Employer Health Reform Issues Brief: Ban on Preexisting Condition Exclusions
Smart first steps for employers
All group health plans – including grandfathered plans – will be prohibited from imposing any preexisting condition exclusions. This means plans will no longer be permitted to deny new enrollees’ otherwise eligible claims because they relate to conditions that were diagnosed or treated within the 6-month period immediately preceding enrollment. Current law allows these preexisting condition exclusions to be imposed for as many as 12-months (or 18-months in the case of late enrollees).
Effective Date: Plan years beginning on or after September 23, 2010, for enrollees under 19 years old. Plan years beginning on or after January 1, 2014, for all other enrollees.
Key Implication: Plan Design
Plans that currently impose any preexisting condition exclusions will need to be modified to eliminate those exclusions for under age 19 enrollees before the start of the 2011 plan year and for other enrollees before the start of the 2014 plan year.
Key Implication: Cost
Eliminating preexisting condition exclusions may increase costs for plans that currently impose them, but the impact may be small because of existing limits on their use.
Key Implication: Communication
Plans choosing to initially implement the ban only with respect to under age 19 enrollees should be prepared to explain the different effective dates to employees. Many employees likely are aware of the ban on preexisting condition exclusions, but they may not be aware of the 2014 effective date for adult enrollees.
Smart First Steps
Plan Design: Evaluate current plan design to determine what, if any, changes will be needed to comply with the ban and the deadline for making those changes.
Cost: Assess the cost impact of implementing the ban. Consider comparing the cost of initially implementing the ban only with respect to under age 19 enrollees versus implementing for all enrollees beginning with the 2011 plan year. It might be worth implementing the ban all at once instead of incrementally, as permitted by law.
Communications: Update Summary Plan Descriptions (SPDs) and other plan communication materials to conform to plan changes made to implement the ban. A clear statement of the decision to implement the ban in two stages might help preempt employee questions and confusion about the law’s requirements. If the ban is to be implemented in one step rather than two, consider highlighting how the plan is more generous than the law requires.
As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.