Group-to-Individual Portability | Plan Provisions and Taxation

HIPAA makes it easier for individuals who lose group medical expense coverage to find alternative coverage in the individual marketplace. The purpose of the federal legislation seems to be to encourage states to adopt their own mechanisms to achieve this goal. The federal rules apply in a state only if the state fails to have its own plan in effect.

Most states have adopted their own plans so that the federal rules have not become effective. The state alternative must do all the following:

• Provide a choice of health insurance coverage to all eligible individuals

• Not impose any preexisting-conditions restrictions

• Include at least one policy form of coverage that is either comparable to comprehensive health coverage offered in the individual marketplace or comparable to or a standard option of coverage available under the group or individual laws of the state

In addition, the state must implement one of the following:

• One of the NAIC model laws on individual market reform

• A qualified high-risk pool

• Certain other mechanisms specified in the act

If a state fails to adopt an alternative to federal regulation, then insurance companies, HMOs, and other health plan providers in the individual marketplace are required to make coverage available on a guaranteed-issue basis to individuals with 18 or more months of creditable coverage and whose most recent coverage was under a group health plan. Coverage does not have to be provided to an individual who has other health insurance or who is eligible for COBRA coverage, Medicare, or Medicaid. No preexisting-conditions exclusions can be imposed. Health insurers have three options for providing coverage to eligible individuals:

1. They may offer every health insurance policy they offer in the state.

2. They may offer their two most popular policies in the state, based on premium volume.

3. They may offer a low-level and a high-level coverage as long as they contain benefits that are similar to other coverage offered by the insurer in the state.