Internal Revenue Bulletin 1998-45 (PDF rendition): IRS Revenue Rulings

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.

SPECIAL ANNOUNCEMENT
Announcement 98–102, page 28.
The Eleventh Annual Institute on Current Issues in Interna-
tional Taxation, co-sponsored with The George Washington
University, will be held on December 10 and 11, 1998, at
the J.W. Marriott Hotel in Washington, DC.
INCOME TAX
Rev. Rul. 98–52, page 4.
Federal rates; adjusted federal rates; adjusted federal
long-term rate, and the long-term exempt rate.For
purposes of sections 1274, 1288, 382, and other sections
of the Code, tables set forth the rates for November 1998.
EMPLOYEE PLANS
T.D. 8788, page 6.
REG–109708–97, page 29.
These documents contain interim rules governing the New-
borns’ and Mothers’ Health Protection Act of 1996 (NMHPA).
The interim rules provide guidance to employers, group
health plans, health insurance issuers, participants, and ben-
eficiaries relating to new requirements for hospital lengths of
stay in connection with childbirth.
EXEMPT ORGANIZATIONS
Announcement 98–101, page 27.
A list is provided of organizations now classified as private
foundations.
Internal Revenue
bbuulllleettiinn
Bulletin No. 1998–45
November 9, 1998
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
Department of the Treasury
Internal Revenue Service
Finding Lists begin on page 31.
IRB 1998-45 11/4/98 3:23 PM Page 1

The IRS Mission
Provide America’s taxpayers top quality service by help-
ing them understand and meet their tax responsibilities
and by applying the tax law with integrity and fairness to
all.
2
Statement of Principles
of Internal Revenue
Tax Administration
The function of the Internal Revenue Service is to adminis-
ter the Internal Revenue Code. Tax policy for raising revenue
is determined by Congress.
With this in mind, it is the duty of the Service to carry out that
policy by correctly applying the laws enacted by Congress;
to determine the reasonable meaning of various Code provi-
sions in light of the Congressional purpose in enacting them;
and to perform this work in a fair and impartial manner, with
neither a government nor a taxpayer point of view.
At the heart of administration is interpretation of the Code. It
is the responsibility of each person in the Service, charged
with the duty of interpreting the law, to try to find the true
meaning of the statutory provision and not to adopt a
strained construction in the belief that he or she is “protect-
ing the revenue.” The revenue is properly protected only
when we ascertain and apply the true meaning of the statute.
The Service also has the responsibility of applying and
administering the law in a reasonable, practical manner.
Issues should only be raised by examining officers when
they have merit, never arbitrarily or for trading purposes.
At the same time, the examining officer should never hesi-
tate to raise a meritorious issue. It is also important that
care be exercised not to raise an issue or to ask a court to
adopt a position inconsistent with an established Service
position.
Administration should be both reasonable and vigorous. It
should be conducted with as little delay as possible and
with great courtesy and considerateness. It should never
try to overreach, and should be reasonable within the
bounds of law and sound administration. It should, howev-
er, be vigorous in requiring compliance with law and it
should be relentless in its attack on unreal tax devices and
fraud.
IRB 1998-45 11/4/98 3:23 PM Page 2

The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing offi-
cial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly and may be obtained
from the Superintendent of Documents on a subscription
basis. Bulletin contents of a permanent nature are consoli-
dated semiannually into Cumulative Bulletins, which are sold
on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of in-
ternal management are not published; however, statements
of internal practices and procedures that affect the rights
and duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service on
the application of the law to the pivotal facts stated in the
revenue ruling. In those based on positions taken in rulings
to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature
are deleted to prevent unwarranted invasions of privacy and
to comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have
the force and effect of Treasury Department Regulations,
but they may be used as precedents. Unpublished rulings
will not be relied on, used, or cited as precedents by Service
personnel in the disposition of other cases. In applying pub-
lished rulings and procedures, the effect of subsequent leg-
islation, regulations, court decisions, rulings, and proce-
dures must be considered, and Service personnel and oth-
ers concerned are cautioned against reaching the same con-
clusions in other cases unless the facts and circumstances
are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions, and Subpart B, Legislation and Related
Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to
these subjects are contained in the other Parts and Sub-
parts. Also included in this part are Bank Secrecy Act Admin-
istrative Rulings. Bank Secrecy Act Administrative Rulings
are issued by the Department of the Treasury’s Office of the
Assistant Secretary (Enforcement).
Part IV.—Items of General Interest.
With the exception of the Notice of Proposed Rulemaking
and the disbarment and suspension list included in this part,
none of these announcements are consolidated in the Cumu-
lative Bulletins.
The first Bulletin for each month includes a cumulative index
for the matters published during the preceding months.
These monthly indexes are cumulated on a semiannual basis
and are published in the first Bulletin of the succeeding semi-
annual period, respectively.
3
Introduction
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.
IRB 1998-45 11/4/98 3:23 PM Page 3

Section 42.—Low-Income
Housing Credit
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month of
November 1998. See Rev. Rul. 98–52, on this page.
Section 280G.—Golden
Parachute Payments
Federal short-term, mid-term, and long-term
rates are set forth for the month of November 1998.
See Rev. Rul. 98–52, on this page.
Section 382.—Limitation on Net
Operating Loss Carryforwards
and Certain Built-In Losses
Following Ownership Change
The adjusted federal long-term rate is set forth
for the month of November 1998. See Rev. Rul.
98–52, on this page.
Section 412.—Minimum Funding
Standards
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month of
November 1998. See Rev. Rul. 98–52, on this page.
Section 467.—Certain Payments
for the Use of Property or
Services
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month of
November 1998. See Rev. Rul. 98–52, on this page.
Section 468.—Special Rules
for Mining and Solid Waste
Reclamation and Closing Costs
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month of
November 1998. See Rev. Rul. 98–52, on this page.
Section 482.—Allocation of
Income and Deductions Among
Taxpayers
Federal short-term, mid-term, and long-term
rates are set forth for the month of November 1998.
See Rev. Rul. 98–52, on this page.
Section 483.—Interest on
Certain Deferred Payments
The adjusted applicable federal short-term,
mid-term, and long-term rates are set forth for the
month of November 1998. See Rev. Rul. 98–52, on
this page.
Section 642.—Special Rules for
Credits and Deductions
Federal short-term, mid-term, and long-term
rates are set forth for the month of November 1998.
See Rev. Rul. 98–52, on this page.
Section 807.—Rules for Certain
Reserves
The adjusted applicable federal short-term,
mid-term, and long-term rates are set forth for the
month of November 1998. See Rev. Rul. 98–52, on
this page.
Section 846.—Discounted
Unpaid Losses Defined
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month of
November 1998. See Rev. Rul. 98–52, on this page.
Section 1274.—Determination
of Issue Price in the Case of
Certain Debt Instruments Issued
for Property
(Also Sections 42, 280G, 382, 412, 467, 468, 482,
483, 642, 807, 846, 1288, 7520, 7872.)
Federal rates; adjusted federal rates;
adjusted federal long-term rate, and
the long-term exempt rate.For purposes
of sections 1274, 1288, 382, and other
sections of the Code, tables set forth the
rates for November 1998.
Rev. Rul. 98–52
This revenue ruling provides various
prescribed rates for federal income tax
purposes for November 1998 (the current
month.) Table 1 contains the short-term,
mid-term, and long-term applicable fed-
eral rates (AFR) for the current month for
purposes of section 1274(d) of the Inter-
nal Revenue Code. Table 2 contains the
short-term, mid-term, and long-term ad-
justed applicable federal rates (adjusted
AFR) for the current month for purposes
of section 1288(b). Table 3 sets forth the
adjusted federal long-term rate and the
long-term tax-exempt rate described in
section 382(f). Table 4 contains the ap-
propriate percentages for determining the
low-income housing credit described in
section 42(b)(2) for buildings placed in
service during the current month. Finally,
Table 5 contains the federal rate for deter-
mining the present value of an annuity, an
interest for life or for a term of years, or a
remainder or a reversionary interest for
purposes of section 7520.
November 9, 199841998–45 I.R.B.
Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
REV. RUL. 98–52 TABLE 1
Applicable Federal Rates (AFR) for November 1998
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-Term
AFR4.47%4.42%4.40%4.38%
110% AFR4.92%4.86%4.83%4.81%
120% AFR5.37%5.30%5.27%5.24%
130% AFR5.83%5.75%5.71%5.68%
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REV. RUL. 98–52 TABLE 3
Rates Under Section 382 for November 1998
Adjusted federal long-term rate for the current month4.65%
Long-term tax-exempt rate for ownership changes during the current month (the highest of the
adjusted federal long-term rates for the current month and the prior two months.)5.02%
1998–45 I.R.B.5November 9, 1998
REV. RUL. 98–52 TABLE 2
Adjusted AFR for November 1998
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term
adjusted AFR3.30%3.27%3.26%3.25%
Mid-term
adjusted AFR3.88%3.84%3.82%3.81%
Long-term
adjusted AFR4.65%4.60%4.57%4.56%
REV. RUL. 98–52 TABLE 4
Appropriate Percentages Under Section 42(b)(2) for November 1998
Appropriate percentage for the 70% present value low-income housing credit 8.12%
Appropriate percentage for the 30% present value low-income housing credit 3.48%
REV. RUL. 98–52 TABLE 5
Rate Under Section 7520 for November 1998
Applicable federal rate for determining the present value of an annuity, an interest for life or a
term of years, or a remainder or reversionary interest5.4%
REV. RUL. 98–52 TABLE 1 (Continued)
Applicable Federal Rates (AFR) for November 1998
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Mid-Term
AFR4.51%4.46%4.44%4.42%
110% AFR4.97%4.91%4.88%4.86%
120% AFR5.42%5.35%5.31%5.29%
130% AFR5.88%5.80%5.76%5.73%
150% AFR6.80%6.69%6.63%6.60%
175% AFR7.96%7.81%7.74%7.69%
Long-Term
AFR5.10%5.04%5.01%4.99%
110% AFR5.62%5.54%5.50%5.48%
120% AFR6.14%6.05%6.00%5.98%
130% AFR6.66%6.55%6.50%6.46%
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Section 1288.—Treatment of
Original Issue Discount on Tax-
Exempt Obligations
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of November 1998. See Rev. Rul. 98–52, page 4.
Section 7520.—Valuation Tables
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of November 1998. See Rev. Rul. 98–52, page 4.
Section 7872.—Treatment of
Loans With Below-Market
Interest Rates
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of November 1998. See Rev. Rul. 98–52, page 4.
Section 9811.—Standards
Relating to Benefits for Mothers
and Newborns
26 CFR 54.9811–1: Standards relating to benefits
for mothers and newborns (temporary).
T.D. 8788
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 54
DEPARTMENT OF LABOR
Pension and Welfare Benefits
Administration
29 CFR Part 2590
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Health Care Financing
Administration
45 CFR Parts 144, 146, and
148
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, Depart-
ment of Labor; Health Care Financing
Administration, Department of Health
and Human Services.
ACTION:Interim rules with request for
comments.
SUMMARY: This document contains in-
terim 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 partic-
ipants 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 In-
come Security Act of 1974 (ERISA) and
the Public Health Service Act (PHS Act)
made by NMHPA, and changes to the In-
ternal Revenue Code of 1986 (Code) en-
acted as part of the Taxpayer Relief Act of
1997 (TRA ’97). Interested persons are
invited to submit comments on the in-
terim rules for consideration by the De-
partment of the Treasury, the Department
of Labor, and the Department of Health
and Human Services (Departments) in de-
veloping final rules.
DATES:Effective Date:The interim
rules are effective January 1, 1999.
Applicability Dates: Group market
rules.The interim rules for the group mar-
ket apply to group health plans and group
health insurance issuers for plan years be-
ginning on or after January 1, 1999.
Individual market rules.The interim
rules for the individual market apply with
respect to health insurance coverage of-
fered, 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 origi-
nal and three copies (except for electronic
submissions to the Internal Revenue Ser-
vice (IRS)) to any of the addresses speci-
fied below. For convenience, comments
may be addressed to any of the Depart-
ments, except that comments relating pri-
marily to the individual market regula-
tions should be addressed to the
Department of Health and Human Ser-
vices (HHS). Any comment that is sub-
mitted 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 transmit-
ted 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-de-
livered 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
November 9, 199861998–45 I.R.B.
IRB 1998-45 11/4/98 3:23 PM Page 6

