You probably know the Health Insurance Portability and Accountability Act, or HIPAA, from the privacy-notification forms you have to sign at your doctor's office and pharmacy. HIPAA, enacted by the United States Congress in 1996, has two functions.
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.
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.
- 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 pre-existing medical problems for 12 months (except pregnancy, if the plan has maternity coverage. Late enrollees in group health plans might have to wait up to 18 months for coverage of pre-existing conditions.
Pre-existing conditions
A pre-existing condition is generally considered a physical or mental ailment for which medical advice, diagnosis, care, or treatment was recommended or received before you enroll in a health insurance plan.
It can also be a problem you were aware of, but for which you never sought treatment.
Under some policies, a medical problem can be considered pre-existing even if you didn't know you had the problem before you bought your health plan.
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There is no federal law that requires health plans to provide maternity coverage, although some states have such laws. (Read more about how Pregnancy complicates health insurance options.)
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.
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, it's 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. The law is meant to 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
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 in coverage for 63 days or more. |
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 four months, you would only be credited for four months of dental coverage. Your new group health plan could impose an eight-month waiting period for dental coverage.
Continue to Page 2: Individual health plans and HIPAA
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