Health Insurance: What to Do When You Change Jobs TRANSCRIPT TUESDAY, JULY 29, 1997, 9 a.m. - 10 a.m. GUEST: RICHARD SCHWARTZ, EMPLOYEE BENEFITS ATTORNEY The following are excerpts from the viewer call-in portion of the program. JUNE GRASSO: Good morning. I'm June Grasso, and you're watching Legal Cafe, Court TV's daily wakeup call to the law in your life. Our first topic this morning is health insurance, specifically the laws that apply when you switch jobs and you don't want to lose coverage. There's definitely a lot to talk about with these issues, so let's get right into health insurance. According to several estimates, there are 35 million Americans who don't' have insurance. At the same time, a first-time visit to the physician can cost a new patient $90 or much more, and since employers are under no legal obligation to provide health insurance t their workers, even the smallest illness can quickly become a financial disaster. Joining me now to discuss that and other, more substantial laws on health insurance is Richard Schwartz, a specialist in employee benefits law and who has also written several articles on the subject. Good morning, Richard. MR. SCHWARTZ: Good morning. WHAT IS COBRA? MS. GRASSO: Okay, now COBRA. What is COBRA, exactly? MR. SCHWARTZ: COBRA is a law, a federal law, that requires employers to offer individuals who lose health insurance coverage as a result of certain events the right to elect to continue that coverage for a period of time, generally 18 months; in some cases, 36 months. MS. GRASSO: Now, they have to pay. They don't just get to continue it with the employer. So, basically, I mean, is the main reason why you elect COBRA because you've been fired from your job? Is that one of the big ones? MR. SCHWARTZ: Well, that may be. In many instances, that will be the COBRA qualifying event, as we call it. MS. GRASSO: What are some of the other reasons why? MR. SCHWARTZ: Some individuals may go from full-time to part-time and, as a result of that reduction in hours, lose eligibility for health benefits. So you may not be fired. Also, there may be a divorce in the family and as a result of the divorce, you lose coverage, or a child who loses dependent status under the terms of a plan. MS. GRASSO: Now, is it usually a hefty amount you have to pay to continue your insurance coverage? MR. SCHWARTZ: Well, it can depend. It depends on the particular plan we're talking about, but, in general, it can be quite a few -- you know, it can be expensive each month to pay the bill, but, on the other hand, Congress was more concerned that this insurance was at least available to people. MS. GRASSO: So do you end up paying the employer -- I mean, I was surprised at some of the costs that employers pick up. I think it was like about $3,500 a year per employee on the average for insurance. A lot of employers also require employees to put part of their salary towards -- MR. SCHWARTZ: They can put -- right, they put some -- MS. GRASSO: -- contribute. When you're doing COBRA, the COBRA payment, are you picking up the entire payment or is the employer still picking up a little bit? MR. SCHWARTZ: Well, it depends. The employer is entitled to ask you -- may ask you to pick up the entire payment, plus an additional 2 percent for administration fees, administration expenses. MS. GRASSO: Suppose -- you know, it's a federal law. There are penalties, but from what I was reading, it's kind of hard to enforce it if your employer doesn't follow the rules. MR. SCHWARTZ: Well, there are all sorts of mechanisms to enforce COBRA. There is a -- every employer is required to give you notice of your COBRA rights, and if that notice is complete and accurate, it will tell you how to enforce your rights, because these are also rights that are given to you under a group health plan, which is governed by another federal statute, ERISA. You have all sorts of rights under ERISA that you can use against your employer. MS. GRASSO: Well, politicians have been arguing about it for years, but the bottom line on health insurance is that your employer is not required by federal law to provide you with coverage. The good news is that many employers do provide at least some health insurance. Many legal issues arise when you change jobs and go to work for a new company. There is a federal law in this area. It's called COBRA, which stands for Consolidated Omnibus Budget Reconciliation Act. It's kind of a strange name, but it's a serious law, and here is what it says. First, your employer is required to extend coverage for you and your family for up to 18 months after you leave the job, but with several important limitations. For example, your company is not required to pay for the insurance, it only has to make the coverage available, and it can charge you a slight premium for it. Also, the law only applies to companies with more than 20 employees, so if you work at a small business, you might be out of luck. Now, Richard, my producer is keeping me honest here, because you mentioned the name of an act, and we didn't explain it, so we're going to have to -- in the last segment, so we're going to have to have you explain ERISA. MR. SCHWARTZ: Well, ERISA stands for the Employee Retirement Income Security Act. This was a law that was enacted in 1974, and it's a federal legislation that regulates retirement and what we call welfare plans. Welfare plans include health insurance, life insurance, disability, and similar type benefits. That's the overriding statute. COBRA is actually part of ERISA. MS. GRASSO: Okay. Well, that was a simple explanation. Thank you. COBRA AND GETTING A DIVORCE Let's go to the phones now. Jennifer from New York, good morning