b)(2) of this section.)

Example 2. (i) A group health plan generally covers 70 percent of
the cost of a hospital length of stay in connection with childbirth.
However, the plan will cover 80 percent of the cost of the stay if
the participant or beneficiary notifies the plan of the pregnancy in
advance of admission and uses whatever hospital the plan may
designate.

(ii) In this Example 2, the plan does not violate the rules of this
paragraph (c)(3) because the level of benefits provided (70 percent
or 80 percent) is consistent throughout the 48-hour (or 96-hour)
hospital length of stay required under paragraph (a) of this
section. (In addition, the plan does not violate the rules in
paragraph (a)(4) or paragraph (b)(2) of this section.)

(4) Compensation of attending provider. This section does not
prevent a group health plan or a health insurance issuer offering
group health insurance coverage from negotiating with an attending
provider the level and type of compensation for care furnished in
accordance with this section (including paragraph (b) of this
section).

(d) Notice requirement. Except as provided in paragraph (d)(4)of
this section, a group health plan that provides benefits for
hospital lengths of stay in connection with childbirth must meet the
following requirements:

(1) Required statement. The plan document that provides a
description of plan benefits to participants and beneficiaries must
disclose information that notifies participants and beneficiaries of
their rights under this section.

(2) Disclosure notice. To meet the disclosure requirement set forth
in paragraph (d)(1) of this section, the following disclosure notice
must be used:

Statement of Rights under the Newborns' and Mothers' Health
Protection Act

Under federal law, group health plans and health insurance issuers
offering group health insurance coverage generally may not restrict
benefits for any hospital length of stay in connection with
childbirth for the mother or newborn child to less than 48 hours
following a vaginal delivery, or less than 96 hours following a
delivery by cesarean section. However, the plan or issuer may pay
for a shorter stay if the attending provider (e.g.,your physician,
nurse midwife, or physician assistant), after consultation with the
mother, discharges the mother or newborn earlier.

Also, under federal law, plans and issuers may not set the level of
benefits or out-of-pocket costs so that any later portion of the 48-
hour (or 96-hour) stay is treated in a manner less favorable to the
mother or newborn than any earlier portion of the stay.

In addition, a plan or issuer may not, under federal law, require
that a physician or other health care provider obtain authorization
for prescribing a length of stay of up to 48 hours (or 96 hours).
However, to use certain providers or facilities, or to reduce your
out-of-pocket costs, you may be required to obtain precertification.
For information on precertification, contact your plan
administrator.

(3) Timing of disclosure. The disclosure notice in paragraph (d)(2)
of this section shall be furnished to each participant covered under
a group health plan, and each beneficiary receiving benefits under a
group health plan, not later than 60 days after the first day of the
first plan year beginning on or after January 1, 1999.

(4) Exceptions. The requirements of this paragraph (d) do not apply
in the following situations:

(i) Self-insured plans. The benefits for hospital lengths of stay in
connection with childbirth are not provided through health insurance
coverage, and the group health plan has made the election described
in �146.180 to be exempted from the requirements of this section.

(ii) Insured plans. The benefits for hospital lengths of stay in
connection with childbirth are provided through health insurance
coverage, and the coverage is regulated under a State law described
in paragraph (e) of this section.

(e) Applicability in certain States

(1) Health insurance coverage. The requirements of section 2704 of
the PHS Act and this section do not apply with respect to health
insurance coverage offered in connection with a group health plan if
there is a State law regulating the coverage that meets any of the
following criteria:

(i) The State law requires the coverage to provide for at least a
48-hour hospital length of stay following a vaginal delivery and at
least a 96-hour hospital length of stay following a delivery by
cesarean section.

(ii) The State law requires the coverage to provide for maternity
and pediatric care in accordance with guidelines established by the
American College of Obstetricians and Gynecologists, the American
Academy of Pediatrics, or any other established professional medical
association.

(iii) The State law requires, in connection with the coverage for
maternity care, that the hospital length of stay for such care is
left to the decision of (or is required to be made by) the attending
provider in consultation with the mother.

State laws that require the decision to be made by the attending
provider with the consent of the mother satisfy the criterion of
this paragraph (e)(1)(iii).

(2) Group health plans

(i) Fully-insured plans. For a group health plan that provides
benefits solely through health insurance coverage, if the State law
regulating the health insurance coverage meets any of the criteria
in paragraph (e)(1) of this section, then the requirements of
section 2704 of the PHS Act and this section do not apply.

(ii) Self-insured plans. For a group health plan that provides all
benefits for hospital lengths of stay in connection with childbirth
other than through health insurance coverage, the requirements of
section 2704 of the PHS Act and this section apply.

