Affording Health Coverage

September 24th, 2009, by

Q: I was laid off six months ago. My health benefits with my former employer will expire soon. I was solicited by a contracting company, which traditionally does not offer benefits to a new contractor-employee. However, to bring me on board, they did offer me access to their medical and dental plan and sent me a 30-page PowerPoint presentation.

Aside from the plan being generally weak, with large deductibles and premiums, compared to what I was used to with a large, well-established company, I noticed that I would not qualify for coverage, as I have a pre-existing condition.

It appears that no matter what hourly pay I make, seeking health coverage through the contracting company or through the private health insurance market will be a problem for people like me. Could you comment?

A visitor, Reston, Virginia

A: You may soon join the millions of others who do not have health insurance. The number of people without coverage rose from 45.7 million in 2007 to 46.3 million in 2008, according to the latest available data from the U.S. Census Bureau.

As you’ve noticed in seeking new employment, many employers are asking workers to carry more of the health insurance burden.

But let’s hope you can keep some kind of coverage.

There are a couple of things you should know that may help in your situation.

First, there have been some changes to the health benefit provisions of the Consolidated Omnibus Budget Reconciliation Act, which is commonly referred to as COBRA. The new law includes a temporary COBRA premium reduction.

Under the new law, eligible terminated employees enrolled in their employer’s health plan can get a subsidy to help fund the cost of their insurance. So, for up to nine months, laid-off workers only have to pay 35% of the COBRA premium. Employers pay the remaining 65% and recoup that money by applying for a credit on their quarterly federal employment tax return. You may also be eligible for the subsidy for group health insurance coverage provided under state laws similar to COBRA.

Under COBRA, employers are required by law to offer the option of continuing health insurance for up to 18 months. Coverage can be extended up to 36 months under some circumstances, such as a divorce, disability or the death of the policyholder.

The problem for many people is that COBRA is, or was, too expensive to carry. Family coverage can cost, on average, about $1,000 a month, according to the national nonprofit Families USA. The average monthly COBRA premium for individual coverage is $388.

To qualify for the reduced COBRA payment, you must be involuntarily separated from your job between September 1, 2008 and December 31, 2009. Those who are eligible for other group coverage (such as a spouse’s plan or Medicare) are not eligible for the premium reduction.

The subsidy phases out for individuals whose modified adjusted gross income exceeds $125,000, or $250,000 for those filing joint returns. Taxpayers with modified adjusted gross income exceeding $145,000, or $290,000 for those filing joint returns, do not qualify for the subsidy. If your company closed or went bankrupt, and there is no longer a group health plan, there is no COBRA subsidy available.

There’s another catch to this payment break. The premium reduction applies to coverage beginning on or after February 17, 2009, when the law was enacted. You cannot get a refund for premium payments made prior to the law’s enactment.

In your case, if you opt not to take the insurance from the contracting company, you could continue your coverage–at least for nine months–under the new COBRA provision. That might give you some time to look for a more affordable plan.

For more details on the COBRA subsidy, go to the Department of Labor’s Web site. You can also call the Employee Benefits Security Administration at (866) 444-3272.

But, if you don’t think you will be switching jobs or can’t get coverage on your own, I would still consider the package offered by the new employer. This is the new dawn of a time when workers will have to get used to higher premiums and deductibles.

This year, premiums for employer-sponsored health insurance rose to $13,375 annually for family coverage–with employees, on average, paying $3,515 and employers paying $9,860, according to a recent survey by the Kaiser Family Foundation and the Health Research & Educational Trust.

The survey found–as you and so many others have discovered–the smaller the firm, the less likely it is to offer health benefits, with fewer than half (46%) of the smallest employers (three to nine workers) offering them.

Among those firms offering benefits, 21% report they reduced the scope or increased cost-sharing, due to the economic downturn, and 15% report they increased the worker’s share of the premium.

As you are learning, it’s rough out there if you lose your good job with a big company, which is more likely to offer affordable healthcare.

But, I do have some good news about your pre-existing condition.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) is a federal law that limits the ability of a new employer plan to exclude coverage for pre-existing conditions. The law also prohibits discrimination against employees and their dependent family members based on any health factors they may have, including prior medical conditions, previous claims experience and genetic information.

Additionally, there may be a law in your state that also offers some protections. Contact your state insurance commissioner’s office to find out. You can go to the National Association of Insurance Commissioners site to help figure out who to contact.

Specifically, HIPAA says that a pre-existing condition exclusion can be imposed only if medical advice, diagnosis, care or treatment was recommended or received during the 6 months prior to your enrollment date in the plan, according to the Department of Labor.

But, let’s say you did seek treatment in the last six months. If you have a pre-existing condition that can be excluded from your plan coverage, then there is a limit on how long the plan can exclude coverage for that condition. The law limits the pre-existing condition exclusion period, for most people, to 12 months (18 months if you enroll late).

If you have a history of prior health coverage, you may be able to reduce the exclusion period even further, using what’s called “creditable coverage.”

You should also know that the pre-existing condition exclusion relates only to benefits for that particular problem. You can still enroll in the plan and receive the other health benefits.

Click here for more information about the Health Insurance Portability and Accountability Act. Please read the information and double check with your employer. You may find that you are wrong and that your pre-existing condition can’t be excluded.

If you do choose to opt out of joining the new health plan, you can get help in finding insurance with a pre-existing condition by contacting the Foundation for Health Coverage Education at (800) 234-1317.

Your question, and others like it, put a real face on the healthcare debate.

(Photo by Lab2112)

Last modified: April 27, 2011 at 3:27 pm