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Finding Health Insurance to Cover Pre-existing Medical Conditions

TN | November 4, 2005

 

Contents

Overview

Americans are not required to maintain health insurance so about one in ten people goes without coverage for a period of more than six months. Gaps in coverage are triggered by changing jobs, layoffs, leaving parents' coverage, graduation from college, relocation, immigration, or starting a business. In the past, the lower income employees of many businesses did not have access to group health insurance. Now most people are eligible for at least a limited benefits insurance at an affordable price but many Americans are still either unaware of coverage options or make an economic decision not to enroll. A disproportionate number of these people seek new insurance when they have cause to suspect that their upcoming medical expenses will be substantial. This is referred to as a "pre-existing medical condition".

Commercial individual health insurance in the U.S. is designed and priced to cover unforeseen medical expenses for the majority of plan members. Most policies restrict or exclude coverage for pre-existing medical conditions. In addition, many of the lowest priced health insurance plans restricts eligibility to exclude those with significant pre-existing medical conditions. Federal law ensures that takeover coverage is available to those who do not have a significant gap in health insurance. Guaranteed issue insurance is also available to everyone regardless of medical history. Requires that a high risk open enrollment insurance is available in each state but other obstacles usually prevent this from being a viable option.

The most commonly used strategies for individuals with pre-existing medical conditions include:

  • use a short term major medical insurance policy to ensure takeover coverage in the future
  • use limited benefit insurance to provide an affordable level of coverage
  • use non-insurance options including pricing discount arrangements and needs-based medical providers,

Whether covered by insurance or other means, the total cost of health care for a person with a pre-existing medical condition is high enough to dramatically impact the lifestyle of those who need to buy health insurance to coverage for pre-existing medical conditions.

Terminology

The key terms used for the type of coverage discussed in this article are "open enrollment" (meaning that everyone is accepted) and "takeover benefits" (meaning that the policy pays for pre-existing medical conditions). "Limited benefit" refers to a specific dollar amount of coverage that may be available for pre-existing medical condition. In other words, this insurance offers less coverage at a lower price. These policies, also known as "mini-med", allow the applicant to choose a plan based on the premium that fits their budget, rather than set the premiums at prices that are out-of-reach.

It helps to use these specific terms when shopping for health insurance to communicate clearly the type of coverage you are seeking. For example asking "Is this an open enrollment plan?" and "Does this policy provide takeover benefits?" will clearly communicate your intent. Most of the U.S. health insurance policies available to individuals do not offer these two specific features.

Five Money-Saving Tips for Covering Pre-Existing Medical Conditions

1. Employer-provided group insurance is always the best way to cover pre-existing medical conditions. In the household where one member has a serious chronic medical condition, access to group health insurance is more important than other working conditions or compensation factors. If no one in your family is employed or employable, then your insurance options are more severely limited. Each state has at least one health insurance open to individuals with pre-existing medical conditions that will eventually cover pre-existing medical conditions. This insurance is very expensive. Applicants with a lower income and minimal assets should check with their local welfare office of the state insurance department for cost-subsidized plans.

2. Use short term health insurance during the required waiting period for other insurance plans. Do not allow a gap in coverage of more than two months. Under HIPAA law, the continuity of coverage rules then apply to the insurance plan even though you were covered by a less expensive insurance policy during the waiting period. After the switch, the new more expensive plan that covers pre-existing conditions immediately. (If you had no prior health plan or short term medical insurance, be prepared to wait for 6 months after the new insurance is in effect before the costs of pre-existing medical conditions are covered. This waiting period is waived if you have 18 months coverage under a prior group insurance policy).

3. Put family members on different health insurance plans. The best heath plans choice for one family member with medical insurance problems is usually not the best choice for the others. For example, healthy family members are best covered under a high quality yet inexpensive comprehensive insurance plan like "Secure STM" (see www.MedSave.com for listings) while a family member with diabetes is best covered on the state high risk health pool.

