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Kids and Health Care: The Kennedy-Kassebaum Act

In addition to COBRA, there's one other major U.S. law that affects how you can keep health benefits when you change jobs: The Health Insurance Portability and Accountability Act of 1996 (HIPAA), also known as the Kennedy-Kassembaum Act -- after the two senators who first promoted it.

HIPAA is designed to ease "job lock," which is the reluctance that many people feel to changing jobs for fear of losing their family's high-quality health coverage. The law limits the extent to which some group health plans can exclude coverage for preexisting conditions. For instance, if your family has had creditable health insurance for 12 straight months, with no lapse in coverage of 63 days or more, a new group health plan cannot invoke the pre-existing condition exclusion. It must cover your medical problems as soon as you enroll in the plan.

What is "creditable" coverage? It includes prior coverage you had under any of the following:

  • a group health plan;
  • Medicare;
  • Medicaid;
  • a military-sponsored health care program;
  • health plans offered by the Indian Health Service;
  • a state high-risk pool;
  • the federal Employees Health Benefit Program;
  • a public health plan established or maintained by a state or local government; or
  • a health benefit plan provided for Peace Corps members.

On the other hand, if you are not switching from a "creditable" health policy when you enroll in a new group plan, your new insurer can refuse to pay for any existing medical problems -- except pregnancy. And maternity restrictions are only legal for a maximum of 12 months. (That said, there's no U.S. federal law that requires health plans to provide maternity coverage, although some states have such laws.)

Basically, HIPAA says that a new health plan has to recognize the time your family was covered under your previous plan -- and deduct that from any preexisting condition limits or exclusion periods. If you had 12 or more months of continuous coverage, it can't make you accept any exclusion period; if you had coverage for eight months, you can only be required to have a four-month exclusion period; etc.

Under HIPAA, group health plans can't deny your application for coverage based solely on your health status. And they can't deny coverage because of mental illness, genetic information, disability or claims your family members have filed in the past.

HIPAA's rules apply to any employer group health plan that has at least two participants who are current employees; and the law also applies to larger companies that are self-insured.

There is one major exception to HIPAA: It provides no protection if you switch from one individual health plan to another individual plan.

And, even though HIPAA makes it easier to get coverage from your new employer if you switch jobs, it doesn't guarantee the same level of benefits, deductibles and claim limits you might have had with a former employer's plan. And, as we noted above, the law does allow some waiting periods before coverage kicks in. So, you may need to keep your COBRA coverage from the old job while waiting for the new coverage to take effect.

To comply with HIPAA rules, whenever you leave a job with health benefits get a "certificate of creditable coverage" in writing. This will simplify matters when it comes time to join the group plan at your next job. A certificate should list the following:

  • coverage dates;
  • policy ID number;
  • the insurer's name and address; and
  • any children or family members covered by the policy.

This is the easiest way to ensure maximum protection under HIPAA. But, if you can't or don't get a certificate, you can use other evidence to prove creditable coverage, including:

  • pay stubs that reflect a health insurance premium deduction;
  • explanation-of-benefit forms;
  • a benefit-termination notice from Medicare or Medicaid; or
  • a verification letter from a doctor or former health insurance provider.
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