What Are “Hidden” Pre-Existing Condition Exclusions?
Question: After enactment of the Affordable Care Act (ACA), we removed our self-insured health plan’s pre-existing condition exclusion (PCE) for certain types of cancer. However, we’ve been warned that we should examine the plan for “hidden” PCEs. What are these?
Answer: A PCE is any exclusion or limitation of benefits that’s based on the presence of a condition before the effective date of coverage. For example, a group health plan provision that excludes benefits for asthma if the individual had asthma before the effective date of coverage under the plan is a PCE. As noted in your question, the ACA prohibits PCEs in group health plans, effective for plan years beginning on or after January 1, 2014, as well as plan years beginning on or after September 23, 2010, for enrollees under age 19.
Although most PCEs are specifically designated as such in plan documents, some — commonly called “hidden” PCEs — aren’t so obvious. If a plan provision operates to restrict benefits based on whether an individual’s medical condition arose before the effective date of coverage, then it may be a PCE even if that terminology is unused in the plan documents. Final regulations include the following examples of hidden PCEs:
- A plan provides for treatment for diabetes and generally doesn’t require approval of a treatment plan. However, if a participant was diagnosed with diabetes before the effective date of coverage, then diabetes coverage is subject to obtaining prior approval of a treatment plan.
- A participant generally becomes eligible for benefits when coverage begins under the group health plan. However, benefits for pregnancy are unavailable until the participant has been covered under the plan for 12 months. (This is considered a subterfuge for a PCE because only individuals who become pregnant after coverage begins will be eligible for pregnancy benefits.)
- A plan provides for treatment of cleft palate, but only if the individual receiving the treatment was covered by the plan continuously from his or her date of birth.
- A plan covers surgery for injuries, but only if the injury occurred while a participant was covered by the plan.
Identifying hidden PCEs may not always be easy. A good starting point is to look for provisions that place a condition on the receipt of benefits. For example, look for statements that benefits will be paid “if” or “only if” certain conditions are met. Some of those provisions could turn out to be hidden PCEs.
Also, look for provisions that require a continuous period of coverage, coverage since the date of birth, or some other specific period of coverage as a condition to coverage for a benefit. As with other PCEs, hidden PCEs violate the ACA and you should eliminate them from your plan.