QUESTION: After enactment of the Affordable Care Act (ACA), we removed our self-insured health plan’s preexisting condition exclusion (PCE) for certain types of cancer. However, we’ve been warned that we should examine the plan for “hidden” PCEs. What’s a hidden PCE?
ANSWER: A PCE is any exclusion or limitation of benefits that is 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 (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—are not 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 not used in the plan documents. Final regulations include examples of hidden PCEs, such as—
A plan provides for treatment for diabetes and generally does not 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 all benefits when coverage begins under the group health plan. However, benefits for pregnancy are not available 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 the 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, but the 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 should be eliminated from the plan.
For further information, see EBIA’s HIPAA Portability, Privacy & Security manual at Section VII.A (“History of Restrictions on Preexisting Condition Exclusions”). See also EBIA’s Health Care Reform manual at Section X.B (“Prohibition on Preexisting Condition Exclusions”) and EBIA’s Self-Insured Health Plans manual at Section XIII.E (“Coverage Limitations and Exclusions”).
Contributing Editors: EBIA Staff.