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Recent federal and state laws provide important consumer protections for those who have pre-existing medical conditions and move from one job to another.
The federal law, officially called the "Health Insurance Portability and Accountability Act of 1996" (HIPAA), also referred to as the "Kassebaum-Kennedy Act", was enacted by President Clinton on August 21, 1996.
This document is designed to provide a general overview of the HIPAA law and how it interacts with existing state laws.
We hope this document will also help correct a few misconceptions about the recent laws.
You may have heard that you’ll be able "to take your medical coverage with you." This is only partially true. You do not actually take your exact plan of health benefits with you, but you do get to "take the credit" for the time you’ve served under your former plan to your new employer’s plan. In general, the new laws require employer group health plans to cover pre-existing conditions sooner by giving you credit for coverage under your former health plan.
The law applies to most health plans. The "portability" or take it with you concept does not apply if you are changing from one individual health plan to another individual health plan. Pre-existing conditions limits will still apply.
The laws do not affect all health insurance policies in exactly the same way. Group policies have different rules than policies purchased by individuals.
As a consumer, you need to know what kind of plan you have and which laws apply to your plan. In general, most of the new laws cover group health plans only. Very few changes were made to individual health plans. Tax changes were also made to long-term care plans and health savings accounts.
Employer provided group health plans are either fully insured or self-insured.
Self-insured group health plans (or self-funded plans) are set-up by employers to pay the health claims of its employees. The employer assumes the risk of providing the benefits and is obligated to pay all the claims.
Sometimes self-insured plans are confused with fully insured plans because employers often hire an insurance company or third party administrator to pay the claims. If you do not know what kind of plan you have, ask your employer or plan administrator.
Federal and state laws make a number of changes which apply to all group health plans. The health insurance changes required by the new laws include the following:
The main reason so many consumers have had difficulty changing from one insurance plan to another is because of prior or on going health conditions commonly called "pre-existing medical conditions." Historically, health plans would not cover pre-existing conditions, or limited coverage when you joined the plan, or even refused to give you health insurance. The new laws:
A pre-existing medical condition is defined as a physical or mental condition for which medical advice, diagnosis, care or treatment is recommended or received prior to your date of hire, or the date your coverage begins (depending on the plan).
The pre-existing condition limits vary depending on the type of group health plan that you have.
A fully insured small employer plan (2 to 50 employees) can exclude coverage for pre-existing conditions for up to 12 months (18 months for a late enrollee). Your pre-existing condition must meet the new definition and must have occurred within six-months prior to your effective date of coverage.
A fully insured large employer plan (51 or more employees) can exclude coverage for pre-existing conditions for up to 12 months. Your pre-existing condition must meet the new definition and must have occurred within 6 months prior to your effective date of coverage.
A self-insured plan can exclude coverage for your pre-existing conditions for up to 12 months. Your pre-existing condition must meet the new definition and must have occurred within six months prior to your hire date.
Conditions which may not be considered "pre-existing"
The laws add another very important provision to help make it easier for you when changing health plans. You get credit for your time served under the former health plan. This credit is "portable," that is, you take it with you as you move from plan to plan.
If your new group health plan has limits on coverage for pre-existing medical conditions, they must give you credit for any prior health coverage that you had. The law calls this credit "prior creditable coverage."
For example, let’s assume your new group health plan has a 6 months pre-existing condition exclusion period. Your new plan must give you credit for time served under your prior health plan. If your prior coverage was for at least 6 months, the plan must give you full credit which means all pre-existing conditions would be covered under your new plan. If your prior coverage was for 60 days, the plan can only impose a 120 day exclusion for pre-existing conditions.
Qualifying for prior coverage To qualify for prior coverage credit:
Plans that do not qualify for "prior creditable coverage"
You cannot get credit for coverage under non-medical coverages such as dental or vision plans; specified disease policies such as cancer or disability insurance; or workers compensation coverage.
