AIDS TREATMENT NEWS No. 255 - September 20, 1996
John S. James

Since 1987 AIDS Benefits Counselors (ABC) has advised San Francisco residents on health insurance, disability, and other benefits programs, both private and public; it serves over 2,000 clients a year. AIDS TREATMENT NEWS asked Daniel Fortuno, employee benefits counselor and coordinator for volunteers and training at ABC, to outline some of the areas which are most critical for people to know to prevent serious, costly mistakes. [Note: Fortuno's name is spelled with a tilde over the 'n'.]

The interview below focuses on California; some of the information will not apply in other states. And because it is based on practical experience in advising clients, it cannot address new Federal laws -- both for good and for ill -- that have been signed but not yet taken effect.

An article cannot provide advice you may need in your particular situation. Instead, we hope to provide a heads-up so that you can get personal advice elsewhere.

Because of the length of the interview below, we divided it into two parts, and plan to publish part II in our next issue.

Background and Glossary

Insurance and benefits information is complex. The interview below necessarily jumps between various private, California, and Federal systems, since different programs need to be coordinated to meet an individual's needs. This section on basic concepts and historical context will help readers understand the interview.

* History: The U.S. system of health insurance through employment largely began in World War II, as a way to evade wartime government wage controls when labor was scarce. Companies were not allowed to raise wages to attract workers, so they gave health insurance instead.

* Costs: Until recently, health insurance companies were reluctant to challenge doctors' medical opinions, so they basically paid whatever bills were sent. Doctors and hospitals could raise their incomes just by raising their prices, and/or doing more procedures. This system led to unsustainable medical costs, as well as massive unnecessary surgery and other unnecessary treatment.

* Managed care: Today's "managed care" (such as provided by HMOs -- health management organizations) developed as a way to control the cost of health insurance to large employers. A key concept of managed care is the change from "fee for service" -- the traditional way doctors were paid, so much money for each procedure or service performed -- to "capitation." Capitation means that a health-care organization is paid a certain annual amount per patient, no matter how much care the patient receives; if the organization spends less on the average, it keeps the difference, but if it spends more it loses money. Capitation changes medicine from having an incentive to overtreat, to having an incentive to undertreat.

* Pre-existing conditions (medical conditions you had before obtaining health insurance with a particular company): Insurance and health-maintenance organizations have reduced costs by "cherry picking" -- only insuring those at low risk of getting sick. Persons with a pre-existing condition especially found it very difficult to get insurance. In the past this has resulted in "job lock" -- millions of people unable to change jobs because they would lose their medical coverage for an ongoing illness -- and other serious hardships.

* Contestability. If someone makes a material false statement when they apply for insurance (such as not disclosing a prior condition), the company can cancel their policy to avoid paying benefits. Typically the insurance company will send a check refunding the premiums the person has paid; if they cash that check, they give up all rights to the policy. But if the insurance has been in effect for longer than a "contestability" period (usually two years), it is almost impossible for the company to cancel it, even if there were false statements in the application (although it is possible to challenge the policy by alleging fraud).

* AB 1672 (California): AB 1672, a California law which became effective in July 1993, greatly restricted the ability of health-insurance companies to refuse insurance due to pre- existing conditions (including HIV) to small *groups* of three to 50 persons. AB 1672 has worked well, making health insurance much more available to the sick, with little overall rise in prices.

* New Federal law on health insurance: The Health Insurance Portability and Accountability Act of 1996, signed August 21 by President Clinton but not effective until July 1, 1997, is intended to reduce the problem of exclusion for pre-existing conditions (in all states) much like AB 1672 has done in California. It is too early to know how this new law will work in practice. According to an August 21 memo from National AIDS Policy Director Patricia S. Flemming, "Insurers will be required to sell policies to anyone who wants one without regard to their health status... People who move from one job to another will be able to keep their coverage even if their new employer does not offer coverage... Insurers can no longer exclude coverage of treatment of pre-existing medical conditions if a worker moves from one job to another. Exclusions are limited to a maximum of 12 months and that period is reduced by one month for every month a person was covered in their old job." Also, this law includes tax relief for most viatical settlements.

* Insurance through associations: Persons who are unemployed, self-employed, or working at a job without satisfactory health insurance, can often obtain group insurance through a professional association -- even if they have prior conditions such as HIV or AIDS.

