Last Updated: July 2005

"COMMERCIAL" OR "PRIVATE" HEALTH INSURANCE

Q. What is "commercial" or "private" insurance?

A. “Commercial” health insurance (also called “private” health insurance) is any kind of health insurance paid for by somebody other than the government. The kinds of insurance described in the earlier sections of this manual--Medicare, Medicaid, Child Health Plus, Family Health Plus, and Veterans Benefits—are all paid for by government, so they are NOT commercial or private. There is also one kind of commercial insurance that the government does pay for: coverage for its own civilian employees.

Government health insurance is standard for each program, but commercial health insurance includes many variations in price and the kinds of benefits that clients get. The rules about health insurance--such as what benefits are available and what rights the client has—depend on two things: the type of insurance (HMO, fee-for-service, and so on) and who is paying for the insurance.

Q. Who pays for commercial insurance?

A. Commercial health insurance is usually paid for by the client’s employer, union, by the client and employer sharing the cost, or by the client. There is a difference between the rules that apply to government-sponsored health coverage and those that apply to commercial health coverage. (There are also differences between the rules that apply to different government plans, such as Medicare and Medicaid.

Most people who have private health insurance coverage get it from their employer or union. This costs the client much less than buying his/her own health insurance as an individual. Unfortunately, not all jobs come with health insurance, and sometimes clients are between jobs. In these situations, clients may want to self-pay for insurance order to maintain it.

People who work in civilian jobs for the federal, state, or city governments and get health coverage from their government employer are subject to slightly different rules. Even though the government is paying for their coverage, they are covered by commercial plans. See page 49 for more details.

Some employers are “self-insured”. This means that the client does not have real insurance; when he/she needs health care, the employer—not an insurance company—is responsible for the cost. The difference matters because self-insured plans do not have to obey many New York State laws about insurance. In fact, self-insured plans are sometimes called “ERISA” plans because the only law that governs them is the federal law known as “ERISA.”

Also, if a client needs to contact a government agency about your coverage under a self-insured plan, he/she would need to contact the U.S. Department of Labor; for regular health insurance, he/she would contact the New York State Department of Insurance (1-800-342-3736), the New York Attorney General’s Health Care Bureau (1-800-771-7755) or the New York State Department of Health (1-800-206-8125).

Q. What are the types of commercial health insurance?

A. Commercial health insurance can take several different forms. These are “indemnity” or “fee-for-service”, the kind most people used to have; and the three major new forms: health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point-of-service plans (POS), which are more common now. New types of insurance are continually being developed, but most are variations or combinations of these four types of insurance.

1. “Indemnity” or “fee-for-service” insurance: covers a defined set of services or benefits. Clients can go to any doctor or other health care provider he/she chooses. Indemnity plans may be comprehensive or may only cover a limited set of benefits. Some, for example, only cover hospital costs.
   
2. Health Maintenance Organizations (HMOs): must provide a minimum set of services required by New York State. Nearly all HMOs require the client to choose a “primary care provider” or “PCP”, who will take charge of his/her health care. The client will need an okay (a “referral”) from your PCP, who will be his/her regular doctor, to see nearly any other health care provider, such as a specialist in diabetes or asthma. A client must choose his/her PCP from the list received from the HMO, and any specialist seen will also be from the HMO’s list, in nearly all cases. Each time a client sees a doctor, he/she will probably have to pay a small, fixed amount, called a “copayment”.
   
3. Point of Service (POS) Plans: usually require the client to choose a primary care physician (PCP) from their list. Unlike HMOs, at almost any “point of service” he/she can choose to see a doctor who is not on the list, if he/she is willing to pay more for this choice. If a client chooses to go to “out-of-network” doctors, he/she will have to pay all his/her bills up to a fixed amount—often $200 or more—called a “deductible ”. Once the client has reached the deductible, he/she can get some of the payments back for additional bills. As long as the client sees doctors within his/her plan’s network, he/she will pay only a small co-payment.

Under a POS plan, clients may have a narrower choice of health care providers than they would have in an indemnity plan. The plan may require that out of network services be obtained within the geographic area covered by the plan, or that prescription drugs be bought from particular drugstores.

• Preferred Provider Organizations (PPOs): will give the client a list of doctors and other health care providers that he/she can go to for a discounted price. The client will be able to go to doctors outside this “network” if, as in the POS plan, he/she is willing to pay a deductible and a large portion—often 20% or more—of these doctors’ bills. PPOs are different from POS plans in that they do not ask a client to choose a primary care physician (PCP) to manage his/her health care.
  

