Chapter 3. Your Protections When Buying Health Insurance

If you do not have access to employer-sponsored group insurance, you may want to buy an individual health plan from a private health insurance company.  In most other states — you have limited guaranteed access to individual health insurance.  There are some alternatives to individual health insurance coverage like COBRA coverage.  This chapter summarizes your protections under different kinds of health plan coverage. 

Individual health insurance sold by private insurers

WHEN DO INDIVIDUAL HEALTH INSURERS HAVE TO SELL ME COVERAGE?     

Your ability to buy individual health coverage may depend on your health status. 

•        In general, companies that sell individual health insurance are free to turn you down because of your health status and other factors.  When applying for individual coverage, you may be asked questions about health conditions you have now or had in the past.  Depending on your health status, insurers might refuse to sell you coverage or offer to sell you a policy that has special limitations on what it covers.  (See below.)

•        Under most state laws, newborns and adopted children are automatically covered under the parents’ individual health plan for the first 31 days, if the plan covers dependents. The insurer may require that the parent enroll the child and pay the required premium within the 31 days in order to continue coverage beyond the 31 days.

•        In your state, mentally retarded and physically disabled dependents are permitted to remain insured under their parent’s individual health insurance policy after they reach the age at which dependent coverage is usually terminated.  The adult dependent must be incapable of self-support and must rely on the policyholder for support.  In addition, proof of dependency and disability must be provided to the insurer within 31 days of the dependent reaching the limiting age.

WHAT WILL MY INDIVIDUAL HEALTH PLAN COVER?

•        It depends on what you buy.  Your state may not require health insurers in the individual market to sell standardized policies.  Health plans can design different policies and you will have to read and compare them carefully.  However, your state may not require all health plans to cover certain mandated benefits.  Check with the your insurance department for more information about mandated benefits.

WHAT ABOUT COVERAGE FOR MY PRE-EXISTING CONDITION?

•        The definition of pre-existing condition varies by type of individual health plan.

•        Individual HMO plans can count as pre-existing any condition for which medical advice, treatment or diagnosis was actually received or recommended during the 12-month period immediately before you enrolled. Pre-existing condition periods in HMO individual health plans can be no longer than 12 months.

•        If you apply for an individual indemnity plan, the rules regarding preexisting conditions depend on the kind of form you completed when you applied for coverage. There are two types of forms that an indemnity plan can use.  One, a comprehensive form, will ask you detailed questions regarding your medical history. The other, a simplified form, will ask minimal questions regarding your medical history.  The insurance company selling the policy decides which form it will use at the time you apply.

If the plan uses a comprehensive form, then for the first 24 months it can refuse to    cover any condition that you disclose, or it can impose an elimination rider, which is an amendment to your health insurance contract that permanently excludes coverage for a health condition, body part, or body system.

In addition, if you make a claim during the first 2 years the plan can refuse to pay that claim and others related to the condition if it determines the condition was pre-existing.  In individual health plans, pre-existing conditions include those that were not previously diagnosed, but caused symptoms for which most people would have sought care.   This is called the prudent person rule.

If the individual indemnity plan used a simplified form when you applied for insurance then a different set of rules apply.  Contact your insurance department for more information.

•        In your state, pregnancy may be be considered a pre-existing condition in all individual health plans.  Genetic information cannot be considered a pre-existing condition.

•        Individual health plans do not have to give credit for your prior coverage, unlike group health plans.

WHAT CAN I BE CHARGED FOR INDIVIDUAL HEALTH COVERAGE?

•        In your state there are no limits on how much individual premiums can vary due to age, gender, health status, family size, and other factors. Your insurance department does check premiums for reasonableness in general.

•        There are some limits on how much your premiums can increase at renewal.  Call the Insurance Department if you have any questions.

CAN MY INDIVIDUAL HEALTH INSURANCE POLICY BE CANCELLED?

•        Your coverage cannot be canceled because you get sick.  This is called guaranteed renewability. You have this protection provided that you pay the premiums, do not defraud the company, and, in the case of managed care plans, continue to live in the plan service area. 

•        Some insurance companies sell temporary health insurance policies.  Temporary policies are not guaranteed renewable.  They will only cover you for a limited time, such as 6 months.  If you want to renew coverage under a temporary policy after it expires, you will have to reapply and there is no guarantee that coverage will be re-issued at all or at the same price.

Cobra continuation coverage

WHEN DO I HAVE TO BE OFFERED COBRA COVERAGE?

If you are leaving your job and you had group coverage, you may be able to stay in your group plan for an extended time through COBRA coverage.  The information presented below was taken from publications prepared by the U.S. Department of Labor.  You should contact them for more information about your rights under COBRA.

•        To qualify for COBRA continuation coverage, you must meet 3 criteria:

First, you must work for an employer with 20 or more employees.  If you work for an employer with 2-19 employees, you may qualify for state continuation coverage.  (See next page.)

Second, you must be covered under the employer’s group health plan as an employee or as the spouse or dependent child of an employee.

Finally, you must have a qualifying event that would cause you to lose your group health coverage.

•        Each person who is eligible for COBRA continuation can make his or her own decision. If your dependents were covered under your employer plan, they may independently elect COBRA coverage as well.

•        To qualify as federally eligible, you must use up any COBRA continuation coverage available to you.

•        You must be notified of your COBRA rights when you join the group health plan, and again if you qualify for COBRA coverage.  The notice rules are somewhat complicated and you should contact the U.S. Department of Labor for more information.

