Medicaid and Portability: Rights to Purchase Other Insurance When Medicaid Ends
May 2005
Introduction
“Portability” is a term that when used in the health care field refers to several rights that protect health insurance coverage for the insured and their dependents when they change insurers. These rights include whether (and for how long) a health insurer can exclude coverage of treatment for a pre-existing condition, whether an insurer must allow a person to enroll outside of regular enrollment periods, the prohibition on pricing based on health status, the prohibition on denying coverage based on health status, and the right to purchase individual health coverage through certain plans. The extent to which people losing Medicaid have any portability protections is covered under either the Health Insurance Portability and Accountability Act (HIPAA) of 1996, which describes rights to employer-based health coverage and to individually purchased health insurance, or under the Social Security Act, which describes Medicare beneficiaries’ rights to purchase Medicare Supplement Insurance policies, known as Medigap plans.
HIPAA is designed to protect individuals who have had employer-based group health insurance from losing coverage because of their pre-existing conditions when they lose or change jobs. Generally, under HIPAA, individuals who have had twelve continuous months of group health insurance (“creditable coverage”) and who then change insurers within 63 days may not be subject to any waiting periods for coverage of any pre-existing conditions; those who have had less than twelve continuous months may be subject to a waiting period but it may not exceed twelve months minus the number of months they have had group coverage during the preceding twelve months.
Generally, under HIPAA, Medicaid is “creditable coverage” that will reduce the amount of time people wait for coverage of treatment for a pre-existing health condition when they enroll in employer-based health coverage or individual health insurance. Similarly, under the Social Security Act, Medicaid is “creditable coverage” that will reduce the amount of time people wait for coverage of treatment for a pre-existing health condition when they enroll in Medigap plans. However, generally, people losing Medicaid coverage do not have other federal portability protections. Yet states can enact laws that would help to ensure people losing Medicaid have the right to obtain health coverage through an employer outside of open-enrollment periods and the right to purchase individual health insurance or Medigap plans.
On December 30, 2004, the Department of the Treasury, the Department of Labor, and the Department of Health and Human Services published final regulations for health plan portability in the Federal Register. These final regulations further explain who has the rights established by HIPAA and how group health plans and group health insurance issuers must comply. The regulations are effective for health plan years beginning on or after July 1, 2005.
Under the rules, Medicaid, State Children’s Health Insurance Plans (SCHIP), and health coverage provided by other governmental entities are among types of “creditable coverage” that can reduce waiting periods for coverage of a pre-existing health condition by a group health plan or group health insurance issuer. States are required to issue notices of creditable coverage to people losing Medicaid, and a model notice is on page 78728 of that Federal Register (Volume 69, Number 250). However, HIPAA does not provide a clear right under federal law for people losing Medicaid to enroll in either employer-based private insurance or individual private insurance outside of open enrollment periods. State laws may be necessary to provide former Medicaid beneficiaries with those rights.
For Medicare beneficiaries who obtain Medicare supplemental insurance policies, known as Medigap plans, portability rights are provided by a different law: the Social Security Act. Generally, Medigap insurers can impose pre-existing condition exclusion periods of up to six months. However, Medicaid coverage will reduce this waiting period. The right to enroll in a Medigap plan outside of an open-enrollment period applies only to a very narrow group of Medicaid beneficiaries under federal law, as discussed in Part II. States can take further action to protect Medicare beneficiaries who are losing Medicaid (duals) and who wish to purchase Medigap plans.
I. Rights of Former Medicaid Beneficiaries When Seeking Private Insurance
There are a few questions related to portability of health insurance or the right to purchase private health insurance outside of regular enrollment periods and regardless of previous health status:
1) Must group health insurance plans offered through an employer allow employees and their employees who have recently lost Medicaid coverage an opportunity to enroll outside of an open enrollment period?
2) If the group health insurance plan offered through an employer excludes coverage of pre-existing conditions for a period of time for new enrollees, will that exclusion apply to people who recently lost Medicaid coverage?
3) Must a private insurer that sells individual coverage offer to sell a policy to a person whose most recent coverage was through Medicaid regardless of the individual’s health status? Can the insurer charge a higher price based on the individual’s health status?
Federal requirements concerning each of these questions are discussed below and are contained in 29 Code of Federal Regulations, Part 2590, 26 Code of Federal Regulations, Part 54, 45 Code of Federal Regulations, Parts 146 and 148, and Public Law 104-191. These are only minimum requirements, and states and employers can provide further protection. Contact your state department of insurance or employer to learn if the state or employer has additional safeguards.
1) Must a group health plan offered through an employer allow employees and their dependents who have recently lost Medicaid coverage an opportunity to enroll outside of an open enrollment period?