and copying in the Public Documents
Room, Pension and Welfare Benefits Ad-
ministration, 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 Administra-
tion, Department of Labor, at (202) 219-
4377; Suzanne Long, Health Care Financ-
ing 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:Indi-
viduals interested in obtaining a copy of
the Department of Labor’s booklet enti-
tled “Questions and Answers: Recent
Changes in Health Care Law,” which in-
cludes information on NMHPA, may call
the following toll-free number: 1-800-
998-7542. Information on NMHPA and
other recent health care laws is also avail-
able on the Department of Labor’s web-
site (www.dol.gov/dol/pwba) and the De-
partment 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 moth-
ers and their newborn children with re-
gard to hospital lengths of stay following
childbirth.
1
In section 602 of NMHPA,
Congress declared its findings that:
(1) the length of post-delivery hospi-
tal stay should be based on the
unique characteristics of each
mother and her newborn child, tak-
ing into consideration the health of
the mother, the health and stability of
the newborn, the ability and confi-
dence 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 new-
born to appropriate follow-up health
care; and (2) the timing of the dis-
charge 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 Inter-
nal 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 provi-
sions of TRA ’97.
NMHPA was incorporated into the ad-
ministrative framework established by
Titles I and IV of the Health Insurance
Portability and Accountability Act of
1996 (HIPAA) (Pub. L. 104–191).
2
These titles of HIPAA include substan-
tially similar changes to the Internal Rev-
enue Code, the Employee Retirement In-
come Security Act (ERISA), and the
Public Health Service Act (PHS Act) re-
lating to group health plans and issuers of
group health insurance coverage.
3
Cer-
tain other 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 Registeron April 8, 1997. The
group market regulations were issued
jointly by the Secretaries of the Treasury,
Labor, and Health and Human Services
(HHS) (62 F.R. 16894). The individual
market regulations were issued only by
HHS (62 F.R. 16985). See also 62 F.R.
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 juris-
diction 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 em-
ployer 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 connec-
tion with such group health plans.
Generally, the Secretary of Labor en-
forces 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 cir-
cumstances, under State law.
• The NMHPA provisions in the PHS
Act generally apply to health insur-
ance 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 pro-
visions under its insurance laws will
HHS enforce the provisions, through
1998–45 I.R.B.7November 9, 1998
1
NMHPA adds to protections already established
under the Health Insurance Portability and Account-
ability 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 re-
lating to pregnancy as a preexisting condition.
2
NMHPA amended Chapter 100 of Subtitle K of
the Code, Part 7 of Subtitle B of Title I of the Em-
ployee Retirement Income Security Act (ERISA),
and Title XXVII of the Public Health Service Act
(PHS Act).
3
The terms group health planand health insur-
ance issuerare defined in Code section 9832(a) and
(b)(2), ERISA.section 733(a) and (b)(2), and PHS
Act section 2791(a) and (b)(2). The termgroup
health insurance coverageis defined in ERISA sec-
tion 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 pur-
poses. The terms individual health insurance cover-
ageand invididual marketare defined in PHS Act
section 2791(b)(5) and (e)(1).
IRB 1998-45 11/4/98 3:23 PM Page 7

the imposition of civil money penal-
ties. 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 coordi-
nated basis by the Departments. In addi-
tion, these interim rules take into account
comments received by the Departments in
response to the request for public com-
ments on NMHPA published in the Fed-
eral Registeron June 26, 1997 (62 F.R.
34604). Except to the extent needed to
reflect the statutory differences described
above, the interim rules of each Depart-
ment are substantively identical. How-
ever, there are certain nonsubstantive dif-
ferences, including certain stylistic
differences in language and structure to
conform to conventions used by a particu-
lar Department. These differences have
been minimized and any differences in
wording (other than those reflecting dif-
ferences in the NMHPA statutory provi-
sions described above) are not intended to
create any substantive difference. Finally,
the individual market regulations are is-
sued 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 fol-
lowing a vaginal delivery or 96 hours fol-
lowing a delivery by cesarean section.
4
The general rule requires plans and is-
suers providing benefits for hospital
lengths of stay in connection with child-
birth to cover the minimum length of stay
for all deliveries. The interim rules pro-
vide that the determination of whether an
admission is in connection with childbirth
is a medical decision to be made by the at-
tending 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 consul-
tation 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 hospi-
tal, 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 be-
gins 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 pro-
viding such care to a mother or newborn
child. Therefore, a plan, hospital, man-
aged 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 pedi-
atric 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 consul-
tation 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 re-
sult in early discharges that could ad-
versely 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 re-
quirements, or provide monetary pay-
ments or rebates to a mother to encourage
her to accept less than the minimum pro-
tections available under NMHPA. The in-
terim 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 vio-
late 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 re-
strictions, NMHPA and the interim rules
provide that a plan or issuer may not re-
strict 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 por-
tion of the stay. This prohibition includes
certain types of precertification require-
ments, discussed below in the Authoriza-
tion and precertification section.
Finally, with respect to attending
providers, NMHPA provides that a plan or
issuer may not penalize, or otherwise re-
duce or limit the reimbursement of, an at-
tending provider because the provider fur-
nished care to a mother or newborn in
accordance with NMHPA, or provide
monetary or other incentives to an attend-
ing provider to induce the provider to fur-
nish 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 at-
tending providers. Second, penalties
against an attending provider include tak-
ing disciplinary action against or retaliat-
ing against the attending provider. Third,
the term “compensation” is used in the in-
terim rules rather than the term “reim-
bursement” to clarify that all forms of re-
muneration to attending providers are
included in the prohibition, and to avoid
any confusion that otherwise could result
from the fact that the term “reimburse-
ment” has a narrower meaning in some
insurance contexts. Fourth, the statutory
phrase “to induce” is interpreted to in-
clude providing any incentive that could
induce an attending provider to furnish
care inconsistent with NMHPA and the
interim rules (whether or not a specific at-
tending 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 in-
surance issuers that provide benefits for a
hospital stay in connection with child-
birth. NMHPA and the interim rules do
not require plans and issuers to provide
November 9, 199881998–45 I.R.B.
4
The interim rules use the term “vaginal deliv-
ery” to clarify that all vaginal deliveries, whether
with complications or without complications, are
subject to the 48-hour length-of-stay requirement.
IRB 1998-45 11/4/98 3:23 PM Page 8

these benefits.
5
In addition, NMHPA and
the interim rules do not prevent plans or
issuers from imposing deductibles, coin-
surance, 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 new-
borns 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 can-
not be greater than that for the first 24
hours.
With respect to health insurance cover-
age 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 precertifi-
cation 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 pre-
vent 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 con-
struction), a plan or issuer may not in-
crease an individual’s coinsurance for
any later portion of a 48-hour (or 96-
hour) hospital stay. An example illus-
trates that plans and issuers may vary
cost-sharing in certain circumstances,
provided the cost-sharing rate is con-
sistent throughout the 48-hour (or 96-
hour) hospital length of stay.
Compensation of attending provider
NMHPA and the interim rules do not
prevent a group health plan or a health in-
surance issuer from negotiating with an
attending provider the level and type of
compensation for care furnished in accor-
dance with the interim rules (including
the prohibitions section).
Applicability in certain States
There is an exception to the NMHPA
requirements for health insurance cover-
age in certain States.
6
Specifically,
NMHPA and the interim rules do not
apply with respect to health insurance
coverage if there is a State law
7
that meets
any of the following criteria:
• 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 Ameri-
can College of Obstetricians and Gy-
necologists, 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 attend-
ing provider in consultation with the
mother. The interim rules clarify that
State laws that require the mother to
consent to the decision made by the at-
tending provider satisfy this criterion.
Although this NMHPA exception ap-
plies 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.
8
Notice requirements under ERISA and
the PHS Act
ERISA background.ERISA generally
requires that participants in, and benefi-
ciaries 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 partici-
pants and beneficiaries are to be notified
of any “material modification” to the
1998–45 I.R.B.9November 9, 1998
5
While NMHPA and the interim rules do not re-
quire plans and issuers to provide coverage for hos-
pital stays in connection with childbirth, other legal
requirements may apply, including Title VII of the
Civil Rights Act of 1964 (Title VII). Title VII pro-
hibits discrimination on the basis of sex, including
because of pregnancy, childbirth, or related medical
conditions. 42 U.S.C. 2000e-(k). The Equal Em-
ployment 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 con-
nection with childbirth if the plan provides hospital
stay benefits in connection with other medical con-
ditions.” EEOC is the federal agency responsible for
enforcing Title VII and other federal equal employ-
ment opportunity laws. Questions regarding Title
VII should be directed to the EEOC.
6
The term Stateincludes the 50 States, the Dis-
trict 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 agree-
ments, until December 31, 1999.)
7
Generally, under Part 7 of ERISA and Title
XXVII of the PHS Act, a State law 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 crite-
ria will apply even though they might otherwise
“prevent the application of” the NMHPA require-
ments. See section 711(f) of ERISA and sections
2704(f) and 2751(c) of the PHS Act.
8
In conducting an economic analysis of the in-
terim rules, the Department of Labor and HHS con-
ducted a preliminary review of State laws to deter-
mine the applicability of NMHPA’s requirements in
each State. This discussion, in section D of this pre-
amble, includes a list of the States in which the De-
partments of Labor and HHS assumed, solely for the
purpose of the economic analysis, that NMHPA’s re-
quirements apply.
IRB 1998-45 11/4/98 3:23 PM Page 9

terms of the plan or any change in the in-
formation required to be included in the
SPD. A summary description of a mater-
ial 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 fur-
nished not later than 60 days after adop-
tion of the change.
NMHPA changes to ERISA and the
PHS Act.The NMHPA amendments to
ERISA added section 711(d), which re-
quires 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 enti-
ties not otherwise subject to ERISA.
The Department of Labor published in-
terim regulations implementing section
711(d) of ERISA on April 8, 1997 (62
F.R. 16979), issued separately from the
HIPAA regulations published on the same
date.
Section 2704(d) of the PHS Act re-
quires nonfederal governmental plans to
comply with the notice requirement con-
tained 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 require-
ment 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 ap-
plicable 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’ interpre-
tations of NMHPA’s substantive require-
ments as contained in these interim rules.
A revision of the notice provisions applic-
able to plans subject to ERISA recently
was published in the Federal Registerin
order to accommodate these interpreta-
tions. 63 F.R. 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 differences
in the types of entities regulated under
ERISA as compared to the PHS Act, and
in the structure of the two Acts, the De-
partments are coordinating their work on
these two regulations to ensure that af-
fected individuals will receive the same
disclosure of rights, adapted as appropri-
ate to take into account the different
contexts.
Substance of the PHS Act notice re-
quirements—In the group market.Sec-
tion 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 non-
federal governmental plans, which are not
directly subject to any ERISA require-
ments. In addition, these plans may elect
to be exempt from most of the require-
ments 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 pro-
vide benefits for hospital lengths of stay
in connection with childbirth, and that are
subject to the NMHPA requirements, pro-
vide 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 benefi-
ciaries and must be furnished to partici-
pants 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.
9
The interim
rules set forth the 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 is-
suer subject to the individual market pro-
visions 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 dis-
closure of a “summary plan description”
under ERISA, although they may be sub-
ject 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 re-
quirements is not tied to a plan year. Ac-
cordingly, the requirements of these in-
terim 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.
10
These interim rules interpret section
2751(b) of the PHS Act to require that is-
suers of individual health insurance cov-
erage that includes benefits for hospital
lengths of stay in connection with child-
birth must include a statement in the in-
surance 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 insur-
ance issuers for plan years beginning on
November 9, 1998101998–45 I.R.B.
9
Although the specific requirements of these in-
terim rules therefore apply for plan years beginning
on or after January 1, 1999, the underlying statutory
requirement went into effect for plan years begin-
ning on or after January 1, 1998, the effective data of
NMHPA.
10
Although the specific requirements of these in-
terim rules therefore apply on or after January 1,
1999, the underlying statutory requirement went into
effect January 1, 1998, the effective data of
NMHPA.
IRB 1998-45 11/4/98 3:23 PM Page 10

