Switching from One Health Plan to Another
When you, or a loved one, are changing jobs, losing your job, leaving a job for other adventures or taking an early retirement, there are many questions you may have about how it will affect your health care coverage. Educating yourself on your rights and options will ensure you make the best decisions for your situation.
You will generally have five options:
- Conversion to an individual policy with the same insurer that provided the Michigan employer group coverage,
- Temporary continuation of the same group plan under COBRA,
- Purchase of an individual policy with Blue Cross Blue Shield of Michigan, if you are a Michigan resident,
- Enroll in coverage with a Health Maintenance Organization (HMO) during its annual open enrollment period if you live in the service area, or
- Purchasing individual coverage from an insurance company.
GROUP CONVERSION RIGHTS:
If your Michigan employer-provided group health coverage is not a self-funded health care plan and you were continuously covered under the policy for at least 3 months, you may have the right to convert your group health coverage into individual coverage provided by the group's health carrier. This is called group conversion. Your Michigan employer must give you written notice of your right to the group conversion option and you must apply for group conversion coverage within 30 days of losing the employer group coverage. Your coverage under group conversion will not be the same coverage as the employer group coverage. The group conversion policy must be issued with no pre-existing condition exclusions. Premiums will likely be higher and benefits are likely to be less. However, you can keep the group conversion coverage as long as you pay premiums.
You have the right to convert your Michigan employer group policy to an individual policy with the same health carrier if you have been continuously insured for at least three months in the employer group plan and:
- You leave the employer, the group policy has been discontinued for all employees or for a specific class of employees, you are involuntarily terminated for reasons other than gross misconduct, or
- You are a covered family member of a certificate holder who has died, or
- You have reached the age limit for coverage under your parent's group coverage, or
- You divorce or separate from the certificate holder or you cease to be a qualified family member under a group plan.
Under Michigan law, if you convert your group policy to an individual (group conversion) policy with a health carrier other than Blue Cross Blue Shield of Michigan, you are no longer considered a Health Insurance Portability and Accountability Act (HIPAA) eligible individual and you will lose protections provided under HIPAA for health coverage in Michigan. If you have a pre-existing condition you may want to choose coverage with Blue Cross Blue Shield of Michigan or an HMO during the annual open enrollment rather than group conversion coverage. See Moving From An Employer Group Plan to Individual Plan. More information at: HIPAA FAQs
TEMPORARY CONTINUATION OF COVERAGE
CONSOLIDATED OMNIBUS BUDGET RECONCILIATION ACT (COBRA):
COBRA is a federal law that gives you the right to continue employer provided group health coverage on a temporary basis after you or your spouse or parent leave an employer with 20 or more employees. Employers of 20 or more workers must comply, including employers who provide coverage through self-funded health care plans. However, COBRA does NOT apply to plans sponsored by the federal government and some church-related organizations.
Your former employer must notify you of your COBRA rights within 30 days after you leave the employer. Once notified, you have 60 days to apply for the COBRA coverage. If you choose to purchase the COBRA coverage, you are insured from the date the employer group coverage ended, even if you wait until the 59th day to apply. You must pay the whole group premium including any part your employer had been paying, plus up to an additional 2 percent for administrative expenses. COBRA coverage ends after either:
- 18 months,
- 29 months if you became eligible for Social Security disability during the first 60 days of COBRA continuation, or36 months if you were insured through your spouse's or parent's employer and the spouse or parent has become eligible for Medicare, died, divorced, or separated or if you are a dependent child who has reached the age beyond eligibility.
COBRA is not this simple! Your employer's personnel office should have a booklet that explains all of the details. You may also contact the U.S. Department of Labor, Employee Benefits Security Administration at 1-866-444-3272 or on the Internet at www.dol.gov/ebsa. More information at: COBRA FAQs.
OTHER THAN COBRA CONTINUATION OF COVERAGE:
If you lose your employer group coverage and the Michigan employer has less than 20 employees, you do not have COBRA rights. However, you do have the following options for continuation of health coverage:
- You have the right to a group conversion policy with the Michigan employer’s group health carrier, or
- You can apply for an individual policy with Blue Cross Blue Shield of Michigan, if you are a Michigan resident and are not eligible for group coverage elsewhere, or
- You can apply for coverage with an HMO that has a service area where you live during the HMO’s annual open enrollment period. The HMO cannot turn you down during their annual open enrollment period, unless it has reached enrollment capacity. If you have more than six months of creditable coverage the HMO cannot institute a pre-existing condition exclusion, or
- If coverage for a pre-existing condition is not an issue, you can apply for coverage with any health carrier that sells individual coverage in Michigan. Click here for Authorized Major Medical Companies.
HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT (HIPAA):
HIPAA is a federal law that makes it easier for you to stay insured and covered for pre-existing conditions when you move from one employer group health plan to another employer group plan. HIPAA establishes rules that identify HIPAA eligible individuals. The “Portability” part of HIPAA is the ability to move from one employer group health plan to another employer group health plan without pre-existing condition exclusion waiting periods when you arrive at your new employer group health plan. HIPAA FAQs
MOVING FROM ONE EMPLOYER GROUP PLAN TO ANOTHER EMPLOYER GROUP PLAN:
HIPAA applies if you are covered by your employer’s group health plan and you move to a different employer that also offers health coverage. Your new employer’s group health plan must cover any dependent that was covered under the plan with the old employer, if the new employer’s group plan provides dependent coverage. You cannot be turned down or charged higher premiums simply because of a dependent’s medical condition. Your new employer’s group health plan may cost more and provide different coverage.