In general, if the event that qualifies you for COBRA coverage involves the death, termination, reduction in hours worked, or Medicare eligibility of a covered worker, the employer has 30 days to notify the group health plan of this event.  However, if the qualifying event involves divorce or legal separation or loss of dependent status, You have 60 days to notify the group health plan.  Once it has been notified of the qualifying event, the group health plan has 14 days to send you a notice about how to elect COBRA coverage.  Each member of your family eligible for COBRA coverage then has 60 days to make this election. 

Once you elect COBRA, coverage will begin retroactive to the qualifying event.  You will have to pay premiums dating back to this period.

WHAT WILL COBRA COVER?

•        Your covered health benefits under COBRA will be the same as those you had before you qualified for COBRA. For example, if you had coverage for medical, hospitalization, dental, vision, and prescription drug benefits before COBRA, you can continue coverage for all of these benefits under COBRA.  If these benefits were covered under more than one plan (for example, a separate health insurance and dental insurance plan) you can choose to continue coverage under any or all of the plans.  Life insurance is not covered by COBRA.

If your employer changes the health benefits package after your qualifying event, you must be offered coverage identical to that available to other active employees who are covered under the plan.

WHAT ABOUT COVERAGE FOR MY PRE-EXISTING CONDITION?

•        Because your group coverage is continuing, you will not have a new pre-existing condition exclusion period under COBRA.  However, if you were in the middle of a pre-existing condition exclusion period when your qualifying event occurred, you will have to finish it.

WHAT CAN I BE CHARGED FOR COBRA COVERAGE?

•        You must pay the entire premium (employer and employee share, plus a 2% administrative fee) for COBRA continuation coverage.  The first premium must be paid within 45 days of electing COBRA coverage. 

•        If you elect the 11-month disability extension, the premium will increase to 150% of the total cost of coverage.  See next page for more information about the disability extension.

HOW LONG DOES COBRA COVERAGE LAST?

•        COBRA coverage generally lasts up to 18 months and cannot be renewed.  However, certain dependents are sometimes eligible for up to 36 months of COBRA continuation coverage, depending on their qualifying event. 

In addition, special rules for disabled individuals may extend the maximum period of coverage to 29 months.  To qualify for the disability extension, you must have been disabled at the time of your COBRA qualifying event (such as termination of employment or reduction in hours) or within 60 days of that qualifying event.  You must obtain this disability determination from the Social Security Administration, and you must notify your group health plan of this disability determination.

•        Usually, COBRA continuation coverage ends when you join a new health plan. However, if your new plan has a waiting period or a pre-existing condition exclusion period, you can keep whatever COBRA continuation coverage you have left during that period. For specifics, ask your former employer or contact the U.S. Department of Labor.

•        COBRA coverage also ends if your employer stops offering health benefits to other employees. 

•        COBRA coverage might end if you are in a managed care plan that is available only to people living in a limited geographic area and you move out of that area.  However, if you are eligible for COBRA and are moving out of your current health plan’s service area, your employer must provide you with the opportunity to switch to a different plan, but only if the employer already offers other plans to its employees.  Examples of the other plans your employer may offer you are a managed care plan whose service area includes the area you are moving to, or another plan that does not have a limited service area.

WHAT ABOUT CONTINUATION COVERAGE?

•        If your employer offers a fully insured group health plan, you may also be eligible for continuation coverage, which allows you to extend your coverage for up to 6 months.

•        In order to be eligible for this type of continuation coverage, you must have been continuously covered under the group policy for 6 months.  Termination of your group plan must have occurred for any other reason besides nonpayment of your required contribution.

•        This continuation coverage does not apply if you are eligible for a longer period of continuation of coverage under the Federal COBRA law, become eligible for similar group coverage or become eligible for Medicare benefits.

•        If you qualify for this longer extended coverage, you can keep it even if you join a new health plan.  This can help you if your new plan imposes a pre-existing condition period. 

Conversion coverage

WHEN DO I HAVE TO BE OFFERED CONVERSION COVERAGE?

•        If you are recently divorced and have coverage through your former spouse’s fully insured group health plan, you are eligible to buy conversion coverage.  This is a policy you get from the company that insured your previous group plan.  To qualify, though, you must apply within 60 days of the divorce decree.  Conversion policy benefits must be essentially the same as those under your former plan, but are likely to be costlier.

•        HMO enrollees who lose individual coverage are also eligible for conversion coverage. 

WHAT WILL MY CoNVERSION Policy Cover?

•        Insurers are required to sell you a policy, offered by the insurer, which is most similar to your terminated policy.

WHAT ABOUT COVERAGE FOR MY PRE-EXISTING CONDITION?

•        Conversion policies cannot impose new probationary or waiting periods.  These periods are considered met to the extent coverage was in force under your prior policy. However, you might have to satisfy the unexpired portion of any pre-existing condition exclusion period from your former health plan.

WHAT CAN I BE CHARGED FOR A Conversion Policy?

•        Generally there are no limits on how much individual premiums can vary due to age, gender, health status, family size, and other factors.

CAN MY Conversion POLICY BE CANCELLED?

•        Your conversion policy cannot be canceled because you get sick.  This is called guaranteed renewability. You have this protection provided that you pay the premiums, do not defraud the company, and, in the case of managed care plans, continue to live in the plan service area.