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 individ-
ual market apply to health insurance cov-
erage offered, sold, issued, renewed, in
effect, or operated in the individual mar-
ket 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 (for-
merly section 707), and section 2792 of
the PHS Act authorize the Secretaries of
the Treasury, Labor, and HHS to promul-
gate any interim final rules that they de-
termine 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 in-
terim 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 De-
partments to clarify certain NMHPA pro-
visions. For example, the Departments
have been asked when the 48-hour (or 96-
hour) stay begins, and whether the re-
quirements apply only after birth in a hos-
pital. In addition, NMHPA does not apply
to health insurance coverage if there is a
State law that meets certain criteria out-
lined in the NMHPA exception. Cur-
rently, there are many States that have
such laws meeting the NMHPA excep-
tion. Commenters have asked the Depart-
ments to clarify the applicability of fed-
eral 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 In-
formation (RFI) inviting comments on the
NMHPA provisions. After consideration
of the many comments received in re-
sponse to the Departments’ RFI and in
light of the outstanding questions relating
to the substance and applicability of
NMHPA, the Departments have deter-
mined that it is appropriate to issue in-
terim 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 an-
ticipation 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 agen-
cies to assess all costs and benefits of
available regulatory alternatives, and when
regulation is necessary, to select regulatory
approaches that maximize net benefits (in-
cluding potential economic, environmen-
tal, public health and safety effects; distrib-
utive 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 regu-
latory action” according to specified crite-
ria. This includes whether the rule may
have an annual effect on the economy of
$100 million or more or certain other spec-
ified 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 signifi-
cant 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 clarifica-
tions to some of the statutory provisions,
none of these has a significant economic
impact. The effect of the statute is ad-
dressed 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 ade-
quate 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 oblig-
ated to stay in the hospital for any period
of time following delivery, plans and is-
suers must 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 ce-
sarean 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 effec-
tively 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 pro-
vided an acceptable level of postpartum
care.
Many States
11
have enacted laws that
prescribe benefits for hospital lengths of
1998–45 I.R.B.11November 9, 1998
11
For purposes of Part 7 of ERISA and Title
XXVII of the PHS Act (including the NMHPA pro-
visions), the term State includes the 50 States, the
District of Columbia, Puerto Rico, the Virgin Is-
lands, American Samoa, Guam, Wake Island, the
IRB 1998-45 11/4/98 3:23 PM Page 11

stay in connection with childbirth.
NMHPA provides that the federal
NMHPA requirements do not apply with
respect to health insurance coverage
12
if
there is a State law that satisfies one or
more of the following criteria: (1) re-
quires such coverage to provide for at
least a 48-hour hospital length of stay fol-
lowing a vaginal delivery and at least a
96-hour length of stay following a deliv-
ery by cesarean section, (2) requires such
coverage to provide for maternity and pe-
diatric care in accordance with guidelines
established by the American College of
Obstetricians and Gynecologists, the
American Academy of Pediatrics, or other
established professional medical associa-
tions, 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 con-
sultation with the mother.
Accordingly, the federal NMHPA re-
quirements 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 is-
suers (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 Com-
missioners for a hearing in September
1997 before the House Committee on
Ways and Means, Subcommittee on
Health, many States already had provi-
sions in their laws or regulations prescrib-
ing benefits for hospital lengths of stay in
connection with childbirth before the en-
actment of NMHPA. 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.
13
As a result of this review,
it is estimated that 40 States have laws
that appear to meet the criteria specified
in NMHPA. These States are as follows:
Alabama, Alaska, Arizona, Arkansas, Cal-
ifornia, Colorado, Connecticut, the Dis-
trict of Columbia, Florida, Georgia, Illi-
nois, Indiana, Iowa, Kansas, Kentucky,
Louisiana, Maine, Maryland, Massachu-
setts, Minnesota, Missouri, Montana,
Nevada, New Hampshire, New Jersey,
New Mexico, New York, North Carolina,
North Dakota, Ohio, Oklahoma, Pennsyl-
vania, 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,
14
and self-insured nonfederal governmental
plans
15
will be affected by NMHPA.
Based on data from the March 1996 Cur-
rent Population Survey and other sources,
Price Waterhouse has estimated that there
are approximately 270,000 self-insured
ERISA plans covering 53 million individ-
uals. In addition, based on data from the
March 1996 Current Population Survey
and other sources, Price Waterhouse esti-
mated that there are approximately
30,000 self-insured nonfederal govern-
mental plans covering 18 million individ-
uals.
16
NMHPA will also affect insured ERISA
plans, insured church plans, insured non-
federal governmental plans, and issuers in
the individual market in States that do not
have a law meeting one or more of the cri-
teria 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.
17
These States are as follows:
Delaware, Hawaii, Idaho, Michigan, Mis-
sissippi, Nebraska, Oregon, Utah, Ver-
mont, 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 in-
sured ERISA plans, 145,000 insured non-
federal governmental plans, and 1,000 is-
suers in the individual market. For a
variety of reasons, these totals cannot be
broken down by State. These reasons in-
November 9, 1998121998–45 I.R.B.
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 197 and related agreements,
until December 31, 1999.)
12
The term health insurance coveragemeans
“benefits consisting of medical care (provided di-
rectly, through insurance or reimbursement, or oth-
erwise and including any items and services paid for
as medical care) under any hospital or medical ser-
vice 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 issuermeans
“an insurance company ,insurance service, or insur-
ance organization . . . 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 doe snot include a group health plan.”
ERISA section 733(b)(2) and PHS Act section
2791(b)(2).
13
In conducting the review, the Departments con-
sidered State statutes, regulations, rules, bulletins,
and case law. However, the review did not take into
account other State actions that should be consid-
ered when making a legal determination regarding
whether a State law meets the criteria specified in
NMHPA.
14
Hereafter, other private-sector employer-spon-
sored group health plans are referred to as ERISA
plans.
15
The term nonfederal government planmeans a
governmental plan that is not a federal government
plan. PHS Act section 2791(d)(8)(C). The term gov-
ernmental plangenerally 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 in-
strumentally of any of the foregoing. PHS Act sec-
tion 2791(d)(8)(A). The term federal governmental
plan means a governmental plan established or main-
tained for its employees by the government of the
United States or by any agency or instrumentally of
such government. PHS Act section 2791(d)(8)(B).
16
Sponsors of self-insured nonfederal govern-
mental plans can elect to have their 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 ex-
empted 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.
17
The federal NMHPA provisions appear to apply
in these 18 States because either the State has not
enacted any law that meets the NMHPA criteria or
the State has incorporated the federal NMHPA re-
quirements by reference.
IRB 1998-45 11/4/98 3:23 PM Page 12

clude 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 volatil-
ity 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 diffi-
cult to define and track such plans.
18
The Congressional Budget Office
(CBO) did not estimate costs for imple-
menting NMHPA, passed by the Congress
in September 1996. However, CBO esti-
mated the costs for implementing S.969,
the Senate version of NMHPA. While
there are several differences between
S.969 and the final joint legislation
19
, the
CBO estimates for implementing S. 969
are the only 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 al-
lowed by NMHPA, while others are al-
ready receiving a timely follow-up visit
and therefore would not incur any addi-
tional costs. CBO estimated that inpatient
hospital days would increase by approxi-
mately 400,000 days and follow-up care
would increase by approximately 200,000
visits annually.
CBO estimated that the additional uti-
lization 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 individu-
ally purchased health plans. CBO as-
sumed 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 off-
set this minimal increase in cost, the De-
partments believe that virtually no em-
ployers will drop health coverage entirely
or drop coverage for hospital stays in con-
nection with childbirth. After taking be-
havioral responses into account, CBO es-
timated 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 in-
crease to the cost of health insurance for
covered employees of nonfederal govern-
mental 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 addi-
tional costs for enforcing NMHPA’s re-
quirements on issuers of health insurance
in the group and individual markets. Be-
cause States currently regulate the pri-
vate-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 imple-
menting 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 elimina-
tion of post-delivery follow up care. Ad-
justing the CBO estimates for 28 States
that had laws that met the criteria speci-
fied in NMHPA at the time of NMHPA’s
enactment, reduces the number of people
directly affected by NMHPA. Approxi-
mately 60 percent of people covered by
insured ERISA plans and therefore sub-
ject to State laws, are in the 28 States that
had enacted laws prior to NMHPA.
With fewer people affected, the as-
sumed 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 esti-
mated 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 unneces-
sary, and that less than the minimum hos-
pital length of stay is necessary, some of
the additional costs will not be incurred.
If none of the follow-up visits were con-
verted to additional inpatient days, the es-
timated 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 enact-
ment of NMHPA, twelve additional States
have 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 fed-
eral law, other States had already con-
sidered hospital lengths of stay for child-
birth, but without final passage of
legislation. Thus, the estimates of the
statutory impacts, as of the date of enact-
ment, probably overstate the direct impact
of NMHPA.
Paperwork Reduction Act
The interim rules contain no new infor-
mation 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 informa-
tion collection burdens associated with
NMHPA in the interim rules (Interim
Rules Amending ERISA Disclosure Re-
quirements for Group Health Plans) im-
plementing section 711(d) of ERISA that
were published in the Federal Register
on April 8, 1997 (62 F.R. 16979). OMB
approved these information collection re-
1998–45 I.R.B.13November 9, 1998
18
See, for example, Chollet, D.J., Kirk, A.M. and
Ermann, R.D. (1997). Mapping Insurance Markets:
The Group and Individual Insurance Markets in 26
Sates.Washington: The Alpha Center.
19
S. 969 contained provisions for post-delivery
follow-up care, or home health visits. In addition,
the costs provided by CBO assumed an implementa-
tion date of January 1, 1997, rather than January 1,
1998.
IRB 1998-45 11/4/98 3:23 PM Page 13

quirements under OMB control number
1210–0039. Subsequently, the agencies
published the OMB control number in the
Federal Registerat 62 F.R. 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 de-
fined 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 sup-
plied by the federal government to the re-
cipient for the purpose of disclosure to the
public is not included within the defini-
tion” 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, when-
ever an agency is required to publish a
general notice of proposed rulemaking,
the agency shall prepare and make avail-
able for public comment an initial regula-
tory flexibility analysis. The analysis de-
scribes the impact of the rule on small
entities and identifies any significant al-
ternatives 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 in-
terim final rules and not as a Notice of
Proposed Rulemaking (NPRM), the RFA
does not apply and a regulatory flexibil-
ity 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 num-
ber of small entities for the following rea-
sons: 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 in-
terpretations or clarifications to the statu-
tory provisions that are made by these
rules are minor and will not have a signif-
icant impact; and 3) because most States
have laws that apply in place of the
NMHPA standards, in those States the in-
terim rules will not apply to insurance is-
suers, 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-in-
sure. 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 be-
lieve that these rules will not have a sig-
nificant impact on small entities, specific
data that would permit a complete evalua-
tion of the impact on small entities is not
currently available. Therefore, the De-
partments invite interested persons to sub-
mit comments on the impact of these rules
on small entities for consideration in the
development of the final rules implement-
ing NMHPA. Consistent with the RFA,
the Departments also encourage the pub-
lic to submit comments on alternative
rules that will accomplish the stated pur-
pose 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 state-
ments 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 be-
cause they are interim rules. However,
consistent with the policy embodied in the
UMRA, the interim rules have been de-
signed to be the least burdensome alterna-
tive for State, local, tribal governments,
and the private sector.
Small Business Regulatory Enforcement
Fairness Act of 1996
The Administrator of the Office of In-
formation 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 re-
view. 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 in-
terim rules is more than 60 days after pub-
lication in the Federal Register and re-
ceipt by Congress, the requirements of
SBREFA have been satisfied with respect
to these rules.
Statutory Authority
The Department of the Treasury tempo-
rary rule is adopted pursuant to the au-
thority 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
F.R. 13139, April 21, 1987.
The HHS interim final rule is adopted
pursuant to the authority contained in sec-
tions 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).
*****
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 * * *
November 9, 1998141998–45 I.R.B.
IRB 1998-45 11/4/98 3:23 PM Page 14