and welcome to Legal Cafe, Jennifer. Q Good morning. My question is I'm in the process of getting divorced. I'm separated right now, and I have insurance through my husband. My job will not give me insurance until my divorce is final, and I'd like to know -- they did mention something about COBRA, so I'd like to know when my divorce is final, will I get the COBRA right away and how long can I have it and how much would I have to pay out of my pocket? Because I am having some problems right now and I will need to face surgery very soon. I don't know if it's going to be before my divorce or right after. I'm a little concerned. MS. GRASSO: All right, Jennifer, let me ask you a question. Your job will give you insurance or they'll give you COBRA after your divorce? Q They said they'll give me insurance, but they won't until the divorce is final, and it will take some time, and that's when they mentioned COBRA. MS. GRASSO: all right. Well, stay right there. First of all, Richard, is she covered under her husband's insurance until the divorce? MR. SCHWARTZ: Well, Jennifer mentioned that she is covered under her husband's insurance presently, so she will likely continue to be covered until there's an actual divorce, until you're separated and you're no longer considered his legal spouse. MS. GRASSO: Now, as far as COBRA, does she -- she doesn't seem to really need COBRA, then, does she, because then her insurance should kick in from her job. MR. SCHWARTZ: Well, it really depends on the terms of your husband's plan. If, for example, you're going to lose your insurance because you're legally separated from your husband presently, then you may need to take COBRA under his insurance, but that would be an option provided by his employer. MS. GRASSO: So what she has to do is have her husband -- her separated husband, at this point -- so are you on good terms, Jennifer, or speaking terms? Q Yes, yes, we are. MS. GRASSO: Okay. Well, you'll have to find out what his insurance and how long his insurance is going to cover you and see if you have to get COBRA, and it would be from his insurance company that would extend it until your insurance kicks in, and if you've been a long-time employee, I take it that her insurance can probably kick in right away. MR. SCHWARTZ: Well, I'm not sure of the terms of your plan, Jennifer, but it's most likely that your insurance would kick in immediately, without any waiting period. MS. GRASSO: Okay, so two things, Jennifer. You have to find out how long your husband's insurance is going to cover you -- and then you have to find out what date, you know, your insurance is going to kick in, the date of your divorce, and you may have to have some COBRA coverage there in between. COBRA AND MEDICARE Our next caller is Theresa from Kansas. Good morning, Theresa. Q Well, listen, my question is what can I do or what options do I have to supplement my Medicare? I spent five years in college, 10 years working up my way on the ladder, and then I had to go out on disability because of an illness, it's an incurable illness, and what can I do to supplement that and then what is considered a prior illness when you do take on the new insurance? MR. SCHWARTZ: Well, there are all sorts of -- this is a little beyond the scope of what we were talking about with COBRA, but there are all sorts of Medicare supplemental policies that are available to individuals. I don't know, Theresa -- you mentioned you had prior coverage with an employer? Q Yes, I did. MR. SCHWARTZ: You did. So you might be entitled to a COBRA continuation if -- you're already on Medicare? Q Yes, I am. MR. SCHWARTZ: Okay. Well, unfortunately, once you become entitled for Medicare, you lose any -- you may lose your COBRA continuation rights, but you may nevertheless have the right to have your COBRA policy or your employer's policy converted to an individual policy from the group policy. That might get expensive, but, on the other hand, if you have no other options, it may be something that's available to you. MS. GRASSO: Richard, let's talk about pre-existing conditions, and that's a term you hear all the time with insurance. What exactly is a pre-existing condition? MR. SCHWARTZ: Well, a pre-existing condition is anything that you have prior to entry into the plan -- any condition that you had, any condition that you sought treatment for. Interestingly enough, there was a new law passed just last year, just last summer -- we refer to it as HIPA, the Health Insurance Portability and Accountability Act -- Now, HIPA provides that an employer that provides health insurance may have -- may include a pre-existing condition exclusion, period within the health plan, but it has to meet certain restrictions, and those are that the exclusion period does not last more than 12 months, in many instances, possibly up to 18 months if you enroll at a date subsequent to your initial eligibility date. WHEN COBRA RUNS OUT MS. GRASSO: Our next caller is Joan from New York. Good morning, Joan. Q Yes. My question is that what can I do -- my COBRA is running out, and I haven't found employment yet. I've been out of work for 14 months. I was laid off. What can I do to continue that in the event that I don't find work within the next four months? MS. GRASSO: All right. First of all, COBRA goes for how long, Richard? Thirty-six -- MR. SCHWARTZ: Well, in the case of a termination of employment, it's 18 months. MS. GRASSO: Okay. So now what do you do, do you have to go out and find private insurance? MR. SCHWARTZ: Well, you can purchase your own insurance, or it may be possible to convert the COBRA continuation coverage to an individual policy. The benefit of that is there's