But under HIPAA, you might be able to buy an individual health plan without the threat of exclusions for pre-existing conditions. In order to do so, you have to qualify as an "eligible individual" — and the rules are tougher than for group health plans.

To be eligible under HIPAA, you must:

• Have at least 18 months of continuous creditable coverage
• Have been covered under a group health plan, a governmental plan, or church plan (or health insurance offered in connection with such plans, such as COBRA) during the most recent period of creditable coverage
• Not be eligible for coverage under a group health plan, Medicare, or Medicaid
• Not have other health insurance coverage
• Have not had your most recent coverage canceled for nonpayment of premiums or fraud (unless it was your employer that failed to pay premiums)
• Have elected and exhausted any option for continuation of coverage (under COBRA or a similar state law) that was available under your prior plan.

If you qualify as an eligible individual, any insurer that sells individual health plans in your service area must offer you a plan. But keep in mind that your premiums are not governed by HIPAA; rather, they are determined by state law and can generally be set higher if you have medical problems. Thus, while your application for coverage won't be rejected because of your health problems, the health plan can charge higher rates as long as it has state approval.

In addition, your benefits could be vastly different under an individual plan. That's why when you're moving from a group plan to an individual plan it's especially important to shop around for the best rates and benefits to suit your needs.

In some cases, you might be offered a conversion plan when you lose your group health plan coverage. That essentially lets you convert your group plan into an individual plan, with certain restrictions. Be careful choosing that option, though. Because conversion plans are individual plans, once you buy it, you'll no longer qualify as an eligible individual for the individual market.

Be sure to check with your state's insurance regulatory agency when you buy any new health plan, though. States can, and often do, enact laws that shorten the exclusion periods insures can provide. And some have relaxed the rules to qualify as an eligible individual.

If at all possible, you should buy coverage through a group plan, as they generally have broader benefits and wellness care. You don't necessarily have to have an employer to do so: Trade associations and chambers of commerce often offer their members group health insurance. In some states, such as Connecticut, you can get group coverage if you're self-employed — as a "group" of one. Check with your state's department of insurance to find out your rights on buying a group plan.

Thorns in the Rose Bush
As is the case with all laws, they're fine in theory but can become thorny in practice. HIPAA is no exception. Official memoranda sent to both state insurance departments and insurers from the Health Care Financing Administration (HCFA), the branch of the U.S. government that oversees HIPAA, indicate that rights of some consumers are being usurped.

Denying Your Rights "An issuer does not exercise 'reasonable diligence' in making a determination whether applicants are eligible individuals unless it makes a reasonable effort to determine whether any applicant for any type of coverage in the individual market (including medically underwritten and conversion products) is an eligible individual, regardless of whether the individual knows or believes he or she has this status, and regardless of whether he or she specifically applied for a HIPAA product." Source: Health Care Financing Administration memo, June 1999

In a June 1999 memo, for instance, HCFA notes that some health plans and health insurance agents may be shirking their obligation to offer eligible individuals coverage by not telling them about their rights under HIPAA, unless the applicant specifically asks. By law, insurers must use "reasonable diligence" to determine whether you qualify as an eligible individual.

And in a March 1998 memo, HCFA says it learned that some insurers were offering coverage to eligible individuals and small employer groups — but at such exorbitant premiums that the plans were unaffordable "in order to avoid providing coverage . . . while appearing to comply with the guaranteed availability provisions of HIPAA."

Further, insurers would set commissions for agents so low that they would be discouraged from marketing policies to eligible individuals and small groups. And processing applications would be "unreasonably" delayed in another ploy to discourage enrollment.

The reason? If you have an existing illness, you're going to cost the health plan a lot more money than someone who is healthy.

Which is precisely why you have HIPAA on your side.

Back to page 1.

By Frances Donovan and Jennifer M. Gangloff
insure.com.