03/18/2010 05:12 am ET Updated May 25, 2011

How You Can Get Medical Insurance, Even With a Pre-Existing Condition

California offers excellent, and reasonably priced, insurance coverage for people transitioning to freelance work. It's available regardless of pre-existing conditions. Unfortunately, most of those that could benefit have never heard about it. This insurance is available because of a federal mandate in HIPAA legislation - and California's very effective compliance. Here's how I found out about it:

A few years ago I decided to explore filmmaking, and in order to free up some time, I transitioned from full time employment to part time consulting. I knew I had a pre-existing condition - a bout with cancer a few years before - but was told that my professional organization, the IEEE, offered health insurance to its members. It had a two year waiting period, but if I could get by two years with COBRA and CalCOBRA, I could join the
IEEE plan.

So with my plan in hand, I embarked on COBRA, and as the 18 month COBRA coverage came to an end, I transitioned to CalCOBRA (an extension to COBRA mandated by the state of California, that essentially provides COBRA coverage for another 18 months). And then I checked again on my IEEE option - I was coming up on 2 years - and found that... it had been closed to newcomers.

Now I was anxious. I debated a couple of weeks on what to do. I was hooked on my consulting lifestyle, was in the middle of several projects, and didn't want to look for corporate employment. I was afraid of calling insurance companies directly, telling them about my pre-existing condition, being rejected, and having that rejection on my records forever.

Then on a flight a doctor sitting next to me - a senior official at Kaiser - gave me his advice. "Whatever you do, don't tell them about your cancer," he said. As I found out later, he had given me the worst advice possible. Surprising, because even as an insider he didn't have the full information.

And here's what I found out: As long as you've used your COBRA and CalCOBRA options and did not discontinue them prematurely, a set of federal laws called HIPAA (the Health Insurance Portability and Accountability Act) mandates that you be offered continuation insurance regardless of pre-existing conditions. In California, the state complies with HIPAA by mandating that all the major insurance companies offer several of their standard private plans in a HIPAA version. Meaning that you can buy them regardless of pre-existing condition. Insurance companies call them "HIPAA Plans" or "GI (Guaranteed Issue) Plans". The state also regulates their price, preventing insurance companies from charging more than these plans
actually cost them.

The one I selected was the Anthem Blue Cross PPO Share 1500. It's their PPO plan with $1,500 yearly deductible. Doctor visits are not subject to the deductible, but carry a 30% co-pay. It pays a $5M lifetime maximum. At my age range of 45-49, if I had bought it on the open market without pre-existing conditions, it would have cost me $472 per month. Under HIPAA,
regardless of pre-existing condition, it was offered for $562 per month.

Not cheap, but still my HIPAA plans is just 16% above market price compared to what's available with no pre-existing conditions. You can get a HIPAA plan regardless of illness, you cannot be denied the coverage, and as long as you continue paying your premiums, you're entitled to it.

In the time since I discovered HIPAA, I've talked about it with numerous friends - accountants, doctors, journalists, people who should know. No one knew about it. Doctors are familiar with HIPAA because it also includes regulations on confidentiality of patient records. But they don't know about the guarantee of insurance availability.

I did call a few more brokers. I discovered I had been lucky. The first agent I called had told me about it. But many would not. They had all heard about it, but as they explained, the commissions on HIPAA insurance were too low to be worth the trouble. Maybe that's how HIPAA insurance has been maintained as the best kept secret of the health insurance industry.

What I also found out was that the worst possible move would have been to hide my pre-existing condition. If I'd done that and then become ill, my insurance company would have asked for a review of all my previous medical records from all doctors. If they'd found out about my pre-existing condition, they could and would deny coverage even if the new condition had nothing to do with my prior illness.

So if you have a pre-existing condition, or suspect that you may have one (it doesn't need to be much -- high blood pressure, being overweight and a history of back problems all qualify as pre-existing conditions), here are some does and don'ts:

1. Do not let your COBRA and CalCOBRA lapse.

2. If you're planning to use a HIPAA insurance option - make sure to sign up for your continuation insurance before your COBRA and CalCOBRA expire. I suggest starting to set it up at least 3 months in advance. That'll give you time to work out your options without a lapse in coverage.

3. Don't try to hide any pre-existing condition from an insurance company in order to get coverage. They'll accept your money, but if something does happen, they'll ask your doctors for medical records dating back many years, and if anything suspicious shows up, they'll deny you coverage. It happens all the time.

4. If in doubt, use an insurance broker. They know what's available, can help you navigate the options more easily, and it doesn't cost you anything - the insurance company pays. If your agent doesn't deal in HIPAA plans, find another one. The agent I used is Marilyn Zukin - but there are many more.

And most importantly - don't let the fear of being denied health care coverage keep you from starting out on your own.