4. At this time limited benefit insurance plans Core Health Plans and Basic Health Insurance are the most liberal commercial health insurance coverage for pre-existing medical conditions because all applicants are accepted regardless of medical history and pre-existing medical conditions are covered after the policy has been in force for 1 to 12 months (depending on the plan and benefit; see policy for specifics). These are limited benefit plans that do not cover the full cost billed by medical service providers and coverage is not available to residents of all states. Other commercial insurance options for covering pre-existing medical conditions are Value Med and Value Health that each have a twelve month waiting period. These policies may be overlapped and combined to provide a higher overall level of protection.

5. If your out-of-pocket expenses for health care are more than $1000 per year, use a low cost PPO discount card like the ones offered by Careington at www.ehealthdicountplan.com . This is not insurance, but does help to reduce your out-of-pocket expense.

"Pre-existing medical condition" defined

This article does not address the question of the legal definition of a "pre-existing medical condition". This issue is addressed elsewhere, including the "Frequently Asked Questions" section at www.MedSave.com. For purposes of this article, we assume that any medical claim anticipated in advance is a due to a pre-existing condition but in most states the definition is more narrowly defined. Common examples of pre-existing medical conditions are pregnancy and diabetes. Also be aware that if you are now taking any type of prescription medication, this indicates that there is an underlying pre-existing medical condition for which the medication was prescribed. Current prescriptions are always treated as expenses for pre-existing medical conditions.

There is another practical way to look at this issue: if you have to ask if your specific medical situation is covered, then you probably have a pre-existing medical condition. Conversely, a medical problem that is not a pre-existing condition would not be known to the policyholder prior to the start of coverage. Commercial health insurance available to individuals is primarily designed to cover those medical risks that are not known at the time the insurance starts. State laws may offer some relief by limiting the application of the pre-existing medical condition exclusion rules.

Also, this article does not address welfare plans that are available to people whose income and net worth combined is not enough to pay for the cost of other available health care. Every state offers some type of welfare health coverage, but these plans are not covered in this article. If you think that this type of coverage might be available to you due to income level, it pays to check with the local welfare office or your state insurance department Web site for eligibility guidelines and procedures.

Eligibility for coverage

There are six variables that affect your eligibility for any type of open enrollment health coverage that provides takeover benefits:

  • availability of employer-sponsored group health coverage;
  • availability of COBRA coverage,
  • availability of a "Certificate of Creditable Coverage" from your prior health plan and;
  • your financial status (income and assets) that determine eligibility for welfare plans,
  • citizenship,
  • your state of legal residence.

Each type of health insurance plan may address these issues differently. Each eligibility condition is addressed in the sections below.

Group heath insurance

If you are enrolling in an employer-sponsored group health plan, the rules are simple and straightforward. All pre-existing medical conditions are covered for those who enroll at the time the policy starts or on the first day they become eligible. For those who enroll at a later date, pre-existing conditions are covered after the person has been covered for 18 months. This 18-month period includes the amount of time you were covered under a prior health insurance plan.

Eligibility and administrative requirements for group health insurance are rigid. Eligibility for group health plans is governed by both the Department of Labor and the Treasury Department (IRS) in addition to state insurance departments. This has the effect of causing these health plans to appear harsh and sometimes illogical with regard to eligibility. Not all businesses qualify for group health insurance. Small family businesses may make the mistake of assuming that they are eligible for group insurance when this is not always the case. A small husband and wife business, for example, may not be eligible for group insurance coverage unless there is a history of payment of state wage taxes (unemployment compensation tax) and they must be able to provide copies of these business tax returns. Part-time employees and those paid cash "under the table" are not eligible for this coverage. For more information, see the article "How to Start a Small Business Group Health Insurance Policy at MedSave.com.

Group health insurance is also controlled by the state in which the business is headquartered unless a significant number of employees reside outside of that state. In the case of businesses with employees in scattered states, the most restrictive state laws may apply (causing the insurance to be more expensive). This may seem unfair to employees living in states where health insurance is less expensive and easer to find.

