"Pre-existing condition" is a phrase that can make both health insurance companies and those applying for insurance cringe. Simply defined, a pre-existing condition is a health condition or illness that you have had before your first day of coverage on a new plan. This rather broad definition is just the tip of the iceberg, and the actual health coverage for those with pre-existing conditions depends on a few factors -- including the type of health insurance plan, the level of care needed for your pre-existing condition, and your health insurance history.
Because a person with a pre-existing condition can cost an insurance company millions, it is in their best interest to exclude those who have them. In this article, we'll explain the many aspects of a health insurance plan's pre-existing conditions exclusion.
It is important to note that different rules apply for individual health insurance plans and group plans set up by your employer. We'll start by discussing group plans and then get into individual plans, which are generally much stricter about pre-existing conditions.
The Pre-Existing Conditions Exclusion
Now we've defined pre-existing conditions, the question remains: How is a condition like this going to affect my health care coverage? There is no simple answer. Some conditions will not affect your coverage at all, but others could keep you from having coverage for that condition for up to a year. When an insurance company applies a pre-existing condition exclusion, it can limit or exclude coverage for that condition.
In a group health plan, some situations may seem to fit the pre-existing condition definition, but exclusions don't apply to them. For example, if you have a gene that makes you more likely to get Huntington's disease -- but you don't actually have Huntington's disease -- that usually isn't considered a pre-existing condition.
Many HMOs have an affiliation period that you must wait out before your coverage kicks in. The affilation period can't be longer than two months from your enrollment date, or three months for late enrollees. But HMOs can't use both affiliation periods and pre-existing condition exclusions -- it's one or the other.
While the idea of a pre-existing condition exclusion period can be daunting to those in need of health care, there are rules and regulations that can work in your favor. In the next section, we'll explain the limitations of the affiliation period -- and how you may be able to eliminate it altogether.
Pre-Existing Condition Exclusions
The Health Insurance Portability and Accountability Act, or HIPAA, was passed on July 1, 1997. While this act involves many aspects of health care, it has had a profound effect on the availability of health care in the United States. Thanks to HIPAA, there are rules limiting the maximum length of time a pre-existing exclusion can be applied in a group plan, and there are even ways in which you can reduce or eliminate this exclusion period altogether. Under the HIPAA guidelines, the maximum amount of time that you have to wait in order to get coverage for your pre-existing condition cannot exceed 12 months, or 18 months for late enrollees.
A year is a long time to wait for medical coverage, so HIPAA uses what is known as "credible coverage." This term refers to any health insurance you had before your new insurance plan, as long as it was not interrupted by a period of 63 or more days. This time period can be longer, depending on your state laws and the type of insurance plan you were on. Once you have proven that you have had uninterrupted insurance before your current plan, this insurance coverage can be credited toward any pre-existing condition exclusion you may have. In fact, if you had at least one year of group health insurance at one job and then received health insurance at a new job without a break of more than 63 days, the new health insurance plan cannot impose a pre-existing condition exclusion on you at all. If however, a break in coverage is greater than 63 days, all the health insurance coverage before the break is not counted toward your pre-existing condition exclusion period.
HIPAA placed limitations on the pre-existing condition exclusion -- and it also helps ensure that those with pre-existing conditions can get health care at all. So, you might have to live with a pre-existing condition exclusion period, but you can't be denied coverage in a group plan because of your health. In fact, not only does the plan have to cover you regardless of your health, it also can't charge you more than a co-worker who may be in perfect shape.
Individual Health Plans and Pre-Existing Conditions
It should be noted that not every plan has to comply with HIPAA rules. In general, HIPAA rules apply to group health insurance plans. This means that individual health plans can still deny coverage based on a pre-existing condition. In these types of plans, the risk for the insurance company is greater and the cost to you is much higher.
Group health plans have the luxury of numbers, so the insurance company can handle the costs incurred by a person with a pre-existing condition. But because of the increased risk, the list of pre-existing conditions can be long.
However, there are cases in which HIPAA rules apply to individual health policies. In these cases, if you fit the requirements to be an "eligible individual," you can buy some individual health plans without a pre-existing condition exclusion. Oftentimes, these plans have significantly higher monthly premiums than a group plan, and less benefits. Therefore, this option is usually used as a last resort. To qualify as an eligible individual, you must have been covered by a group health plan for a minimum of 18 months without a 63-day break in coverage. In addition, the loss of your group coverage could not be because you failed to pay your premiums or because you committed insurance fraud. Finally, you may be considered eligible if you cannot get any other type of insurance like COBRA, Medicaid or Medicare.
In addition to HIPAA, states may have regulations on insurance plans that may ultimately benefit you. For example, some states require individual health plans to provide coverage to people regardless of their health issues. This, of course, usually results in extremely high premiums, but this might be worth it to someone who has a lot of health issues. Click here to find out your state's insurance laws.
For more information on pre-existing conditions, check out the links on the next page.
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More Great Links
- CBS News: Resources on Finding Individual Health Insurance. http://www.cbsnews.com/stories/2007/05/23/fyi/main2843052.shtml
- FreeAdvice.com: Exclusions and Limitations. http://insurance.freeadvice.com/insurance_help.php/108_119_127.htm
- U.S. Department of Labor: Pre-Existing Condition Exclusion. http://www.dol.gov/elaws/ebsa/health/glossary.htm?wd=Preexisting_Condition_Exclusion
- NAIC: State's Insurance Department Web Sites. http://www.naic.org/state_web_map.htm
- Insure.com: Tips for Buying Individual Health Coverage. http://www.insure.com/articles/healthinsurance/individual-health-coverage.html