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 para-
graph (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) im-
plement 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 sec-
tions 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 in-
surance coverage. * * *
* * * * *
Par. 3. In §54.9801–2T, the introduc-
tory text is revised to read as follows:
§54.9801–2T Definitions (temporary).
Unless otherwise provided, the defini-
tions 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) Gen-
eral rule.Except as provided in para-
graph (a)(5) of this section, a group health
plan that provides benefits for a hospital
length of stay in connection with child-
birth for a mother or her newborn may not
restrict benefits for the stay to less than —
(i) 48 hours following a vaginal deliv-
ery; 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 de-
livery (or in the case of multiple births, at
the time of the last delivery).
(ii) Delivery outside a hospital. If de-
livery occurs outside a hospital, the hospi-
tal length of stay begins at the time the
mother or newborn is admitted as a hospi-
tal inpatient in connection with childbirth.
The determination of whether an admis-
sion is in connection with childbirth is a
medical decision to be made by the at-
tending provider.
(3) Examples.The rules of paragraphs
(a)(1) and (2) of this section are illustrated
by the following examples. In each exam-
ple, the group health plan provides bene-
fits for hospital lengths of stay in connec-
tion 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 de-
scribed 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 ex-
cessively in connection with the childbirth and is ad-
mitted 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 de-
scribed 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 child-
birth.
(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 admis-
sion 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 exam-
ples regarding other authorization and
certain notice requirements.)
(ii) Example.The rule of this para-
graph (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 require-
ments 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 neces-
sity. 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 at-
tending provider complete a certificate of medical
necessity to obtain authorization for the period be-
tween 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 para-
graph (a)(1) of this section do not apply
for any period after the discharge.
(ii) Discharge of newborn.If a deci-
sion to discharge a newborn child earlier
than the period specified in paragraph
(a)(1) of this section is made by an attend-
ing provider, in consultation with the
mother (or the newborn’s authorized rep-
resentative), the requirements of para-
graph (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 li-
censed under applicable State law to pro-
vide maternity or pediatric care and who
is directly responsible for providing ma-
ternity or pediatric care to a mother or
newborn child.
(iv) Example.The rules of this para-
graph (a)(5) are illustrated by the follow-
ing 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 au-
thorize the early discharge of both the mother and
1998–45 I.R.B.15November 9, 1998
IRB 1998-45 11/4/98 3:23 PM Page 15

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 require-
ments of this section; or
(B) Provide payments (including pay-
ments-in-kind) or rebates to a mother to
encourage her to accept less than the min-
imum protections available under this
section.
(ii) Examples.The rules of this para-
graph (b)(1) are illustrated by the follow-
ing 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 new-
born 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 co-
payment and deductible is in the nature of a rebate
that the mother would not receive if she and her new-
born remained in the hospital, it is prohibited by this
paragraph (b)(1). (In addition, the plan violates para-
graph (b)(2) of this section because, in effect, no co-
payment 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 hospi-
tal, coverage for the follow-up visit is not prohibited
by this paragraph (b)(1)
.
(2) With respect to benefit restric-
tions—(i) In general.Subject to para-
graph (c)(3) of this section, a group health
plan may not restrict the benefits for any
portion of a hospital length of stay re-
quired under paragraph (a) of this section
in a manner that is less favorable than the
benefits provided for any preceding por-
tion of the stay.
(ii) Example.The rules of this para-
graph (b)(2) are illustrated by the follow-
ing example:
Example.(i) A group health plan subject to the
requirements of this section provides benefits for
hospital lengths of stay in connection with child-
birth. 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 ob-
tain precertification from a utilization reviewer, who
determines if an additional 24-hour period is med-
ically 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 immedi-
ately following the initial 48-hour stay is prohibited
by this paragraph (b)(2) because benefits for the lat-
ter 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 uti-
lization 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 discipli-
nary action against or retaliate against), or
otherwise reduce or limit the compensa-
tion of, an attending provider because the
provider furnished care to a participant or
beneficiary in accordance with this sec-
tion; or
(ii) Provide monetary or other incen-
tives to an attending provider to induce
the provider to furnish care to a partici-
pant or beneficiary in a manner inconsis-
tent with this section, including providing
any incentive that could induce an attend-
ing 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 construc-
tion 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 pe-
riod of time following the birth of her
child.
(2) Hospital stay benefits not man-
dated. 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 gen-
eral. This section does not prevent a
group health plan from imposing de-
ductibles, coinsurance, or other cost-shar-
ing in relation to benefits for hospital
lengths of stay in connection with child-
birth for a mother or a newborn under the
plan or coverage, except that the coinsur-
ance 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 para-
graph (c)(3) are illustrated by the follow-
ing 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 cov-
ers 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 what-
ever 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 con-
sistent 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 pro-
vider.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 accor-
dance with this section (including para-
graph (b) of this section).
(d) Notice requirement.See 29 CFR
2520.102–3(u) and (v)(2) for rules relat-
ing to a notice requirement imposed under
section 711 of the Employee Retirement
November 9, 1998161998–45 I.R.B.
IRB 1998-45 11/4/98 3:23 PM Page 16

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 require-
ments 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 deliv-
ery 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 Acad-
emy of Pediatrics, or any other estab-
lished professional medical association.
(iii) The State law requires, in connec-
tion with the coverage for maternity care,
that the hospital length of stay for such
care is left to the decision of (or is re-
quired 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-in-
sured plans.For a group health plan that
provides benefits solely through health in-
surance coverage, if the State law regulat-
ing the health insurance coverage meets
any of the criteria in paragraph (e)(1) of
this section, then the requirements of sec-
tion 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 insur-
ance coverage, the requirements of sec-
tion 9811 and this section apply.
(iii) Partially-insured plans.For a
group health plan that provides some ben-
efits through health insurance coverage, if
the State law regulating the health insur-
ance coverage meets any of the criteria in
paragraph (e)(1) of this section, then the
requirements of section 9811 and this sec-
tion apply only to the extent the plan pro-
vides 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) re-
garding 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 para-
graph (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 hos-
pital 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 es-
tablished 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 hos-
pital 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 ap-
plies 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 Janu-
ary 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 para-
graph (b)(2), (3), (4), or (5) of this section
(or any combination of these benefits).
* * * * *
Michael P. Dolan,
Deputy Commissioner of
Internal Revenue.
Approved August 14, 1998.
Donald C. Lubick,
Assistant Secretary of
the Treasury.
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 F.R. 13139, April 21,
1987.
Subpart B—Other Requirements
2. § 2590.711 is revised to read as fol-
lows:
§ 2590.711 Standards relating to
benefits for mothers and newborns.
(a) Hospital length of stay—(1) Gen-
eral rule.Except as provided in para-
graph (a)(5) of this section, a group health
plan, or a health insurance issuer offering
group health insurance coverage, that pro-
vides 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 deliv-
ery; 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 de-
livery (or in the case of multiple births, at
the time of the last delivery).
(ii) Delivery outside a hospital.If de-
livery occurs outside a hospital, the hospi-
tal length of stay begins at the time the
mother or newborn is admitted as a hospi-
1998–45 I.R.B.17November 9, 1998
IRB 1998-45 11/4/98 3:23 PM Page 17

tal inpatient in connection with childbirth.
The determination of whether an admis-
sion is in connection with childbirth is a
medical decision to be made by the at-
tending provider.
(3) Examples.The rules of paragraphs
(a)(1) and (2) of this section are illustrated
by the following examples. In each exam-
ple, the group health plan provides bene-
fits for hospital lengths of stay in connec-
tion 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 de-
scribed 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 ex-
cessively in connection with the childbirth and is ad-
mitted 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 de-
scribed 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 child-
birth.
(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 admis-
sion 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 alsopara-
graphs (b)(2) and (c)(3) of this section for
rules and examples regarding other autho-
rization and certain notice requirements.)
(ii) Example.The rule of this para-
graph (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 require-
ments 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 neces-
sity. 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 at-
tending provider complete a certificate of medical
necessity to obtain authorization for the period be-
tween 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 para-
graph (a)(1) of this section do not apply
for any period after the discharge.
(ii) Discharge of newborn.If a deci-
sion to discharge a newborn child earlier
than the period specified in paragraph
(a)(1) of this section is made by an attend-
ing provider, in consultation with the
mother (or the newborn’s authorized rep-
resentative), the requirements of para-
graph (a)(1) of this section do not apply
for any period after the discharge.
(iii) Attending provider defined.For
purposes of this section, attending pro-
vidermeans an individual who is licensed
under applicable State law to provide ma-
ternity or pediatric care and who is di-
rectly responsible for providing maternity
or pediatric care to a mother or newborn
child.
(iv) Example.The rules of this para-
graph (a)(5) are illustrated by the follow-
ing 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 au-
thorize 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 offer-
ing group health insurance coverage, may
no—
(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 require-
ments of this section; or
(B) Provide payments (including pay-
ments-in-kind) or rebates to a mother to
encourage her to accept less than the min-
imum protections available under this
section.
(ii) Examples.The rules of this para-
graph (b)(1) are illustrated by the follow-
ing 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 new-
born 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 co-
payment and deductible is in the nature of a rebate
that the mother would not receive if she and her new-
born remained in the hospital, it is prohibited by this
paragraph (b)(1). (In addition, the plan violates para-
graph (b)(2) of this section because, in effect, no co-
payment 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 hospi-
tal, coverage for the follow-up visit is not prohibited
by this paragraph (b)(1).
(2) With respect to benefit restric-
tions—(i) In general.Subject to para-
graph (c)(3) of this section, a group health
plan, and a health insurance issuer offer-
ing 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 pro-
vided for any preceding portion of the
stay.
(ii) Example.The rules of this para-
graph (b)(2) are illustrated by the follow-
ing example:
Example.(i) A group health plan subject to the
requirements of this section provides benefits for
hospital lengths of stay in connection with child-
birth. 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 ob-
November 9, 1998181998–45 I.R.B.
IRB 1998-45 11/4/98 3:23 PM Page 18

tain precertification from a utilization reviewer, who
determines if an additional 24-hour period is med-
ically 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 immedi-
ately following the initial 48-hour stay is prohibited
by this paragraph (b)(2) because benefits for the lat-
ter 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 uti-
lization 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 insur-
ance issuer offering group health insur-
ance coverage, may not directly or indi-
rectly—
(i) Penalize (for example, take discipli-
nary action against or retaliate against), or
otherwise reduce or limit the compensa-
tion of, an attending provider because the
provider furnished care to a participant or
beneficiary in accordance with this sec-
tion; or
(ii) Provide monetary or other incen-
tives to an attending provider to induce
the provider to furnish care to a partici-
pant or beneficiary in a manner inconsis-
tent with this section, including providing
any incentive that could induce an attend-
ing 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 construc-
tion 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 pe-
riod of time following the birth of her
child.
(2) Hospital stay benefits not man-
dated. This section does not apply to any
group health plan, or any group health in-
surance 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 of-
fering group health insurance coverage
from imposing deductibles, coinsurance,
or other cost-sharing in relation to bene-
fits for hospital lengths of stay in connec-
tion with childbirth for a mother or a new-
born 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 para-
graph (c)(3) are illustrated by the follow-
ing 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 cov-
ers 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 what-
ever 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 con-
sistent 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 pro-
vider.This section does not prevent a
group health plan or a health insurance is-
suer offering group health insurance cov-
erage from negotiating with an attending
provider the level and type of compensa-
tion 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 require-
ments 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 deliv-
ery 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 Acad-
emy of Pediatrics, or any other estab-
lished professional medical association.
(iii) The State law requires, in connec-
tion with the coverage for maternity care,
that the hospital length of stay for such
care is left to the decision of (or is re-
quired 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-in-
sured plans.For a group health plan that
provides benefits solely through health in-
surance coverage, if the State law regulat-
ing the health insurance coverage meets
any of the criteria in paragraph (e)(1) of
this section, then the requirements of sec-
tion 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 insur-
ance coverage, the requirements of sec-
tion 711 of the Act and this section apply.
(iii) Partially-insured plans. For a
group health plan that provides some ben-
efits through health insurance coverage, if
the State law regulating the health insur-
ance 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 con-
tained 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 para-
graph (e) are illustrated by the following
examples:
1998–45 I.R.B.19November 9, 1998
IRB 1998-45 11/4/98 3:23 PM Page 19

