Understanding Health Insurance Exclusions & Creditable Coverage

Your Guide to HIPAA Pre-Existing Condition Protections

Asthmatic boy (6-7) using inhaler
Science Photo Library - IAN HOOTON/Brand X Pictures/Getty Images

Many Americans have health-related problems that insurance companies define as pre-existing conditions. A pre-existing condition is a health problem that exists before you apply for a health insurance policy or enroll in a new health plan.

At the end of the day, insurance companies and health plans are businesses that are concerned about their financial bottom line. It’s in their best interest, therefore, to exclude people with a pre-existing condition, impose a waiting period before coverage starts or charge higher premiums and out-of-pocket expenses.

A pre-existing condition can be something as common and as serious as heart disease, high blood pressure, cancer, type 2 diabetes, and asthma – chronic health problems that affect a large portion of the population. Even if you have a relatively minor condition such as hay fever or a previous accidental injury, a health plan can still deny coverage.

Health Care Reform and Pre-Existing Conditions

One of the hallmarks of the Patient Protection and Affordable Care Act signed into law in March 2010 is the elimination of pre-existing condition requirements imposed by health plans.

Effective as of September 2010, children under the age of 19 with pre-existing conditions may not be denied access to their parents' health plan, and insurance companies will no longer be allowed to insure a child, but exclude treatments for that child's pre-existing condition.

The Pre-Existing Condition Exclusion

A pre-existing condition can affect your health insurance coverage.

If you are applying for insurance, some health insurance companies may accept you conditionally by providing a pre-existing condition exclusion period.

Although the health plan has accepted you and you are paying your monthly premiums, you may not have coverage for any care or services related to your pre-existing condition.

Depending on the policy and your state’s insurance regulations, this exclusion period can range from six to 18 months.

For example: Lori S. is a 48-year-old woman who works as a freelance writer. She has high blood pressure that is well controlled on two medications. She recently decided to purchase her own health insurance that included drug coverage. The only affordable health plan she could find had a 12-month exclusion period for her high blood pressure. For the first 12 months of her policy, all of her claims (including doctor visits and medications) related to her high blood pressure were denied. However, within that first year of coverage, she also got the flu and a urinary tract infection – both of which were completely covered because they were not pre-existing conditions.

If you are getting insurance at your job, depending on your employer and the health plans offered, you may have a pre-existing exclusion period. However, the exclusion period is limited to 12 months (18 months if you enrolled late in the health plan) and only applies to health conditions for which you sought treatment in the 6 months before you enrolled in the health plan.

For example: Mike J., a 34-year-old man, recently got a new job after being unemployed for almost a year. His new company allows employees to participate in its health plan at the end of the first pay period. Mike has mild asthma and sustained a knee injury playing basketball when he was in his 20s. In the 6 months prior to the time he enrolled in his employer’s health plan, he had no doctor visits and did not take any medication. He was not subject, therefore, to any exclusion period for his pre-existing conditions. Shortly after he started working, his asthma worsened – he was fully covered for all of his asthma-related care.

HIPAA and Creditable Coverage

In 1996, Congress passed the Health Insurance Portability and Accountability Act (HIPAA), a law that provides some protection for you and your family members when you need to buy, change or continue your health insurance. These protections include:

  • Limits on the use of pre-existing condition exclusions.
  • Prevents many health plans from discriminating against you by denying you coverage or charging you more for coverage based on your or a family member's health problems.
  • Guarantees (most of the time) that if you lose your job and your coverage, you have the right to purchase health insurance for you and your family.
  • Usually guarantees that if you purchase health insurance, you can renew your coverage regardless of any health conditions in your family.

Although HIPAA does not apply in all situations, the law may decrease your chance of losing your existing coverage, make it easier for you to switch health plans and help you buy coverage if you lose your job-related health plan and have no other coverage available.

Creditable Coverage

An important feature of HIPAA is known as creditable coverageCreditable coverage is health insurance coverage you had before you enrolled in your new health plan, as long as it was not interrupted by a period of 63 or more days. The amount of time you had “creditable” health insurance coverage can be used to offset a pre-existing condition exclusion period in your new health plan.

The bottom line: If you had at least a full year of health coverage at your previous job and you enrolled in your new health plan without a break of 63 days or more, your new health plan cannot subject you to the pre-existing condition exclusion.

For example: Greg L. decided to change jobs for better promotion opportunities. He worked with a recruiter and found a new job, which he started 4 weeks after resigning from his previous position. His new job offered similar health insurance and he enrolled in a family point-of-service plan. Although Greg is in good health, his wife has type 2 diabetes and one of his children has asthma.

Greg had worked for his previous company for 2 years and had no health insurance coverage for 4 weeks (less than 63 days). In spite of pre-existing health conditions in his family, Greg’s health plan was not able to impose a pre-existing condition exclusion period.

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