Health Insurance More Available: Federal Legislation Effective July 1

New Federal laws which became effective on July 1 will make it much easier for persons with preexisting medical conditions to change jobs without losing health insurance, and will also help some people who do not now have health insurance at all.

The new legislation, the Health Insurance Portability and Accountability Act, became law on August 21, 1996, but many of its provisions were not effective until July 1. Some -- but not all -- of the protections of this law were already available through state law in California and some other states. (State laws may continue to provide additional protections beyond those of the Federal law.)

Here we quote from the Conference Report, which was passed by both houses of Congress in early August 1996, which authoritatively explains the law. We added our own notes with explanations and additional information. There are many more details, and expert advice will be needed in some cases. But anyone with a serious illness should be aware of the major provisions of the law.

From the Conference Report:

"The Legislation Limits Exclusions for Preexisting Conditions. The bill prohibits employers offering health coverage and health insurers from limiting or denying coverage to individuals covered under a group health plan for more than 12 months for a medical condition that was diagnosed or treated during the previous 6 months. Once the 12-month limit expires, no new preexisting condition limit may ever be imposed on people maintaining their coverage, with no more than a 63 day gap, even if they change jobs or health plans."

"Employers and insurers must credit coverage of less than 12 months toward any preexisting condition exclusion under a new health plan. For example, an individual who has had coverage for six months when he or she changes jobs or health plans would face a maximum additional exclusion of 6 months, rather than the normal 12 months... "

"The Legislation Prohibits Discrimination Against Employees and Dependents Based on Health Status. The bill prohibits employers offering health coverage to employees or dependents from excluding an employee or dependent from coverage, to drop an employee or dependent from coverage, or to charge an employee or dependent higher premiums based on that individual's health status, medical condition, claims experience, receipt of health care, medical history, genetic information, evidence of insurability (including domestic violence), or disability."

Note: Employers do not have to offer health insurance at all. But if they do, their health insurer cannot exclude individuals based on their health status. They can exclude coverage for preexisting conditions, for a maximum of 12 months -- where "preexisting conditions" are only those diagnosed, treated, etc. in the last six months. (This appears to prevent insurance companies from excluding HIV infection or AIDS from coverage, if the new employee had been diagnosed over six months ago, and had received no medical attention in the last six months.)

While the employer cannot ask job applicants about health status, due to the Americans With Disabilities Act, the employer's insurance company may ask about medical history -- and may exclude coverage for preexisting conditions, as described above. But many group health plans do not exclude preexisting conditions; employees should check this when they choose a plan.

Also, a small employer seeking health insurance coverage usually cannot be turned down by any insurance company that sells health insurance to other small employers in that state. (This should greatly reduce insurance discrimination against small businesses believed likely to have gay employees.)

If a new employee does have one or more preexisting conditions (diagnosed or treated in the last six months), the time that the person was previously insured (in former jobs, but apparently not before the bill was signed) counts toward the 12-month exclusion for those conditions. However, if there was a gap in coverage longer than 63 days, insurance before that gap does not count.

When an employee leaves their old job, they should be given documentation showing when they were covered by health insurance, so that they can use that time to credit against the 12-month exclusion of preexisting conditions. Dependents insured on the old job can also get this credit.

An employee who turns down health insurance when they get a new job because they already have previous coverage, and then loses their previous coverage, can sometimes enroll as a "late enrollee" -- but only under certain conditions (for example, they must have stated in writing that they were turning down the new coverage because they already had coverage -- and they must request the new coverage within 30 days of the loss of the old). And with late enrollees, the exclusion for preexisting conditions can be 18 months instead of 12 months.

The limitations on exclusion for preexisting conditions will often not start exactly on July 1, because they become effective for the "plan year" beginning after July 1 (sometimes even later if the plan is under a collective bargaining agreement).

"The Legislation Helps Individuals Leaving or Losing Their Jobs to Maintain Health Coverage. The bill guarantees the availability of individual health coverage to 'eligible individuals' who have had employment-based health coverage for at least 18 months, who are ineligible for or have exhausted their COBRA coverage, and who are ineligible for coverage under any other employment-based health plan."

Note: The Federal law encourages states to pass their own laws to meet this goal. If states do not, then insurers must respond in one of several ways to offer individuals reasonable access to the insurance they sell in that state. Insurers must start selling these policies on July 1, 1997, although this can be delayed to January 1, 1998 if a state requests (or July 1, 1998 for states whose legislatures do not meet in 1997).

Other provisions of the legislation (effective July 1 or earlier) include:

* Not taxing viatical sale of life-insurance policies, or accelerated death benefits from life insurance, if the recipient is terminally or critically ill.

* Allowing someone who becomes disabled within 60 days of losing their job to qualify for the 11-month OBRA extension of the 18-month COBRA coverage. Before the new law, they had to be officially disabled at the time of becoming eligible for COBRA (on the day they were fired, for example), in order to qualify for OBRA. (COBRA allows anyone, disabled or not, to continue their health plan for up to 18 months after losing their job, by paying the premiums themselves, provided that the group plan itself remains in effect. OBRA allows disabled persons to extend this for 11 months -- totaling 29 months after the beginning of their disability, at which they become eligible for Medicare. However, they must have been disabled within 60 days of the beginning of the 18-month COBRA period -- long before the OBRA coverage starts.)

* Allowing tax-free withdrawal from IRA accounts for health care if (a) the individual has received unemployment for at least 12 weeks, in the year of the withdrawal or the previous one, or (b) for other medical expenses that exceed 7.5% of adjusted gross income.

On July 1, The Washington Post published an article by Marilyn Moon, looking at the new health insurance law and its limitations (page Z15).

[AIDS Treatment News thanks Betsy Johnsen, benefits attorney with AIDS Legal Referral Panel in San Francisco, for assistance with this article.]