* HMO vs. PPO: These are two of several kinds of health- insurance plans that may be offered through an employer (or through an association). Usually the HMO costs less, but the PPO offers more flexibility. In California at least, a person with HIV or AIDS who becomes eligible for private health insurance through a job or association will often choose an HMO plan first, because it does not have a period of exclusion of coverage for pre-existing conditions -- and then switch to a PPO, indemnity, or some other plan during an open-enrollment period (when one is allowed to change plans).

* Self-insured trust: This is a health plan offered by some employers, which is *not* covered by California's AB 1672, or any other state insurance law or regulation -- which can create serious problems for persons with a major illness.

* COBRA and OBRA: If you have health insurance through your job with a large employer but then change jobs or become unemployed, a Federal law called COBRA (Consolidated Omnibus Budget Reconciliation Act) allows you to keep your existing insurance at 2% more than what your employer or insurance administrator is paying, for 18 months. (The law only requires employers of 20 or more employees to offer this option -- and it may not apply if the employer goes bankrupt or otherwise stops medical coverage.) For those who stop working because of permanent disability, Medicare is available, but only after 29 months of disability determined by Social Security -- and COBRA only covers the first 18 months. The 11-month gap between when COBRA ends and Medicare begins can now be filled by another Federally-mandated program called OBRA (Omnibus Budget Reconciliation Act), which sometimes allows one's work insurance to be maintained (at a somewhat higher cost than COBRA, however). And one must do the paperwork right to avoid losing one's rights to COBRA and OBRA.

* Medicare: Medicare is a Federal program which covers many health-care expenses after age 65. The same coverage is also available after 29 months of disability. Medicare does not include prescription drug coverage; other benefit or insurance programs can often fill this gap. Medicare is available without regard to one's income and assets.

* Medicaid/Medi-Cal: Medicaid (called Medi-Cal in California) is available in all states, but is very different in different states. Unlike Medicare, Medicaid is designed for the poor; therefore, in order to qualify you must have limited income and assets. And not everyone who is poor can get Medi-Cal; in addition to financial criteria, you also need to be disabled, or to meet certain other conditions.

* SSDI and SSI: Both of these are Federal programs, under Social Security, to maintain income (not to pay medical expenses, like Medicare or Medicaid) in event of permanent disability. SSDI is a Federal disability *insurance* program, which workers pay for by their payroll deductions; because it is an insurance, it is available without regard to income and assets -- but the amount it pays depends on how much you have paid in to the system. But SSI is more like welfare than insurance -- it is for those who have not paid in enough in their payroll taxes to get SSDI. Therefore, it is only available to those who meet income and asset limits.

* State disability: California has a one-year disability income program, which is easier to use than Federal programs like SSDI.

* ADAP: ADAP (the AIDS Drug Assistance Program), funded by the Ryan White Care Act, can pay all or part of the cost of AIDS prescription drugs, depending on one's income level. The drugs covered, and the income levels required to qualify, vary greatly between states, but one is allowed much higher income than for Medicaid. In California, ADAP can be a far more flexible program than generally realized; for example, it can sometimes be used for copayments, either from private insurance, or from Medi-Cal.

Interview with Daniel Fortuno, AIDS Benefits Counselors, San Francisco

AIDS TREATMENT NEWS: If you are uninsured and have HIV or AIDS, can you get good private insurance through your job?

Fortuno: In California you can come into an employer group with a pre-existing condition. Many people do not realize that. For example, a local newspaper recently had an article about a person having great fear of returning to work, fearing loss of healthcare due to having AIDS as a pre- existing condition and being unable to get insurance.

But a California law, AB 1672, covers individuals that want to become reinsured, even if they have a pre-existing condition. [Note: A Federal law will set somewhat similar rules nationally next year.] If the insurance is a traditional PPO or indemnity plan, and if the employee has not been insured, their pre-existing conditions can only be excluded for six months, and after that they have to be covered. But if the person already has health insurance, and wants to change jobs, if he or she left the previous insurance group voluntarily and there has not been a 180-day gap (30 days if they left the job voluntarily), then that six months is waived and they can transition immediately onto their new insurance.

And with HMOs, there is no issue of pre-existing conditions. Persons can enter an HMO through their job and be covered immediately for pre-existing conditions, even if they have not had health insurance before.

But in order to get private insurance despite pre-existing conditions, they must become eligible through a group. If they apply as an individual, California's AB 1672 will not apply to them, and the company can reject them for pre- existing conditions.