(iii) Partially-insured plans. For a group health plan that provides
some benefits through health insurance coverage, if the State law
regulating the health insurance coverage meets any of the criteria
in paragraph (e)(1) of this section, then the requirements of
section 2704 of the PHS Act and this section apply only to the
extent the plan provides benefits for hospital lengths of stay in
connection with childbirth other than through health insurance
coverage.

(3) Relation to section 2723(a) of the PHS Act. The preemption
provisions contained in section 2723(a)(1) of the PHS Act and �
146.143(a) do not supersede a State law described in paragraph (e)
(1) of this section.

(4) Examples. The rules of this paragraph (e) are illustrated by the
following examples:

Example 1. (i) A group health plan buys group health insurance
coverage in a State that requires that the coverage provide for at
least a 48-hour hospital length of stay following a vaginal delivery
and at least a 96-hour hospital length of stay following a delivery
by cesarean section.

(ii) In this Example 1, the coverage is subject to State law, and
the requirements of section 2704 of the PHS Act and this section do
not apply.

Example 2. (i) A self-insured group health plan covers hospital
lengths of stay in connection with childbirth in a State that
requires health insurance coverage to provide for maternity care in
accordance with guidelines established by the American College of
Obstetricians and Gynecologists and to provide for pediatric care in
accordance with guidelines established by the American Academy of
Pediatrics.

(ii) In this Example 2, even though the State law satisfies the
criterion of paragraph (e)(1)(ii) of this section, because the plan
provides benefits for hospital lengths of stay in connection with
childbirth other than through health insurance coverage, the plan is
subject to the requirements of section 2704 of the PHS Act and this
section.

(f) Effective date. Section 2704 of the PHS Act applies to group
health plans, and health insurance issuers offering group health
insurance coverage, for plan years beginning on or after January 1,
1998. This section applies to group health plans, and health
insurance issuers offering group health insurance coverage, for plan
years beginning on or after January 1, 1999.

C. Part 148 is amended as follows:

PART 148--REQUIREMENTS FOR THE INDIVIDUAL HEALTH INSURANCE MARKET

1. The authority citation for part 148 continues to read as follows:

Authority: Secs. 2741 through 2763, 2791, and 2792 of the Public
Health Service Act (42 U.S.C. 300gg-41 through 300gg-63, 300gg-91,
and 300gg-92).

2. Section 148.101 is revised to read as follows:

� 148.101 Basis and purpose.

This part implements sections 2741 through 2763 and 2791 and 2792 of
the PHS Act. Its purpose is to improve access to individual health
insurance coverage for certain eligible individuals who previously
had group coverage, and to guarantee the renewability of all
coverage in the individual market. It also provides certain
protections for mothers and newborns with respect to coverage for
hospital stays in connection with childbirth.

3. In � 148.102, paragraphs (a) heading,(a)(2), and (b) are revised
to read as follows:

� 148.102 Scope, applicability, and effective dates.

(a) Scope and applicability. * * *

(2) The requirements of this part that pertain to guaranteed
availability of individual health insurance coverage for certain
eligible individuals apply to all issuers of individual health
insurance coverage in a State, unless the State implements an
acceptable alternative mechanism as described in �148.128. The
requirements that pertain to guaranteed renewability for all
individuals, and to protections for mothers and newborns with
respect to hospital stays in connection with childbirth, apply to
all issuers of individual health insurance coverage in the State,
regardless of whether a State implements an alternative mechanism.

(b) Effective date. Except as provided in ��148.124 (certificate of
coverage), 148.128 (alternative State mechanisms), and 148.170
(standards relating to benefits for mothers and newborns), the
requirements of this part apply to health insurance coverage
offered, sold, issued, renewed, in effect, or operated in the
individual market after June 30, 1997, regardless of when a period
of creditable coverage occU.S. 4. A new subpart C is added to read
as follows:

Subpart C--Requirements Related to Benefits � 148.170 Standards
relating to benefits for mothers and newborns.

(a) Hospital length of stay

(1) General rule. Except as provided in paragraph (a)(5) of this
section, an issuer offering health insurance coverage in the
individual market that provides benefits for a hospital length of
stay in connection with childbirth for a mother or her newborn may
not restrict benefits for the stay to less than

(i) 48 hours following a vaginal delivery; or

(ii) 96 hours following a delivery by cesarean section.

(2) When stay begins

(i) Delivery in a hospital. If delivery occurs in a hospital, the
hospital length of stay for the mother or newborn child begins at
the time of delivery (or in the case of multiple births, at the time
of the last delivery).