AN INDIVIDUAL’S RIGHTS WHEN HE/SHE IS COVERED BY COMMERCIAL HEALTH INSURANCE

Q. Do all jobs come with health insurance?

A. No. Although most people in New York who do have insurance coverage get it through their jobs, private employers are not legally required to provide health coverage for their employees. Unions are not required to, either.

Q. How much can an employer charge the employee for health insurance coverage?

A. An employer can charge his employees all or part of the cost of the insurance (called a “premium”). Some people choose not to enroll in their employer’s health plan because they feel that they cannot afford to pay the premiums.

Q. If an employer or union does have a health plan, are all employees or union members guaranteed health care coverage?

A. No. The employer can limit health care coverage to certain kinds of employees (for example, executives but not hourly wage workers). The employer can require the employee to wait a certain amount of time after being hired before enrolling in a health insurance plan.

Q. Can a client be denied health insurance because he/she is in poor health?

A. No. New York State law guarantees a client’s right to buy individual coverage offered through HMO or POS plans regardless of his/her health status. If the client gets a job where the employer maintains a group health plan or he/she joins a union that has one, he/she cannot be denied coverage because of his/her health or other personal characteristics. For instance, an employer cannot choose to deny coverage only to employees with a physical disability. A federal law known as “HIPAA” (Health Insurance Portability and Accountability Act) guarantees this “right of access” to all groups all across the country. Click here for more details on HIPAA.

Q. What if the employer or insurance company wants employees to take a physical?

A. Employees cannot be required to have a medical examination until the employer offers the person a job and he/she has accepted it. After that, the employer or its insurance company can require a physical. Medical examinations can be used to deny some kinds of coverage, such as supplemental life insurance or disability benefits. However, the results of the physical cannot be used to prevent employees from getting health insurance.

Q. Can a person be charged more for health insurance because they are in poor health?

A. No, state laws forbid charging individual policy holders or group members more because of their health status. Large groups can be charged more if their members have high health costs, but federal law forbids charging higher amounts to sicker individuals within a group.

Q. If an employee chooses not to enroll in the employer’s health insurance plan when first hired, will he/she be able to change his/her mind and join it later?

A. Yes, but not right away. Employers usually have one time during the year when individuals can enroll in a health insurance plan. Enrollment may be required within 30 days of starting work, for example, or during a yearly “open enrollment period.”

If the employee or his/her family members don’t sign up during these periods, they may be treated as “late entrants”. In some plans (self-insured plans) clients will also have to wait longer before insurance will cover treatment for “pre-existing conditions” (illnesses you were getting treatment for before enrolling in the new plan)—18 months rather than a year. Individuals cannot be required to wait this extra time, or be treated as a late entrant, in the situations below:

• If the client or his/her dependent did not choose to enroll in the employer’s plan because he/she had other insurance coverage, and he/she later loses that coverage for a reason outside his/her control, the client or his/her dependent have 30 days after the end of the other coverage during which they are allowed to enroll in the employer’s health plan.

Example: A husband has insurance coverage through his own employer, until he loses his job. He must then be given 30 days to enroll in his wife’s employer’s health plan (if your employer offers family coverage), counting from the date when his ex-employer’s insurance coverage ends.

• New dependents who enter the client’s life through marriage, birth, adoption, or other events must be given 30 days—counting from the day of the marriage, birth, adoption, etc.--to enroll in your health plan, no matter when the event occurs during the year.

Q. If an employer offers health insurance to its workers, does it also have to cover their family members (husbands, wives, children and other dependents)?

A. No. A health insurance plan does not have to cover employees’ family members simply because it covers employees, although many plans do. A plan is allowed to charge higher premiums for family members than it does for actual employees.

Q. Once a client purchases an individual insurance policy, can the managed care plan cancel it without the client’s consent?

A. Once issued, coverage can only be canceled by the plan in the following circumstances:

• The client does not pay the premium on time: If premiums are not received by the due date, plans may suspend benefits until the payment is received. The client is most likely to discover this when trying to fill a pharmacy prescription. If coverage is permanently canceled because the client didn’t pay his/her premiums, the consequences can be severe. No other plan has to sell the client individual coverage until 12 months have passed from the time he/she lost his/her last coverage. In practice, generally only the plan that cancelled the client’s coverage is likely to delay enrolling him/her.
  
• The client is involved in fraud against the plan.
  
• The client moves outside the plan’s service area. Even if the same insurer is doing business in the place the client is moving to, having a policy in New York does not always mean that he/she can keep it after moving to a new state. If keeping the client’s individual insurance policy is important to him/her, look closely at the availability of individual coverage in the state where he/she plans to move, before leaving New York. A client can lose coverage even when he/she moves within the state. Oxford’s service area, for example, is downstate. If a client is enrolled in Oxford and moves to Rochester, he/she would lose Oxford coverage.
  
