INSURANCE TO GO : How Legislation Now before Congress Would Make Health Coverage Portable

If you are resigned to staying in your job because you can’t get medical coverage anywhere else, start thinking again.

Legislators in both houses of Congress have approved bills that could make health coverage more portable, eliminating “job lock”--the need to stay put because a new policy would not cover a preexisting medical problem.

Although such reform would not solve the problems of all the uninsured, it would make it easier for the insured to stay covered. Overall, the change would probably incrementally raise rates for everyone, but, proponents argue, the whole economy would benefit from a more flexible employment pattern.

The House and Senate bills contain many differences that could make negotiating a final compromise difficult, but everyone supports certain key elements. What are they and how would they affect you? Answers to some key questions:

Q: What’s this all about?

A: Sens. Edward M. Kennedy (D-Mass.) and Nancy Landon Kassebaum (R-Kan.) have spearheaded the Health Insurance Reform Act, which aims to do three things: make health insurance coverage easily portable, limit the use of preexisting-condition clauses and make it easier for small companies to buy health insurance. The House and the Senate bills have these three elements, which have wide support among Republicans and Democrats alike, as well as the support of business and consumer groups. Analysts believe these measures could help 25 million of the 40 million Americans who do not have health coverage obtain it.

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Q: How would it work?

A: Under the current system, when you switch jobs, there’s a break in your health insurance coverage. Coverage through the old company stops. Coverage through the new company starts. That break means you are subject to preexisting-condition clauses in the new coverage that deny coverage for a set period--sometimes six months, sometimes a year--for any ailment that was diagnosed before you switched health plans. In some cases--if your new employer is a small business and the existing ailment is serious, for example--switching jobs and insurance plans can mean you’ve lost coverage for that ailment indefinitely.

The bills would give you the ability to create a continuous chain of health insurance--even when you switch jobs or go to work for yourself. If you have been insured for at least 18 months, the bills say, your switch to a new company’s plan must be seamless. You would be able to link into the new coverage without facing any waiting periods or exclusions.

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Q: Would this mean that my new company would have to offer the same insurance plan as my old one?

A: No. As is true today, companies would be able to offer virtually any type of insurance or none at all. This law would simply give you the ability to transfer into a new company’s comprehensive plan, if one is offered, without having to go through a waiting period for preexisting conditions.

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Q: What would happen if the new company doesn’t offer insurance, or offers lousy coverage?

A: Current Cobra law, or the Consolidated Omnibus Reconciliation Act of 1986, allows you to buy coverage under your old company’s plan for up to 18 months. The bills would allow you to convert to an individual policy after that, as long as you had been covered under your old group plan for at least 18 months and then exhausted your Cobra coverage. If you went through these steps to maintain your insurance, you would never suffer a lapse in coverage or face exclusions for preexisting conditions.

Of course, as with Cobra, you would have to pay the full cost of such individual plan coverage.

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Q: What would happen if I went without insurance for a while?

A: If you went uninsured for more than 30 days, you would break the chain of insurance. The result would be that the next time you bought insurance, you could be subject to restrictions and exclusions relating to preexisting conditions.

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Q: I’ve purchased Cobra coverage before and I found it extremely expensive. Where I had been paying about $80 a month when I was employed, the Cobra coverage was $300 a month. Would the bills control costs?

A: No. The reason you found Cobra coverage so costly is that you were paying the entire premium yourself. Most companies pick up about 75% of health insurance premiums, so a worker is only paying about 25%. Some firms pay the entire premium. However, when you buy insurance as an individual, either through Cobra or independently, you pay 100% of the cost. Health insurance is expensive, and nothing in the proposed law would change that.

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Q: Does this mean I wouldn’t have to worry about switching jobs if I was pregnant?

A: Yes. In fact, the bills would specifically bar insurers from considering pregnancy a preexisting condition under all circumstances. So even if you didn’t have insurance before, if you took a job while pregnant and signed up for the insurance plan, your prenatal visits and the delivery would be covered immediately.

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Q: What would happen to, say, diabetics--or anyone with a long-term ailment who takes a first job?

A: The insurer could impose a waiting period of up to 12 months before it would cover that ailment. However, once that passed, another waiting period could never be imposed--no matter how many times the individual changed jobs--as long as the person maintained continuous insurance coverage.

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Q: What if you switch jobs during the 12-month waiting period?

A: As long as you were signed up for an insurance plan, you would get credit for the months already spent waiting. For example, if you switched jobs after six months, your new employer’s plan would be able to exclude your preexisting condition only for another six months.

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Q: How would the new employer--or the new employer’s insurance company, rather--know whether you had insurance before and thus whether or not you were subject to the waiting period?

A: Employers would be required to provide insurance documentation to all workers who terminated employment, whether that termination was voluntary or involuntary. You would be responsible for providing those documents to your next employer.

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Q: What if I don’t switch jobs but do want to switch health plans during an open enrollment period? Would the new plan in this case be prohibited from excluding my preexisting ailment?

A: Yes. But if you go to a more comprehensive plan, you could be subject to the exclusions of the previous plan for up to a year, says Dean Rosen, health policy counsel to Kassebaum. For instance, let’s say you were in a high-deductible insurance program and received a diagnosis of cancer. Aware that your high-deductible plan would cost you a fortune for cancer treatment, you decide to switch to a health maintenance organization--which offers first-dollar coverage and just a $5 co-payment for doctors’ visits--during the next open enrollment period. For the first year you’re in the new HMO plan, you would still be subject to the deductibles and co-payments of the old plan, says Rosen. That provision is to guard against “adverse selection”--that is, people buying the more costly coverage only when they have a costly illness, Rosen says.

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Q: How would the law make it easier for small businesses to buy insurance?

A: It would allow them to band together in order to secure group rates. Companies that employ a few people with serious ailments now often face coverage exclusions, denials or sky-high premiums. By allowing small companies to band together, the risk of having a few very sick people insured would be spread among a larger group, which would moderate rates for the whole group.