Portability: Moving from Plan to Plan
You can move from a group plan to the state "high risk pool" (Indiana Comprehensive Health Insurance Association) with-out pre-existing conditions being applied if:
The Indiana Comprehensive Health Insurance Association ("state high risk pool") was created by the Indiana legislature in 1981 to provide health insurance coverage to consumers who are unable to obtain health insurance in the private market.
Lifetime benefit maximums are unlimited. The plan allows dependent coverage.
When you leave a plan All group health plans must give you a certificate that shows how many months of coverage you had under their plan. This certificate of "prior creditable coverage" must be provided to you when:
When you enroll in a new plan All group health plans must tell you about any pre-existing condition limits in their plan.
They must tell you what will be required to show proof of prior coverage.
After receiving proof of prior coverage, the plan must advise you if any conditions you have will be excluded as a pre-existing condition.
Discrimination based on medical history prohibited The new laws prohibit all group health plans from discriminating against you based on your health status. In other words, the plan can not treat you any differently from other individuals covered under your plan because you have a medical condition (such as cancer or a disability) or have a history of filing medical claims.
Prior Coverage Certification
All group health employer plans must provide written certification of prior coverage to all individuals losing coverage. The certificate must identify the covered person, period of coverage, and waiting periods (if any). It should be sent by first class mail to the employee’s last known address. The plan must also provide specific benefit information upon request to another employer’s plan.
Notice of Pre-existing Condition Exclusion Certain information must be included in the Summary Plan Description (SPD) employee booklet to notify of their right to:
Plans must provide a special enrollment period:
Disclosure Requirements (for self-insured plans only)
Plans must provide notice of material reduction in benefits or services within 60 days.
The Summary Plan Description must include information about the third-party administrators of the plan.
Employer Rights The laws also grant employers certain rights.
Some important examples:
Mental Health Coverage Large employer and self-funded health plans are prohibited from imposing different annual or lifetime dollar limits on benefits provided for mental health conditions than for medical and surgical coverage. In other words, if your plan has a $50,000 annual limit on benefits for medical conditions, it must have the same annual limit for mental health coverage.
There is an exception to this rule. A plan can opt out, i.e. not provide this coverage, if they can show that their plan costs would increase by 1%.
The federal law (HIPAA) provides for favorable tax treatment for "qualified long-term care plans." If you have a qualified plan:
You should consult with your attorney, accountant, or tax advisor regarding the tax implications of purchasing long-term care insurance. For more information about long-term care insurance in Indiana, please call the Senior Health Insurance Information Program (SHIIP) at the Indiana Department of Insurance, 1-800-452-4800 or (317) 233-3475.
Fully insured Group Health Plans Fully insured group health plans are subject to state laws and compliance is enforced by the Indiana Department of Insurance.
Self-insured Group Health plans Self-insured group health are not governed by state laws, but by a federal law called the Employee Retirement Income Security Act (ERISA).
If your plan is self-insured, it must follow the new federal laws (HIPAA). The U.S. Department of Labor (Pension and Welfare Benefits Administration) is enforcing these new rules.
Self-insured plans not complying with the new guidelines may be subject to an excise tax imposed by the Internal Revenue Service of $100 per day per violation. Non-compliance also means the possibility of lawsuits from plan participants or the U.S. Department of Labor. If you should have questions regarding any of these changes you will need to contact the U.S. Department of Labor.
Individual Health Plans If you have an individual health plan, your plan is governed by state law and is enforced by the Indiana Insurance Department. If you have questions, please contact the Department.
Long-term Care Insurance HIPAA provides for favorable tax treatment for "qualified long-term care plans." Any questions regarding the tax qualification of a long-term care policy will be determined by the Internal Revenue Service.
Indiana Department of Insurance
311 West Washington Street, Suite 300
Indianapolis, Indiana 46204-2787
Phone: (317) 232-2385
FAX: (317) 232-5251
Stephen W. Robertson, Commissioner
CONSUMER ASSISTANCE DIVISION
TOLL-FREE NUMBER1-800-622-4461 or (317) 232-2395