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By Tim Jarvis
The term “creditable coverage” and the resulting document titled Certificate of Creditable Coverage are the products of the Health Insurance Portability and Accountability Act (HIPPA) of 1996. HIPAA was originally sponsored by Sen. Edward Kennedy (D-Mass) and Sen. Nancy Kassebaum (R-Kan) and is comprised of two sections Title 1 and Title II. Title I of HIPAA protects health insurance coverage for insured members and their families when they change or lose health insurance coverage. Title II, known as the Administrative Simplification (AS) provisions, requires the establishment of national standards for electronic health care transactions.
The term “creditable coverage” is the coverage requirement in order for an individual to realize a reduction in the exclusion period placed on benefits when enrolling in a new health insurance plan. Health insurance plans may restrict benefits relating to a preexisting condition for a period of up to 12 months after enrollment in the plan. However, if the individual has maintained creditable coverage prior to enrolling in the plan and did not experience a “significant break” in coverage, the exclusion period may be reduced or eliminated. “Creditable coverage” is defined quite broadly and includes nearly all group and individual health plans, Medicare, and Medicaid. Short-term or temporary health insurance coverage typically does not meet the requirement of “creditable coverage”, although some carriers will accept short-term coverage as “creditable coverage.”
A “significant break” in coverage is defined as any 63-day period without any creditable coverage. A gap in coverage of less than 63 days does not jeopardize the “continuous coverage,” but it is important to maintain a short-term health insurance policy if there is going to be a gap between two health plans.
The Certificate of Creditable Coverage is the accepted documentation in order to confirm an individuals prior health insurance coverage. A Certificate of Creditable Coverage indicates each individual who was covered by the health plan and the length of time each individual was continuously covered under the health plan.
A common misunderstanding regarding the purpose of a Certificate of Creditable Coverage is that the document qualifies an individual for guaranteed issue coverage with full access to benefits related to a preexisting condition. The Certificate cannot fulfill this purpose because individual health insurance plans are subject to medical underwriting which may establish eligibility requirements excluding individuals with prior health issues. The Certificate of Creditable Coverage also does not eliminate or reduce a rider assigned to coverage that deals with a specific health condition. A rider is either a permanent or temporary waiver of benefits related to a specific health condition. A rider is an alteration of an insurance contract between the insured member and the insurance carrier. The Certificate of Creditable Coverage does not nullify the rider assigned to the coverage.
Certificates of Creditable Coverage are generated by the health insurance carrier after the termination date of coverage. When you receive a Certificate of Creditable Coverage be sure to check the document for accuracy. Individuals covered by the health plan should be listed with the start date and stop date of coverage included.
To illustrate the application of the Certificate of Creditable Coverage, assume an individual enrolls in a health plan on January 1, 2010. The individual was previously insured under another plan from January 1, 2009 until February 1, 2009 and from August 1, 2009 until December 31, 2009.
To determine the value of the creditable coverage and how much prior coverage can be credited against the exclusion period in the new plan, start at the enrollment date and count backwards until you reach a significant break or gap in coverage. Counting backwards would result in five months of coverage between August 1, 2009 and December 31, 2009, which would reduce the exclusion period by the same number of months. But a gap in coverage was experienced between February 1, 2009 and August 1, 2009 of greater than 63 days. Because the gap in coverage is greater than 63 days and would meet the definition of a “significant break” in coverage, no coverage prior to it can be used to reduce the exclusion period. The covered individual could deduct five months from the exclusion period, reducing the exclusion period to seven months.
The Certificate of Creditable Coverage should not be overlooked, because it serves an important administrative function to document your prior coverage. If you have questions concerning the Certificate of Creditable Coverage contact Stateside Insurance Services or the carrier responsible for providing you with the Certificate of Creditable Coverage.
About the Author: Texas Jarvis is a licensed Texas health insurance broker with extensive knowledge of the Individual and Small Group health insurance markets in Texas.
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