Small Maryland Employer: A Delayed Claim, a Mid-Year Marriage, and a Resignation
Custom Machine Works in Frederick, Maryland, employs 14 full-time workers and 3 part-time machinists who each work 25 hours per week. The owner buys a fully insured group health plan from a Maryland carrier. The plan documents include a 12-month pre-existing condition exclusion for anyone enrolling after the initial enrollment window, a 30-day waiting period for new hires, and no coverage for dependent children over age 19. In April, employee Duane submitted a $38,000 claim for back surgery performed in March; the plan paid nothing, citing the exclusion because Duane had seen a chiropractor in 2023. In May, employee Janelle married and asked to add her husband effective June 1. In June, the office manager resigned.
1. Was the denial of Duane's claim correct? What should he do next?
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No - the denial is improper and should be reversed.
- The plan is fully insured in the small-group market and is not grandfathered in any way that matters here. Pre-existing condition exclusions are prohibited in non-grandfathered plans, and even grandfathered plans lost the ability to impose them. The chiropractor visit in 2023 is irrelevant; the exclusion itself is unenforceable.
- The 30-day waiting period is permissible - waiting periods must be 90 days or fewer.
- The maximum-out-of-pocket and preventive rules also apply; if the surgery was otherwise covered, the plan pays subject to cost sharing.
- Duane's sequence: (1) written internal appeal within 180 days, requesting the plan document and the specific provision relied on; (2) if upheld, external review; (3) file a complaint with the Maryland Insurance Administration, which regulates the carrier. An ERISA-covered plan adds a parallel federal track, but the state complaint is the practical lever against the carrier.
- Secondary observation: the plan document itself is evidence of a compliance failure the owner should fix immediately - an unenforceable exclusion invites litigation and regulator scrutiny on every other claim.
2. Must the carrier add Janelle's husband on June 1? And does the exclusion of children over 19 hold up?
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The husband must be added; the age-19 dependent cut-off does not survive.
- Marriage is a HIPAA special enrollment event. The plan must allow at least 30 days to request enrollment, and coverage must be effective no later than the first day of the month following the request. Janelle asked in May, so a June 1 effective date is the outer limit, not a favor.
- She needs documentation of the marriage; the carrier cannot impose late-enrollee penalties or a pre-existing condition analysis.
- Dependent children must be offered to age 26, regardless of student status, marital status, or tax dependency, in plans that offer dependent coverage. A blanket exclusion at 19 is impermissible and must be corrected; the child's own employer coverage offer does not relieve the plan until age 26 under the ACA rule.
- Side note on the part-timers: 25 hours per week is under the 30-hour full-time threshold, so they are not counted as full-time employees for the employer mandate, and with 14 full-time employees the shop is not an applicable large employer in any event. That means no employer shared-responsibility penalty - but every plan it does sell must still be ACA-compliant.
3. When the office manager resigns, what continuation rights does she have, and what happens if she goes without coverage?
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Maryland continuation rules fill the COBRA gap, and the state individual mandate is a separate exposure.
- Federal COBRA does not apply - it covers employers with 20 or more employees, and this shop has 14.
- Maryland's continuation law applies to small employers who fall outside COBRA, requiring the carrier to offer the departing employee continuation of group coverage, generally for up to 18 months (with additional periods for disability or a second qualifying event), at premium up to 102% of the group rate. She must elect within the stated window; a voluntary resignation is a qualifying event.
- Confirm the current duration and election window with the Maryland Insurance Administration or the carrier's contract before advising her - small-group continuation timelines have been amended more than once.
- If she declines or exhausts continuation: a resignation is not a special enrollment event on the Exchange, so she would need to wait for open enrollment unless she has another trigger (marriage, birth, move, loss of other coverage).
- Maryland individual mandate: Maryland requires state residents to maintain minimum essential coverage and report it on the state return; without coverage she owes a penalty calculated on her state income tax return unless she qualifies for an affordability or other exemption. She should also price a subsidized Exchange plan against the 102% continuation premium before deciding.