The HIPAA law:
Health portability

By Frances Donovan

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If you're worried about keeping your health benefits when you change jobs, you should know about a federal law called HIPAA. It's the Kennedy-Kassebaum act, also known as the Health Insurance Portability and Accountability Act of 1996, or HIPAA for short. While HIPAA does little for people who don't have insurance in the first place, it does help keep people from losing benefits they already have.

HIPAA says that health plans cannot deny people outright based on their health status; gives workers who change or lose jobs better access to health insurance coverage; limits exclusions for pre-existing conditions; and guarantees renewability and availability of health coverage to certain employees and individuals. HIPAA was designed to ease a growing problem known as "job lock" � people's reluctance to move from one company to another for fear of losing their health benefits. (Another federal law called COBRA helps you buy benefits when you're in between employers. See Know your COBRA rights .)

HIPAA offers a modicum of protection, but it has plenty of loopholes, conditions, and exceptions. Make sure you understand what your rights are under HIPAA and what they aren't.

Preexisting conditions

Some health insurance companies cut their costs by invoking something called a " preexisting condition" clause. The notion of a preexisting condition makes sense when you're talking about car insurance: your windshield was cracked before you bought your coverage, so you can't expect the insurance company to replace it once your policy is in force. But it's a more sensitive issue when you're talking about someone's health. Got diabetes? Your current benefit plan may pay for your insulin and doctor visits. But if you change jobs, your new health plan can call your diabetes a preexisting condition and refuse to treat it. Now you're paying for all of your diabetes treatment yourself, plus the regular out-of-pocket expenses for other medical treatments.

HIPAA limits the instances in which a company can exclude payment for preexisting conditions. This is where it gets tricky:

HIPAA definition

A preexisting condition is something for which you've been treated or diagnosed in the last six months.

The time limit: A health insurance company can still refuse to pay for a preexisting condition, but only for 12 months. Late enrollees in group health plans may have to wait up to 18 months for coverage of preexisting conditions.

Credit for time served: If you've been continuously covered under another plan, your new health plan must give you credit for time served. So if you move from one company to another and you've already been denied coverage for a preexisting condition for 12 months, the new health plan must cover your condition. Likewise, if you've been waiting out a preexisting-condition clause for eight months, the new health plan can deny you coverage for that preexisting condition only for four months � a total of 12 months.

Continuous coverage: In order to keep your coverage continuous, you cannot let it lapse for more than 62 days. That's where COBRA comes in. If you leave one company before starting with another, or if your new company's benefits don't kick in for three months, you should buy COBRA coverage to keep your coverage continuous. Otherwise, you'll be back at square one with the 12-month waiting period.

Five types of coverage: There are five types of coverage that may carry an additional waiting period: prescriptions, vision, dental, mental health, and substance abuse treatment. "If the health plan wants to, they can look back at prior coverage to see if you had those services," says Karen Pollitz, a health policy researcher at Georgetown. "If you didn't, then they can apply a separate pre-ex on those coverages. " Aside from those five, your new health plan will have to cover you regardless of what your coverage was under the old plan.

Discrimination, changes in status, and certification

HIPAA says that health plans cannot discriminate on the basis of health status. "They can't exclude them, can't take them on different terms, or charge different premiums based on health status," says Pollitz.

If you have a change in your family status or your insurance coverage, the health plan also has to offer you a special opportunity to enroll or change your enrollment status. So if you're covered under your spouse's plan and your spouse loses coverage, your own employer has to offer you coverage. The same goes if you get married, divorced, widowed, or have or adopt a baby. Health plan enrollment must be offered for 30 days, and it can't count as a late enrollment.

Whenever you leave any health plan, either group or individual, make sure that you get a certificate of coverage. This is the only way to ensure your rights under HIPAA when you're next covered. Your certificate should say:

how long you were covered under the last plan
if you had any of these five coverages: prescription, vision, dental, mental health, or substance abuse treatment (as is mentioned above, health plans can invoke a separate preexisting condition clause if you weren't covered for them under your old plan)
any family members included under your coverage.

Individual health insurance and HIPAA

All the rights listed above are for people moving from one group health plan to another. HIPAA doesn't do a lot for people who want to buy individual health insurance. (See: Tips for buying individual health coverage .) While it does prevent insurers from denying people outright because of their health status, it does nothing to prevent them from jacking up their premiums. If at all possible, you should buy your coverage through a group plan. You don't necessarily have to have an employer to do so: trade associations and Chambers of Commerce often offer their members group health insurance. In some states, you can get group coverage if you're self-employed � as a group of one.

Some states have instituted other measures for people who want or need health individual coverage. "Basically, what your protections are in the individual market depends largely on the state in which you live," says Pollitz.

Rights in your state

HIPAA is a federal law, which means that it applies to all types of health plans, whether they be employer-funded (known as self-funded ERISA plans) or regular old health insurance. But individual states have also passed measures governing how health insurers can treat customers. In some states, you'll have better protections than those provided by the federal law. The Georgetown Institute for Health Care Research and Policy has a Web site that will take you through the laws specific to your state. It's not the prettiest thing in the world, but it is very useful: http://data.georgetown.edu/research/ihcrp/hipaa/

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Last updated Feb. 3, 1999