COBRA, HIPAA, PORTABILITY.... ?


In July of 1996, Congress passed a mandate called HIPAA (Health Insurance Portability & Accountability Act). The purpose of this law was to ensure that consumers who had exhausted their 18 months of COBRA coverage or who were coming from a [true] group plan too small to offer COBRA, would not lose the ability to continue their health coverage, regardless of any preexisting conditions.

In theory, this was a great concept. However, what many people heard when the president described this "guaranteed coverage" plan was only those words: guaranteed coverage. The part about "must have 18 months of continuous coverage" (with true group or COBRA being the most recent portion of that 18 months) was rarely mentioned and overwhelmingly elusive for most consumers when it was. What consumers were not told - and what was downplayed in media soundbites - was the fact that carriers could raise their rates as much as 300-500% to compensate for covering people they would normally decline.

The cost of coverage under the "portability law" was high, but at least the coverage was there: 15 years ago, a 22 year old with diabetes, coming off his parents' group policy but not working at a company with group insurance, would have found it nearly impossible (in some states, including Arizona) to get health insurance. Ditto the person who had had a heart attack, stroke, or been treated recently for cancer while on COBRA. There was no guarantee of coverage beyond COBRA for these people.

COBRA stands for Consolidated Omnibus Budget Reconciliation Act. If your employer had 20 or more full-time employees on his payroll, and some (or all) of them were on a group plan, he had to offer an extension ("continuation") of the benefits of that plan, for 18 months (36 months in certain situations). If there were less than 20 employees on the payroll, COBRA was optional (by employer), but rarely was it offered and was not mandatory. The key here was the number of employees on the payroll, not the number of employees on the group policy. But in order to get COBRA, you had to be on the group plan, either as emploee or dependent of an emploee. COBRA is still offered today and can actually be less expensive than the new plans under the helathcare reform guidelines.

Consumers believe that COBRA is expensive, that the carrier increased their rates on them. Not so. The premium charged under COBRA reflects the rate your employer was paying for your coverage, plus a small administrative fee (2%). On most group plans, employers pay from 40% to 75% of the employee's portion of the premium, so rarely does the employee know what the true premium is - until he elects to go onto COBRA, and that's when he see what the actual premium was. All other things being equal (which they rarely are), group insurance is the most expensive, due to the number of members in the group across which the carrier must spread the cost of any claims paid out for those group members.  This is why just as many employers are dropping group plans as starting them.

COBRA is not actually a new insurance policy but a short term continuation of benefits, utilized most effectively by people who are undergoing medical attention at the end of their group coverage, who are pregnant or who have preexisting conditions that would make it hard - if not impossible - to obtain health coverage otherwise. COBRA goes away after a specific period of time - 18 to 36 months, depending on certain situations (death of the primary, disability, divorce, etc). The introduction of the Affordable Care Act took away the issue of qualifying for coverage after COBRA, since the ACA guarantees coverage to those who can afford it and who apply within the specific enrollment timelines.

If you can obtain health coverage elsewhere and especially if you qualify for a tax subsidy, you generally do not want to take COBRA. if you do take COBRA, then when it goes away you will have a sixty day period following a loss of coverage "through no fault of your own" (which the 18th month expiration of COBRA would qualify as) to apply for new coverage. under new laws, you cannot opt to take COBRA and then drop it during mid-year and get a private policy. Otherwise, you must let it run its 18 months. Exceptions: if you have other "qualifying events" - move out of the coverage area, marriage, divorce, new job, etc. You can also drop a COBRA plan during the annual enrollment period, which starts November 1st and runs through till January 31st. Needless to say, as of January 1 2014, no one kept a HIPAA plan if they had one; even with the higher rates under healthcare reform, HIPAA was worse.

In a way, HIPAA plans were an extension of coverage in that preexisting conditions were covered - as they are now under the ACA (healthcare reform).  

If you had group coverage through a company too small to offer COBRA, and you had major health issues, you could go right to HIPAA coverage from the group plan, providing you could show that you had 18 months of continuous health coverage, with the most recent coverage being group. Self-employed groups of one could not qualify for portability, as portability benefits were designed for people coming from groups which had two or more employees.  (In AZ, one carrier did extend HIPAA coverage to a group of one.) HIPAA plans went away in 2014.

One of the problems with portability was that, whenever someone's coverage ends - whether it is  group or individual coverage, COBRA or short term - that carrier must provide what is called a "Certificate of Creditable Coverage" to the insured. This letter confirms that the policy-holder had coverage from this date to that date, and that "[they] may be eligible for guaranteed coverage under the Portability Act. " This letter did not guarantee coverage if going to a non-HIPAA individual plan. This letter was so the individual can get "credit" for this coverage toward his 18 months of continuous coverage requirement (it didn't matter what comprised the 18 months of coverage, so long as it was true insurance and as long as the last coverage preceding portability was true group).

Please note that AHCCCS is not  insurance - it is Medicaid and tax-payor supported; there is generally no premium. And those inexpensive medical discount plans you see all over faxes, e-mail and the papers.... are NOT insurance.  Most "specified benefit" plans - plans reimbursing you for various medical expenses - were sometimes referred to as insurance plans but in fine print, one discovered they were not.

If your group coverage is going away, you have several options - COBRA or taking a plan under healthcare reform. Get hold of your agent or a broker as soon as  you know you are losing group coverage to determine the least expensive but best path for you. Federal law states that any member of your family that was covered under your group plan is eligible for COBRA, if the employer offers it, whether the employee takes it or not. This is law and an employer who refuses to cover a dependent on COBRA if the former employee does not take it is subject to a pretty nasty fine. However, again - rates under healthcare reform could be lower than COBRA rates, especially in a multi-member family environment.