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Insurance Safety Net Still Has Gaps

Don't assume you'll be covered by the new health insurance reforms. Supporters assert that, under the law, people won't lose their coverage when they lose their jobs. That is true for many people and will be a great comfort to them. But it's not true for everyone.

The new law intends to free people from "job lock" -- meaning that they stay in the jobs they have solely to keep their health insurance. This could be you, if you have a chronic health problem such as diabetes; if you're pregnant, or your spouse is; or if you're healthy but your spouse or one of your children isn't.

Even if you have medical problems, you can sometimes switch to a job with a major company. Its heath plan may take all comers, with no waiting periods.

But medium-size or small companies often restrict coverage for new employees, said Mary Case, a health benefits expert for the consulting firm Kwasha Lipton in Fort Lee, N.J. For example, they may exclude existing illnesses or conditions, including pregnancy, for a certain period of time.

If you leave your job and start a business of your own, you'd have to buy individual coverage -- and if you have health problems, you might not be able to get it.

The new law, sponsored by Sens. Edward M. Kennedy (D-Mass.) and Nancy Landon Kassebaum (R-Kan.), ends these limitations for people with prior coverage. The law also requires plans to cover illnesses arising from genetic defects or accidents stemming from daredevil hobbies such as skydiving.

But all you get is access to coverage. Nothing requires that the coverage be affordable. If you don't have the money, you have to go without. Also note that a job switch won't be protected right away, warned Frank McArdle of the nationwide consulting firm Hewitt Associates. The change for group plans begins with the first plan year after July 1, 1997. Most plans, but not all of them, should be on board by Jan. 1, 1998.

Here are some of the rules for workers with health insurance who jump to a new employer's plan:

If you've been insured for at least 12 months, your new group plan has to cover you and your dependents immediately. That qualifying period rises to 18 months for new employees who enroll in their health plans late.

If you haven't had 12 or 18 months of coverage, plans can force you to wait as long as a year before insuring most pre-existing conditions. A break in prior group health insurance lasting more than 63 days causes the qualifying period to start all over again. There's immediate coverage, however, for pregnancy, newborns and children placed in your home pending adoption.

You may not receive every benefit that your new health plan offers. Employers can limit you to the type of coverage you had before. If your old plan didn't cover prescription drugs, for example, your new plan isn't required to offer it to you -- even if other employees have it. It remains to be seen whether companies will choose to discriminate that way.

Nothing mandates what the health plan has to cover. The employer could exclude certain illnesses for all employees or put a cap on benefits, said Hewitt's John Piro.

State and local government health plans can opt out of this law. That would free them to exclude your pre-existing illnesses.

Insurance companies that sell small-business plans generally have to take all comers. They can't reject or cancel a company that has had a lot of claims. This protection goes to firms that employ two to 50 people.

There's no limit, however, to what you can be charged. Employers can raise the group plan's co-payments and deductibles, as long as all employees pay the same. Insurers can continue to jack up prices on small plans with a lot of claims. This law may not cause much in the way of additional price increases for group plans, however, because insurers can spread the risk.

What happens if your new company has no health plan or you go into business for yourself? Under the law, you must have unrestricted access to a choice of individual health insurance policies if (1) you previously had insurance for at least 18 months and (2) you are coming out of a group plan. Each state will decide what those choices are.

But this insurance may cost as much as double the price of policies offered to healthier people. Access to insurance you can't afford is effectively no protection at all.