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Health Insurance Laws that You Need to Know: COBRA and HIPAA

Let’s say that you have just been offered a fantastic new job at a new employer making double what you are making at your current job, a signing bonus of $25,000, and a fantastic 401(k) retirement benefit package. You are absolutely thrilled and you are ready to take the new job with no hesitations but then you remember something; your child is in the middle of very expensive but very necessary medical treatments and the new job does not offer any type of formal health insurance plan. What do you do? What rights do you have? What health insurance options do you have?

There are 2 main health insurance laws that affect people in the scenario mentioned above and many other common scenarios. It is unfortunate that many do not realize the different options that they have in these kinds of situations and the rights that they have due to the COBRA health insurance laws and the HIPAA health insurance laws. Let’s take a brief overview of both of these laws so that you can know a few things to help guide you in situations such as the one outlined above.

COBRA Health Insurance Laws

The COBRA health insurance laws are Federal laws that are designed to apply to companies that have 20 or more employees. These laws provide for group continuation coverage for employees that are currently on the company’s group health insurance plan and a “qualifying event” happens to them such that they leave the company. In the scenario above; leaving the company to take a new job is considered to be the qualifying event (if you divorce your spouse, get fired, change from full-time work status to part-time work status, and basically leave the company or become ineligible for health coverage for any reason besides gross negligence then you become eligible for COBRA).

This COBRA group continuation coverage lasts for a set period of time. The standard time period is 18 months although there are different time periods for different types of qualifying events. The COBRA group continuation coverage is the exact same group plan that you had while you were still at your employer. The only thing to be careful about is that if your employer was previously paying for all or some of your premiums then after you leave the company then rarely will they continue to do so. This means that you may be faced with a much larger health insurance bill because you are responsible for the entire premium (although by law they cannot charge you more than 102% more than the regular group rate for employees at the company – but remember they still don’t have to chip in and pay any portion of your premium as you are no longer with the company).

So should you take the COBRA offer or should you purchase individual health insurance on the open market? This is usually a very easy decision because if you are fairly healthy and you are not pregnant then you should always purchase individual health insurance coverage because individual health insurance is so much cheaper (approximately half the cost of a similar group health plan). If you are unhealthy (have major health issues) or pregnant then take the COBRA offer because you will likely not be eligible for an individual health insurance plan.

Ok, so what happens if you are forced into taking COBRA due to health issues and your 18 month time period is about to run out? You can’t get individual health insurance because of your major pre-existing health conditions UNLESS you apply for what is called a HIPAA health insurance plan. This brings us to the next very important health insurance law: the HIPAA health insurance laws.

HIPAA Health Insurance Laws

In a nutshell, the HIPAA health insurance laws are designed to provide health insurance coverage for those who have done the responsible thing and kept continuous health insurance coverage and then for reasons beyond their control they are unable to continue their health insurance (Example: your COBRA time period is up or your small company never offered you COBRA in the first place). Once this happens, then the HIPAA laws step in and mandate to individual health insurance companies that they must provide an individual health insurance plan to you on a guaranteed issue basis and they cannot exclude coverage for any pre-existing conditions.

There are 6 requirements that must be met in order to be eligible for a HIPAA health insurance plan:

1. You must not have any other health insurance coverage (or it will be involuntarily terminated soon - for example: the end of your 18 months or 36 months under COBRA coverage is approaching soon). If you are offered benefits at a new employer then the moment that you become eligible for those benefits you cease to be eligible for a HIPAA plan. 2. You have been insured by creditable coverage (creditable coverage being defined as having a full comprehensive major medical policy and not just a plan that is supplemental in nature or insures only against accident, disability, or liability) for the last 18 months or more with no lapse of coverage of more than 63 days. 3. Your most recent coverage was under a group health plan, a governmental plan, or a church plan; or under an individual plan that terminated due to: the insurer's insolvency, the insurer's discontinuance of all its individual coverage in your particular area; or the fact that you no longer live in the service area of your prior insurance company. 4. Your most recent coverage was not terminated due to nonpayment of premiums, fraud, or intentional misrepresentations. 5. You are not eligible under a conversion plan, a group health plan, Medicare, or Medicaid. 6. You accepted and exhausted any group continuation of coverage (including COBRA) that was offered to you.

HIPAA health insurance rates will generally be more expensive than a regular fully underwritten individual health insurance plan but usually no more expensive than a COBRA plan/group health insurance plan. The HIPAA health insurance laws were designed to prevent “job lock” where an employee was forced to stay at their current job because of their health issues and concerns about obtaining health insurance if they were to leave their current position.

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One of the most important things that you can do is to be fully informed of the plans, rates, and laws in your state of residence. Take just a few moments from the comfort of your own home or office and use our free health quote finder at the top of the page or on our home page to view plans from the top insurance companies that offer coverage in your home zip code. Whether you need COBRA health insurance, HIPAA health insurance, or regular individual health insurance - get a free health insurance quote comparison now!