ATN: What if someone is unemployed, or self-employed, or working at a job without good health coverage?

Fortuno: It is often possible to enter group health insurance through a professional association. We have had very good luck with that. I have worked with doctors, attorneys, social workers, people who are self employed. Often because of their professional licensing they have access to an association that will provide them with medical insurance, giving them the opportunity to be a member of a group. Sometimes no licensing is required in order to become a member of some association that offers health insurance.

HMO, PPO, or Indemnity -- and Caution on "Self-Insured Trust"

ATN: When one gets group health insurance (through a job or association), what are the pros and cons of choosing HMO (health management organization), PPO (preferred provider organization), or indemnity insurance (if there is a choice)?

Fortuno: Many individuals without prior insurance first join the HMO, because there is no issue of pre-existing conditions even if they have not had prior health insurance. Then in the next open enrollment, they switch to the PPO if that is the style of coverage they prefer.

Usually the PPO is more expensive than the HMO, but offers more choice. In an HMO, you work within a specific list of providers through the HMO, with a primary-care physician who manages your care. With the PPO, you are given that specific list but are also allowed to go outside it (at extra cost). The HMO has a very specific co-pay rate, while the PPO has a *percentage* of services you are responsible for.

Indemnity is a style of insurance that allows you to go to any doctor you want. It may be a little more expensive even than the PPO.

One thing to be careful of concerning insurance is the "self insured trust." This is not insurance. In simple English, it is a pool of money that an employer has set aside to take claims out of. Either they pay the claims from it, or they have a third-party administrator pay the claims. They are not required by law to abide by AB 1672. So their rules on pre- existing conditions will be whatever rules they want to make (although they cannot completely precluded coverage for any condition).

A key caution with a self-insured trust is that some of them say, if you use us in the first year, and you have a pre- existing condition, we will cap you at $2,000 (or some other amount) for that pre-existing condition. But if you wait till after the first year of being covered by us, we will cover it fully.

So a person who changes jobs to where there is a self-insured trust needs to be educated to what kind of coverage it is, and needs to keep his or her previous insurance and COBRA it over, or use another insurance while waiting for that first year to lapse.

Some employers will offer self-insured trusts only; some offer it with other choices like an HMO or PPO. Often someone with a pre-existing condition should choose the HMO option, or keep the previous insurance for the first year, then might transition on to the self-insured trust during the open enrollment.

With a self-insured trust, the rules depend on the plan. It is essential that persons understand the products they're interacting with.

COBRA

ATN: If someone becomes permanently disabled, how can they keep their private health insurance coverage until Medicare becomes available to them, 29 months after Social Security determination of disability?

Fortuno: They can keep their insurance for 18 months under COBRA. COBRA is available for anybody who leaves a job with 20 or more employees for any reason other than gross misconduct. So if you leave because of disability, or get laid off, or quit, you can get COBRA.

With COBRA, you keep the same insurance plan you had at work. But you pay the full premium (which your employer no longer pays), plus you pay 2% to administer COBRA. That is why it is called the 102%.

COBRA is a good tool to use when changing jobs, especially when there is an issue of pre-existing conditions, with regard to a self-insured trust. You can use the COBRA to get over that. Say you get a job that's big bucks, but the only health plan they have is a self-insured trust, and they will not cover you for the first year. So you keep your old insurance. You sign up for the new plan, but do not use it during the first year for the pre-existing condition, and use your previous insurance under COBRA.

There is more flexibility than people realize.

OBRA

For disabled persons, after 18 months of disability, there is another program called OBRA to fill the 11-month gap before Medicare coverage begins. At least until now OBRA has only been available if the reason that you left the job is that you were disabled -- and the proof that they require is a copy of the Social Security award letter, to the person who is administering the COBRA. And it has to be given to them within 60 days of the date of issue of the Social Security award letter. So unlike COBRA, they only give OBRA to people who are on approved Social Security disability, and also your disability has to be the reason that the COBRA was initiated. Yet I have had clients who were laid off, and their medical records showed that they were disabled, and we have been able to get Social Security to acknowledge that, even though they were laid off, their medical records supported total disability. I have had people that have been fired still be able to get OBRA. That can be worked with, if the medical record supports total disability.

With OBRA you pay the full premium plus 50%. OBRA lasts 11 months, or until Medicare starts. For example, suppose somebody works for a company that gives them a six-month medical leave of absence; that delays the beginning of COBRA. So the person will only have to use five months of OBRA -- saving money, as that is six months they do not need to pay the full premium plus 50%.

