Multiple Sclerosis and Coverage - The Gap Widens
Facts: Clara, who is 53, lives in Tennessee and has Multiple Sclerosis - a disabling, degenerative condition whose progress can sometimes be slowed by medications. Clara’s MS drugs cost over $1,000 per month, but because of them, she can still work and walk. Clara works for a small company that, until recently, offered health benefits. However, the cost of coverage had grown so high that Clara’s employer decided to discontinue the health plan. This left Clara and her co-workers – three other women, one with a small child – uninsured.
Clara desperately wants to remain insured, but finding new coverage is proving to be very difficult. When she first contacted www.healthinsuranceinfo.net, in November of 2002, she had been uninsured for one week and had paid for her next month’s supply of prescription drugs with a credit card. If she can’t continue to take her medication, Clara could permanently lose the ability to walk.
A number of protections have been enacted to protect people losing their job-based health insurance. These protections, as well as other options, applied to Clara’s case as follows:
COBRA – People in group health plans sponsored by employers with 20 or more workers have the right to continue coverage under that health plan temporarily when it would otherwise end. Many states, including Tennessee, have adopted state continuation laws offering similar rights to people losing coverage under smaller group health plans. However, when an employer discontinues a health plan, there is no plan to continue under. Therefore, COBRA and state continuation laws offered no help to Clara.
Conversion policies – The coverage Clara’s employer purchased on her behalf contained a provision guaranteeing Clara and others the right to convert group coverage to a non-group policy. This means Clara had the right to purchase a non-group policy from the health insurance company that used to cover her employer-sponsored plan. The conversion policy offered comprehensive coverage, including prescription drugs, though the cost was high – over $800 per month. This was more than Clara (who earns only about $2,000 per month) could afford.
HIPAA – People leaving group health coverage also have rights under a federal law called HIPAA. Under HIPAA, health insurance companies in the individual market must agree to sell coverage to HIPAA-eligible individuals (people who have lost group coverage, who have at least 18 months of prior coverage, and who meet other requirements.)1 However, HIPAA sets no limits on what private insurers can charge for this coverage and, as a result, it tends to be very expensive. Indeed, Clara contacted several insurance companies, all of which offered her coverage for a premium of about $1,000 per month. One company did offer a cheaper policy (only $300 per month) but that policy didn’t cover prescription drugs, an essential benefit for Clara.
Shop around for cheaper coverage – Many people who lose job-based health benefits try to shop around for affordable individual policies. In fact, many policies for sale in the individual health insurance market today are substantially cheaper than $1,000 per month. However, Clara is unlikely to qualify for them. The cheaper coverage is only available to people who can pass “medical underwriting,” a process insurance companies use to determine an applicant’s likely risk and expense. In Tennessee, as in most states, Clara will be turned down for medically underwritten health insurance because she has MS. In fact, the only time individual health insurers in Tennessee are prohibited from turning down Clara is during the 63-day period that she is HIPAA eligible.
High-risk pools – The state of Tennessee used to operate a high-risk pool – a government program to provide health insurance for people, like Clara, whom private insurers would prefer to deny. Several years ago, however, Tennessee merged its high-risk pool program into its Medicaid program, TennCare. For a while, TennCare offered coverage to all uninsurable residents in the state. Then, it limited eligibility to uninsurable residents below the federal poverty level. (Clara’s modest income of $2,000/month is well above the federal poverty level.) Currently, because of the state’s tight budget, TennCare is accepting no new enrollment by uninsurable residents.
Get another job – Another more drastic option facing Clara would be to try to find a new job that offers health benefits. She considered this option, though it seemed unlikely. For one thing, as Clara wrote, “I have worked for this same company (a small family owned business) for 20 years and have stayed because I love what I do and I trusted the people I work for.” Further, Clara worried that her age and narrow work experience would be a disadvantage in today’s job market. If she did try to switch jobs, she would need to hurry. To avoid incurring a pre-existing condition exclusion period under a new group health plan, Clara would have to enroll within 63 days of losing her prior coverage. If it takes longer than 63 days, a new group health plan could require Clara to pay out of pocket for her MS drugs for one year.
Move – An even more drastic option would be to move to another state where non-group health insurance is more readily available to people like Clara. In New York and New Jersey, for example, health insurers cannot turn people down or charge them more based on a health condition like MS. Clara would be able to buy health insurance with prescription drug coverage for $400-$450 per month, depending on the insurer. However, she would need to relocate quickly – within the next 63 days. After that, the individual insurers in these states would also be allowed to impose a pre-existing condition exclusion period. A move so far in so short a time period seemed impractical to Clara.
Lessons for Policymakers
Clara is typical of many millions of Americans who end up uninsured. She has been fortunate enough to have a good job with benefits for many years, but now that economic times are tighter, her job-based health insurance has come to an end. No federal or state law guarantees Clara will have access to coverage that is both adequate and affordable. The safety nets that have been enacted to help people like Clara – COBRA and HIPAA – have too many gaps to offer her meaningful protection and leave her facing difficult choices.
At Christmas, just as her period of HIPAA eligibility was coming to an end, Clara’s daughter gave her enough money to cover three-months of health insurance under a HIPAA policy. Clara accepted this gift with some misgivings. She doesn’t like being a financial burden on her daughter and worries about how she’ll afford coverage after three months. She writes,
“Now I am in the position of having to decide to carry individual health coverage, stop taking the medication that has kept my disease in check, or stop paying rent and groceries to pay insurance … [I] make more than minimum wage. However, there is not money left over at the end of the month now…and in the future there will be lots of month left over after the money runs out. Stress over the impending insurance-less future has already caused my illness to begin to worsen. I am so afraid that when I am unable to afford the medication I am now taking, it will exacerbate further and I will become disabled in a short time.”
