No, it’s not some new software from Bill Gates, or a video game your kids shouldn’t be watching: HIPAA stands for Health Insurance Portability and Accountability Act of 1996, and it’s actually a very important piece of legislation.
If you’ve ever changed jobs (and who hasn’t?), you know that health insurance benefits don’t follow you from one employer to another. Your new employer might have a health insurance plan comparable to your old coverage, but if you have “pre-existing conditions”, your new employer’s health insurance company won’t be happy about covering you.
Pre-existing conditions are just that: medical conditions that existed prior to your obtaining coverage with that company. Maybe you’ve got a heart problem, high blood pressure, diabetes or rheumatoid arthritis. In an effort to hold down cost, your new insurance company would refuse to cover any treatment associated with your “pre-existing” medical condition, which meant that you would be forced to pay costs out of pocket. Not just the normal out-of-pocket expenses like co-pays for doctor visits and prescription drugs, but every phase of treatment: MRI’s and hospital stays and open-heart surgery and dialysis. You get the idea. No health insurance coverage for those types of procedures and you could be bankrupt in short order.
HIPAA changed all that, by imposing limits on health insurance companies who seek to exclude pre-existing conditions. For example, if you’ve had “creditable” insurance coverage for one year, with no lapse for 63 days or more, your new insurance company can’t use your previous conditions to decline coverage or limit your benefits. They must cover you as soon as you’re eligible for coverage under their plan. That’s an important point, because most employers have a waiting period before you become eligible, typically from one to three months.
What do they mean by “creditable coverage”? It means you were enrolled in one of the following health insurance plans: a group health plan, Medicare or Medicaid, military coverage, Federal or State plans, a state high-risk pool, health plans offered by the Indian Health Service or a plan offered to Peace Corps members.
Another thing to keep in mind is that HIPAA only applies to group health insurance plans: it does absolutely nothing for you if you’re switching from one individual plan to another individual plan.
The advantages consumers gained under HIPAA are the restrictions imposed on group health insurers: they can’t deny you coverage based entirely on your medical condition, it limits exclusions on pre-existing conditions, and it prevents insurers from denying coverage for mental illness, genetic information or disability. For those polices that offer maternity coverage, it also states that the insurers are exulted from considering pregnancy a pre-existing condition. This means they can’t exclude coverage for pre-natal care or delivery costs.
There are a few things that HIPAA doesn’t do: it can’t guarantee that the coverage offered by your new employer will have the same benefits, deductibles and co-payments as the coverage you had under your old employer’s plan. It doesn’t guarantee coverage for mental health or pregnancy. Health insurance benefits for employees are not mandated by federal law – it’s the employer’s option whether to offer them. And while most employers genuinely recognize the value of offering a comprehensive benefit package, after all, it greatly aids in employee retention, the truth is that many small businesses can’t afford the high cost of an all-inclusive plan.
The lesson here is: look before you leap. Examine your prospective employer’s health insurance plan very carefully before you accept that great new job. It could mean the difference between putting that raise in your pocket, or spending it on health care.