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 pre-existing conditions, 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.

Prior to 2014, in most states, an individual market health plan (the kind you buy yourself) could deny coverage for anything related to your pre-existing condition, charge you higher premiums based on your medical history, or even reject your application altogether. And if you were enrolling in an employer's plan, you faced potential waiting periods for pre-existing condition coverage if you hadn't maintained continuous coverage prior to enrolling in the new plan.

The Affordable Care Act and Pre-Existing Conditions

One of the hallmarks of the Patient Protection and Affordable Care Act signed into law in March 2010, was 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 could not be denied access to their parents' health plan, and insurance companies were no longer be allowed to exclude pre-existing conditions from a child's health coverage.

And starting in January 2014, all new health plans (both on and off-exchange) were required to be guaranteed issue, which means that pre-existing conditions can no longer be taken into consideration when an applicant enrolls.

Premiums can only vary based on age, zip code, tobacco use, and family size. So a person in the middle of cancer treatment will pay the same premium as a person who is perfectly healthy, and the cancer treatments will be covered by the new health plan.

Let's take a look at how pre-existing conditions were treated before the ACA's reforms took effect. If the ACA is repealed, it's possible that some or all of these methods of addressing pre-existing conditions could be resurrected.

The Pre-Existing Condition Exclusion

Pre-ACA, a pre-existing condition could affect your health insurance coverage. If you were applying for insurance, some health insurance companies would accept you conditionally by providing a pre-existing condition exclusion period, or a full exclusion on the pre-existing condition.

Although the health plan had accepted you and you were paying your monthly premiums, you would not have had 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 could range from six months to a permanent exclusion.

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 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.

Although temporary pre-existing condition exclusion periods were used, it was also common to see permanent pre-existing condition exclusions in the individual health insurance market. Under those exclusions, the pre-existing condition would never be covered by the plan. By the time the ACA was enacted, pre-existing condition exclusions were becoming less common, and underwriting rate increases were taking their place more frequently. So in the example of Lori S, above, a health insurance company might have agreed to cover Lori in full (including her hypertension), but with a premium that was 25 percent or 50 percent higher than the standard rate for someone her age.

If you were getting insurance at your job, depending on your employer and the health plans offered, you may have had a pre-existing exclusion period. However, the exclusion period was limited to 12 months (18 months if you enrolled late in the health plan) and only applied to health conditions for which you sought treatment in the 6 months before you enrolled in the health plan (these enhanced protections under employer-sponsored health plans were due to HIPAA, discussed below):

For example: Mike J., a 34-year-old man, got a new job after being unemployed for almost a year. His new company allowed employees to participate in its health plan at the end of the first pay period. Mike had 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 in employer-sponsored health plans.
  • Prevents employer-sponsored 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.
  • 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 made it easier for people to switch from one employer-sponsored health plan to another, regardless of pre-existing conditions.

And although HIPAA protections did not extend to private individual market coverage, some states had adopted regulations that allowed HIPAA-eligible individuals to purchase guaranteed issue coverage in the individual market (HIPAA-eligible means that the person had at least 18 months of creditable coverage without a gap of more than 63 days, and the most recent creditable coverage was under an employer-sponsored plan, a government plan, or a church plan; also, the individual must have exhausted COBRA if it was available, and can't be eligible for Medicare or Medicaid).

But in most states, prior to 2014, if HIPAA-eligible individuals needed to buy their own health insurance and had pre-existing conditions, their only guaranteed-issue option was the state-run high-risk pool.

[Although the Trump Administration and Republicans in Congress have vowed to repeal and replace the ACA, those actions would not impact HIPAA, which predates the ACA by nearly two decades.]

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 could be used to offset a pre-existing condition exclusion period in your new health plan, before the ACA eliminated pre-existing condition exclusion periods.

The bottom line: If you had at least 18 month of health coverage at your previous job and you enrolled in your new employer-sponsored health plan without a break of 63 days or more, your new health plan could not subject you to a pre-existing condition exclusion. This was true before the ACA, and efforts to repeal and replace the ACA would not impact this provision, as it's part of HIPAA rather than the ACA.

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 was in good health, his wife had type 2 diabetes and one of his children had 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. 

Now that the ACA has been implemented, Greg's employer cannot impose pre-existing condition waiting periods on any new enrollees, regardless of their medical history or health insurance history. If the ACA is repealed or changed, HIPAA provisions would still remain place (HIPAA is much less controversial than the ACA, and not likely to be modified even if ACA replacement legislation is enacted).

Updated by Louise Norris.

Sources:

Department of Health and Human Services, HIPAA

HealthCare.gov, HIPAA-Eligible Individual.

HealthCare.gov, Read the Affordable Care Act.

Kaiser Family Foundation, Health Insurance Market Reforms: Guaranteed Issue. June 2012.

Kaiser Family Foundation, Non-Group Coverage for HIPAA-Eligible Individuals, June 2012.

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