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 hos-
pital 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 es-
tablished 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 hos-
pital 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 Ser-
vice 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 cover-
age, to guarantee the renewability of all
coverage in the group market, and to pro-
vide certain protections for mothers and
newborns with respect to coverage for
hospital stays in connection with child-
birth. Part 148 of this subchapter imple-
ments sections 2741 through 2763 of the
PHS Act. Its purpose is to improve access
to individual health insurance coverage
for certain eligible individuals who previ-
ously had group coverage, to guarantee
the renewability of all coverage in the in-
dividual market, and to provide protec-
tions for mothers and newborns with re-
spect 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 sub-
chapter and provide the basis for issuing
these regulations, respectively.
3. In § 144.102, paragraph (b) is re-
vised 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 ob-
tained 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 insur-
ance 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 avail-
ability 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 mar-
ket, 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 re-
vised, 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 fol-
lows:
§ 146.101 Basis and scope.
(a) Statutory basis.This part imple-
ments 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 cer-
tain 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 sub-
chapter 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 cover-
age for hospital stays in connection with
childbirth. It also sets forth the regula-
tions governing parity between medical/
surgical benefits and mental health bene-
fits in group health plans and health insur-
ance coverage offered by issuers in con-
nection 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) Gen-
eral rule.Except as provided in para-
graph (a)(5) of this section, a group health
plan, or a health insurance issuer offering
November 9, 1998201998–45 I.R.B.
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group health insurance coverage, that pro-
vides 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 deliv-
ery; 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 de-
livery (or in the case of multiple births, at
the time of the last delivery).
(ii) Delivery outside a hospital.If de-
livery occurs outside a hospital, the hospi-
tal length of stay begins at the time the
mother or newborn is admitted as a hospi-
tal inpatient in connection with childbirth.
The determination of whether an admis-
sion is in connection with childbirth is a
medical decision to be made by the at-
tending provider.
(3) Examples.The rules of paragraphs
(a)(1) and (a)(2) of this section are illus-
trated 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 de-
scribed 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 ex-
cessively in connection with the childbirth and is ad-
mitted 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 de-
scribed 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 child-
birth.
(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 admis-
sion 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 alsopara-
graphs (b)(2) and (c)(3) of this section for
rules and examples regarding other autho-
rization and certain notice requirements.)
(ii) Example.The rule of this para-
graph (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 require-
ments 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 neces-
sity. 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 at-
tending provider complete a certificate of medical
necessity to obtain authorization for the period be-
tween 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 para-
graph (a)(1) of this section do not apply
for any period after the discharge.
(ii) Discharge of newborn.If a deci-
sion to discharge a newborn child earlier
than the period specified in paragraph
(a)(1) of this section is made by an attend-
ing provider, in consultation with the
mother (or the newborn’s authorized rep-
resentative), the requirements of para-
graph (a)(1) of this section do not apply
for any period after the discharge.
(iii) Attending provider defined.For
purposes of this section, attending
providermeans an individual who is li-
censed under applicable State law to pro-
vide maternity or pediatric care and who
is directly responsible for providing ma-
ternity or pediatric care to a mother or
newborn child.
(iv) Example.The rules of this para-
graph (a)(5) are illustrated by the follow-
ing 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 au-
thorize 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 offer-
ing 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 require-
ments of this section; or
(B) Provide payments (including pay-
ments-in-kind) or rebates to a mother to
encourage her to accept less than the min-
imum protections available under this
section.
(ii) Examples.The rules of this para-
graph (b)(1) are illustrated by the follow-
ing 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 new-
born 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 co-
payment and deductible is in the nature of a rebate
that the mother would not receive if she and her new-
born remained in the hospital, it is prohibited by this
paragraph (b)(1). (In addition, the plan violates para-
graph (b)(2) of this section because, in effect, no co-
payment 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 hospi-
tal, coverage for the follow-up visit is not prohibited
by this paragraph (b)(1).
(2) With respect to benefit restric-
tions—(i) In general. Subject to para-
1998–45 I.R.B.21November 9, 1998
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graph (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 para-
graph (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 para-
graph (b)(2) are illustrated by the follow-
ing example:
Example.(i) A group health plan subject to the
requirements of this section provides benefits for
hospital lengths of stay in connection with child-
birth. 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 ob-
tain precertification from a utilization reviewer, who
determines if an additional 24-hour period is med-
ically 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 immedi-
ately following the initial 48-hour stay is prohibited
by this paragraph (b)(2) because benefits for the lat-
ter 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 uti-
lization 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 insur-
ance issuer offering group health insur-
ance coverage, may not directly or indi-
rectly —
(i) Penalize (for example, take discipli-
nary action against or retaliate against), or
otherwise reduce or limit the compensa-
tion of, an attending provider because the
provider furnished care to a participant or
beneficiary in accordance with this sec-
tion; or
(ii) Provide monetary or other incen-
tives to an attending provider to induce
the provider to furnish care to a partici-
pant or beneficiary in a manner inconsis-
tent with this section, including providing
any incentive that could induce an attend-
ing 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 construc-
tion 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 pe-
riod of time following the birth of her
child.
(2) Hospital stay benefits not man-
dated.This section does not apply to any
group health plan, or any group health in-
surance 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 of-
fering group health insurance coverage
from imposing deductibles, coinsurance,
or other cost-sharing in relation to bene-
fits for hospital lengths of stay in connec-
tion with childbirth for a mother or a new-
born 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 para-
graph (c)(3) are illustrated by the follow-
ing 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 cov-
ers 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 what-
ever 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 con-
sistent 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 is-
suer offering group health insurance cov-
erage from negotiating with an attending
provider the level and type of compensa-
tion for care furnished in accordance with
this section (including paragraph (b) of
this section).
(d) Notice requirement.Except as pro-
vided 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 docu-
ment 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 dis-
closure requirement set forth in paragraph
(d)(1) of this section, the following dis-
closure 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 ce-
sarean section. However, the plan or issuer
may pay for a shorter stay if the attending
provider (e.g.,your physician, nurse mid-
wife, or physician assistant), after consul-
tation with the mother, discharges the
mother or newborn earlier.
Also, under federal law, plans and is-
suers may not set the level of benefits or
out-of-pocket costs so that any later por-
tion of the 48-hour (or 96-hour) stay is
treated in a manner less favorable to the
mother or newborn than any earlier por-
tion of the stay.
In addition, a plan or issuer may not,
under federal law, require that a physician
or other health care provider obtain autho-
rization for prescribing a length of stay of
up to 48 hours (or 96 hours). However, to
use certain providers or facilities, or to re-
duce 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 disclo-
sure notice in paragraph (d)(2) of this sec-
November 9, 1998221998–45 I.R.B.
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tion 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 be-
ginning on or after January 1, 1999.
(4) Exceptions.The requirements of
this paragraph (d) do not apply in the fol-
lowing 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 re-
quirements of this section.
(ii) Insured plans.The benefits for
hospital lengths of stay in connection with
childbirth are provided through health in-
surance 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 require-
ments of section 2704 of the PHS Act and
this section do not apply with respect to
health insurance coverage offered in con-
nection 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 deliv-
ery 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 Acad-
emy of Pediatrics, or any other estab-
lished professional medical association.
(iii) The State law requires, in connec-
tion with the coverage for maternity care,
that the hospital length of stay for such
care is left to the decision of (or is re-
quired 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-in-
sured plans.For a group health plan that
provides benefits solely through health in-
surance coverage, if the State law regulat-
ing the health insurance coverage meets
any of the criteria in paragraph (e)(1) of
this section, then the requirements of sec-
tion 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 insur-
ance coverage, the requirements of sec-
tion 2704 of the PHS Act and this section
apply.
(iii) Partially-insured plans.For a
group health plan that provides some ben-
efits through health insurance coverage, if
the State law regulating the health insur-
ance 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 ex-
tent the plan provides benefits for hospital
lengths of stay in connection with child-
birth other than through health insurance
coverage.
(3) Relation to section 2723(a) of the
PHS Act.The preemption provisions con-
tained 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 para-
graph (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 hos-
pital 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 es-
tablished 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 hos-
pital 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 Janu-
ary 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 Ser-
vice 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 previ-
ously had group coverage, and to guaran-
tee the renewability of all coverage in the
individual market. It also provides cer-
tain protections for mothers and newborns
with respect to coverage for hospital stays
in connection with childbirth.
3. In § 148.102, paragraphs (a) head-
ing,(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 indi-
vidual health insurance coverage for cer-
tain eligible individuals apply to all is-
suers of individual health insurance
coverage in a State, unless the State im-
plements an acceptable alternative mech-
anism as described in §148.128. The re-
quirements that pertain to guaranteed
renewability for all individuals, and to
protections for mothers and newborns
with respect to hospital stays in connec-
tion 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),
1998–45 I.R.B.23November 9, 1998
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and 148.170 (standards relating to bene-
fits for mothers and newborns), the re-
quirements of this part apply to health in-
surance coverage offered, sold, issued,
renewed, in effect, or operated in the indi-
vidual market after June 30, 1997, regard-
less of when a period of creditable cover-
age occurs.
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) Gen-
eral rule.Except as provided in para-
graph (a)(5) of this section, an issuer of-
fering 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 new-
born may not restrict benefits for the stay
to less than —
(i) 48 hours following a vaginal deliv-
ery; 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 de-
livery (or in the case of multiple births, at
the time of the last delivery).
(ii) Delivery outside a hospital.If de-
livery occurs outside a hospital, the hospi-
tal length of stay begins at the time the
mother or newborn is admitted as a hospi-
tal inpatient in connection with childbirth.
The determination of whether an admis-
sion is in connection with childbirth is a
medical decision to be made by the at-
tending provider.
(3) Examples.The rules of paragraphs
(a)(1) and (a)(2) of this section are illus-
trated 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 require-
ments 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 de-
scribed 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 be-
gins 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 de-
scribed 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 vagi-
nal delivery at home. The child later develops pneu-
monia and is admitted to the hospital. The attending
provider determines that the admission is not in con-
nection 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 admis-
sion 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 re-
quired under paragraph (a)(1) of this sec-
tion. (See alsoparagraphs (b)(2) and
(c)(3) of this section for rules and exam-
ples regarding other authorization and
certain notice requirements.)
(ii) Example.The rule of this para-
graph (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 hos-
pital 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 is-
suer then makes a determination, based on the cer-
tificate of medical necessity, whether a longer stay is
medically necessary.
(ii) In this Example,the requirement that an at-
tending provider complete a certificate of medical
necessity to obtain authorization for the period be-
tween 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 para-
graph (a)(1) of this section do not apply
for any period after the discharge.
(ii) Discharge of newborn.If a deci-
sion to discharge a newborn child earlier
than the period specified in paragraph
(a)(1) of this section is made by an attend-
ing provider, in consultation with the
mother (or the newborn’s authorized rep-
resentative), the requirements of para-
graph (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 li-
censed under applicable State law to pro-
vide maternity or pediatric care and who
is directly responsible for providing ma-
ternity or pediatric care to a mother or
newborn child.
(iv) Example.The rules of this para-
graph (a)(5) are illustrated by the follow-
ing example:
Example.(i) A pregnant woman covered under a
policy offered by an issuer subject to the require-
ments 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 attend-
ing 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 pay-
ments-in-kind) or rebates to a mother to
encourage her to accept less than the min-
imum protections available under this
section.
(ii) Examples.The rules of this para-
graph (b)(1) are illustrated by the follow-
ing examples. In each example, the issuer
is subject to the requirements of this sec-
tion, 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 is-
suer will waive the copayment and deductible.
(ii) In this Example 1,because waiver of the co-
payment 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 vio-
lates paragraph (b)(2) of this section because, in ef-
fect, no copayment or deductible is required for the
first portion of the stay and a double copayment and
November 9, 1998241998–45 I.R.B.
IRB 1998-45 11/4/98 3:23 PM Page 24

