Late Entrant and the Evidence-of-Insurability Deadline
A 240-employee manufacturer installs a new group term life plan effective January 1. The certificate states that employees who enroll within 31 days of their eligibility date receive up to $150,000 of coverage without evidence of insurability (EOI); amounts above $150,000 and all enrollments after the 31-day window require EOI. The plan also includes a late-entrant provision limiting late enrollees to $20,000 until they submit satisfactory EOI. Priya, a machine operator hired November 15, becomes eligible January 1 but does not return her enrollment form until March 10; she elects $400,000. On March 2, before submitting anything, she is diagnosed with early-stage breast cancer. The employer's HR generalist tells Priya she is "probably fine because open enrollment lets everyone in." The carrier receives her form March 14 and requests EOI.
1. Evaluate whether Priya's election of $400,000 is payable and identify the errors in the HR generalist's statement.
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Priya's enrollment is a late enrollment, not a timely one. Her eligibility date was January 1 and she had until January 31 to enroll without EOI. Submitting on March 10 is outside the 31-day window, so the late-entrant provision applies: she is limited to $20,000 until she provides satisfactory EOI, and the $380,000 excess is not effective. The HR generalist confuses two different mechanics. First, open enrollment is an annual window for changes to existing coverage and does not reset an individual's initial eligibility clock or waive EOI for a late entrant. Second, "everyone gets in" is false where the plan conditions late-entrant coverage on EOI. The cancer diagnosis is material because it occurred before she submitted the form and is exactly the kind of information underwriters assess; it does not automatically bar coverage, but it makes the EOI outcome uncertain and may produce a rated or declined decision on the excess amount. The carrier should treat the $20,000 as effective (subject to the plan's late-entrant terms) and underwrite the requested increase. HR should correct the misstatement in writing to avoid an estoppel or fiduciary-breach argument.
2. The employer wants to backdate Priya's coverage to January 1 to 'fix' the problem. What should the carrier do?
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The carrier should decline to backdate. Backdating coverage to January 1 would retroactively eliminate the late-enrollment period and effectively grant $400,000 of coverage without EOI to an individual who did not enroll timely and who had a known diagnosis before her form arrived. That is adverse selection against the group and may conflict with the master policy's effective-date and eligibility provisions. The correct remedy is prospective: accept the $20,000 late-entrant amount, process EOI for the increase, and set the effective date of any approved increase to the date EOI is satisfied (or the first of the month following approval, per the policy). If the employer believes an administrative error by the plan sponsor caused the delay, it can raise that separately, but the carrier should not retroactively waive underwriting requirements. Document the request and the denial in the file.