While COBRA was a real breakthrough for employees, it has its weaknesses. For one thing, small employer groups (20 employees or less) are exempt from the law, and COBRA makes no provision for continuation of coverage if the employer cancels the group plan. Obviously, if an employer discontinues the master group policy, there is no way an individual subscriber can maintain coverage under it.
Congress addressed some of COBRA’s shortcomings by enacting the Health Insurance Portability and Accountability Act (HIPAA). Among its provisions, HIPAA protects the rights of persons not protected by COBRA to continue their insurance coverage. If a person leaves his job or if his employer discontinues the group plan, HIPAA provides the guaranteed right for him to purchase an individual (non-group) medical insurance plan, assuming he meets the law’s eligibility requirements.
It’s important to note that the individual insurance policies whose purchase HIPAA guarantees are not the same as conversion policies, which are group policies converted to individual policies. Insurance companies have generally always offered conversion policy coverage to terminating employees and their dependents if they applied within 30 days of termination. However, the benefits available under most conversion plans are not nearly as extensive as those included in individual plans offered to a healthy buyer. Conversion plans are guaranteed to be renewable, but if a person does not choose to renew, HIPAA will not provide protection to switch from one individual plan to another.
HIPAA allows a person to purchase the same quality of coverage that would be offered to applicants capable of passing even the most demanding of insurance exams. However, while a person’s application won’t be rejected because of health problems, insurance companies can charge higher rates (with the state’s approval). Nevertheless, HIPAA is a real boon for those with medical problems: If a person is able to secure coverage under an employer-sponsored group medical plan, he doesn’t ever have to be without medical insurance again, assuming he continues to pay premiums.
The best plan for people with diabetes
As stated earlier, people with diabetes are generally better off covered by a group plan, if one is available, than with an individual plan. It is usually far easier to qualify for group coverage than for an individual policy that investigates health history. Depending on the plan and the state, the group plan may impose few (if any) preexisting conditions, exclusions, or extensive waiting periods that are common with individual policies.
A person with diabetes whose employer or union offers a variety of coverage choices may have to evaluate the pros and cons of each plan before deciding which is best. For example, people who live in large urban centers with several participating medical centers may want to explore HMOs. Generally speaking, HMOs cost a person less in out-of-pocket charges at claim time than either indemnity plans or self-funded plans. But HMOs may have more expensive premiums, and they may require a person to change from his current physician to a plan physician. That factor alone may decide the question.
Indemnity plans, including PPOs, generally give a person more freedom to choose his care givers and save him a few dollars in the premium outlay. The tradeoff, however, is that the insured person pays a higher proportion of doctors’ and other providers’ fees at claim time.
As for self-funded plans, most of them operate in the same fashion as PPOs and traditional hospital–medical programs. Self-funded plans offer a person more choices of providers, but at the same time, they encourage people to seek out certain practitioners by decreasing the person’s out-of-pocket share of the bill. And don’t forget that self-funded plans may not be regulated by the state’s insurance commissioner and that benefits that are common to traditional medical insurance plans may not be available to a person covered by the self-funded plan.