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.
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
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.
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.
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
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:
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.
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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