The widely touted Health Insurance Portability and Accountability Act (HIPAA), passed by the Congress in 1996, isn’t delivering as promised–at least, not for everyone.
Generally speaking, HIPAA guarantees you access to new health insurance if you’ve been in a group plan and lose your job.
Healthy people don’t need this law. It’s for workers and their families who are dealing with a chronic illness or serious disease. Without HIPAA, insurers might exclude them from coverage.
The new health plan you switch to isn’t forced to cover your particular disease. But it can’t exclude you while providing that coverage to everyone else.
Most Americans came under HIPAA by last January. Some weren’t covered until this month; starting this month everyone is finally covered. A handful of states already had guaranteed-coverage laws of their own.
HIPAA has worked best for job switchers who move from one health plan to another. “It’s now easier to join the new health plan without facing unreasonable exclusions or waiting periods,” says Sen. Edward Kennedy (D-Mass.), one of the sponsors of the law.
Easy, that is, if you join the new plan within 30 days of becoming eligible. If you don’t, and then change your mind, some insurers will require you to wait 18 months for coverage. HIPAA allows this, though some states may not.
Workers with an illness in the family face even higher hurdles when they leave an employee group plan and have to buy an individual policy. This occurs when your new employer has no health plan or if you start working for yourself.
In many states, high-risk individuals, including people eligible for HIPAA, are diverted into special insurance pools. In others, insurance companies sell HIPAA policies directly.
Some insurers who sell directly haven’t been living up to the law. That might have been temporary while insurers learned the rules, says Randy DiRosa, a senior evaluator for the Government Accounting Office in Chicago.
Or it could have been deliberate. Here are the kinds of problems that have been reported:
– Insurers may delay your application, or take a long time to issue a price quote. If 62 days pass, from the time you leave your group plan, you no longer qualify for guaranteed coverage under HIPAA. (You still qualify, however, in 13 states that mandate coverage for everyone. Ask your insurance agent about it.)
– Insurers may pay agents much lower commissions for HIPAA policies, which discourages the agents from making sales. Take Central Reserve Life Insurance Company in Strongsville, Ohio. Since Jan. 1, it has paid a commission of only 4 percent on HIPAA plans sold to individuals.
That compares with 20 percent commissions on policies sold to healthy people. Central Reserve’s president, Glen Laffoon, says commissions were cut only to keep the price of HIPAA policies down.
– Insurers may charge prices so high that you can’t afford to buy. Some policies cost 500 percent more than the normal rate, says Missouri Insurance Director Jay Angoff, and the normal rate is bad enough.
Some states limit the price increase for high-risk individuals, though the feds haven’t checked on how well the states implement their own laws. State risk pools charge up to 200 percent more.
HIPAA allows health insurers to charge what they want, even if it prices people out of their so-called “guaranteed” coverage. This part of the law was always a joke.
It’s illegal, however, to deliberately delay your application. President Clinton recently warned that insurers who violate HIPAA would not be allowed to participate in the federal health-insurance plan.
In practice, insurers haven’t actually been thrown out of the plan. Problems have been solved through bilateral negotiations, says a source at the federal Office of Personnel Management in Washington, D.C.
Here’s who’s eligible for HIPAA protection:
– Applicants for individual health insurance, if they’re leaving a group-health plan that covered them for at least 18 months. If your former company employed 20 people or more, you can keep its group plan, at your expense, for at least 18 months. You must use up this coverage before HIPAA applies.
– Applicants for new group plans, if they belonged to their previous group plan for at least 12 months. If you belonged for less than 12 months, the new plan can impose a waiting period before covering pre-existing illnesses, but in any case, no more than 12 months (18 months if you don’t join the new group right away).
If you have individual coverage and want to change insurers, an insurer can still refuse you, unless your state has a law of its own. The number of uninsured increases every year.