Many of today's consumer driven health plans like Health Reimbursement Arrangement (HRA) and Flexible Spending Account (FSA) plans allow an employee to opt out and find another more attractive health plan that is paid (fully or partially) by the employer.

Group health insurance is moving rapidly toward high deductibles. Employees need to be financially prepared to cover at least the first few thousand dollars of medical expenses, regardless of the cause. Even at the companies with the best health insurance plans, families with children are now paying out-of-pocket costs of more than $5,000 per year for medical and dental expenses. Ideally, with the right financial planning and budgeting, these expenses are paid through a Health Savings Account or other non-insured health plan.

COBRA coverage

COBRA coverage option is only available for individuals leaving a group health policy of an employer with more than 20 employees. This type of insurance is available for up to 18 months. COBRA coverage is the most expensive type of health insurance and some state laws require that residents exhaust this type of coverage before becoming available for other types of insurance like state-sponsored high risk insurance pools. This means that if you are eligible for COBRA, other less expensive options may not be available, even if you cannot afford the price of this coverage. Contact your employer or you group health plan directly to access COBRA benefits.

It is important to realize that individuals who decline COBRA coverage due to the high cost may not be immediately eligible for other cost-subsidized health insurance otherwise available through state programs.

Individual health insurance

Individuals not eligible for regular commercial health insurance plans due to pre-existing medical conditions may be eligible for any of the following five categories of limited benefit health insurance plans and takeover the costs of pre-existing medical conditions. While these provide less protection than regular major medical insurance, they are less expensive, have more liberal medical eligibility requirements and provide more liberal coverage of pre-existing medical conditions. At least one of those five types of coverage is available on a guaranteed issue basis to almost all U.S. residents.

1) Core Health Insurance - a limited benefit insurance available to U.S. residents (citizenship not required) in most states that accepts all applicants under age 65 regardless of medical history and pays for pre-existing medical conditions with the following limitations: a) a waiting period of the first 30 days following new policy issue applies for doctor's office sickness benefits, b) a 12 month waiting period applies for hospital and surgical benefits for pre-existing medical conditions. Other coverage for pre-existing conditions begin immediately in the same manner as any other covered expense. Amounts of coverage amounts vary depending on the coverage options and premium amount selected, so it is possible to adjust the insurance benefits to fit a specific budget. Maximum lifetime benefit from this policy is $1 million. Unlike most limited benefit insurance plans, doctors and hospitals may bill this health plan directly and take direct assignment of claims payments.  See the "Plan Details" section online for a full description of coverage. Coverage is issued online and can be in force on the next business day following application. For all of the reasons summarized here, Core Health Insurance is often the best choice for a person with significant pre-existing medical conditions when other medical insurance is unavailable or unaffordable. The waiting period of 30 days/12 months for the substantial coverage of pre-existing medical conditions is the most generous currently available in commercial health insurance market. For this reason, we believe that Core Health Insurance should be the first consideration of those who cannot enroll (either due to eligibility or cost) in major medical insurance.

2) Basic Health Insurance - a limited coverage plan is available in most states that admits all applicants under age 70 regardless of medical history and pays for pre-existing medical conditions after being enrolled for 6 months. As the name implies, this insurance covers limited items and not all medical costs. See www.basichealthinsurance.net for information about availability, rates and enrollment.

3) The five Value Benefit plans including - "Value Health USA", "Value 24 Hour Accident", "Value 24 Hour Accident Coverage", "Value Emergency Room Insurance" and "Value Med" insurance can be used in combination or separately where available. Unfortunately, some of these are not available to those with the most severe and chronic medical conditions like AIDS, cancer, insulin dependent diabetes, and cardio-vascular disease. Value Health is a hospitalization and surgical cost policy and Value Med is an outpatient policy that helps pay for doctor visits, lab tests, emergency room and ambulance costs. Value Med recently added optional coverage for expanded hospitalization benefits making this the most well-rounded plan available to date). Both are limited benefit policies that are not designed to cover the full amount of larger medical bills. See the description of coverage for the specific coverage limits. These policies are available in most states to individuals. Pre-existing medical conditions are covered under both Value Health and Value Med plans after the policy has been in force for 12 months (the waiting period is 6 months in ID and NV). Both of these can be used in combination with Basic Health Insurance and Core Health Insurance above to increase overall coverage.

