The Portability Act (HR 3103) was signed by President Clinton in 1996. Some
provisions became effective on January 1, 1997 and other provisions become
effective on the first health plan renewal date after June 30, 1997. The law is
intended to reduce barriers for individuals when obtaining new health insurance
coverage, whether through a new employer or an individual plan.
It covers health care plans with at least two participants who are active
employees of single employers, multi-employers, collective bargaining units,
churches or governmental employers. Retirees and their dependents are covered
under the law as well, provided they participate in a group plan with at least
two active participants. State and local government employers can elect not to
have their health plans covered under the law on a plan-year by plan-year basis.
Health Plan Availability and Renewability
HMO's, insurers and employers' self-funded groups cannot deny coverage to
any individual on the basis of health status (e.g., medical condition, genetic
information, evidence of insurability). These provisions are effective for plan
years after June 30, 1997.
Insurers and HMO's providing group health coverage to the "small
group market" (employers with 2 to 50 employees) must generally make the
coverage available to all eligible employees.
Insurers and HMO's must guarantee renewability of group health coverage in
both large and small markets.
Pre-existing Medical Condition Limitation (Portability)
These provisions are also generally effective for plan years beginning after
June 30, 1997.
Preexisting condition exclusions are generally limited to a 12-month
maximum after timely enrollment for conditions that were treated or diagnosed in
the previous six months. The exclusion period can be up to 18 months for late
enrollees (those who decline to enroll when first eligible).
The preexisting condition exclusion period is reduced by the length of
prior continuous coverage, unless more than 62 days have elapsed since coverage
ended. The break in coverage cannot include waiting periods required by plans
before commencing coverage.
Employers or plan sponsors must provide certification of prior coverage
(going back to 7/1/96) when:
upon an individual's request (provided the request is made no more than 24
months after coverage ceases).
No group plan may exclude pregnancy as a preexisting condition, nor
exclude newborns or adopted children under age 18, as long as the child is
enrolled within 30 days after birth, adoption, or placement for adoption.
Companies will be required to allow employees enrollment for certain
losses of "other coverage" or employee changes in family status. For
example, if employees don't join the company plan when they first become
eligible because they want to keep their other coverage, including COBRA
coverage, employers must allow them to join the company health plan within 30
days after cessation of that other coverage.
HMO Waiting Periods
An HMO must provide immediate coverage and may impose a waiting period only
if:
no preexisting condition exclusion is imposed;
the period is imposed uniformly without regard to health status;
the period does not exceed two months for timely enrollment or three
months for late enrollment.
COBRA Changes for 1997
The Health Insurance Portability Act expands COBRA
eligibility, effective January 1, 1997. In addition, employers of 20 or more
were required to communicate specific COBRA changes by November 1, 1996 toemployees or dependents who have elected COBRA continuation. The new rules
apply to all COBRA continuees beginning on January 1, 1997.
Disability extension of 11 months may be added to the regular 18 month COBRA
coverage period if the Social Security Administration determines that the
disability occurred within 60 days of the COBRA qualifying event and if the
qualifying event was either loss of employment or reduction in hours. Extended
COBRA coverage is also available to non-disabled family members.
Definition of a qualified beneficiary was amended to include a child born or
adopted during the COBRA continuation period. COBRA qualified beneficiaries may
also change coverage status, (i.e. from individual to family) under the same
terms as active employees upon the birth or adoption of a child.
State of California's Pre-existing Condition Limitation
The State of California has had a pre-existing condition limitation on the
books (AB1672) since 1993 that is generally more beneficial to employees than
HIPAA. Under the state law, the maximum length of a pre-existing condition
limitation is six months. In addition, a new employee's health coverage
cannot be affected
by a pre-existing medical condition, as long the employee has had continuous
medical coverage for the preceding six months.
Conclusions
From an employee standpoint, this is a popular bill as it will eliminate
barriers to changing jobs. From an employer perspective, there is good and bad.
Although employers may incur higher medical costs (or medical insurance
costs) by virtue of hiring employees
with pre-existing medical conditions (e.g. employee or dependents with chronic
medical conditions), it is also possible that employees with high medical usage
may leave and join another company. In theory, over time the cost and benefit
should even out. In addition, hiring managers will appreciate eliminating
barriers to hiring qualified candidates (e.g. the pregnancy of an applicant or
the wife of an applicant), especially in today's tight labor market.
