Maryland Life and Health Insurance License Practice Exam

Under what condition can a group health policy renewal be denied according to HIPAA?

1. Change in employer ownership

2. Participation or contribution rules have been violated

3. Increase in age of employees

4. Reduction in benefits offered

The correct answer is: Participation or contribution rules have been violated

A group health policy renewal can be denied due to violations of participation or contribution rules because these conditions directly relate to the eligibility and financial responsibilities of group members participating in the plan. HIPAA (Health Insurance Portability and Accountability Act) establishes guidelines to prevent discrimination in renewals based on health status, but it does allow for certain operational rules to be enforced, such as ensuring that a minimum percentage of eligible employees participate in the plan or that contributions meet specific standards. When these rules are not adhered to, such as when too few employees enroll or when the company does not meet contribution thresholds, the insurer has valid reasons to deny the renewal of the group policy. This ensures that the insurance pool remains viable and that coverage can effectively be provided for all participating members. Other conditions, such as changes in employer ownership, increases in employee age, or reductions in benefits, don't align with the specific operational conduct governed by HIPAA that pertains to the renewal eligibility of group health policies.