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Health insurance from your employer may not be the best bet.

Most Americans get their major medical and hospital insurance through their employers. This insurance is often called "employer-based" group health insurance, and it may have some significant risks. In fact, you may be better off spending more money now to get group health insurance that is not based on employment, even if you currently have no disability.

If your insurance is based on your personal employment, then the onset of a disability that prevents you from working may become the very event that causes you to lose your insurance. Employer-based group health insurance is usually available in two cases. Either the insurance covers a class of eligible people that includes you as employee, employee's spouse, or employee's dependent - or you qualify for "COBRA" benefits as defined by federal law.

Most primary participants in employer-based plans must be current, full-time, active employees. Some, but only a few, employers include retired employees as an eligible class. If your employer's plan does not include disability-retired employees, then you may be required to forfeit your normal group health benefits if illness forces you to leave work.

At that point you would be entitled to what federal law mandates through COBRA. COBRA benefits extend anywhere from 18 to 36 months. At the end of this period, it may be difficult or impossible to purchase any adequate form of group or individual major medical coverage from the private marketplace. This may include health insurance coverage at a future employer as well.

Remember too, if your employer currently includes disability-retired employees as an eligible class, your employer may eliminate that class at some future date to cut costs. If you leave work due to disability and apply for Social Security, and are accepted, you will receive Medicare coverage 29 months after you become eligible.

As long as your health insurance is based on somebody's employment, your coverage is not as bullet-proof as it might be. There is yet another risk. This system of employer-based private insurance has enabled the private marketplace to keep costs down, at least in part by shifting many higher-cost users out of commercially available insurance risk pools. Another way to keep costs down is for an insurance company to refuse to pay legitimate claims. The legal structure of employer-based policies may actually encourage more claim refusals in employer-based groups than in other forms of health insurance. Here's how:

An insurance policy is actually a contract, and is usually governed by your state's law. This includes your state's legal remedies for breach of contract. In many states, when an insurance company acts in bad faith, by not paying legitimate claims, for example, the legal damages owed to the insured person can be a much larger sum than what was originally owed for the claim. This possibility can be enough to encourage the insurance company to pay what is legally owed.

But most employer-based group health insurance plans are governed by a federal law called the Employee Retirement Income Security Act (ERISA). Because of provisions in ERISA, the remedies for breach of contract against most employer-based health insurance plans are limited by federal common law, which does not include any form of penalty for bad-faith misbehavior. Even if taken to court, all the insurer would ever have to pay would be the amount due under the policy - and then only when ordered by a court. In other words, there is no penalty to provide an incentive against misbehavior.

Bottom line: Explore any options you may have for major medical or hospital insurance through a professional, trade, alumni, or other association or group to which you belong, or which you could join. If you are lucky enough to have an option, consider it carefully even though it may cost more than employer-based insurance. In my opinion, coverage that depends upon membership instead of employment is better should you ultimately need your insurance protection to perform.

Laura Cooper, Esq., writes regularly INSIDE MS.
COPYRIGHT 1995 National Multiple Sclerosis Society
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1995, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Author:Cooper, Laura
Publication:Inside MS
Date:Sep 22, 1995
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