Health Insurance for the Self Employed - Can Denial Happen Again?

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COBRA refers to a federal law passed in 1986 titled the Consolidated Omnibus Budget Reconciliation Act. Congress added to this budget bill several provisions related to employee benefits, including the right for an employee to continue insurance coverage after leaving a job. This is often referred to as COBRA continuation coverage.

The law generally covers group health plans maintained by employers with 20 or more employees in the prior year. It applies to plans in the private sector and those sponsored by state and local governments. Basically, COBRA gives a former employee the right to continue group insurance coverage for up to 18 months as long as the person pays the premium. In some circumstances, coverage can be continued for up to 36 months. Since the passage of COBRA, several states have passed laws that extend continuation coverage rights to employees of companies with even fewer than 20 workers.

Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, as usually the employer pays a part of the premium for active employees while COBRA participants generally must pay the entire premium themselves. It is ordinarily less expensive, though, than individual health coverage.

Another federal law passed in 1996, the Health Insurance Portability and Accountability Act (HIPAA), added some new provisions related to COBRA. Basically, HIPAA says that any person with previous qualifying coverage who has exhausted COBRA coverage (if it was available) has a 62-day window to obtain health insurance in the individual market on a guaranteed-issue basis. Those employees not eligible for COBRA coverage but who have had 18 months of previous qualifying coverage are still eligible for guaranteed-issue coverage in the individual market. This was intended to protect the insurability of people who maintain continuous coverage. Unfortunately, those who qualify for guaranteed-issue insurance may find the premium to be prohibitive.

Each state has implemented its own mechanism for eligible people. The insurance department of your state can tell you what this mechanism is. When an eligible person applies for individual insurance, it is important to comply with the state's designated mechanism and let it be known that you are "HIPAA eligible."

If you have been denied coverage to which you believe you were entitled, check again with the state insurance department to determine what remedies and options are available to you.

This becomes a moot point, however, when a person gets a job with insurance benefits. You may have to satisfy another 12-month exclusion period for pre-existing conditions, but once this period is over, and you maintain continuous coverage, you will not have to satisfy another 12-month exclusion. If your new employer is required to provide COBRA coverage and it is administered correctly, you will not lose your eligibility under the law. As long as you maintain continuous coverage, no company or employer may impose another pre-existing condition exclusion period.

Many people are confused by these laws, and even businesses and insurance companies do not understand them fully. The federal government makes information available on COBRA and HIPAA for consumers. The Department of Labor and the Department of Health and Human Services regulate these laws, and the information is available on their respective websites. Search for information on COBRA and HIPAA. Especially helpful are the following web documents: