Portability in insurance means the ability to keep important coverage if you move from one employer to another. Portability can be applied to any kind of insurance offered through employment, including disability, life insurance and health insurance. It is an important benefit that in some cases is controlled by federal law.
Group life insurance through employers was first offered by the Equitable Life Assurance Society of New York. Although it represented a useful employment benefit, group-rate life insurance policies held by employees expired along with the term of employment, whether they quit, were fired or suffered a layoff
New policies written in later years offered the feature of portability. If the company closed for business, or the employee lost his or her job for any reason, or retired from work altogether, the life insurance policy remained in force (becoming an individual rather than group policy) as long as the premiums were paid. As individuals grow older and lose insurance options due to age or ill health, portable life insurance polices become more valuable.
Many individual life or disability policies offered through the employer’s carrier also feature portability. The employee signs up for an amount of additional insurance that is right for him or her, and pays the premiums through a regular payroll deduction. This supplemental insurance is optional and additional to the group insurance plan that the company offers.
Portable health insurance has been in effect since the passage of the Health Insurance Portability and Accountability Act (HIPAA) of 1996. Under this law, someone changing employers and applying for coverage under a new group plan cannot be excluded due to preexisting health conditions. In this way, health issues that arise during employment can still be treated if an employee is fired, laid off or resigns.
The company providing insurance can examine medical records covering a period of six months before the proposed start of coverage. If no medical care or treatment for the condition was undertaken in the last six months, then there can be no denial of coverage based on that condition. There can be a preexisting condition exclusion if care or treatment occurred within the last six months. By the HIPAA law, the period of this exclusion is limited to 12 months after the date of enrollment. There can be no preexisting exclusions imposed on those who are pregnant. The law does not require employers to offer health coverage nor does it require health insurance policies to cover any specific condition.
Health Reform 2010
By the Patient Protection and Affordable Care Act, signed into law in March 2010, employers must provide group health insurance to employees; those who do not will pay penalties. Beginning September 2, 2010, there can be no preexisting conclusions for children who are covered by group plans and under the age of 19. In 2014, the law bans all preexisting condition exclusions. In addition, companies of 200 or more employees must automatically enroll their workers in their group plans; an employee then has the option of withdrawing from the plan and enrolling with another carrier.