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 fol-
low-up visit by a nurse within 48 hours after the dis-
charges 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 hospi-
tal, coverage for the follow-up visit is not prohibited
by this paragraph (b)(1).
(2) With respect to benefit restric-
tions—(i) In general.Subject to para-
graph (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 pro-
vided for any preceding portion of the
stay.
(ii) Example.The rules of this para-
graph (b)(2) are illustrated by the follow-
ing example:
Example.(i) An issuer subject to the require-
ments 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 au-
tomatically pays for the first 48 hours. With respect
to each succeeding 24-hour period, the covered indi-
vidual must call the issuer to obtain precertification
from a utilization reviewer, who determines if an ad-
ditional 24-hour period is medically necessary. If
this approval is not obtained, the issuer will not pro-
vide benefits for any succeeding 24-hour period.
(ii) In this Example,the requirement to obtain
precertification for the two 24-hour periods immedi-
ately following the initial 48-hour stay is prohibited
by this paragraph (b)(2) because benefits for the lat-
ter 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 pe-
riod after the first 96 hours.) In addition, if the is-
suer’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 discipli-
nary action against or retaliate against), or
otherwise reduce or limit the compensa-
tion of, an attending provider because the
provider furnished care to a covered indi-
vidual in accordance with this section; or
(ii) Provide monetary or other incen-
tives 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 in-
centive that could induce an attending
provider to discharge a mother or new-
born earlier than 48 hours (or 96 hours)
after delivery.
(c) Construction.With respect to this
section, the following rules of construc-
tion 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 pe-
riod 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 child-
birth 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 bene-
fits for hospital lengths of stay in connec-
tion with childbirth for a mother or a new-
born under the coverage, except that the
coinsurance or other cost-sharing for any
portion of the hospital length of stay re-
quired under paragraph (a) of this section
may not be greater than that for any pre-
ceding portion of the stay.
(ii) Examples. The rules of this para-
graph (c)(3) are illustrated by the follow-
ing examples. In each example, the issuer
is subject to the requirements of this sec-
tion, 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 per-
cent of the cost of the stay for the first 24-hour pe-
riod 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 per-
cent after 24 hours.
(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 ad-
vance 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 con-
sistent 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 pro-
vider. This section does not prevent an is-
suer from negotiating with an attending
provider the level and type of compensa-
tion 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 pro-
vided to eligible individuals as defined in
section 2741(b) of the PHS Act.
(d) Notice requirement.Except as pro-
vided in paragraph (d)(4) of this section,
an issuer offering health insurance in the
individual market must meet the follow-
ing 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 dis-
closure requirement set forth in paragraph
(d)(1) of this section, the following dis-
closure notice must be used:
Statement of Rights under the Newborns’
and Mothers’ Health Protection Act
Under federal law, health insurance is-
suers generally may not restrict benefits
for any hospital length of stay in connec-
tion with childbirth for the mother or
newborn child to less than 48 hours fol-
lowing 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 man-
ner less favorable to the mother or new-
born than any earlier portion of the stay.
In addition, an issuer may not, under
federal law, require that a physician or
1998–45 I.R.B.25November 9, 1998
IRB 1998-45 11/4/98 3:23 PM Page 25

other health care provider obtain autho-
rization for prescribing a length of stay of
up to 48 hours (or 96 hours). However, to
use certain providers or facilities, or to re-
duce your out-of-pocket costs, you may
be required to obtain precertification. For
information on precertification, contact
your issuer.
(3) Timing of disclosure.The disclo-
sure 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 amend-
ment to the contract), not later than March
1, 1999.
(4) Exception.The requirements of
this paragraph (d) do not apply with re-
spect to coverage regulated under a State
law described in paragraph (e) of this
section.
(e) Applicability in certain States—(1)
Health insurance coverage.The require-
ments of section 2751 of the PHS Act and
this section do not apply with respect to
health insurance coverage in the individ-
ual market if there is a State law regulat-
ing the coverage that meets any of the fol-
lowing criteria:
(i) The State law requires the coverage
to provide for at least a 48-hour hospital
length of stay following a vaginal deliv-
ery 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 estab-
lished by the American College of Obste-
tricians and Gynecologists, the American
Academy of Pediatrics, or any other
established professional medical associa-
tion.
(iii) The State law requires, in connec-
tion with the coverage for maternity care,
that the hospital length of stay for such
care is left to the decision of (or is re-
quired 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 con-
tained 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 cov-
erage offered, sold, issued, renewed, in
effect, or operated in the individual mar-
ket on or after January 1, 1998. This sec-
tion 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.
(Filed by the Office of the Federal Register on
October 26, 1998, 8:45 a.m., and published in the
issue of the Federal Register for October 27, 1998,
63 F.R. 57546)
November 9, 1998261998–45 I.R.B.
IRB 1998-45 11/4/98 3:23 PM Page 26

1998–45 I.R.B.27November 9, 1998
Foundations Status of Certain
Organizations
Announcement 98–101
The following organizations have
failed to establish or have been unable to
maintain their status as public charities or
as operating foundations. Accordingly,
grantors and contributors may not, after
this date, rely on previous rulings or des-
ignations in the Cumulative List of Orga-
nizations (Publication 78), or on the pre-
sumption arising from the filing of notices
under section 508(b) of the Code. This
listing does notindicate that the organiza-
tions have lost their status as organiza-
tions described in section 501(c)(3), eligi-
ble to receive deductible contributions.
Former Public Charities.The following
organizations (which have been treated as
organizations that are not private founda-
tions described in section 509(a) of the
Code) are now classified as private foun-
dations:
9th Avenue International Market,
New York, NY
15th Avenue Housing Corporation,
Escondido, CA
24 hours for Children Foundation U S A
Inc., New York, NY
24 Karat Career Development Center,
Chicago, IL
142 Ludlow Street Housing Development
Fund Corporation, New York, NY
258 Cumberland Avenue Inc., West
Paterson, NJ
573 Warren Street HD FC, Brooklyn,
NY
701 Shipley Inc., Wilmington, DE
1290 Scholarship Fund Inc., Milwaukee,
WI
1993 Denver Dynamite Club, Denver,
CO
1995 Vandergrift Centennial Committee
Inc., Vandergrift, PA
1996 United States Precision Figure
Skating Championship Inc., Chicago,
IL
2450 W. Monroe St. Resident
Organization, Chicago, IL
A Bridge to the Arts Inc., Mt. Kisco, NY
A Childs Claim for Survival, Spokane,
WA
A Childs Right Foundation Incorporated,
Cotati, CA
AFTERCare Unlimited Inc., New
York, NY
A I D to Mankind, Louisville, KY
A Legacy of Care Inc., Columbus, OH
A O A Health Center Inc., Orange, MA
A Plus for Kids Inc., Great Neck, NY
A Second Chance-A Haven for Abuse-N-
Battered Women & Children,
Philadelphia, PA
A Statue for Roberto, Pittsburgh, PA
A Taste of the Berkshires Inc., Great
Barrington, MA
A Vision for the Community Inc.,
Denver, CO
A Womans Place, Asheville, NC
Abbeville General Hospital Volunteers
Inc., Abbeville, LA
ABC Missions Inc., Rapid River, MI
Aberdeen Community Projects
Committee Inc., Aberdeen, MD
Above and Beyond for Children,
Bedford, TX
Abraham Moyano International
Ministries Inc., Houston, TX
Abundant Harvest Foundation, Marrero,
LA
Abundant Life Support Group, New
Bern, NC
Academy Child Care Center, Cleveland,
OH
Academy of Human Resource
Development Inc., Austin, TX
Accident Prone Man Press and
Publication LTD., Tulsa, OK
Ace Association of Eau Claire Inc.,
Eau Claire, WI
ACF Black Hills Chapter of Professional
Chefs, Deadwood, SD
ACHI Foundation, San Francisco, CA
ACI Fund for Developing Nations
Airports-North American Fund,
Tucson, AZ
Action & Community Training,
Arlington, MA
Action 4 Aids, Miami, FL
Action Not Gridlock Education Fund,
Arlington, VA
Actors Theatre Inc., Virginia Beach, VA
Acupuncture Society of Michigan,
Ann Arbor, MI
Ad Astra Inc., Houston, TX
Ad Hoc Committee for Courts LTD.,
New York, NY
Ada Council for the Arts, Grand Rapids,
MI
Adagio Center Inc., Portland, OR
Adais Inc., Chicago, IL
Adaptive Recreation Inc., Hattiesburg,
MS
Adebara Research Foundation, Staten
Island, NY
Adirondack Community Foundation Inc.,
Rochester, NY
Adopt a Horse Program Inc., Palermo,
ME
Adopt-A-Neighborhood Inc., Racine,
WI
Adopt-A-Spot, St. Thomas, VI
Adoption Knowledge Affiliates, Austin,
TX
Adoration Ministries Inc., Jackson, TN
Adult Attention Deficit Disorder
Awareness, Warren, MI
Adult Literacy Center of Southern West
Virginia, Beckley, WV
Adult Sexual Abuse and Incest Survivors,
Dewitt, IA
Adults and Youth United Development
Association Inc., El Paso, TX
Adults Committed to Inspire
Opportunities Needed for Kids, Simi
Valley, CA
Advances in Mineral Metabolism,
Rochester, MN
Advisory Board to the Michigan City
Police Department DARE Program
Inc., Michigan City, IN
Advocates for Dignity, Westerspring, IL
Aerospace Education of Wisconsin Inc.,
Neenah, WI
Affordable Housing Advocates of Kansas
Association, Topeka, KS
Affordable Housing Alliance Inc., Irvine,
CA
Affordable Housing Inc., Anoka, MN
Afghan Womens Association
International, Hayward, CA
Africa Biodiversity Foundation,
Missoula, MT
African American Chamber of,
Milwaukee, WI
African American Clergy, Portland, OR
African American Community Initiatives
Inc., Minneapolis, MN
African American Institute Inc.,
Birmingham, AL
African American Leaders of Tomorrow,
Seattle, WA
African American Parade Day Committee
Inc., Bloomfield, CT
African American Recruitment Training
and Placement Assn. Inc., Chicago, IL
Part IV. Items of General Interest
IRB 1998-45 11/4/98 3:23 PM Page 27

