Health Insurance Portability Act

The Health Insurance Portability Act, better known as HIPAA ( Health Insurance Portability and Accountability Act of 1996) was created to eliminate the loss of health insurance when an individual changes jobs. The worker provides proof to the new employer of the number of months he was covered by the old employer's policy, eliminating any exclusion period.

Protection

• Following a job change, HIPAA provides protection for former employees and their families by guaranteeing that the new employer honor the amount of time they had built up in their previous policy. Before HIPAA, new employees usually had to undergo a period of exclusion, whereby they would not be eligible for insurance coverage. In practice, this prevented people from changing jobs.

Preexisting Conditions

• If a worker has a preexisting condition for which she was covered by the group plan at her former place of employment, it should have no great effect on the new insurance policy premiums or coverage at the new employer. Previously, workers were subject to a 12-month exclusion period, for which the new insurance company would not cover expenses related to this condition. If certain restrictions are met, the exclusion is not allowed.

Restrictions on Portability of Coverage

• For HIPAA to apply, the gap in insurance coverage cannot exceed 63 days. If this restriction is met, then the old employer can provide the worker with a certificate showing the number of months the worker was covered under the previous group plan. For every month of coverage the employee had under the group plan at his old job, the 12 months will be reduced by the same amount of time. For example, if the worker was covered for four months at his old job, then he would only be eligible for exclusion for eight months under the new policy.

Prohibiting Discrimination

• HIPAA prohibits an insurance company from discrimination in its group plans. For example, if applicants meet the previous-coverage and 63-day lapse restrictions discussed above, they cannot be denied coverage or charged substantially higher premiums because of health status, age, medical history, or genetic information.