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What happens to my health insurance when changing jobs?

To sum it up...
  • The importance of continued health insurance coverage between jobs.
  • How HIPAA laws help you transfer your health insurance coverage from one employer to the next.
  • A description of COBRA and how it helps you to avoid a lapse in your health insurance coverage.
  • How short-term health insurance policies may or may not be your best alternative to COBRA.

Are you excited that you’re moving up to a better paying job or because you’re relocating to a new place full of so much promise? Maybe you’re devastated by a layoff or getting fired from your current job and need to find another one. In either case, you might be wondering what happens to your health insurance when you are between jobs or change jobs. After all, medical insurance is a critical part of protecting you and your family and its importance can’t be ignored or overlooked.

With a little bit of information about how health insurance coverage between jobs works, you can make sure that there is no lapse in your coverage and set your mind at ease.

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How important is it to remain covered between jobs?

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When you’ve recently lost a job or if you’re moving to a different job, you need to be certain that your coverage does not lapse. There are a few reasons why avoiding a lapse is necessary:

1. Paying out of pocket for medical costs is next to impossible for the average person. On average, out of pocket expenses with insurance will cost about 12 percent of what self-paying your medical expenses would cost.
2. If a medical condition or accident should occur during a period when you’re uninsured, it might not be covered on your new employee health plan, because it would be considered a pre-existing condition.
3. If you or a family member have a chronic condition like diabetes, heart disease or cancer, you could encounter a pre-existing condition exclusion clause in your future policy.

Regardless of the financial burden, it might cause if you have an uncovered time period between employee insurance plans, you need to make certain that you and your family aren’t put at greater risk because you have no coverage.

What is HIPAA?

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HIPAA is the Health Insurance Portability and Accountability Act, which most people associate with keeping your medical and health information private (title II provision). HIPAA does more than just protect your privacy rights. As you might infer from the title of the act, its main purpose is to make your health insurance portable between employee plans. How does the title I provision of HIPAA help make your insurance portable?

The United States Department of Labor lists the following as HIPAA’s umbrella of protection:
• “Limits the ability of a new employer plan to exclude coverage for preexisting conditions;
• Provides additional opportunities to enroll in a group health plan if you lose other coverage or experience certain life events;
• 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; and
• Guarantees that certain individuals will have access to, and can renew, individual health insurance policies.”

This is good news if you are transferring from one job to another, because it helps you avoid the issues that might arise when moving from one company’s employee health plan to that of another. In addition to what is covered in the title I provisions are provisions in title IV which also protect the insurance by further defining the guidelines for the continuation of coverage between employers, even if one or the other of the employers has company-owned insurance.

In short, if you are moving from one company with employee health insurance to another company with employee health insurance, HIPAA makes certain that your coverage is continued without a lapse. What happens if you lose your job or quit a job and there is a time interval in between?

What is COBRA?

It sounds scary, but COBRA stands for the Consolidated Omnibus Budget Reconciliation Act, which was a law passed allowing employees and their dependents to keep their group health insurance plan even after leaving the company that was providing it. Essentially, COBRA helps you avoid a lapse in health insurance coverage for your family during a period of unemployment, regardless of why you became unemployed.

How does COBRA work?

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By law, when your job terminates, for any reason, you are allowed to continue your coverage on your previous employer’s medical plan. You are given 60 days to decide if you want to continue the plan and another 45 days after you make that election before you must start paying the premiums.

During that intervening period, you are, essentially covered, but will have to start paying the premiums if you file a claim during that term. COBRA policies can be more expensive than you might expect.

Why are COBRA policies expensive?

While you were employed, your employer probably paid from 70 to 90 percent of your group policy premium as part of your benefits package. Consequently, you were only paying 10 to 30 percent of your insurance premium. When your employment terminates, your employer no longer pays their portion of the premium and you are required to pay 100 percent of the premium required to maintain the coverage.

What are some of the other drawbacks of COBRA?

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The expense continuing a COBRA policy is often a drawback in and of itself, but there are some others. Here are some of those additional drawbacks:

• Coverage does not last forever. At some point, you’ll have to find a new plan.
• If your previous employer changes insurance plans, you’ll get whatever insurance plan they have adopted and whatever changes go with it.
• Because it is group insurance, it may or may not fit your specific needs. Since you’ve begun paying full price, there might be too much or too little coverage of certain areas and it might not be the most cost-effective plan for you and your family.

Where COBRA certainly helps you avoid a lapse in health insurance coverage while you’re unemployed or between jobs, there are alternatives to retaining your old insurance without putting you and your family at risk of being denied coverage for existing conditions or other exclusions.

Are there other short-term health insurance options?

Thankfully there are other short-term health insurance options that can bridge that gap between being covered under your previous employee health plan and being covered under the plan of a future company. Short-term health insurance plans are usually less expensive and cover a period of between six months to a year.

The protection offered by them will cover major medical expenses. In short, they are a viable alternative to continuing the group coverage of your previous employer, if you and your family have no chronic or pre-existing conditions. If you do, then you need to be very careful with them.

Buyer Beware!

Be cautious before purchasing a short-term health insurance plan. According to Amanda Banach of Demand Media There are several issues that you need to be very much aware of before purchasing a short-term health insurance policy and here they are:

• “They do not cover as many visits and services and are generally not considered to be creditable coverage under HIPAA.
• Most short-term plans also do not cover treatment of pre-existing medical conditions.”

If you go with this option, then you must be certain that your pre-existing conditions will be covered and that the coverage will transfer to the new employee health plan without a hitch, via HIPAA, when you become employed again.

Conclusion

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Due to HIPAA and COBRA laws, you can avoid going without insurance coverage when you’re between jobs. If you’re starting a new job right away, then HIPAA will make certain that you can move over from your old health insurance provider to your new one without a problem. If there is going to be a lapse between jobs, however, keeping your old employee health plan via COBRA, though expensive, will avoid potential problems with chronic and pre-existing conditions when you are enrolled in a new employee health plan at your future job.

Even a short-term health insurance plan is better than no coverage at all, just make certain that you know what that short-term plan is covering and what potential problems could arise when you start your new job. Regardless of what you choose, choose something. Do not go without coverage in any case.

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