Employers normally allow new employees and their dependents (if they offer dependent coverage) a specific, limited time to enroll in the employer-based health plan. Many employers also have periodic open-enrollment periods when employees and dependents can join a group health plan. However, under HIPAA, employers must allow a special-enrollment period when an employee and/or dependents who previously declined the plan because they had certain other health insurance coverage and then lost eligibility for the other health coverage in which they had been enrolled.¹ Under the rules governing special enrollment periods, employees and (if dependent coverage is offered) dependents must be allowed to enroll in employer-based coverage if requested within 30 days of losing their other coverage. One may argue that this protection will apply to people who were in state-licensed Medicaid managed care plans and then lost their Medicaid coverage because these managed care plans will probably meet the definition of “health insurance coverage” quoted in the section below.² However, people who lose Medicaid fee-for-service coverage are not protected under federal law. To assure that people who are losing Medicaid coverage have rights to special enrollment, states can require this of state-licensed insurers.
Why is this?
Under federal rules, the special enrollment period for people who lose other health coverage applies to people losing “another group health plan or other health insurance coverage.” A group health plan as defined under Title I of HIPAA is a plan for employees or their dependents, so Medicaid does not meet this definition. “Health insurance coverage” is defined under Title I of HIPAA as “benefits consisting of medical care (provided directly, through insurance or reimbursement, or otherwise) under any hospital or medical services policy or certificate, hospital or medical service policy or certificate, hospital or medical service plan contract, or HMO contract offered by a health insurance issuer….that is required to be licensed to engage in the business of insurance in a State and that is subject to State law that regulates insurance….” Generally, one could argue that Medicaid managed care plans will meet this definition if the HMOs are required to be licensed by the state, but Medicaid fee-for-service does not meet the definition.³
What can a state do to assist people losing Medicaid coverage?
Under state law or regulations, a state can require health insurers that it regulates to provide special enrollment for people losing Medicaid coverage. States do not regulate coverage that is “self-funded,” that is, coverage that requires the employer to pay for each claim rather than for which an insurance company is at risk for the claim. (The employer can confirm whether its plan is self-funded or not.) Thus, although many employer plans within the Medicaid beneficiaries’ state would need to abide by a state-imposed special enrollment right, not all would.
2) If a group health plan offered through an employer excludes coverage of pre-existing conditions for a period of time for certain new enrollees, will that exclusion apply to people who recently had Medicaid?
Under HIPAA, a group health plan can not exclude coverage of pre-existing conditions if the new enrollees have had a certain amount of prior “creditable coverage.” According to the regulations issued in December 2004, both Medicaid managed care and Medicaid fee-for-service coverage count as “creditable coverage” under HIPAA. Depending on the length of previous coverage, previous coverage through Medicaid therefore will either reduce or eliminate pre-existing-condition exclusions in employer-based plans as long as the former Medicaid beneficiary enrolls in an employer-based plan within 63 days (or, if the person had another source of coverage in between Medicaid and the employer-based plan, Medicaid remains creditable as long as the person goes without a break in coverage of more than 63 days). A pre-existing condition exclusion period is reduced by the number of days that a person had creditable coverage, unless the person had a break in coverage of more than 63 days. If the person had twelve continuous months of creditable coverage prior to enrolling in a health plan during a regular or special enrollment period, or 18 months of creditable coverage prior to enrolling late in a health plan, the plan cannot impose any pre-existing condition exclusion. If there is a special-enrollment opportunity for people losing Medicaid coverage, this will not be considered a late enrollment under HIPAA.
For example, Mary did not enroll in her employer’s plan when she was first eligible because she was in a Medicaid managed care plan that offered good coverage, and she could not afford to pay the premiums and cost-sharing required by her employer’s plan. After a year, however, she loses Medicaid and is given a special enrollment period to join her employer’s plan. If she enrolls during this special period, she will not be considered a late enrollee. She enrolls within 63 days of losing Medicaid. Because she had Medicaid for 12 continuous months, the employer-based plan cannot exclude coverage of any pre-existing conditions she may have.
Jane likewise did not initially join her employer’s plan because she too had Medicaid managed care. However, she had Medicaid coverage for only five months before she lost that coverage and before that, she was uninsured. She joins her employer’s plan within 63 days of losing Medicaid. The plan has a twelve-month pre-existing condition exclusion period, but because Jane had five months of creditable coverage through Medicaid, the period that she must wait for coverage of treatment for her pre-existing condition is only seven months.
4) Must a private insurer that sells individual coverage offer to sell a policy to a person whose most recent coverage was through Medicaid regardless of the individual’s health status? Can the insurer charge a higher price based on the individual’s health status?
The answers depend entirely on state law and regulations. Contact your state department of insurance for further information. The federal Health Insurance Portability and Accountability Act provides no protection for people losing Medicaid to buy individual insurance policies. Federal HIPAA protections in the individual market apply only to people whose most recent coverage was through an employer-based plan, a church plan, or a plan for government employees, and even then an insurer can generally charge individuals higher prices according to the individual’s health status.