(ii) Delivery outside a hospital. If delivery occurs outside a
hospital, the hospital length of stay begins at the time the mother
or newborn is admitted as a hospital inpatient in connection with
childbirth. The determination of whether an admission is in
connection with childbirth is a medical decision to be made by the
attending provider.

(3) Examples. The rules of paragraphs (a)(1) and (a)(2) of this
section are illustrated by the following examples. In each example,
the issuer provides benefits for hospital lengths of stay in
connection with childbirth and is subject to the requirements of
this section, as follows:

Example 1. (i) A pregnant woman covered under a policy issued in the
individual market goes into labor and is admitted to the hospital at
10 p.m. on June 11. She gives birth by vaginal delivery at 6 a.m. on
June 12.

(ii) In this Example 1, the 48-hour period described in paragraph
(a)(1)(i) of this section ends at 6 a.m. on June 14.

Example 2. (i) A woman covered under a policy issued in the
individual market gives birth at home by vaginal delivery. After the
delivery, the woman begins bleeding excessively in connection with
the childbirth and is admitted to the hospital for treatment of the
excessive bleeding at 7 p.m. on October 1..74 (ii) In this Example
2, the 48-hour period described in paragraph (a)(1)(i) of this
section ends at 7 p.m. on October 3.

Example 3. (i) A woman covered under a policy issued in the
individual market gives birth by vaginal delivery at home.

The child later develops pneumonia and is admitted to the hospital.
The attending provider determines that the admission is not in
connection with childbirth.

(ii) In this Example 3, the hospital length-of-stay requirements of
this section do not apply to the child's admission to the hospital
because the admission is not in connection with childbirth.

(4) Authorization not required

(i) In general. An issuer may not require that a physician or other
health care provider obtain authorization from the issuer for
prescribing the hospital length of stay required under paragraph (a)
(1) of this section. (See also paragraphs (b)(2) and (c)(3) of this
section for rules and examples regarding other authorization and
certain notice requirements.)

(ii) Example. The rule of this paragraph (a)(4) is illustrated by
the following example:

Example. (i) In the case of a delivery by cesarean section, an
issuer subject to the requirements of this section automatically
provides benefits for any hospital length of stay of up to 72 hours.
For any longer stay, the issuer requires an attending provider to
complete a certificate of medical necessity. The issuer then makes a
determination, based on the certificate of medical necessity,
whether a longer stay is medically necessary.

(ii) In this Example, the requirement that an attending provider
complete a certificate of medical necessity to obtain authorization
for the period between 72 hours and 96 hours following a delivery by
cesarean section is prohibited by this paragraph (a)(4).

(5) Exceptions

(i) Discharge of mother. If a decision to discharge a mother earlier
than the period specified in paragraph (a)(1) of this section is
made by an attending provider, in consultation with the mother, the
requirements of paragraph (a)(1) of this section do not apply for
any period after the discharge.

(ii) Discharge of newborn. If a decision to discharge a newborn
child earlier than the period specified in paragraph (a)(1) of this
section is made by an attending provider, in consultation with the
mother (or the newborn's authorized representative), the
requirements of paragraph (a)(1) of this section do not apply for
any period after the discharge.

(iii) Attending provider defined. For purposes of this section,
attending provider means an individual who is licensed under
applicable State law to provide maternity or pediatric care and who
is directly responsible for providing maternity or pediatric care to
a mother or newborn child.

(iv) Example. The rules of this paragraph (a)(5) are illustrated by
the following example:

Example. (i) A pregnant woman covered under a policy offered by an
issuer subject to the requirements of this section goes into labor
and is admitted to a hospital. She gives birth by cesarean section.
On the third day after the delivery, the attending provider for the
mother consults with the mother, and the attending provider for the
newborn consults with the mother regarding the newborn. The
attending providers authorize the early discharge of both the mother
and the newborn. Both are discharged approximately 72 hours after
the delivery. The issuer pays for the 72-hour hospital stays.

(ii) In this Example, the requirements of this paragraph (a) have
been satisfied with respect to the mother and the newborn. If either
is readmitted, the hospital stay for the readmission is not subject
to this section.

(b) Prohibitions

(1) With respect to mothers

(i) In general. An issuer may not

(A) Deny a mother or her newborn child eligibility or continued
eligibility to enroll in or renew coverage solely to avoid the
requirements of this section; or (B) Provide payments (including
payments-in-kind) or rebates to a mother to encourage her to accept
less than the minimum protections available under this section.

