The Group Plan, the Leave, and the Waiting Period
Priya works for a 40-employee employer with a fully insured group health plan. She has been covered for three years. In February she takes approved FMLA leave for surgery and recovery, expected to last 10 weeks. Her employer continues her coverage during the leave and continues deducting her share of premium. In May, while still on leave, she is diagnosed with a complication requiring an additional surgery and six more weeks off. Meanwhile, the employer switches carriers effective July 1, moving to a new insurer with a preexisting-condition look-back and a 12-month exclusion period for late enrollees. Priya's claim for the May surgery is submitted in June. The new carrier's certificate says the exclusion period applies to "conditions treated in the 6 months before enrollment."
1. Is Priya's May claim covered, and by which carrier?
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The old carrier covers the May surgery. Coverage was continuous, premiums were paid, and the claim arose in June while the old policy was still in force. The carrier change on July 1 does not retroactively reach a June claim.
Her FMLA leave does not interrupt coverage because the employer continued it and continued her premium share - the plan treated her as an active employee for coverage purposes. Even if the employer had not continued it, FMLA rules generally require group health coverage to continue on the same terms as if she had been working.
The new carrier's preexisting-condition language is irrelevant to a claim incurred before its effective date.
2. Assume Priya's condition is a "preexisting condition" under the new carrier's definition and she enrolls effective July 1. Can the new carrier impose the 12-month exclusion on her?
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Generally no, on two grounds.
Creditable coverage / continuous coverage. Under HIPAA portability rules as incorporated into group health plans, a new group plan must credit prior continuous coverage against any preexisting-condition exclusion period. Priya has three years of continuous group coverage with no significant break. Even if the plan's exclusion period is valid in form, her prior coverage should satisfy it entirely, so no exclusion should apply to her.
Group market PCE limits. For group health plans, preexisting-condition exclusions are tightly restricted; the look-back period for identifying a preexisting condition is limited (commonly six months), and the exclusion period itself is limited and must be offset by creditable coverage. A 12-month exclusion applied to a long-tenured continuously covered employee is very likely improper.
The carrier should be asked for a certificate of creditable coverage from the prior plan and a written determination applying the credit. If it refuses, that is a claims-practice and portability issue worth escalating.
3. The employer's HR staff told Priya the switch was "seamless" and that she "wouldn't notice any difference." Evaluate that statement.
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It is inaccurate and creates avoidable exposure. A carrier change is not seamless for anyone with an open claim, an ongoing course of treatment, or a leave situation. HR should have:
- Sent a notice of the change with the new carrier's effective date, network, and any formulary or provider changes.
- Confirmed continuity of care for Priya's ongoing treatment, including whether her surgeons are in the new network.
- Explained that claims incurred before July 1 go to the old carrier and after July 1 to the new one, and how to submit each.
- Provided certificates of creditable coverage so any exclusion period is properly offset.
"You won't notice any difference" is the kind of statement that becomes an exhibit in a complaint. The accurate message is that coverage continues without a break, but the administrator, network, and claims process change on July 1.