Consumer Guide to Health Insurance

Health-care concepts you should know

Pharmacy formularies

Insurance companies usually offer pharmacy benefits based on prescription drug formularies. A formulary is simply a list of pharmaceuticals or brands that are covered or not covered under an insurance plan. There are three types of formularies:

• An open formulary has no limitations on prescriptions.
  
  
• A closed formulary allows medical exceptions.
  
  
• A mandatory closed formulary does not allow medical exceptions.

Upon request, your insurance company must tell you if a medication is a covered benefit in a formulary and how it can be included in the formulary when exceptions are allowed. The insurance company must provide a summary of its prescription formulary policy, cost sharing, and restrictions. Your insurance company may exclude specific prescriptions from coverage.

Preauthorization

Insurance companies may require preauthorization for some medical procedures. This is often referred to as "prior approval," because you must get approval from the insurer before you have the medical procedures. Insurance companies must review preauthor-ization requests for non-emergency services within two days. Determinations are binding for 30 days. Preauthorizations affected by termination of coverage are binding for five days unless the insurance company knows coverage will end prior to the date of service and a termination date is specified.

On request, your insurance company should provide a written explanation of how preauthorization decisions are made.

Pre-existing conditions

Your policy may exclude or limit coverage of treatment for pre-existing conditions for six to 12 months. A pre-existing condition is a medical condition for which medical advice, diagnosis, care, or treatment was received or recommended during the six months before your enrollment. Your enrollment date is the earlier of the first day your coverage takes effect and the first day of your group plan's pre-eligibility waiting period.

When a plan sold in Oregon limits coverage for pre-existing conditions, the limit must end six months after enrollment or 12 months after the start of the plan's waiting period, whichever is earlier. If you enroll in a self-insured group plan after the initial enrollment period, the limit on pre-existing conditions may be extended to as long as 18 months.

MSA - Medical Savings Account

Many employers allow employees to set aside money into a special "medical" savings account, earmarked to pay eligible health care expenses, including the insurance policy deductible. In order to open an MSA you must have health insurance coverage. This coverage can be either a group policy or an individual policy. MSAs are being phased out in favor of HSAs. No new MSAs can be opened, but existing MSAs can be continued or rolled over into HSAs.

HSA - Health Savings Account

HSAs were created to replace Medical Savings Accounts (MSAs), another special account used to pay eligible health care expenses. Effective January 1, 2004, no new MSAs may be opened under federal law.

HSAs allow employers and consumers to set aside funds on a tax free basis to pay health care expenses, including expenses that may not be covered by traditional health insurance. For example, HSAs may be used to cover vision and dental services, prescription drugs, over-the-counter drugs, long term care services and certain health insurance premiums in retirement.

Additional information on HSAs is available on the U.S. Department of Treasury website at www.treas.gov/offices/public-affairs/hsa/,
or on the IRS web site at www.irs.gov/pub/irs-drop/n-04-2.pdf.

Exclusion periods

An exclusion period is a period of time during which certain treatments or services are excluded from coverage for all new enrollees. For example, some policies have a 24-month exclusion period for organ transplants.

Creditable coverage

Exclusion periods may not apply if a new enrollee has changed insurers with no lapse in coverage. Creditable coverage means prior health-care coverage; it includes coverage remaining in force when an enrollee gets new coverage. If you went no longer than 63 days without coverage before obtaining another health plan, you have the right to apply the time you were covered under your old policy toward any pre-existing-condition exclusion period on your new policy. You will need to get a certificate of creditable coverage from your previous insurance company to present to your new insurance company as proof of coverage.

Example 1: You were covered under Plan A for 12 months. You enroll in Plan B within 63 days of Plan A's termination date. Plan B's 12-month pre-existing-condition exclusion will not apply.

Example 2: You were covered under Plan A for 12 months. You enroll in Plan B within 63 days of Plan A's termination. You need a transplant covered under Plan B, but Plan B has a 24-month exclusion period. If Plan A also covered transplants, you get 12 months' credit toward the 24-month transplant-exclusion period. You would have to wait 12 months instead of 24 months to have insurance coverage for the transplant.

Group health benefit plans, COBRA, state continuation, managed care/HMO, individual health insurance policies, OMIP, Medicaid, and Medicare all provide creditable coverage. Limited plans such as accident-only, dental-only, or vision-only do not.

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