• The client’s insurance company cancels all its individual policies in the state.
  
• In the case of family coverage, the client is no longer a spouse or child dependent on the policyholder. Children can usually not remain on a family plan past age 23, unless they suffer from a disability which makes them unable to support themselves, and they continue to live with and depend on the policyholder.
  

Q. Can a policy be canceled because the client becomes eligible for Medicare?

A. Many people still have policies that say that if a person becomes eligible for Medicare, their right to the policy ends. These clauses are now illegal and cannot be enforced. HIPAA forbids cancellation of an individual policy for this reason. If a client is covered on a group plan as a retiree, however, his/her benefits may change when he/she becomes eligible for Medicare.

Some employees at insurance companies have not yet been retrained, and will mistakenly tell subscribers that they will lose their coverage at age 65. They will often tell them that they must enroll instead in the plan’s Medicare HMO. They are wrong and should be challenged.

HOW INDIVIDUALS CAN KEEP THEIR HEALTH INSURANCE AFTER YOU LEAVING A JOB

Q. Does a client have to lose his/her health insurance if he/she leave his/her job?

A. Not right away. The employer no longer pays for the client’s health insurance once he/she leaves his/her job, but if the client was covered by the employer’s health insurance plan, he/she can continue it for a time by paying for it himself.

If the client worked for an employer with 20 or more employees:

The client is covered by a federal law called COBRA. This lets him/her remain enrolled in the employer’s group health, dental and/or vision plan by paying the amount that the employer used to pay for the client’s insurance, plus 2% more for administration. Because the insurance is sold to a group, it is usually cheaper than buying health insurance. A client can continue buying insurance under COBRA for 18 months or until he/she is covered by Medicare or a new group insurance plan. (If the client is totally disabled, he/she may be entitled to 29 months of COBRA coverage.) However, if the client does not pay his/her bill on time, he/she will lose coverage.

The client and dependents are covered by COBRA for almost any reason that accounts for the client’s loss of insurance: being fired or laid off, quitting the job, or getting hours reduced below the minimum needed for insurance coverage. COBRA coverage is also available to a husband or wife who becomes divorced or separated from the covered employee, to a child who becomes too old to be a dependent, or to the family of a covered employee who has died. If these family related events cause loss of coverage, the COBRA received may extend up to 36 months. Unmarried domestic partners are not covered by COBRA.

If you worked for an employer with fewer than 20 employees:

If the client worked for an employer with fewer than 20 employees:
When an employer has fewer than 20 employees, the client is covered by a different law, called “state continuation”, that also permits him/her to continue insurance coverage by paying for it himself. This law also requires the client to enroll within 60 days of receiving a notice that he/she is eligible for state continuation.

Q. Are there any important differences between COBRA and "state continuation" rules?

A. There are three major differences between COBRA and “state continuation”:

• State continuation does not apply to dental or vision plan.
  
• Under COBRA, clients cannot get coverage if they were fired for “gross misconduct.” Under “state continuation,” clients can get coverage no matter what the reason was for being fired.
  
• Under COBRA, a disabled employee who wants an additional 11 months after the first 18 months of coverage may be required to pay a 50% premium surcharge. Members of “community rated groups” under New York State law do not pay any surcharge.

Q. If a client changes jobs, can an insurance company refuse to cover his/her claims because you have an illness or other “pre-existing condition”?

A. Not permanently. The Federal law called “HIPAA” (Health Insurance Portability and Accountability Act) prevents insurance companies from permanently refusing to cover the client or the client’s illness if it was diagnosed and treated before he/she enrolled. However, the insurer may be able to avoid paying for treatment related to your “pre-existing condition” for up to 12 months (18 months if the client was a late entrant in a self-insured plan). The client can eliminate this waiting period if he/she meets two requirements:

• The client had “creditable” health coverage for 12 months before he/she changed jobs. This means the client was covered by a group health plan, individual health insurance, Medicare, or Medicaid. COBRA or state continuation coverage from a prior group plan also is acceptable. A client will not meet this requirement if all he/she had was accident or disability income insurance, liability insurance or workers compensation. If the client had less than 12 months continuous coverage, his/her waiting period will be reduced by the number of months of coverage had.
  
• The client’s previous health coverage was continuous. This means he/she was covered with no interruptions longer than 63 days. If he/she leaves one job and goes to a new job a week later, and the new employer has a six-month waiting period before the client can get health insurance, the six-month waiting period will count as time covered and the client’s coverage will be considered continuous.