Clara, who is 53, lives in Tennessee and has Multiple Sclerosis – a disabling, degenerative condition whose progress can sometimes be slowed with medications. Clara’s MS drugs cost over $1,000 per month, but because of them, she can still work and walk. Clara works for a small company that, until recently, offered health benefits. However, the cost of coverage had grown so high that Clara’s employer decided to discontinue the health plan as of November 2002.
Federal and state law guaranteed Clara access to some coverage options following loss of her job-based insurance. However, all these options were seriously flawed and Clara had only 63 days to decide between them. Once she made her decision, she found the process of applying for coverage can, itself, be complex and time consuming.
Facts: At the last minute, Clara learned her family could help her pay the health insurance premium, so she decided to buy a HIPAA policy. On the 61st day after she became uninsured, Clara met with a licensed insurance broker and completed an application for an individual HIPAA policy. She provided a check for the first month’s premium with the application. Her broker mailed the application to the insurance company the next day.
Three weeks later, the insurance company rejected Clara’s application because proof of 18 months of credible coverage was not included with her paperwork. Clara provided this proof right away. Two weeks after that, the insurance company again rejected Clara, this time indicating that she had applied too late. For Clara, losing her HIPAA eligible status means that she will not be able to secure insurance in the individual market. She appealed the rejection and, while she awaits a reply, is still uninsured.
Other consumers applying for HIPAA coverage can learn the following lessons from Clara’s experience:
The HIPAA Election Period is Time-Limited
HIPAA guarantees eligible persons access to an individual health insurance policy with no preexisting exclusion period.2 However, this protection only lasts for 63 days. According to federal regulations, HIPAA-eligible people must make a substantially completed application for their HIPAA coverage no later than the 63rd day following the loss of group health plan coverage. (Even if coverage takes effect after the 63rd day, the clock stops with a substantially complete application.) Because the application date is time sensitive, those electing a HIPAA policy are encouraged to send applications using certified mail, so as to verify the date of application.3
Clara applied for coverage on the 61st day of HIPAA eligibility. According to Tennessee insurance regulators, handing her application to a licensed health insurance broker was the same thing as handing her application directly to the insurance company. Therefore, based on this information, Clara’s application should not have been declined.
Proof of HIPAA Eligibility Is Important
People are HIPAA eligible when they have left group health insurance, have at least 18 months of prior creditable coverage, and meet other requirements. Usually, people prove their coverage history with “certificates of creditable coverage.” All health insurers and group health plans must issue certificates to people when their coverage ends. The certificate must document the time you (and your dependents) were enrolled in coverage. In Clara’s case, her employer had provided coverage under various health plans over the years. Each time the employer changed carriers, Clara was issued a certificate and, fortunately, she saved all of them.
Insurers are not allowed to refuse to consider an application for HIPAA coverage solely because the applicant has not yet provided certificates. Federal regulations say it is the responsibility of the insurer to determine if a person is HIPAA eligible. Furthermore, for people who have lost their certificates or can’t obtain new ones, insurers must accept other proof of prior coverage (such as old health plan ID cards, or pay stubs indicating withholding for health insurance.)
The insurance company should not have refused to accept Clara’s application because it was not accompanied by certificates. Insurers Are Not Supposed to Delay the Application Process
Federal rules also state that an insurer receiving an application for HIPAA coverage must promptly determine the consumer’s eligibility based on the application. If the insurer doesn’t have enough information, it must request additional information and do so promptly. An insurer’s delay in processing an application, even in the case of collecting further information from the applicant, cannot be used as a basis for denying an application.
Notice and Consumer Assistance Would Help
Clara did not know the ins and outs of HIPAA when she first lost her health insurance. She received no notice of her HIPAA rights when her group coverage ended, only a certificate of creditable coverage. These documents provide important proof of prior coverage, but no explanation of why such proof is important to consumers or why it is important to act within 63 days to obtain new coverage.
Once Clara decided on HIPAA coverage, she had no independent help in navigating the process of obtaining coverage. She had to rely on her broker and an insurance company to handle her application correctly and promptly, her eligibility for HIPAA coverage was disputed, and she is now trying to resolve this dispute. Some states have enacted consumer ombudsman programs to help people like Clara navigate the health care system and resolve problems like this one. Unfortunately, in Tennessee (and many other states) there is no such program for uninsured and privately insured residents. Clara will have to turn to her state regulator or consider legal assistance if she can’t resolve the situation herself in the very near future.
Lessons for Policy Makers
HIPAA guarantees access to non-group coverage after job-based health coverage ends. For people with health problems like Clara’s, it is often the only option available to stay insured. However, understanding HIPAA rights and rules can be challenging for consumers. The 63-day time limit on HIPAA protections adds to this burden. Finally, the lack of ombudsman programs means most people are left on their own to understand the rules and secure coverage, and some will flounder. Even for people like Clara, who manage to find resources to pay for HIPAA coverage, the health care system’s sheer complexity can create yet another crack to fall through.
This issue brief was prepared by Kevin Lucia and Karen Pollitz.
1In about half the states, the high-risk pool offers coverage to HIPAA-eligible individuals.
2In about half the states, the high-risk pool offers coverage to HIPAA-eligible individuals.
3Planning ahead for this brief period of HIPAA eligibility is advisable whenever possible. People who anticipate losing COBRA (or state continuation coverage) and expect to be HIPAA eligible do not need to wait for COBRA (or state continuation coverage) to be exhausted before applying for a HIPAA policy. Insurers have an obligation to accept applications in advance of the exhaustion date so that coverage can be seamless.