If the new employer health plan offers dependent coverage, it must have a special enrollment period for you to add a dependent because of marriage, birth, adoption or loss of other coverage.
PRE-EXISTING CONDITION WAITING PERIODS WHEN MOVING FROM ONE EMPLOYER GROUP TO ANOTHER:
A pre-existing condition waiting period is the amount of time that the covered person must wait from the beginning of the coverage period before coverage for treatment for pre-existing medical conditions is provided. According to Michigan law:
- No health carrier providing coverage to a small employer group of 2 to 50 employees can require a pre-existing condition waiting period.
- Blue Cross Blue Shield of Michigan (BCBSM) and HMOs cannot require pre-existing condition waiting periods for any size of employer group
- Health carriers, other than BCBSM and HMOs, may require a pre-existing condition waiting period of no more than six months for large groups of 51 or more employees
CREDITABLE COVERAGE WHEN MOVING FROM ONE EMPLOYER GROUP TO ANOTHER:
The concept of “creditable coverage” is that individuals should be given credit for having previous health coverage when moving from one employer group health plan to another employer group health plan, from an employer group health plan to an individual policy, or from certain kinds of individual coverage to an employer group health plan. Generally, most health coverage is considered “creditable coverage”, including prior coverage under a group health plan (including a governmental or church plan), individual health coverage, Medicare, Medicaid, and other government sponsored health coverage.
CERTIFICATE OF CREDITABLE COVERAGE:
HIPAA provides that your former employer or health carrier must issue you an automatic certificate of creditable coverage within a "reasonable" period after your health coverage ends. In addition, within 24 months after coverage ends and upon your written request the employer or health carrier must issue you a certificate of creditable coverage whether or not you already received an "automatic" certificate.
Federal law considers you a HIPAA eligible individual only if you meet all of the following requirements:
- Have 18 months of creditable coverage,
- Were most recently covered by an employer group health plan,
- Were not terminated from your group plan due to nonpayment of premium or fraud,
- Do not have a gap in coverage of more than 62 days,
- Are not eligible for Medicare, Medicaid, or any other group health coverage,
- Have exhausted all COBRA coverage, and
- You do not have any other health coverage.
HIPAA eligibility does not however, prevent a health carrier from denying you individual coverage in Michigan because, under Michigan law, Blue Cross and Blue Shield of Michigan is the “alternate mechanism” or insurer of last resort to provide coverage to individuals in Michigan. If you are a Michigan resident and are not eligible for group coverage elsewhere, Blue Cross Blue Shield of Michigan cannot turn you down regardless of your HIPAA eligibility and your medical condition. Blue Cross Blue Shield of Michigan does have a contractual 180-day waiting period on coverage for pre-existing conditions but it will waive the 180-day waiting period on coverage for pre-existing conditions if the applicant provides a certificate of creditable coverage from their most recent group health plan and meets all of the following:
- Must be eligible by having at least 18 months of continuous health coverage,
- Most recent health coverage was group employment related,
- Have accepted and exhausted all COBRA coverage to which they are entitled, and
- Cannot have more than a 62-day gap in coverage.
If you have creditable coverage from the prior health carrier, the number of months that you had that coverage will be used to eliminate all or a portion of the 180-day pre-existing condition waiting period.
If you work for a small employer (from 2-50 employees), and coverage is provided by an insurance company, the law allows an affiliation waiting period of not more than 90 days, at the employer’s option before coverage is effective.
MOVING FROM AN EMPLOYER GROUP PLAN TO AN INDIVIDUAL PLAN:
In Michigan, if you have lost your employer group coverage and still want to maintain health coverage, you have options. You can apply for individual coverage through any health carrier. However, health carriers, except Blue Cross Blue Shield of Michigan and HMOs during the annual open enrollment period, can medically underwrite your application meaning they can refuse to provide coverage based on your pre-existing health conditions even if you are a HIPAA eligible individual. If the health carrier agrees to provide you with coverage, it can still apply up to a 12-month waiting period on coverage for pre-existing conditions until 2014.
In accordance with HIPAA and under Michigan law, Blue Cross Blue Shield of Michigan is the “alternate mechanism” or insurer of last resort to provide coverage to individuals in Michigan. If you are a Michigan resident and are not eligible for group coverage elsewhere, Blue Cross Blue Shield of Michigan cannot turn you down regardless of your HIPAA eligibility and your medical condition. Blue Cross Blue Shield of Michigan does have a contractual 180-day waiting period on coverage for pre-existing conditions but it will waive this waiting period under certain conditions. If you have creditable coverage from the prior health carrier, the number of months that you had that coverage will be used to eliminate all or a portion of the 180-day pre-existing condition waiting period. More information at: BCBSM Coverage for Individual Michigan Residents