4) Public assistance plans - When disposable income and assets available are less than the cost of health insurance, each state has one or more programs that provide free or reduced cost health insurance. These welfare policies pay for the cost of pre-existing medical conditions after the coverage has been in force for the prescribed length of time, usually six to eighteen months, depending on the state and the program. These plans vary from community to community and change frequently. The easiest way to find the welfare health insurance plans available in your area is to look in the blue pages of your local telephone book under the term welfare office and ask the staff there. Many uninsured children of middle income Americans are eligible for coverage under a program called "Insure Kids Now". See the article titled "Trends in Children's Health Insurance" at MedSave.com for more information.

5) High risk health insurance pools - If no other option is available, each state has at least one open enrollment high risk health insurance plan that will accept all individuals not eligible for coverage under any other health plan. Coverage for pre-existing medical conditions is not immediate unless the applicant has maintained coverage under a group insurance or short term medical insurance for the previous with not more than a 2 months gap in coverage. If a gap in coverage of more than 2 months, then a waiting person of 6 to 18 months before the pre-existing condition coverage becomes effective. There is no requirement that the waiting period be satisfied on the any health insurance plan, so many people use an inexpensive short term health insurance to satisfy the waiting period an then switch to the assigned risk plan. Finding and enrolling in these plans is covered in the next section.

See a state by state listing of product availability for all MedSave.com health insurance products. This chart is designed to help make the lower cost option visible "at a glance" on a state e state basis.

Finding open enrollment high risk health insurance

The best way to find an open enrollment health insurance plan is to contact your state insurance department. Links to the state insurance departments are posted at http://www.medsave.com/license.htm. Since many of these plans are administered by the local Blue Cross associations, it makes sense to also call them directly. A listing of high risk health plans is posted at MedSave.com.

Individuals in Arizona, Delaware, Florida, Missouri, Ohio, Tennessee, Virginia and West Virginia who meet the federal eligibility requirements can apply for coverage with Golden Rule Insurance without being required to meet eligibility requirements. The issued policy will cover the pre-existing medical conditions. However, it will save time if you tell the enrollment adviser that this is a HIPAA application rather than a regular medically underwritten policy.

If you are unable to find an open enrollment health insurance plan through your own search, OnlineAdviser offers free assistance finding this type of health insurance although we are not able to provide enrollment support for these plans. See www.MedSave.com/onlineadviser.htm for details.

"Web surfing" is not a good way to find an individual health plan that covers pre-existing medical conditions. Commercial health insurance plans found on the Internet do not offer this type of coverage provision, yet some people are lured into enrolling for plans that seem to offer this coverage.

Some open enrollment health insurance policies require a "Certificate of Creditable Coverage" in order to access immediate coverage for pre-existing medical conditions. If you have a "Certificate of Creditable Coverage" and live in AZ, CA, DE, DC, FL, MO, NC, TN, VA, WV there are more health plans choices available that provide takeover benefits. In the worst case, the applicant must wait 6 to 18 months under the new coverage pay for the cost of treating pre-existing medical conditions.

It takes at least a few weeks to enroll in this type of health insurance coverage. If you need immediate health insurance coverage, short term medical plans issued online that do not offer takeover of pre-existing coverage might be necessary just to bridge the gap.