(ii) Examples. The rules of this paragraph (b)(1) are illustrated by
the following examples. In each example, the issuer is subject to
the requirements of this section, as follows:

Example 1. (i) An issuer provides benefits for at least a 48-hour
hospital length of stay following a vaginal delivery. If a mother
and newborn covered under a policy issued in the individual market
are discharged within 24 hours after the delivery, the issuer will
waive the copayment and deductible.

(ii) In this Example 1, because waiver of the copayment and
deductible is in the nature of a rebate that the mother would not
receive if she and her newborn remained in the hospital, it is
prohibited by this paragraph (b)(1). (In addition, the issuer
violates paragraph (b)(2) of this section because, in effect, no
copayment or deductible is required for the first portion of the
stay and a double copayment and a deductible are required for the
second portion of the stay.)

Example 2. (i) An issuer provides benefits for at least a 48-hour
hospital length of stay following a vaginal delivery. In the event
that a mother and her newborn are discharged earlier than 48 hours
and the discharges occur after consultation with the mother in
accordance with the requirements of paragraph (a)(5) of this
section, the issuer provides for a follow-up visit by a nurse within
48 hours after the discharges to provide certain services that the
mother and her newborn would otherwise receive in the hospital.

(ii) In this Example 2, because the follow-up visit does not provide
any services beyond what the mother and her newborn would receive in
the hospital, coverage for the follow-up visit is not prohibited by
this paragraph (b)(1).

(2) With respect to benefit restrictions

(i) In general. Subject to paragraph (c)(3) of this section, an
issuer may not restrict the benefits for any portion of a hospital
length of stay required under paragraph (a) of this section in a
manner that is less favorable than the benefits provided for any
preceding portion of the stay.

(ii) Example. The rules of this paragraph (b)(2) are illustrated by
the following example:

Example. (i) An issuer subject to the requirements of this section
provides benefits for hospital lengths of stay in connection with
childbirth. In the case of a delivery by cesarean section, the
issuer automatically pays for the first 48 hours. With respect to
each succeeding 24-hour period, the covered individual must call the
issuer to obtain precertification from a utilization reviewer, who
determines if an additional 24-hour period is medically necessary.
If this approval is not obtained, the issuer will not provide
benefits for any succeeding 24-hour period.

(ii) In this Example, the requirement to obtain precertification for
the two 24-hour periods immediately following the initial 48-hour
stay is prohibited by this paragraph (b)(2) because benefits for the
latter part of the stay are restricted in a manner that is less
favorable than benefits for a preceding portion of the stay.
(However, this section does not prohibit an issuer from requiring
precertification for any period after the first 96 hours.) In
addition, if the issuer's utilization reviewer denied any mother or
her newborn benefits within the 96-hour stay, the issuer would also
violate paragraph (a) of this section.

(3) With respect to attending providers. An issuer may not directly
or indirectly

(i) Penalize (for example, take disciplinary action against or
retaliate against), or otherwise reduce or limit the compensation
of, an attending provider because the provider furnished care to a
covered individual in accordance with this section; or

(ii) Provide monetary or other incentives to an attending provider
to induce the provider to furnish care to a covered individual in a
manner inconsistent with this section, including providing any
incentive that could induce an attending provider to discharge a
mother or newborn earlier than 48 hours (or 96 hours) after
delivery.

(c) Construction. With respect to this section, the following rules
of construction apply:

(1) Hospital stays not mandatory. This section does not require a
mother to

(i) Give birth in a hospital; or

(ii) Stay in the hospital for a fixed period of time following the
birth of her child.

(2) Hospital stay benefits not mandated. This section does not apply
to any issuer that does not provide benefits for hospital lengths of
stay in connection with childbirth for a mother or her newborn
child.

(3) Cost-sharing rules

(i) In general. This section does not prevent an issuer from
imposing deductibles, coinsurance, or other cost-sharing in relation
to benefits for hospital lengths of stay in connection with
childbirth for a mother or a newborn under the coverage, except that
the coinsurance or other cost-sharing for any portion of the
hospital length of stay required under paragraph (a) of this section
may not be greater than that for any preceding portion of the stay.

(ii) Examples. The rules of this paragraph (c)(3) are illustrated by
the following examples. In each example, the issuer is subject to
the requirements of this section, as follows:

Example 1. (i) An issuer provides benefits for at least a 48-hour
hospital length of stay in connection with vaginal deliveries. The
issuer covers 80 percent of the cost of the stay for the first 24-
hour period and 50 percent of the cost of the stay for the second
24-hour period. Thus, the coinsurance paid by the patient increases
from 20 percent to 50 percent after 24 hoU.S.

