What should I know about federal protections, laws, regulations, and resources when purchasing insurance?
Two federal laws affect the provision of health insurance to small business employees:
- the Health Insurance Portability and Accountability Act (HIPAA)
- the Consolidated Omnibus Budget Reconciliation Act (COBRA)
HIPAA, in effect since 1996, includes important health insurance protections for small businesses and their employees.
Important Facts to Know
HIPAA limits benefit exclusions for pre-existing medical conditions to those that have been diagnosed or treated within the previous six months and provides that pre-existing condition restrictions cannot be applied to pregnant women, newborn babies, or adopted children under age 18. Prohibits insurers from discriminating against employees and dependents based on their health status. You, your employees, and any enrolled dependents cannot be denied eligibility or charged more for coverage than any similarly situated person. Guarantees renewability and availability of health coverage to certain employees and individuals. |
HIPAA provides the following protections for self-employed individuals:
Under limited circumstances, guarantees access to at least some insurance products in the individual market with no pre-existing condition exclusion periods for HIPAA-eligible individuals—persons with at least 18 months of prior creditable coverage with no break of more than 63 consecutive days and who:
- are leaving employer-sponsored group coverage
- have exhausted COBRA or other continuous coverage available
- are not eligible for any other group coverage
- have not lost group coverage due to fraud or failure to pay premiums
With limited exceptions, HIPAA provides guaranteed renewability of health plan policies to self-employed individuals; however, a person who loses individual coverage has no federal right to guaranteed access in the individual market.
COBRA, in effect since 1986, permits employees and their dependents to continue participation in their employer-sponsored group health plan for a limited period of time after their job ends. If the employer has 20 or more workers, its employees may be eligible for COBRA continuous coverage when they retire, quit, are fired, or begin working reduced hours. Continuation coverage also extends to surviving, divorced, or separated spouses; dependent children; and children who lose their dependent status under their parents’ plan rules. An employee may choose to continue in the group health plan for a limited time and pay the full premium, including the share the employer previously paid on the employee’s behalf, plus 2 percent to help pay the employer’s administrative costs. COBRA usually guarantees 18 months of coverage, but can be extended to 29 to 36 months under special circumstances.
What should I know about state protections, laws, regulations, and resources when purchasing insurance?
Companies licensed in Virginia to sell health insurance to small businesses are subject to various state laws and regulations with which they must comply. Some of the provisions they address include:
- Monitoring insurers' business practices and requiring them to maintain adequate financial reserves to pay claims.
- Establishing fair marketing practices and having established external grievance requirements to give consumers options if they believe a denied claim or service should have been paid or provided.
These provisions apply alike to small group health plans and individual plans if the cost of the benefit is treated as a business tax deduction, or if the employer pays any portion of the cost through reimbursement, payroll deduction, or wage adjustment.
Virginia law defines small businesses as those that employ two to 50 people. The laws and regulations that govern the business of health insurance in the state change from time to time, and special conditions apply under some circumstances but not others. Thus, small business owners should contact the Virginia Bureau of Insurance with specific questions.
Useful Contact Information
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The Virginia Bureau of Insurance website is http://www.state.va.us/scc/division/boi
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The Virginia Bureau of Insurance number is (800) 552-7945
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Questions about managed care plans (such as HMOs or PPOs) should be directed to the Virginia Bureau of Insurance Managed Care Ombudsman at (877) 310-6560
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Part 1: Insurance Basics