November 9, 1998281998–45 I.R.B.
African American Task Force for
Substance Abuse Prevention, Salt Lake
City, UT
African Forum Inc., Austin, TX
African Lawyer Committee for Human
Rights, Washington, DC
Afrikan Free School Inc., New York, NY
Afrinatino, Corapolis, PA
AFSMI Foundation Inc., Fort Myers, FL
AGAPE Christian Counseling Inc.,
Tampa, FL
AGAPE Foundation Inc., Plainfield, NJ
AGAPE Ministries Inc., Waterbury, CT
AGAPE Placement, Hartsville, SC
AGIOS Prodromos Hellenic Orthodox
Christian Association, Morton Grove,
IL
AHEPA 18 Inc., West Palm Beach, FL
AHEPA 250-II Inc., Niantic, CT
AIADA Disaster Relief Fund Trust,
Alexandria, VA
Aid for the Visually Impaired Inc.,
St. Louis, MO
Aid to AIDS Inc., Clearwater, FL
AIDS Buddy Network, Middleton, CT
AIDS Foundation of America, Augusta,
ME
AIDS Project Inc., Spring Grove, IL
AIDS Relief Fund, Tucson, AZ
AIDS Resource Network of Ellis County
Inc., Hays, KS
AIDS Support Foundation Inc.,
Toms River, NJ
AIDS Wellness Project of Verde Valley
Living with HIV, Cottonwood, AZ
AIJ Inc., College Station, TX
Airport Area Amateur Hockey
Association Inc., Coraopolis, PA
Alabama Association for Behavioral
Analysis Inc., Montgomery, AL
Alabama Association of Minority
Contractors, Birmingham, AL
Alabama Foundation for Workplace
Education, Montgomery, AL
Alabama International Piano Competition
Foundation Inc., Orange Beach, AL
Alachua County Sickle Cell Foundation
Inc., Gainesville, FL
Alamo Association of Adoptive Parents,
San Antonio, TX
Alaska Women in Business Inc.,
Fairbanks, AK
Alcohol Free Drivers Inc., Chapel Hill,
NC
Alcoholic Beverage Servers Relief
Foundation Inc., Martinsburg, WV
Alconon Club of Shelby Inc., Kings
Mountain, NC
Algiers Crescent Community
Development Corporation, New
Orleans, LA
Algonquian Intertribal Village Inc.,
Petersham, MA
Alice Heyward Taylor Tenants Task
Force Inc., Roxbury, MA
Alkebulan Sharo, Akron, OH
All Holiday Moving, Duluth, MN
All One Company, Taos, NM
All Saints Turning Point Recovery
Center, Oakland, CA
Allah Temple No. 6 Prince Hall
Affiliation Inc., Kansas City, MO
Allapattah Wynwood Community and
Development Center Inc., Miami, FL
Alle-Kiski Homeless Project Inc.,
Tarentum, PA
Alleanza Italiana Foundation, Brooklyn
Height, NY
Allegan Youth Sports Inc., Allegan, MI
Allen Outreach and Development Center
Inc., Orlando, FL
Allenton Foundation Inc., Pacific, MO
Alliance for Eye and Vision Research
Inc., Washington, DC
Alliance for Financial Education a
Tax-Exempt Education Corp., Incline
Village, NV
Alliance for Musical Arts Productions
Inc., Miami Beach, FL
Alliance for Women of Divorce Inc.,
Indianapolis, IN
Alliance Francaise de Wilmington,
Wilmington, DE
Alliance of Alcohol & Drug Addicts Inc.
a Non-Profit Corp., Chicago, IL
Allora Inc., Philadelphia, PA
Aloa Scholarship Foundation, Dallas, TX
Alpha Gamma Chapter of Theta Chi
Educational Foundation Inc.,
Southfield, MI
Alpha Health Services Inc., Boutte, LA
Aradia Inc. Aradia Theatre, Buskirk, NY
BCC Inc., Windsor, CO
Center for Modernization Studies,
Dearborn, MI
Children’s Legal and Social Services,
Scotts Valley, CA
Common Sense Environmental
Association, Sacramento, CA
Family Development Foundation, Inc.,
Chesapeake, VA
Gertrude J. Dombrowski Research
Organization, Anacortes, WA
Italian Cultural Society of Northwest
Florida Inc., Pensacola, FL
OIC Housing Inc., Weslaco, TX
Optimist Club Foundation of Abilene
Texas, Inc., Abilene, TX
Research and Education Group, Derry, NM
Spokane Masonic Temple Foundation,
Spokane, WA
Tim Freudenberg Scholarship Fund
University of Kentucky, Inc., Cold
Spring, KY
Wheels of Fire, Dallas, TX
If an organization listed above submits
information that warrants the renewal of
its classification as a public charity or as a
private operating foundation, the Internal
Revenue Service will issue a ruling or de-
termination letter with the revised classi-
fication as to foundation status. Grantors
and contributors may thereafter rely upon
such ruling or determination letter as pro-
vided in section 1.509(a)–7 of the Income
Tax Regulations. It is not the practice of
the Service to announce such revised clas-
sification of foundation status in the Inter-
nal Revenue Bulletin.
Announcement 98–102
Assistant Commissioner (International)
John Lyons has announced the Eleventh
Annual Institute on Current Issues in In-
ternational Taxation, co-sponsored with
The George Washington University, to be
held December 10 and 11, 1998, at the
J.W. Marriott Hotel in Washington, DC.
Designed for professionals in interna-
tional tax law, the Institute will open with
a panel of the Competent Authorities from
the U.S., Germany and Japan and a repre-
sentative from Inland Revenue, UK. The
first day will also include sessions on cur-
rent transfer pricing issues, international
tax issues raised by emerging technolo-
gies, and corporate developments affect-
ing U.S. multinationals. Commissioner
Charles O. Rossotti will be the featured
luncheon speaker. The second day will
include sessions on the return of contro-
versial cross-boarder transactions, in-
bound update, managing the effective tax
rate for U.S. multinationals, and an “Ask
the IRS” panel. Donald C. Lubick, Trea-
sury Assistant Secretary for Tax Policy
will be the featured luncheon speaker.
Those interested in attending may ob-
tain more information from The George
Washington University, Conference Man-
agement Services, by calling (202)973-
1110 or visiting their Internet site at
http://www.gwu.edu/~cms/tax/.
IRB 1998-45 11/4/98 3:23 PM Page 28

Notice of Proposed Rulemaking
by Cross-Reference to
Temporary Regulations
HIPAA Newborns’ and Mothers’
Health Protection Act
Reg–109708–97
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemak-
ing by cross-reference to temporary regu-
lations.
SUMMARY: In T.D. 8788 on page 6, the
IRS is issuing temporary regulations re-
lating to minimum hospital length-of-stay
requirements imposed on group health
plans with respect to mothers and new-
borns. The hospital length-of-stay re-
quirements were added to the Internal
Revenue Code by section 1531 of the
Taxpayer Relief Act of 1997. The IRS is
issuing the temporary regulations at the
same time that the Pension and Welfare
Benefits Administration of the U.S. De-
partment of Labor and the Health Care Fi-
nancing Administration of the U.S. De-
partment of Health and Human Services
are issuing substantially similar interim
final regulations relating to hospital
length-of-stay requirements added by the
Newborns’ and Mothers’ Health Protec-
tion Act of 1996 to the Employee Retire-
ment Income Security Act of 1974 and the
Public Health Service Act. The tempo-
rary regulations provide guidance to em-
ployers and group health plans relating to
the new hospital length-of-stay require-
ments. The text of those temporary regu-
lations also serves as the text of these pro-
posed regulations.
DATES: Written comments and requests
for a public hearing must be received by
January 25, 1999.
ADDRESSES: Send submissions to:
CC:DOM:CORP:R (REG–109708–97),
room 5226, Internal Revenue Service,
POB 7604, Ben Franklin Station, Wash-
ington, DC 20044. Submissions may be
hand-delivered to: CC:DOM:CORP:R
(REG–109708–97), room 5226, Internal
Revenue Service, 1111 Constitution Av-
enue, NW, Washington, DC.
Alternatively, taxpayers may submit
comments electronically via the Internet
by selecting the “Tax Regs” option on the
IRS Home Page, or by submitting com-
ments directly to the IRS Internet site at:
http://www.irs.ustreas.gov/prod/tax_regs/
comments.html
FOR FURTHER INFORMATION CON-
TACT: Russ Weinheimer, (202) 622-
4695 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
T.D. 8788 adds §54.9811–1T to the
Miscellaneous Excise Tax Regulations.
These regulations are being published as
part of a joint rulemaking with the De-
partment of Labor and the Department of
Health and Human Services (the joint
rulemaking).
The text of those temporary regulations
also serves as the text of these proposed
regulations. The preamble to the tempo-
rary regulations explains the temporary
regulations.
Special Analyses
This regulation is not subject to the Un-
funded Mandates Reform Act of 1995 be-
cause the regulation is an interpretive reg-
ulation. It has also been determined that
section 553(b) of the Administrative Pro-
cedure Act (5 U.S.C. chapter 5) does not
apply to this regulation, and because the
regulation does not impose a collection of
information on small entities, the Regula-
tory Flexibility Act (5 U.S.C. chapter 6)
does not apply. For further information
and for analyses relating to the joint rule-
making, see the preamble to the joint rule-
making. Pursuant to section 7805(f) of
the Internal Revenue Code, this notice of
proposed rulemaking will be submitted to
the Chief Counsel for Advocacy of the
Small Business Administration for com-
ment on its impact on small business.
Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations, considera-
tion will be given to any written com-
ments (a signed original and eight (8)
copies) that are submitted timely to the
IRS. All comments will be available for
public inspection and copying. A public
hearing may be scheduled if requested in
writing by a person that timely submits
written comments. If a public hearing is
scheduled, notice of the date, time, and
place for the hearing will be published in
the Federal Register.
Drafting Information
The principal author of these proposed
regulations is Russ Weinheimer, Office of
the Chief Counsel (Employee Benefits
and Exempt Organizations), IRS. How-
ever, other personnel from the IRS and
Treasury Department participated in their
development. The proposed regulations,
as well as the temporary regulations, have
been developed in coordination with per-
sonnel from the U.S. Department of
Labor and the U.S. Department of Health
and Human Services.
*****
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 54 is pro-
posed to be amended as follows:
PART 54—PENSION EXCISE TAXES
Paragraph 1. The authority citation for
part 54 is amended by adding an entry in
numerical order to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 54.9811–1 also issued under 26
U.S.C. 9833. * * *
Par. 2. Section 54.9811–1 is added to
read as follows:
§54.9811–1 Standards relating to
benefits for mothers and newborns.
[The text of this proposed section is the
same as the text of §54.9811–1T pub-
lished in T.D. 8788.]
Michael P. Dolan,
Deputy Commissioner of
Internal Revenue.
(Filed by the Office of the Federal Register on
October 26, 1998, 8:45 a.m., and published in the
issue of the Federal Register for October 27, 1998,
63 F.R. 57565)
1998–45 I.R.B.29November 9, 1998
IRB 1998-45 11/4/98 3:23 PM Page 29

November 9, 1998301998–45 I.R.B.
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus,
if an earlier ruling held that a principle
applied to A, and the new ruling holds
that the same principle also applies to B,
the earlier ruling is amplified. (Compare
with modified, below).
Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously
published ruling and points out an essen-
tial difference between them.
Modified is used where the substance
of a previously published position is
being changed. Thus, if a prior ruling
held that a principle applied to A but not
to B, and the new ruling holds that it ap-
plies to both A and B, the prior ruling is
modified because it corrects a published
position. (Compare with amplified and
clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used
in a ruling that lists previously published
rulings that are obsoleted because of
changes in law or regulations. A ruling
may also be obsoleted because the sub-
stance has been included in regulations
subsequently adopted.
Revoked describes situations where the
position in the previously published rul-
ing is not correct and the correct position
is being stated in the new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the
new ruling does more than restate the
substance of a prior ruling, a combination
of terms is used. For example, modified
and superseded describes a situation
where the substance of a previously pub-
lished ruling is being changed in part and
is continued without change in part and it
is desired to restate the valid portion of
the previously published ruling in a new
ruling that is self contained. In this case
the previously published ruling is first
modified and then, as modified, is super-
seded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and
that list is expanded by adding further
names in subsequent rulings. After the
original ruling has been supplemented
several times, a new ruling may be pub-
lished that includes the list in the original
ruling and the additions, and supersedes
all prior rulings in the series.
Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current use and for-
merly used will appear in material published in the
Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C.—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contribution Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign Corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statements of Procedral Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
Definition of Terms
IRB 1998-45 11/4/98 3:23 PM Page 30

