Most people who have health insurance get that insurance through their employer or their spouse’s employer, through a group insurance policy or some form of government insurance. Some early retirees have the ability to retain their employer based insurance coverage when they retire. Many do not. This FAQ is for early retirees who will need to buy insurance on the private, non-group market.
Private insurance is governed by a mix of federal and state law. The primary federal laws governing insurance which effect early retirees are COBRA and HIPAA.
COBRA gives people who leave their jobs the right to continue their group health insurance for 18 months. Sometimes this time period is longer, for example if you are disabled or you are a divorced dependant of a worker. Some states also lengthen the COBRA period. COBRA only applies to employers with 20 or more employees. If you worked for a smaller employer, your state may have a “mini-COBRA” which gives you similar rights. You are not entitled to COBRA if you were fired for gross misconduct.
So, if you leave a job with group health benefits, generally you will be able to elect to take COBRA and continue your group insurance for 18 months. However, you will pay 100% of the cost and a 2% administrative fee. COBRA is expensive. Unless you know you are uninsurable, you should shop for private insurance before electing COBRA because that private insurance may be far less expensive than a COBRA policy. One place to start to look for private insurance is ehealthinsurance.com.
There are rigid time limits to elect COBRA. Your employer is required to advise you as to what you need to do to elect COBRA and when you need to do it.
COBRA only provides short term coverage, you will need to buy private health insurance on the individual market before COBRA benefits expire. What are your rights to a policy? Can insurers turn you down? Can they exclude preexisting conditions? Can they charge you more if you are not healthy or as you get older? What kind of underwriting do insurance companies do? Will they care that you had a hernia operation last year? Will they care that you take meds for high blood pressure or cholesterol? Can the insurance company cancel your policy later or increase your rates if you get sick? What if you move to a new state, is your policy portable? A number of these questions are addressed in the linked discussions.
If you are healthy you may be able to find a good policy at a reasonable cost. If you have health problems, HIPAA provides you with some protections. Your state may provide you with other protections. Unfortunately, there is no federal law which regulates the price of private insurance, so the cost of a policy may be quite high depending on your health, age and what state you live in.
All but five states (NJ NY VT ME MA) allow insurance companies to deny you individual insurance or charge you more for insurance if you are not healthy. If you are uninsurable, you may nevertheless have the right to buy insurance because of HIPAA. HIPAA requires states to provide one or more insurance policies to certain qualified individuals, without a waiting period. If you are HIPAA eligible there will be an insurance product for you to buy. It may be one or more policies offered by individual insurance companies, it may be through a risk pool, or it may be a conversion policy. A big problem though is cost. Federal law doesn't regulate cost and states are all over the board with what they do regarding cost.
To qualify under HIPAA, an individual must have had 18 months of continuous coverage (without a 63 day break), the most recent coverage must be through a group health plan, the individual must not be eligible for group coverage, Medicare or Medicaid and COBRA benefits must be exhausted. Here are the eligibility rules in detail:
http://www.early-retirement.org/foru...tml#post556826
States vary as to the quality of their HIPAA plans. Some have low lifetime limits, some do not cover prescription drugs, and some have limits on how much the policy will pay for a particular condition.
Whatever you do, stay away from temporary insurance. Once the policy expires you have no rights to further coverage.
If you do not qualify under HIPAA and you are uninsurable, you may be eligible for a state’s high risk pool. However, there very well may be a pre-existing condition exclusion period. Also, there are a number of states with no risk pool or which have a long waiting list.
Once you buy individual health insurance, the next worry people often have is whether that insurance can be canceled if you get ill or whether the rates can go up. HIPAA requires that individual insurance be guaranteed renewable, with some exceptions. Here is a link that has the exceptions:
http://www.early-retirement.org/foru...tml#post523880.
HIPAA does not prohibit insurance companies from increasing your premiums. However, most (but not all) states bar cost increases based on your own health, and only allow increases based on the experience of the plan participants as a whole.
Another worry is what happens if you move from one state to another. In this case, your insurance company decides whether the policy is portable.
In the United States there are thousands of different insurance policies and tremendous variability among companies as well as between what is available in different parts of the country. There are, however, several good resources on shopping for health insurance and understanding your rights:
Georgetown University has a number of resources through its website at
www.healthinsuranceinfo.net:
1. Georgetown has an excellent booklet on understanding the individual health insurance market.
http://www.healthinsuranceinfo.net/m..._Insurance.pdf
2. This is a worksheet to use to compare insurance policies when you are shopping:
http://www.healthinsuranceinfo.net/m.../worksheet.pdf
3. This link provides consumer guides to health insurance for most states:
Health Insurance and Coverage Help for Consumers Everywhere.
4. This link provides a state by state summary of rights:
http://www.healthinsuranceinfo.net/n...ion_limits.pdf
This link provides some information of what is available to you in a particular state, but is not as complete as the Georgetown site:
http://www.coverageforall.org/
The Kaiser Family Foundation also has information regarding health insurance. Here is a good guide to handling disputes with your insurance plan:
A Consumer Guide to Handling Disputes with Your Employer or Private Health Plan, 2005 Update - Kaiser Family Foundation
Kaiser has a table outlining state options for HIPAA eligible individuals:
HIPAA Rules - Kaiser State Health Facts
Kaiser has a table comparing different states' risk pools:
High Risk Pool Programs - Kaiser State Health Facts For states that do not have risk pools, Kaiser also has a table that describes guaranteed issue plans that some states provide, even for people who are not HIPAA eligible:
Individual Market Guaranteed Issue - Kaiser State Health Facts
There are hundreds of threads which talk about health insurance issues and only some will be included in this FAQ. Many of the threads pertain to people’s individual situation which may not generalize well to another person. Many other threads end up political. I did not include the clearly political discussions. However, here is a link to a thread which links to an American College of Physicians paper on the health care market which is even handed and valuable reading:
http://www.early-retirement.org/foru...een-31672.html
I primarily included threads that talk about COBRA and HIPAA rights and underwriting issues. Please be aware that the laws and practices regarding health insurance are in flux and what is true one day may not be true the next.
I omitted any discussion of Health Savings Accounts and will leave them for another FAQ.
If you are Medicare eligible, this is a good informational guide on Medicare and supplements:
http://www.delawareinsurance.gov/dep...ideCurrent.pdf
Because of size limitations on this forum, the forum links are found in the next post.
Do not rely on the information provided to make important life decisions. This post should not be taken as legal advice. I am not responsible for errors. If I offended you with cya I apologize. If I did not, I tried.
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