no need to demonstrate that you're insurable. MS. GRASSO: So now how would she do that? Who would she go to? MR. SCHWARTZ: You can contact the people who administer your COBRA plan right now, and they may -- they should be able to provide you with information. They'll most likely send you to the insurance company. MS. GRASSO: Now, would Joan normally have to pay more as she takes it upon herself to get her own insurance, even if it ends up being a continuation of the same company? MR. SCHWARTZ: Well, again, it's not continuation, it's conversion. In other words, you convert from the group to an individual, and necessarily that usually means a substantial increase in the premium. Also, Joan, just keep in mind, the conversion policy that's offered by your former employer may not be identical to what you have now. MS. GRASSO: And so at a time when you're out of work and you have to make ends meet, your insurance goes up, but -- MR. SCHWARTZ: But at least it's available. MS. GRASSO: Right. Okay, Joan. Thanks so much for that call. Good luck with your job search. MS. GRASSO: Bill from Virginia, welcome to Legal Cafe. THE COST OF COBRA Q Hi. Richard, I have a couple of scenarios here I just want to run by you. Three quick questions. I just separated from my company, a large company, and I was paying $33.15 a paycheck, 66 bucks a month. Now that I'm separated, I'm one week into my separation agreement, where we came to a 30-day agreement where I receive my benefits for 30 days and the company would continue to pay for them -- but they've given me my COBRA rate, and they're outrageous. I mean, they want $371 a month now, and I wanted to know three questions. Are there any laws that prohibit the company from charging these outrageous fees to continue my health care? Essentially what they're doing is chasing me away from taking advantage of the COBRA. Two, can I get a -- can I request documentation of how the company comes to these prices that they charge, and are these prices fixed within the health care industry, and, three, I'm getting married, which is an awful time to lose my job, but I'm getting married in four days, and I want to know if I can have my wife on my health plan in the interim while I'm still being covered under my separation agreement with my company? MR. SCHWARTZ: Well, I can answer a couple of Bill's questions. Essentially the cost, as I mentioned earlier, can be quite high for COBRA. Three hundred seventy-one dollars a month actually in New York is not very high at all. I think Bill mentioned he's calling from Texas? MS. GRASSO: He's from Virginia. MR. SCHWARTZ: Virginia. Then that may be high where you are, Bill, but it's not -- that doesn't shock me at all. Getting your wife on, you may be able to under the terms of your employer's plan as a COBRA participant in your former -- now your former employer's plan, you have the same rights as any other active employee has. There may be an open enrollment period at the beginning of 1998 where you may be able to add your spouse, or maybe sooner, but there's also good news, because new legislation recently enacted will provide that, once it becomes effective in 1998, will provide that you can add your spouse on immediately in that situation. MS. GRASSO: Now, what about Bill's question about, you know, getting documentation from the employer? Does the employer have to provide that? MR. SCHWARTZ: Well, you can request that information from your employer, Bill, and the employer should provide it. Calculating COBRA premiums is not always very easy. You mentioned you work for a large company, so it may be a very complicated calculation. It also wouldn't surprise me if there was a mistake in the calculation, so it's certainly a good idea to check. KEY ISSUES IN HEALTH INSURANCE COVERAGE MS. GRASSO: Okay. All right. Thanks for those three answers to three questions. We have a few minutes left in this hour, so let's take a moment to go over some of the key legal issues in health insurance coverage. We're going to call this Richard Schwartz's House Blend for Good Health. First, don't forget about your COBRA rights, especially if you're in the middle of a waiting period for a new job. Next, make sure you get a copy of your certificate of credible coverage, because this is proof that you, in fact, had insurance coverage at one point. And, third, learn as much as possible about your new health insurance plan, because your new policy could be better or it could be worse. Richard, we called it your house blend, so now you have to explain "certificate of credible coverage." MR. SCHWARTZ: Certificate of credible coverage. As I mentioned earlier, under the new legislation, the HIPA legislation, the Health Insurance Portability law that was passed last summer, a plan may impose a pre-existing condition exclusion period up to 12 or possibly up to 18 months. MS. GRASSO: And pre-existing exclusion period means if you have a -- if you have a health condition -- MR. SCHWARTZ: If you have a condition, exactly, that's existed prior to your entrance into the plan, it's excluded for a period of time. The law now says 12 or 18 months, but the key is that if you have continuous coverage and you've had prior coverage under your prior employer's plan, you can reduce that pre-existing condition exclusion, 12 or 18 months, day by day for your prior coverage. So if you've had at least 12 or 18 months of coverage under your prior employer's plan, a new employer cannot impose any exclusion period on you whatsoever. The key is that will go into effect for many companies beginning January, '98. MS. GRASSO: All right. And that's it for our look at the legal side of job-to-job health insurance.