Understanding Certificate of Creditable Coverage

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Understanding a “Certificate of Creditable Coverage”

by Tony Novak, CPA, MBA, MT
, revised 11/28/2011

A “Certificate of Creditable Coverage” is a creation of the federal Health Insurance Portability and Accountability Act (often referred to as HIPAA) designed to ensured that individuals who change health insurance plans will enjoy continuous coverage for ongoing medical treatments.  Without this federal law, new enrollees in a health plan might be subject to a waiting period before coverage is offered for pre-existing medical conditions under a new group insurance plan and this could be deterrent for employees who want to change jobs.

The Certificate of Creditable Coverage program provides that once you have been continuously insured for 18 months, there is no need to satisfy another waiting period when you change health insurance. A gap in coverage of less than 63 days does not jeopardize the “continuous coverage” but it is important to maintain a short term medical insurance plan if there is going to be a gap of more than two months between group health insurance plans.1

The Certificate of Creditable Coverage program is designed to be largely automated and requires little effort on the part of health plan members. Certificates are automatically generated by every health insurance company within a few weeks of a member’s termination. If you do not receive a Certificate by mail within 30 days of termination, contact the insurer and verify your mailing address. Certificates are not yet available electronically, but most health insurance companies are now developing this additional service. When you receive his certificate, simply forward a copy to your health insurance company while keeping a copy for our own records. You might want to store the certificate inside the cover of the new health insurance policy itself for easy reference later.

Certificates are not useful for the purpose of obtaining coverage for pre-existing conditions when enrolling in a health plan that never offers this benefit in any circumstance. Short term medical insurance policies fall under this category; they never cover pre-existing medical conditions. Also be aware that most of the lower cost individual health insurance plans also do not cover pre-existing medical conditions.

There is a common misconception that a person with a Certificate of Creditable Coverage is eligible for any health insurance plan they may choose with a full take-over benefit for pre-existing conditions. This is simply not the case since most health insurance plans for individuals (as opposed to employer-provider group coverage) have eligibility requirements that preclude individuals with prior health problems.

Certificates are not necessary when an entire business changes health insurance because group health insurance is issued with full takeover benefits for all eligible members enrolled on the date that the new insurance starts. Certificates are requested for those who join at a later date and want take-over benefits.

Finally, be aware that the federal law regarding Certificates of Creditable Coverage is unrelated and independent of specific state laws designed to address issues regarding take-over benefits and eligibility for insurance. While federal benefit laws override state laws in the event that there is a direct conflict in the application of the rules, the states still hold complete control for health insurance plans within their own jurisdiction. One example of this type of legal conflict is that certain states do not recognize Certificates of Creditable Coverage from individual health insurance as valid for entry into state-sponsored high risk health insurance pools. These enrolling members are still subject to an additional waiting period for some benefits. Since these specific issues vary from state-to-state they are not addressed in this article. See your benefits adviser or ask your health insurance company for a list of state-specific mandates that apply in your situation.

More Information

FAQs on portability of coverage from the Department of Labor


1This article addresses only federal law regarding portability of coverage. Some states offer additional consumer protections.

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