Recently, my TMBN colleague, Marc Kashinsky, had an interesting comment left on a post. Briefly, the commenter had supplied inaccurate information when purchasing an individual medical plan; the plan was eventually cancelled by the carrier. To compound matters, the commenter was apparently in the middle of a large claim, and faces substantial economic loss as a result.
I’ll leave it to others to debate the merits of our system as regards such situations, and concentrate on what seemed to have occurred, and how others can avoid a similar fate.
First, a little background: HIPAA (the Health Insurance Portability and Accountability Act), comprises a number of disparate items, including what happens when one loses one's insurance, changes jobs, or even sells a life insurance policy. It does not, however, extend much protection as regards the individual medical insurance market.
HIPAA coordinates, to an extent, with another (older) piece of the pie: The Consolidated Omnibus Budget Reconciliation Act (COBRA), which also addressed some health insurance issues. Together, they act to protect workers who change employers, so that any pre-existing conditions are covered, and folks don’t easily “fall through the cracks.”
As with any such system, there are “holes,” and one must be careful in navigating them. There are also rules, and one must be careful to follow them closely.
In this case, the commenter (we’ll call him Monty), was laid off from his job, and elected COBRA continuation (which allows one to keep one's existing group cover for 18 months). Since most group plans are subsidized (the employer pays a portion of the premium), “sticker shock” at the cost of this coverage is not unusual. Monty decided, after a few months, to drop the coverage and “go naked” (without insurance), thinking (as many of us do) that he’d probably have few, if any, claims.
Eventually, he decided to buy an individual plan, and made application. His agent apparently supplied him with the wrong application, and Monty had to submit a corrected one a week or so later. Before he did so, however, he had a medical procedure, and then failed to disclose this on the (new) application. Further complicating matters was the fact that the agent apparently told Monty that he would transfer the (now incomplete) information from the old app to the new, and all would be fine. Unfortunately for Monty, his signature warranted that the information was accurate, and thus his fate was sealed.
There are a number of lessons to be learned from this sad story: first, while HIPAA is helpful when changing from group to group, it doesn’t protect us in the individual market. Carriers are free to exclude or limit coverage for pre-existing conditions, or charge an extra premium to cover them (even when we’re coming from a group plan).
Second, why we visit a provider really doesn’t matter: the fact that we did so is relevant, and must be disclosed on an application. And it’s always a good idea to review that application; had Monty done so, he might have noticed the absence of the test, and made a correction.
As an aside: it is my practice to let the insured complete the application himself, rather than filling it in for him. Of course, I’m there to answer any questions that may arise, and to make sure that nothing gets skipped.
Third, HIPAA and COBRA do work together to protect folks who have substantial medical problems, but one must be careful to follow the rules for these protections to apply. For example, had Monty kept the COBRA plan in place for the full 18 months, he would have had access to a guaranteed issue plan that would have covered his newfound condition.
Finally, it doesn’t really matter whether or not we agree with how the system works (well, of course it does, but I’m being practical here, not philosophical): if an application asks you whether or not you’ve had any medical advice lately, and you’ve just had an MRI (for example), then the answer is “yes.” Getting mad at “the system” because you failed to follow the rules may make you feel better, but it won’t solve your problem(s).
Henry Stern, LUTCF is an independent insurance agent in Dayton, OH. A licensed Continuing Education instructor for Ohio and Kentucky, he has well over 20 years of experience in “the biz.” He blogs every day (or so it seems) at InsureBlog.