Price

Unfortunately, the laws that assure that we have access to health insurance do not regulate the price of this insurance to make sure that it is affordable. The range of premiums for the open enrolment high risk health insurance coverage goes from about $200 per month for single coverage in parts of the Midwest to more than $1200 per month for the better plans on either coast. Family coverage is 2.5 to 3 times the price of single coverage. Some states limit the price of coverage for high risk applicants at 200% of the price charged for healthy applicants.

In many cases, the cost of health insurance plus out-of-pocket expenses is one of the largest single monthly expenses for the household with significant pre-existing medical conditions.

The less expensive insurance but limited benefit coverage by Basic Health Insurance, Core Health Insurance, "Value Health" and "Value Med" may be necessary when other types of insurance is either unaffordable or unavailable. These plans provide far less coverage but offer a premium price that most people can afford. Some insurance coverage is better than no coverage at all. The cost of these typically range from about $50 to about $400 per month.

Non-insurance discount health plans

When health care expenses are not covered by insurance it makes sense to bypass insurance altogether and use a Preferred Provider Organization (PPO) discount health savings plans instead to cover the cost of pre-existing conditions. Plans like Ehealthdiscountplan can be effective because they cover all pre-existing medical conditions. This is not insurance, but sometimes it is better to pay cash for smaller expenses, especially if the bills are discounted under a PPO agreement. Both doctors and patients prefer this cash pay-as-you-go method because there is no risk of dependency on insurance approval. The combined cost of the cheaper health insurance plus the out-of-pocket cost of pre-existing coverage not covered by insurance is often less that the cost of an open enrollment plan that offers takeover coverage.

PPO discount health plans are very liberal, available to almost everyone, cover a wide range of expenses, include pre-existing medical conditions, and cost little compared to the savings achieved. As a result, these plans tend to be favored by those who use them. See the article "Comparing Health Discount Plans" for more information.

Discount health plans should not be confused with health insurance policies but unfortunately some unscrupulous marketers intentionally blur the line between the two types by offering discount plans in combination with limited benefit insurance. Be sure to understand the distinction between the two types of benefits.

Avoid scams

Individuals seeking insurance to cover pre-existing medical conditions are frequently the victims of scams or unethical marketing programs. Many consumers under pressure to get medical treatment do not realize the limitations of insurance and enroll in a health plan that they believe will pay more in medical expense benefits than the cost of the premium. Obviously that would not be a sound insurance program. It seems that as soon as one of these health insurance scams is shut down by authorities, another surfaces to take its place. Insurance regulators in all 50 states and the District of Columbia have warned consumers to avoid unregulated health insurance plans. The best approach is to realize that a health plan that seems to good to be true probably is exactly that. Realize that there are no commercial insurance plans designed to pay more than the premium collected.

Incorporate health care into financial planning

Health care expenses can be the largest financial in households where one or more members has chronic medical problems. Availability and price of coverage varies significantly from location to location. It might be wise to consider the availability and price of this coverage in states other than your own. Consider, for example, a case where a family would face tens of thousands of dollars in medical insurance and out-of-pocket costs in their own state but could manage fairly well under the rules of another state. Uprooting a household to move to another state for medical treatment might sound extreme, but there are plenty of real-life cases where this made the difference in keeping a family together for the long term.

Conclusions

Insurance that covers the full cost of pre-existing medical conditions is available but is usually not a financially viable option for individuals who purchase their own coverage. Many who need this type of coverage already have a gap in insurance, so federal law does not protect their rights to immediate takeover coverage. There may be a waiting period, a high deductible, or a high premium cost that is either unmanageable or may outweigh the likely policy benefits over the short term.

The best immediate options are to use a lower cost insurance for protection other than the pre-existing medical condition and then manage the immediate medical costs outside of an insurance plan. Additional coverage options become available to most people over the longer term as evidenced by the fact that relatively few people remain uninsured for more than twelve months. Insurance that excludes coverage for pre-existing medical conditions provide the best value in terms of overall protection for the price paid. Limited benefit insurance plans are increasingly available to provide some coverage for pre-existing medical conditions after the policy has been in force for six months.


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