HIPAA Portability Rules

If you're worried about keeping your health benefits when you change jobs, you should know about a federal law called HIPAA. It's the Kassebaum-Kennedy Act, also known as the Health Insurance Portability and Accountability Act of 1996, or HIPAA for short. While HIPAA offers little protection if you're switching from a group health plan to an individual health plan, and nothing if you don't have insurance at all, it can help you from losing coverage when you have a gap in group health insurance.

The law was designed to ease what was then a growing problem known as "job lock" - the reluctance to move from one company to another for fear of losing health coverage.

Pre-existing conditions

The driving force behind HIPAA is that health insurance companies have traditionally tried to hold down their costs by invoking a "pre-existing condition" clause - refusing to cover a condition you had before you bought the health plan.

The concept of pre-existing conditions makes sense when you're talking about auto insurance. For example, if your windshield was cracked before you bought your coverage, you can't expect your new auto insurer to replace it after you buy a policy. That would be like asking your insurer to replace the windshield for free when you haven't paid premiums for that problem.

But when it comes to someone's health, the issue might seem less clear-cut or even downright unfair.

Got diabetes? Your current group health plan might pay for insulin and visits to the doctor. Before HIPAA was enacted, if you switched to a new group health plan, your diabetes would be a pre-existing condition and it wouldn't be covered under the new group health plan. You'd then be stuck paying for all of your diabetes treatment yourself, on top of the regular out-of-pocket expenses you'd pay for other medical care. The frightening prospect of having to pay hundreds or thousands of dollars for medical care created "job lock" and helped fuel the push for legislation banning such practices.

HIPAA imposes limits on the extent to which some group health plans can exclude coverage for pre-existing conditions. For instance, if you've had "creditable" health insurance for 12 straight months, with no lapse in coverage of 63 days or more, and you switch to a new group health plan, it cannot invoke the pre-existing condition exclusion at all. It must cover your medical problems as soon as you enroll in the plan. (Newborns and adopted children who are covered within 30 days are not subject to the 12-month waiting period.)

Most United States health coverage is creditable. It includes prior coverage you had under a group health plan (including a governmental or church plan), health insurance coverage (either group or individual), Medicare, Medicaid, a military-sponsored health care program such as TriCare, a program of the Indian Health Service, a state high-risk pool, the federal Employees Health Benefit Program, a public health plan established or maintained by a state or local government, and a health benefit plan provided for Peace Corps members.

On the other hand, if you don't have that creditable coverage behind you when you enroll in a new group plan - or had coverage from an overseas health insurer - your new health insurer can refuse to pay for any of your existing medical problems (except pregnancy, if the plan has maternity coverage), but only for a maximum of 12 months. Late enrollees in group health plans may have to wait up to 18 months for coverage of pre-existing conditions.

Your rights under HIPAA

HIPAA says that group health plans cannot deny your application for coverage based solely on your health status. It also limits exclusions for pre-existing conditions.

In addition, HIPAA says you can't be denied group health insurance because of mental illness, genetic information, disability, or the claims you've filed in the past.

Group health plans that offer maternity coverage cannot consider pregnancy a pre-existing condition and cannot exclude coverage for prenatal care or your baby's delivery, regardless of your employment or health insurance history. This holds true whether you are the primary insured or listed as a dependent.

Note that there is no federal law that requires health plans to actually provide maternity coverage, although some states have such laws.

HIPAA's rules apply to every employer group health plan that has at least two participants who are current employees, including companies that are self-insured. States have the option of applying the rules to "groups" of one, which some have opted to do - a big bonus for the self-employed. Some states also have enacted their own laws protecting health insurance consumers, and in many cases they afford more rights than federal law.

Unfortunately, there is one huge exception to HIPAA: It provides no protection if you switch from one individual health plan to another individual plan. That's what makes buying individual plans especially difficult for people who have chronic medical problems - the insurers can simply turn them away time after time.

The ifs, ands, or buts of HIPAA

In an effort to balance the interests of consumers and the interests of insurers, HIPAA also contains plenty of other exceptions, conditions, and loopholes that limit your rights. Thus, it's important to understand HIPAA before you change health plans.

First, understand some fundamental tenets of the American health care system. Employers are not required by most states or federal law to offer or pay for health insurance for employees (Hawaii is an exception). And unless mandated by state law, employers do not have to offer specific types of benefits, such as mental health or maternity coverage. Further, just because HIPAA grants you insurance "portability" does not mean that you'll have the same benefits, premiums, co-payments, or deductibles when you move from one health plan to another.

Your group health coverage can be canceled if you or your employer fail to pay the premiums, commit fraud, violate health plan rules, or move outside of your insurer's service area. HIPAA also does not eliminate the common practice of requiring a waiting period, generally one to three months, before you become eligible to join a new group health plan when you switch jobs. (Note, however, that waiting periods do not count as a lapse in health coverage, and thus you would not be penalized under HIPAA.)

HIPAA requirements do not apply to certain types of benefit plans known as "excepted benefits." Those benefits are:

  • Coverage only for accident (such as accidental death or dismemberment) or disability income insurance.

  • Liability insurance.

  • Supplements to liability insurance.

  • Workers compensation or similar insurance.

  • Automobile medical payment insurance (known as "MedPay").

  • Credit-only insurance (for example, mortgage insurance).

  • Coverage for on-site medical clinics.

Creditable coverage

Under HIPAA, if you've already been in a group health plan, chances are you won't have to sit out the full 12-month exclusion period. Your new health plan must give you "credit for time served" - the amount of time you were enrolled in your previous plan - and deduct it from the exclusion period. Thus, if you've had 12 or more months of continuous coverage, you'll have no pre-existing condition waiting period. And if you had prior coverage for eight months, you can be subject to only a four-month exclusion period when you switch jobs.

But let's say you're a recent college graduate and you haven't had health insurance for the last six months because you'd rather spend your money elsewhere. But then you land a job that offers you group health coverage. Because you've had such a long lapse in coverage, you'll likely face the 12-month exclusion period for any existing medical problems you have. (Keep in mind that insurers are not required to impose these pre-existing exclusions, but it is their standard practice.)

In order to keep your coverage continuous, you cannot let it lapse for more than 63 days. That's where COBRA can help. If you leave one company before starting with another, consider buying COBRA coverage to keep your coverage continuous. Otherwise, you'll be back at square one and faced with another 12-month exclusion period.

Whenever you leave any health plan, either group or individual, make sure that you get a "certificate of creditable coverage" in writing. Among other things, your certificate should say:

  • Your coverage dates.

  • Your policy ID number.

  • The insurer's name and address.

  • Any family members included under your coverage.

This is the easiest way to ensure your rights under HIPAA. However, you can use other evidence to prove creditable coverage. These include:

  • Pay stubs that reflect a health insurance premium deduction.

  • Explanation-of-benefit forms.

  • A benefit-termination notice from Medicare or Medicaid.

  • Verification letter from your doctor or your former health insurance provider that you had prior health coverage.

Remember to review the evidence for accuracy. When applying for a new group health plan, you'll give the evidence to the plan administrator at your company.

As an alternative method of determining your creditable coverage, insurers can look at your coverage for five specific benefits: prescription medications, vision, dental, mental health, and substance abuse treatment. If you had a group health plan for 12 continuous months but had coverage for, say, dental benefits, for just six of those months, you would only be credited for six months of dental coverage. Thus, your new group health plan could impose pre-existing condition exclusion for dental benefits only - not the entire health plan - for up to six more months.

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