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Determining Compliance with the HIPAA Provisions in Part 7 of ERISA

Limits on Preexisting Condition Exclusions

If the plan imposes a preexisting condition exclusion period, the plan must comply with certain limits. Does the plan impose a preexisting condition exclusion period, including a hidden preexisting condition exclusion period?

Definition: Generally, a preexisting condition exclusion is a limitation or exclusion of benefits relating to a condition based on the fact that the condition was present before the effective date of coverage under a group health plan or group health insurance coverage, whether or not any medical advice, diagnosis, care, or treatment was recommended or received before that day. See ERISA section 701(b)(1); 29 CFR 2590.701-3(a)(1).

Tip: Some preexisting condition exclusions are clearly designated as such in the plan documents. Others are not. Check for hidden preexisting condition exclusion provisions. A hidden preexisting condition exclusion is not designated as a preexisting condition exclusion, but restricts benefits based on when a condition arose in relation to the effective date of coverage.

Example: A plan excludes coverage for cosmetic surgery unless the surgery is required by reason of an accidental injury occurring after the effective date of coverage. This plan provision operates as a preexisting condition exclusion because only people who were injured while covered under the plan receive benefits for treatment. People who were injured while they had no coverage (or while they had prior coverage) do not receive benefits for treatment. Accordingly, this plan provision limits benefits relating to a condition because the condition was present before the effective date of coverage, and is considered a preexisting condition exclusion.

A plan imposing a preexisting condition exclusion is required to comply with all the rules described in this section. Therefore, if the plan is not mindful that a provision operates as a preexisting condition exclusion, there could be multiple violations of this section.

Tip: To comply with HIPAA, a plan imposing a hidden preexisting condition exclusion can rewrite its plan provision so that it is not a preexisting condition exclusion (i.e., benefits are not limited based on whether the condition arose before an individual's effective date of coverage) or the plan must limit the preexisting condition exclusion to comply with the rules of this section.