(ii) In this Example 1, the issuer violates the rules of this
paragraph (c)(3) because coinsurance for the second 24-hour period
of the 48-hour stay is greater than that for the preceding portion
of the stay. (In addition, the issuer also violates the similar rule
in paragraph (b)(2) of this section.) Example 2. (i) An issuer
generally covers 70 percent of the cost of a hospital length of stay
in connection with childbirth. However, the issuer will cover 80
percent of the cost of the stay if the covered individual notifies
the issuer of the pregnancy in advance of admission and uses
whatever hospital the issuer may designate.

(ii) In this Example 2, the issuer does not violate the rules of
this paragraph (c)(3) because the level of benefits provided (70
percent or 80 percent) is consistent throughout the 48-hour (or 96-
hour) hospital length of stay required under paragraph (a) of this
section. (In addition, the issuer does not violate the rules in
paragraph (a)(4) or paragraph (b)(2) of this section.)

(4) Compensation of attending provider. This section does not
prevent an issuer from negotiating with an attending provider the
level and type of compensation for care furnished in accordance with
this section (including paragraph (b) of this section).

(5) Applicability. This section applies to all health insurance
coverage issued in the individual market, and is not limited in its
application to coverage that is provided to eligible individuals as
defined in section 2741(b) of the PHS Act.

(d) Notice requirement. Except as provided in paragraph (d)(4) of
this section, an issuer offering health insurance in the individual
market must meet the following requirements with respect to benefits
for hospital lengths of stay in connection with childbirth:

(1) Required statement. The insurance contract must disclose
information that notifies covered individuals of their rights under
this section.

(2) Disclosure notice. To meet the disclosure requirement set forth
in paragraph (d)(1) of this section, the following disclosure notice
must be used:

Statement of Rights under the Newborns' and Mothers' Health
Protection Act

Under federal law, health insurance issuers generally may not
restrict benefits for any hospital length of stay in connection with
childbirth for the mother or newborn child to less than 48 hours
following a vaginal delivery, or less than 96 hours following a
delivery by cesarean section. However, the issuer may pay for a
shorter stay if the attending provider (e.g., your physician, nurse
midwife, or physician assistant), after consultation with the
mother, discharges the mother or newborn earlier.

Also, under federal law, issuers may not set the level of benefits
or out-of-pocket costs so that any later portion of the 48-hour (or
96-hour) stay is treated in a manner less favorable to the mother or
newborn than any earlier portion of the stay.

In addition, an issuer may not, under federal law, require that a
physician or other health care provider obtain authorization for
prescribing a length of stay of up to 48 hours (or 96 hours).
However, to use certain providers or facilities, or to reduce your
out-of-pocket costs, you may be required to obtain precertification.
For information on precertification, contact your issuer.

(3) Timing of disclosure. The disclosure notice in paragraph (d)(2)
of this section shall be furnished to the covered individuals in the
form of a copy of the contract, or a rider (or equivalent amendment
to the contract), not later than March 1, 1999.

(4) Exception. The requirements of this paragraph (d) do not apply
with respect to coverage regulated under a State law described in
paragraph (e) of this section.

(e) Applicability in certain States

(1) Health insurance coverage. The requirements of section 2751 of
the PHS Act and this section do not apply with respect to health
insurance coverage in the individual market if there is a State law
regulating the coverage that meets any of the following criteria:

(i) The State law requires the coverage to provide for at least a
48-hour hospital length of stay following a vaginal delivery and at
least a 96-hour hospital length of stay following a delivery by
cesarean section.

(ii) The State law requires the coverage to provide for maternity
and pediatric care in accordance with guidelines established by the
American College of Obstetricians and Gynecologists, the American
Academy of Pediatrics, or any other established professional medical
association.

(iii) The State law requires, in connection with the coverage for
maternity care, that the hospital length of stay for such care is
left to the decision of (or is required to be made by) the attending
provider in consultation with the mother.

State laws that require the decision to be made by the attending
provider with the consent of the mother satisfy the criterion of
this paragraph (e)(1)(iii).

(2) Relation to section 2762(a) of the PHS Act. The preemption
provisions contained in section 2762(a) of the PHS Act and �
148.210(b) do not supersede a State law described in paragraph (e)
(1) of this section.

(f) Effective date. Section 2751 of the PHS Act applies to health
insurance coverage offered, sold, issued, renewed, in effect, or
operated in the individual market on or after January 1, 1998. This
section applies to health insurance coverage offered, sold, issued,
renewed, in effect, or operated in the individual market on or after
January 1, 1999.

Dated: Aug. 27, 1998
Nancy-Ann Min DeParle
Administrator, Health Care
Financing Administration.

Dated: Sept. 21, 1998
Donna E. Shalala
Secretary, Department of Health and
Human Services.

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