II. Rights of Former Medicaid Beneficiaries When Purchasing Medigap Policies
Rights of Medicare beneficiaries to purchase Medicare supplement policies (Medigap) are listed in Section 1882 of the Social Security Act and are summarized below. For those losing Medicaid coverage, as in the case of private insurance, there are three important portability-related questions:
1) Must a Medigap plan allow Medicare beneficiaries who recently lost Medicaid an opportunity to enroll even if it is not an open-enrollment period?
2) Can a Medigap plan exclude coverage of pre-existing conditions for a period of time for new enrollees who recently lost Medicaid?
3) Can a Medigap insurer charge a higher price based on health claims history or health status to new enrollees who recently lost Medicaid?
Federal requirements under the Social Security Act are discussed below. Generally, federal law requires Medigap insurers to sell policies to Medicare beneficiaries during initial open-enrollment periods that occur when they are both age 65 and covered by Medicare Part B and during certain special enrollment periods. Federal law does not require Medigap insurers to sell policies to Medicare beneficiaries who are younger than age 65, but some state laws do provide open enrollment periods in Medigap plans for younger Medicare beneficiaries. The federal portability requirements for Medigap plans are only minimum standards; a Medigap insurer can opt to provide additional coverage, and a state can impose additional requirements on Medigap issuers in its state. Contact the Medigap insurer or the state department of insurance to see if additional protections apply in a particular Medigap plan or a particular state.
1) Must a Medigap plan allow Medicare beneficiaries who recently lost Medicaid an opportunity to enroll even if it is not an open-enrollment period?
Medicare beneficiaries who have a Medigap policy can ask to have their Medigap policy suspended for a period of not more than 24 months when they enroll in Medicaid. Then, if they are no longer covered by Medicaid, they can get the same Medigap policy reinstated as long as it is within that 24-month period. Otherwise, under federal law, there are no special Medigap enrollment periods associated with the loss of Medicaid. If Medicare beneficiaries purchase a Medigap policy within their open enrollment period (which is the first six months during which the Medicare beneficiary is BOTH at least age 65 and enrolled in Medicare Part B, or for a younger Medicare beneficiary, within the first six months of attaining age 65, they are entitled to enroll in any Medigap policy without discrimination in pricing. There are certain other events that trigger the right to enroll in designated Medigap policies without discrimination in pricing and without pre-existing condition exclusions, but loss of Medicaid does not trigger that right.
2) Can a Medigap plan exclude coverage of pre-existing conditions for a period of time for new enrollees who recently lost Medicaid?
During open enrollment (the first six months that a Medicare beneficiary is both at least age 65 and enrolled in Medicare Part B or the first six months after a younger Medicare beneficiary attains age 65), a Medigap insurer can exclude coverage for pre-existing conditions, but it must reduce the waiting period for people who had previous “creditable coverage.” Medicaid counts as creditable coverage. A former Medicaid beneficiary who had at least six months of creditable coverage will not face any pre-existing condition exclusion. A former Medicaid beneficiary who had less than six months of creditable coverage may face a waiting period of up to six months before the pre-existing condition is covered, but the waiting period will be reduced by the amount of time that the person was covered by Medicaid, as long as the person signs up for Medigap within 63 days of losing Medicaid.
When Medicare beneficiaries face certain events (termination of retiree group health coverage; non-renewal of a Medicare Advantage, Medicare SELECT, or PACE plan; relocation out of their Medicare Advantage, PACE, or Medicare SELECT network service area; disenrollment from Medicare Advantage, PACE, or SELECT plan within the first twelve--or in some cases 24---months of first enrollment; insolvency or bankruptcy of a Medigap insurer; failure of a Medicare Advantage or Medigap plan to follow its contract; replacement of a Medigap policy that included drug coverage when Medicare Part D goes into effect), they must be offered certain Medigap plans with no pre-existing condition exclusions and no discrimination in pricing, regardless of whether they had prior creditable coverage. These events and the associated “guaranteed issue” rights are discussed in a CMS publication, Choosing a Medigap Policy: A Guide to Health Insurance for People with Medicare.
3) Can a Medigap insurer charge a higher price based on health claims history or health status to new enrollees who recently lost Medicaid?
The prohibition against price discrimination based on health status applies during a person’s open enrollment period for Medigap and when one of the events listed above triggers a guaranteed issue right. No additional protections apply to people previously covered by Medicaid.
¹ Under HIPAA, special enrollment rights apply to losses of employer-based group health plans and to losses of state-licensed and state-regulated insurance products that provide medical care or reimbursement for medical care under a contract or policy or an HMO contract. See definition in next section. Losses of coverage due to failure to pay premiums or for making fraudulent claims or misrepresenting facts do not entitle people to special enrollment periods. Besides the special enrollment periods discussed in this publication due to the loss of other insurance, people have special enrollment rights for certain dependents following marriage, birth of a child, or adoption or placement for adoption of a child.
² CMS has not issued any formal opinions on this, so consumer counseling programs should check with their state insurance department, Medicaid agency, and/or attorneys as to whether Medicaid managed care plans in their state fit the definition.
³ Ibid.
