Pre-Existing Conditions on Endangered Species List

Dear Health Plan Sponsor: "My name is Pre-Existing Condition and soon I will become extinct.   We will look back in the annals of employee benefit text books and find I was used to deny coverage for those that needed it under health insurance plans."

Yes, it is true.   Our dear friend Mr. Pre-Existing Condition will soon become as extinct as the Do Do bird.   While I understand arguments against nasty insurance companies and employer-sponsored health plans denying coverage for someone who needs it, the pre-existing condition exclusion was purposefully used to help protect a risk pool from individuals jumping on and off an insurance plan in favor of using the   benefit only when the individual was sick.

Employers who self-fund their health plans have two paths they can elect to take.   The first path is to amend your health plan as the regulations require.   You must start by eliminating pre-ex for those under age 19, then open things up for those under age 26, subject to grandfather provisions.   By the first day of the 2014 plan year, you will be required to remove them entirely.   I have attached our health reform advisory practice guidance on how to repeal for enrollees under age 19 if you follow this first approach.

The second approach (which many progressive employers have already done) amends your health plan to remove pre-existing conditions entirely.   If you are in the camp that is afraid of the cost impact to your health plan, you can have your benefits consultant or health plan run the numbers to find out how many claims you are denying due to pre-existing conditions.   When you eliminate enrollees under HMO plans, those who send in HIPAA credible coverage notices without a 63 day break, consider new requirements for those un-grandfathered plans under age 26 and add back in the administration costs and goodwill lost ... my opinion is you will find the "pre-ex juice just ain't worth the squeeze."   This rationale is admittedly harder to make for a small business owner than a larger plan that can absorb a few outliers.   But if you use your health plan as a recruiting tool, it can make sense to clean out the closet and get rid of Mr. Preexisting Condition before the government puts him on the endangered species list ... right next to the DoDo bird.

Eliminate Pre-Existing Condition Exclusions on Enrollees Under Age 19 What's the Requirement?

All plans subject to the health reform requirements, including grandfathered plans, must remove preexisting condition limitations on enrollees who are under 19 years old.

What's the Deadline? First day of the first plan year that begins on or after September 23, 2010.   We believe "plan year" means the ERISA plan year, not the insurance contract year.

What's the Issue? Pre-existing condition restrictions are a dying pony.   Many plans no longer contain these restrictions.   For those that do, they must be amended to remove the restrictions as applied to individuals under age 19 and, by the first day of the 2014 plan year, remove them entirely.   Note that the obligation to remove the restriction for individuals under age 19 is not limited to dependent children; it applies to employees under age 19 as well.   Note also that exclusions that apply regardless of when the condition arose relative to the date of coverage are not pre-existing condition exclusions (for example, a plan provision excluding coverage for bariatric surgery is not a pre-existing condition exclusion, because it applies regardless of when the condition arose).

What Should You Do? Plans that currently apply a pre-existing condition exclusion to enrollees will need to be amended to remove the applicability of the restriction to enrollees under age 19. Ideally the amendment should be made prior to the beginning of the coming plan year.

Notice/Plan Amendment Obligation: Plans currently have an obligation to provide a General Notice of Pre-Existing Condition Restriction to enrollees prior to the date coverage begins. Plans should review this notice and modify it to make clear that it does not apply to enrollees under age 19. Amend the plan, ideally prior to the beginning of the coming plan year, to conform any pre-existing condition restriction to this requirement.