1998–45 I.R.B.31November 9, 1998
Numerical Finding List
1
Bulletins 1998–29 through 44
Announcements:
98–62, 1998–29 I.R.B. 13
98–68, 1998–29 I.R.B. 14
98–69, 1998–30 I.R.B. 16
98–70, 1998–30 I.R.B. 17
98–71, 1998–30 I.R.B. 17
98–72, 1998–31 I.R.B.14
98–73, 1998–31 I.R.B.14
98–74, 1998–31 I.R.B.15
98–75, 1998–31 I.R.B.15
98–76, 1998–32 I.R.B.64
98–77, 1998–34 I.R.B.30
98–78, 1998–34 I.R.B.30
98–79, 1998–34 I.R.B.31
98–80, 1998–34 I.R.B.32
98–81, 1998–36 I.R.B.35
98–82, 1998–35 I.R.B. 17
98–83, 1998–36 I.R.B. 36
98–84, 1998–38 I.R.B.30
98–85, 1998–38 I.R.B.30
98–86, 1998–38 I.R.B.31
98–87, 1998–40 I.R.B.11
98–88, 1998–41 I.R.B. 14
98–89, 1998–40 I.R.B.11
98–90, 1998–42 I.R.B.22
98–91, 1998–40 I.R.B.12
98–92, 1998–41 I.R.B.15
98–93, 1998–43 I.R.B.10
98–94, 1998–43 I.R.B.32
98–95, 1998–44 I.R.B.13
98–96, 1998–44 I.R.B.18
98–97, 1998–44 I.R.B.18
98–98, 1998–44 I.R.B.18
Court Decisions:
2063, 1998–36 I.R.B. 13
2064, 1998–37 I.R.B. 4
2065, 1998–39 I.R.B.7
Notices:
98–36, 1998–29 I.R.B. 8
98–37, 1998–30 I.R.B.13
98–38, 1998–34 I.R.B.7
98–39, 1998–33 I.R.B.11
98–40, 1998–35 I.R.B. 7
98–41, 1998–33 I.R.B.12
98–42, 1998–33 I.R.B.12
98–43, 1998–33 I.R.B.13
98–44, 1998–34 I.R.B.7
98–45, 1998–35 I.R.B.7
98–46, 1998–36 I.R.B. 21
98–47, 1998–37 I.R.B. 8
98–48, 1998–39 I.R.B.17
98–49, 1998–38 I.R.B.5
98–50, 1998–44 I.R.B.10
98–51, 1998–44 I.R.B. 11
Railroad Retirement Quarterly Rate:
1998–31 I.R.B. 7
Proposed Regulations:
REG–209446–82, 1998–36 I.R.B. 24
REG–209060–86, 1998–39 I.R.B. 18
REG–209769–95, 1998–41 I.R.B.8
REG–209813–96, 1998–35 I.R.B. 9
Proposed Regulations—Continued
REG–246256–96, 1998–34 I.R.B.9
REG–104641–97, 1998–29 I.R.B. 9
REG–104565–97, 1998–39 I.R.B.21
REG–106177–97, 1998–37 I.R.B.33
REG–115446–97, 1998–36 I.R.B. 23
REG–116608–97, 1998–29 I.R.B. 12
REG–118926–97, 1998–39 I.R.B.23
REG–118966–97, 1998–39 I.R.B.29
REG–119227–97, 1998–30 I.R.B. 13
REG–122488–97, 1998–42 I.R.B. 19
REG–101363–98, 1998–40 I.R.B.10
REG–106221–98, 1998–41 I.R.B.10
REG–110332–98, 1998–33 I.R.B.18
REG–110403–98, 1998–29 I.R.B.11
REG–115393–98, 1998–39 I.R.B.34
Revenue Procedures:
98–40, 1998–32 I.R.B. 6
98–41, 1998–32 I.R.B. 7
98–42, 1998–28 I.R.B. 9
98–43, 1998–29 I.R.B. 8
98–44, 1998–32 I.R.B. 11
98–45, 1998–34 I.R.B.8
98–46, 1998–36 I.R.B. 21
98–47, 1998–37 I.R.B. 8
98–48, 1998–38 I.R.B.7
98–49, 1998–37 I.R.B. 9
98–50, 1998–38 I.R.B.8
98–51, 1998–38 I.R.B.20
98–52, 1998–37 I.R.B. 12
98–53, 1998–40 I.R.B.9
98–54, 1998–43 I.R.B.7
Revenue Rulings:
98–34, 1998–31 I.R.B. 12
98–35, 1998–30 I.R.B. 4
98–36, 1998–31 I.R.B.6
98–37, 1998–32 I.R.B.5
98–38, 1998–32 I.R.B.4
98–39, 1998–33 I.R.B.4
98–40, 1998–33 I.R.B.4
98–41, 1998–35 I.R.B.6
98–42, 1998–35 I.R.B. 5
98–43, 1998–36 I.R.B. 9
98–44, 1998–37 I.R.B.4
98–45, 1998–38 I.R.B.4
98–46, 1998–39 I.R.B. 10
98–47, 1998–39 I.R.B. 4
98–48, 1998–39 I.R.B. 6
98–49, 1998–40 I.R.B.4
98–50, 1998–40 I.R.B.7
98–51, 1998–43 I.R.B.4
Tax Conventions:
1998–43 I.R.B. 6
Treasury Decisions:
8771, 1998–29 I.R.B. 6
8772, 1998–31 I.R.B. 8
8773, 1998–29 I.R.B. 4
8774, 1998–30 I.R.B. 5
8775, 1998–31 I.R.B.4
8776, 1998–33 I.R.B.6
8777, 1998–34 I.R.B.4
8778, 1998–36 I.R.B. 4
8779, 1998–36 I.R.B. 11
8780, 1998–39 I.R.B.14
Treasury Decisions—Continued
8781, 1998–40 I.R.B. 4
8782, 1998–41 I.R.B.5
8783, 1998–41 I.R.B.4
8784, 1998–42 I.R.B.4
8785, 1998–42 I.R.B.5
8786, 1998–44 I.R.B. 4
1
A cumulative list of all revenue rulings, revenue
procedures, Treasury decisions, etc., published in
Internal Revenue Bulletins 1998–1 through 1998–28
will be found in Internal Revenue Bulletin 1998–29,
dated July 20, 1998.
IRB 1998-45 11/4/98 3:23 PM Page 31

November 9, 1998321998–45 I.R.B.
Finding List of Current Action on
Previously Published Items
1
Bulletins 1998–29 through 44
*Denotes entry since last publication
Notices:
87–13
Modified by
98–49, 1998–38 I.R.B. 5
87–16
Modified by
98–49, 1998–38 I.R.B. 5
Revenue Procedures:
83–58
Obsoleted by
98–37, 1998–32 I.R.B. 5
88–17
Clarified, modified, and superseded by
98–54, 1998–43 I.R.B. 7
97–60
Superseded by
98–50, 1998–38 I.R.B. 8
97–61
Superseded by
98–51, 1998–38 I.R.B. 20
98–14
Modified by
98–53, 1998–40 I.R.B. 9
Revenue Rulings:
57–271
Obsoleted by
98–37, 1998–32 I.R.B. 5
67–301
Modified by
98–41, 1998–35 I.R.B. 6
70–225
Obsoleted by
98–44, 1998–37 I.R.B. 4
71–277
Obsoleted by
98–37, 1998–32 I.R.B. 5
71–434
Obsoleted by
98–37, 1998–32 I.R.B. 5
71–574
Obsoleted by
98–37, 1998–32 I.R.B. 5
72–75
Obsoleted by
98–37, 1998–32 I.R.B. 5
72–120
Obsoleted by
98–37, 1998–32 I.R.B. 5
72–121
Obsoleted by
98–37, 1998–32 I.R.B. 5
72–122
Obsoleted by
98–37, 1998–32 I.R.B. 5
74–77
Obsoleted by
98–37, 1998–32 I.R.B. 5
Revenue Rulings—Continued
75–19
Obsoleted by
98–37, 1998–32 I.R.B. 5
76–562
Obsoleted by
98–37, 1998–32 I.R.B. 5
77–214
Obsoleted by
98–37, 1998–32 I.R.B. 5
79–106
Obsoleted by
98–37, 1998–32 I.R.B. 5
83–113
Obsoleted by
98–37, 1998–32 I.R.B. 5
85–143
Obsoleted by
98–37, 1998–32 I.R.B. 5
88–8
Obsoleted by
98–37, 1998–32 I.R.B. 5
88–76
Obsoleted by
98–37, 1998–32 I.R.B. 5
88–79
Obsoleted by
98–37, 1998–32 I.R.B. 5
93–4
Obsoleted by
98–37, 1998–32 I.R.B. 5
93–5
Obsoleted by
98–37, 1998–32 I.R.B. 5
93–6
Obsoleted by
98–37, 1998–32 I.R.B. 5
93–30
Obsoleted by
98–37, 1998–32 I.R.B. 5
93–38
Obsoleted by
98–37, 1998–32 I.R.B. 5
93–49
Obsoleted by
98–37, 1998–32 I.R.B. 5
93–50
Obsoleted by
98–37, 1998–32 I.R.B. 5
93–53
Obsoleted by
98–37, 1998–32 I.R.B. 5
93–81
Obsoleted by
98–37, 1998–32 I.R.B. 5
93–91
Obsoleted by
98–37, 1998–32 I.R.B. 5
93–92
Obsoleted by
98–37, 1998–32 I.R.B. 5
Revenue Rulings—Continued
93–93
Obsoleted by
98–37, 1998–32 I.R.B. 5
94–5
Obsoleted by
98–37, 1998–32 I.R.B. 5
94–6
Obsoleted by
98–37, 1998–32 I.R.B. 5
94–30
Obsoleted by
98–37, 1998–32 I.R.B. 5
94–51
Obsoleted by
98–37, 1998–32 I.R.B. 5
94–79
Obsoleted by
98–37, 1998–32 I.R.B. 5
95–2
Obsoleted by
98–37, 1998–32 I.R.B. 5
95–9
Obsoleted by
98–37, 1998–32 I.R.B. 5
97–37
Obsoleted by
98–39, 1998–33 I.R.B. 4
1
A cumulative finding list for previously published
items mentioned in Internal Revenue Bulletins
1998–1 through 1998–28 will be found in Internal
Revenue Bulletin 1998–29, dated July 20, 1998.
IRB 1998-45 11/4/98 3:23 PM Page 32

1998–45 I.R.B.33November 9, 1998
Notes
IRB 1998-45 11/4/98 3:23 PM Page 33

November 9, 1998341998–45 I.R.B.
Notes
IRB 1998-45 11/4/98 3:23 PM Page 34

IRB 1998-45 11/4/98 3:23 PM Page 35

INTERNAL REVENUE BULLETIN
The Introduction on page 3 describes the purpose and content of this publication. The weekly Internal Revenue Bulletin is sold
on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superintendent of
Documents when their subscriptions must be renewed.
CUMULATIVE BULLETINS
The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are
sold on a single copy basis and are not included as part of the subscription to the Internal Revenue Bulletin. Subscribers to the week-
ly Bulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of print
and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from the
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HOW TO ORDER
Check the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance,
detach entire page, and mail to the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402. Please
allow two to six weeks, plus mailing time, for delivery.
WE WELCOME COMMENTS ABOUT THE
INTERNAL REVENUE BULLETIN
If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we
would be pleased to hear from you. You can e-mail us your suggestions or comments through the IRS Internet Home Page
(www.irs.ustreas.gov) or write to the IRS Bulletin Unit, T:FP:F:CD, Room 5560, 1111 Constitution Avenue NW, Washington, DC
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IRB 1998-45 11/4/98 3:23 PM Page 36