ADAP

ATN: Where does ADAP (the AIDS Drug Assistance Program) fit in the overall picture of benefits.

Fortuno: ADAP is a very flexible, useful program if used correctly. And using it correctly does not mean abusing it.

For example, I have a client who has health insurance, and the prescription coverage requires a 20% copayment that he cannot afford, even though he is working; he can use the ADAP program to help him with that copayment. Another person has a Medi-Cal share of cost of $500 (share of cost, in simple English, is a monthly deductible that is determined by Medi- Cal, depending upon your income). This person can use ADAP for the $500 per month, and the rest of the bill goes to Medi-Cal.

ADAP varies greatly in different areas; in some places it does not want to be as flexible. I encourage people outside of the San Francisco area to challenge their local ADAP, to see if they can get it to follow San Francisco. The way we use it, the way I suggest clients use it, in the long run works out better for ADAP as well as for the client.

ATN: Because ADAP is paying maybe 20% instead of 100%?

Fortuno: Exactly. If someone qualifies for some other program, but because of ADAP rules they do not even enroll in that program, and use ADAP 100%, ADAP is spending more money.

ADAP income limits vary by state; within California the income limits are uniform, but other states are different. In California, ADAP can fully cover an individual with adjusted gross income up to $30,960 -- with higher limits for families, and partial coverage for incomes somewhat above those limits.

ATN: What about the financial crisis in ADAP programs, due both to the higher cost of the new combination treatments, and to the fact that many more people are coming in for treatment due to greater hope?

Fortuno: I am hoping that as more people are returning to work due to better treatments, fewer people are going to need ADAP. If we can get more people privately insured, we can get them off of ADAP. If we can get people educated, we can help relieve this crisis by getting people off of ADAP, or able to make less use of ADAP.

Medicaid (Medi-Cal)

ATN: Medi-Cal is the California Medicaid?

Fortuno: Yes. People need to understand that when they hear politicians from other states talking about Medicaid, they're talking about Medi-Cal. Medicaid differs greatly between states; every state has its own version. Most Medicaid programs are basically set up for people living in poverty.

ATN: Does someone who lives in San Francisco, where the cost of living is high, have to meet the same income and asset requirements as someone living anywhere else in California.

Fortuno: Yes. Basically how it works is this. They allow you one car, one house that you live in, and up to $2,000 in the bank. They allow you $620 per month income, and anything above that is your share of cost, your monthly deductible before they will pay for anything.

ATN: Besides low income, what other criteria must you meet for Medi-Cal?

Fortuno: In addition to income and asset requirements, you either have to be disabled, as officially determined by the Federal Social Security system, or linked to Medi-Cal through certain other programs. People with HIV usually get Medi-Cal by being disabled.

People say, "I'm HIV positive and meet the income criteria, so I should be able to get Medi-Cal." That is not true.

For both Social Security and Medi-Cal, if you have HIV, one way to meet the disability criteria is to have a specific opportunistic infection. They have a three-page list of conditions, and specific ways the illness must be manifested. For example, if somebody has Kaposi's sarcoma, that does not automatically qualify, unless it is "with extensive oral lesions; or involvement of the gastrointestinal tract, lungs, or other visceral organs; or involvement of the skin or mucous membranes with extensive fungating or ulcerating lesions not responding to treatment." (Quoted from Social Security form "Medical Report on Adult with Allegation of Human Immunodeficiency Virus (HIV) Infection.") So if one has KS on an ear lobe, one does not meet the disability criteria.

These definitions are Federal, and they are uniform in the different states.

Another way to meet the disability criteria is if your medical record clearly shows that you have an inability to do any type of work for at least a year or more, because of your disabling condition. That is my simple description, not the exact language of the law. Those are cases that we are successful on. The key is the medical record, which clearly shows that there are problems.

[Part II, in our next issue, will cover California state disability income, Medicare, how to get benefits advice, and other questions.]

960920
ATN25505

Copyright ©1990, 2000. ÆGiS & the Sisters of Saint Elizabeth of Hungary. All materials appearing on ÆGiS are protected by copyright as a collective work or compilation under U.S. copyright and other laws and are the property of ÆGIS and the Sisters of Saint. Elizabeth of Hungary, or the party credited as the provider of the content.