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HIPAA: Your rights to health insurance portability

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.

The law was designed to ease a problem known as "job lock" — the reluctance to move from one company to another for fear of losing health coverage. (Another federal law called COBRA helps you buy benefits when you're between jobs.

Pre-existing conditions

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 a 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 it comes to health insurance, there has long been a debate about pre-existing conditions.

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, the new insurer could consider your diabetes a pre-existing condition and refuse to cover treatment. You would then have to pay for all of your diabetes treatment, 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, a new group health plan cannot invoke the pre-existing condition exclusion. It must cover your medical problems as soon as you enroll in the plan.

What is “creditable” coverage? It includes prior coverage you had under any of the following health plans:

·        A group health plan

·        Medicare

·        Medicaid

·        A military-sponsored health care program such as TriCare

·        Health plans offered by 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

·        A health benefit plan provided for Peace Corps members

On the other hand, if you are not switching from a “creditable” health policy when you enroll in a new group plan — or had coverage from a foreign health insurer — your new insurer can refuse to pay for any of your existing medical problems (except pregnancy, if the plan has maternity coverage).  Maternity restrictions are only legal for a maximum of 12 months. Late enrollees in group health plans might have to wait up to 18 months for coverage of pre-existing conditions.

Your rights under HIPAA

Under HIPAA, 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 prohibits group health plans from denying coverage 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.

There is no federal law that requires health plans to 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.  That helps the self-employed. Some states also have enacted their own laws protecting health insurance applicants, and in many cases the states afford more rights than federal law.

There is one major exception to HIPAA: It provides no protection if you switch from one individual health plan to another individual plan.

The ifs, ands, or buts of HIPAA

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

Employers are not required by federal law to offer or pay for employee health insurance, and most states also give employers that option.

Even if employers do offer health coverage, its possible they don’t have to cover such things as mental health or maternity.  Levels of mandated coverage vary from state to state.

While HIPAA makes it much easier to get health insurance from your new employer if you switch jobs, it doesn’t guarantee the same level of benefits, deductibles and claim limits you might have enjoyed under your former employer’s health plan.

“It's important to note that HIPAA and the companion state laws do not entitle a person to keep the same health care plan when he or she changes employers,” says Jose Montemayor, the insurance commissioner of Texas. “These laws do; however, provide valuable protection against having to start new waiting periods for coverage of pre-existing conditions when you change jobs.”

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 allows employers or health plans to impose a waiting period, generally one to three months, before you become eligible to join the group health plan of a new employer. Such waiting periods do not count as a lapse in health coverage, and you would not be penalized under HIPAA.

HIPAA requirements do not apply to a list of "excepted benefits." Those benefits include:

• 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 waiting period for pre-existing conditions. If you had prior coverage for eight months, you can be subject to only a four-month exclusion period when you switch jobs.

Let's say you're a recent college graduate and you haven't had health insurance for the last six months. 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. (Insurers are not required to impose these pre-existing exclusions, but it is standard practice.)

In order to keep your coverage continuous, you cannot have a lapse or break in coverage for 63 days or more. That's where COBRA can help. If you leave one company before starting with another, consider maintaining your health plan from your previous employer through COBRA.  COBRA coverage tends to be very expensive, because you are picking up the total cost of your coverage.  Even so, COBRA allows you to maintain continuous coverage and might allow you to avoid an exclusion period for pre-existing conditions.

The Insurance Information Institute points out while COBRA coverage might seem expensive, it’s a relative bargain compared to other health insurance options facing people between jobs. “You must pay the full premium, but at group rates that are far cheaper than the individual rates you would pay for similar coverage.”

The U.S. Centers for Medicare and Medicaid Services warns it’s crucial to maintain health coverage when you leave a job, if you want to avoid exclusions for pre-existing conditions in your new employer’s health plan: “If you had group health plan coverage at your last job, you probably will be offered COBRA continuation coverage. If you are eligible for such continuation coverage, it counts as creditable coverage. In addition, you must accept and exhaust COBRA benefits before you can obtain coverage in the individual market as a HIPAA eligible individual.”

Whenever you leave any health plan, either group or individual, get a "certificate of creditable coverage" in writing. Your certificate should list the following:

• 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. 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 coverage

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 only had dental benefits for six months, you would only be credited for six months of dental coverage. Your new group health plan could impose a six-month waiting period for dental coverage.

Individual health plans and HIPAA

If your employer decides to drop group health coverage, HIPAA might make it easier to get an individual health policy.

Under HIPAA, you might be able to buy an individual health plan without the threat of exclusions for pre-existing conditions. In order to do so, you have to qualify as an "eligible individual."

In some states, if you qualify for individual health coverage under HIPAA, any company offering individual health plans in that state must sell you coverage. Your state’s insurance department can explain the rules.

To be eligible as an individual under HIPAA, you must:

• Have at least 18 months of continuous creditable coverage.
• Have been covered under a group health plan, a governmental plan, or church plan (or health insurance offered in connection with such plans, such as COBRA) during the most recent period of creditable coverage.
• Not be eligible for coverage under a group health plan (including a spouse's plan), Medicare or Medicaid.
• Not have other health insurance coverage.
• Have not lost your most recent health coverage due to non-payment of premiums or fraud (unless it was your employer that failed to pay premiums).
• Have elected and exhausted any option for continuation of coverage (under COBRA or a similar state law) that was available under your prior plan.

HIPAA does not limit the premiums individual health plans can charge.  While your application for insurance won't be rejected because of health problems, the premiums for individual coverage can be much higher than for group plans.

Deborah Chollet, a senior fellow at Mathematica Policy Research, says HIPAA has two shortcomings when it comes to premiums for individual policies. “One is it didn't say anything about how that coverage would be priced. Even if I am leaving the group market, I have lost coverage in the group market for reasons I do not control, HIPAA did not constrain insurers in any way for how they price you coming in,” Chollet says.

“The other thing that HIPAA did not do is make the world safe for people who live in the individual market. If I am in the individual market, I can easily get trapped in a policy. I may have gotten into this policy, but I decided the rates have gone up so I want to shop around. I want to look for other coverage. I don't have guaranteed issue. I have no guarantees that I can find another insurer who will accept me. If I have a guarantee, it comes from the state. It doesn't come from any federal guarantees,” Chollet adds.

In addition, your benefits could be vastly different under an individual plan. That's why when you're moving from a group plan to an individual plan, it's important to shop around for the best rates and benefits.

“The policies, vary tremendously in their content,” points out Steve Larsen, Maryland’s insurance commissioner. “Maryland has many what are called ‘mandated benefits,’ which are laws that require certain benefits to be provided. Beyond that core group of benefits there is a lot of variation, particularly in terms of deductibles and cost sharing.”

“If you are lucky enough to qualify, to not be excluded, and you are comparing individual policies from two carriers, it is hard to compare apples to apples. They have different co-pays, different deductibles, different cost sharing. So the products do vary tremendously,” Larsen adds.

In some cases, you might be offered a "conversion plan" when you lose your group health coverage. That essentially lets you convert your group coverage into an individual plan, with certain restrictions.

If at all possible, you should buy health insurance through a group plan, as they generally have broader benefits and wellness care. You don't necessarily need to buy group plans through an employer. Trade associations and chambers of commerce often offer their members group health insurance. In some states, you can get group coverage if you're self-employed — as a "group of one."

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