Various mechanisms have been offered over the years for people who wish to continue their group health insurance coverage after leaving work. For many years, states mandated that health insurance companies offer a "conversion" policy, an individual health insurance plan.
Insurance companies quickly decided that only people too sick to move on to coverage at another job would purchase those conversion plans so rates were high and benefits were low. Of course, that made the industry's prophecy self-fulfilling. Only those desperate for any kind of coverage bought them and rates continued to climb while benefits shrunk further. Extreme examples had companies offering limited benefit, basic hospital plans and charging $1,200 to $1,500 a month or more for them.
COBRA Continuation Coverage offers some respite by allowing departing employees and dependents an opportunity to continue on their employer's own plan and paying for it themselves. The problem is, COBRA coverage ends after 18 months for employees and 36 months for dependents. Then it's back to the conversion plan.
It's an alternative
The Health Insurance Portability and Accountability Act of 1996 -- affectionately called HIPAA -- offers an alternative. In addition to containing provisions making it easier for a person to move from one group plan to another, the law also provides for leaving a group plan with access to high quality private, or individual, insurance.
Federal law states that anyone leaving a group health plan, after having been covered for at least 18 months, will have the opportunity to purchase individual health coverage on a guaranteed issue basis, i.e. no health questions, provided they are not eligible for any other coverage including COBRA Continuation, other health insurance, Medicare or Medi-Cal. This portion of the law took effect Jan. 1.
While the law sounded wonderful -- especially in an election year -- there was one gap that was intentionally left open. The law requires the insurance companies to offer their two most popular plans based on premium volume so the plans offered are broad plans with coverage for many types of medical charges including hospitals, doctors and prescriptions. However, it did nothing to control the rates that an insurance company can charge for this broad coverage.
When a person who was covered under a group health plan loses coverage, frequently at the end of the COBRA Continuation, the plan administrator, usually the employer or the insurance company, will provide the employee losing coverage with a "Certificate of Creditability." This usually takes the form of a letter simply confirming that the named individual was covered for at least 18 months. The individual can take that letter to any insurance company writing individual health insurance in that state and the insurance company must offer them coverage.
Cost of plans high
A survey of the companies writing most of the individual coverage in California confirms that many are taking advantage of the lack of regulation and charging rates for these HIPAA Conversion Plans that are far in excess of what they charge for similar plans on the open market.
Blue Cross of California offers two plans from their Personal Prudent Buyer program. They are not offering any from their CaliforniaCare HMO. The two plans they do offer have a $1,000 and a $2,000 deductible. Except for the high deductibles, they are broad plans, 80 percent coverage to a $3,000 out-of-pocket stop-loss with a $5 million maximum benefit. However, they charge $395 and $295 per month, respectively, for single coverage.
Blue Shield of California offers similar plans except theirs is a little broader offering doctor's office visits and prescription drugs with a co-payment rather than a co-insurance percentage. For single coverage, they charge $425 per month for the $1,000 deductible and $315 per month for the $2,000 deductible. Similar plans on the open market would cost $80 to $110 for a person age 30 to 39. Again, they are not offering HMO coverage under the HIPAA Conversion Program.
The HMO market
HMOs are not raising their rates nearly so much for their HIPAA Conversion Plans.
Southern California Kaiser is offering its individual plan, which includes prescriptions, for $235 per month. This rate is only about $100 more than they charge in the marketplace.
PacifiCare offers one HMO, their $10 co-pay plan and a $250 deductible PPO plan. A single person in L.A. County between age 30 and 39 would pay $196 and $222 per month, respectively. A person between age 40 and 49 would pay $242 and $275.
CareAmerica, on the other hand, charges the same rates as they charge on the open market. They offer two HMO plans, both with $10 co-pays for doctors and prescriptions. One pays 80 percent of hospital charges; the other pays 100 percent. Rates for a single person between age 30 and 39 are $108 and $124. The rates for age 40 to 49 are $131 and $151.
These federally mandated plans are less than three months old in California, so all that has been stated is simply their starting point. As the insurance companies gain experience, rates and plans will probably be adjusted. Also, there are some bills in the state Legislature that would limit how much the carriers could charge over their "normal" rates.
Having demonstrated that it doesn't have the commitment to bring about much-needed universal access to health insurance, the government seeks to soothe its conscience by relatively minor changes. However, when they expand or extend access, as the HIPAA conversions do, well, it helps some.
For information about insurance and public benefits, call AIDS Project Los Angeles' Benefits Program, (213) 993-1472.
This article has been reprinted at The Body with the permission of AIDS Project Los Angeles (APLA).