In July of 1996, Congress passed a mandate called HIPAA (Health Insurance Portability and Accountability Act). The purpose of this law was to ensure that consumers who had exhausted their 18 months of COBRA coverage or who were coming from a [true] group plan too small to offer COBRA, would not lose the ability to continue their health coverage, regardless of any preexisting conditions.

In theory, this is a great concept. However, what many people heard when the president described this "guaranteed coverage" plan was just that: guaranteed coverage. The part about "must have 18 months of continuous coverage" (with true group being the most recent portion of that 18 months) was rarely mentioned and overwhelmingly elusive for most consumers when it was. What consumers were not told - and what was downplayed in media soundbites - was the fact that carriers could raise their rates as much as 400% to compensate for covering people they would normally decline.

The cost of coverage under the "portability law" is high, but at least the coverage is there - eight years ago, a 22 year old with diabetes coming off his parents' group policy but not working at a company with group insurance would have found it nearly impossible (in some states, including Arizona) to get health insurance. Ditto the person who had had a heart attack, or been treated for cancer while on COBRA. There was no coverage beyond COBRA for these people.

COBRA stands for Consolidated Omnibus Budget Reconciliation Act - if your employer had 20 or more full-time employees on his payroll, and some (or all) of them were on a group plan, he must offer you an extension ("continuation") of the benefits of that plan, for 18 months (36 months in certain situations). If there were less than 20 employees on the payroll, COBRA may be optional, but rarely is it offered and it is not mandatory. The key here is the number of employees on the payroll, not the number of employees on the group policy. But in order to get COBRA, you must have been on the group plan.

Consumers believe that COBRA is expensive, that the carrier increased their rates on them. Not so. The premium charged under COBRA reflects the rate your employer was paying for your coverage, plus a small administrative fee (usually 2%). On most group plans, employers must pay from 50% to 75% of the employee's portion of the premium, so rarely does the employee know what the true premium is - until he elects to go onto COBRA. All other things being equal (which they rarely are), group insurance is the most expensive, due to the number of members in the group across which the carrier must spread the cost of any claims paid out for any members of that group. This is why more employers are dropping their group plans that starting them.

COBRA is not actually insurance. It is a short term continuation of benefits, utilized most effectively by people who are undergoing medical attention at the end of their group coverage, who are pregnant or who have preexisting conditions that would make it hard - if not impossible - to obtain health coverage otherwise. COBRA goes away after a specific period of time - 18 to 36 months, depending on certain situations (death of the primary, divorce, etc)..

If you are in good health and can obtain health coverage elsewhere, do not take COBRA. If something happens to your health while you are on COBRA, you may find yourself uninsurable at reasonable rates when COBRA does go away. Enter portability coverage (aka HIPAA).

In a way, portability is likewise an extension of coverage. You can and should shop for your portability coverage - most carriers offer it. Carriers' rates for portability are allowed, by government mandate, to be increased up to 400% over the regular rates.

Many people who have developed serious health conditions are unable to afford coverage under portability. Example: under HIPAA, the least expensive carrier we know of in Maricopa County, would offer a 50 year old male HMO coverage for $800 per month; the least expensive PPO would charge about  $575 (with a very high deductible).  It goes up from there, with some HMO's charging as much as $1800 and some PPO's charging upwards of $1,200 per month for that 50 year old individual.

Once you have chosen a portability provider, you cannot change. Shop carefully. Exceptions: if your portability provider pulls out of your county or state, you may - at the discretion of the other carrier offering portability - be able to re-enroll. This is not guaranteed and I have never seen it happen in AZ.  If  you move to a state in which your portability provider cannot serve you, you may be able to re-enroll in that state - but it is not guaranteed. (Also, 33 states currently have high risk pools which cannot decline someone on the basis of preexisting conditions. Most of these states have a six to 12 month waiting period following enrollment before benefits begin; a few states have no waiting period, two or three have a three month wait.)  If you later go to work and obtain group coverage again, you can go through the cycle all over again.... if necessary.

If you have group coverage through a company too small to offer COBRA, you can go right to portability coverage from the group plan, providing you can prove you had 18 months of continuous health coverage, with the most recent coverage being group (you may have a total of 63 days' gap in your coverage during that 18 month period, and a new employee waiting period following date of enrollment cannot be counted as part of that 63 day gap). Self-employed groups of one generally cannot qualify for portability; as portability benefits are designed for people coming from groups which had two or more employees.  (In AZ, Cigna will extend HIPAA coverage to a group of one, if they are coming from a true group plan - but this type of exception is subject to change. It doesn't hurt to check with a carrier.)

One of the problems with portability is that, whenever someone's coverage ends - whether it is  group or individual coverage, COBRA or short term - that carrier must provide what is called a "Certificate of Creditable Coverage" to the insured. This letter confirms that the policy-holder had coverage from this date to that date, and that "[they] may be eligible for guaranteed coverage under the Portability Act. " This letter does not guarantee coverage if going to a non-HIPAA individual plan.

This is so the customer can get "credit" for this coverage toward his 18 months of continuous coverage requirement (it doesn't matter what comprises the 18 months of coverage, so long as it is true insurance and as long as the last coverage preceding portability was true group).

Please note that AHCCCS is not  insurance - there is no premium. Also, those inexpensive medical discount plans you see all over faxes, e-mail and the papers.... are NOT insurance. So these types of plans do not count as part of your 18 months. Most specified benefit plans - plans reimbursing you for various medical expenses - are sometimes considered ot insurance plans and may or may not count toward the 18 months of continuous coverage.

Unfortunately, nowhere in any of these letters sent to departing group employees does it explain:
     (1) what portability (aka HIPAA) is;
     (2) that the consumer has only 63 days to apply for coverage under portability;
     (3) that this coverage does not have to come from their COBRA provider;
     (4) that once they select a portability provider, they cannot change;
     (5) that the carriers can raise their rates by 400% for this coverage

The government gives carriers 45 days to issue letters offering COBRA coverage and 45 days for "Certificates of Creditable Coverage." However, you only have 63 days in which to apply for coverage under portability.  Regardless of how long it takes your carrier to send that letter - and many carriers have taken as long as 90 days to issue them - if you miss the 63 day enrollment window, there is no recourse. Not without a lot of yelling, screaming - and possibly a lawyer.

If your group coverage is going away, know that you may have several options - just get hold of your agent or a broker as soon as possible. Time is not on your side with COBRA or portability.