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Pre-existing condition cartoonNearly all group LTD polices contain some type of pre-existing condition provision. These provisions protect the disability insurer from paying claims for conditions that existed before insureds became effective on the current policies.

There are many types of pre-existing condition provisions, 6/12, 3/12, 6/12/24, 6/12/12 etc. The pre-existing condition provision is the second most important provision in your group LTD policy, and it requires your total understanding before submitting a claim for LTD benefits.

Suppose your policy contains the following pre-existing condition provision:

“WHAT IS A PRE-EXISTING CONDITION?

You have a pre-existing condition if:

You received medical treatment, consultation, care or services including diagnostic measures, or took prescribed drugs or medicines in the 3 months just prior to your effective date of coverage, or you had symptoms for which an ordinarily prudent person would have consulted a heath care provider in the 3 months just prior to your effective date of coverage, and your disability begins within 12 months of your effective date of coverage.”  

This provision as written contains a “prudent person” definition. A prudent personis someone who is reasonably expected to seek consultation or treatment when symptoms or disease is known to exist. For example, it would unreasonable for someone with cancer not to seek treatment for three months in order to avoid being denied benefits due to a pre-existing condition. It is considered “prudent” and “reasonable” for any person to seek treatment when they know or suspect they are sick.

The intent of pre-existing condition provisions is to prevent individuals from seeking disability coverage only after being diagnosed with disease. Nevertheless, there are several pieces of information required in order to determine if a claim for any particular impairment should be considered a pre-existing condition. Most disability insurers have specific internal guidelines for reviewing and processing pre-existing condition claims.

There are three definitions that are crucial to your understanding whether pre-existing provisions should be applied to your claim.

  1. The Waiting Periodis the amount of time new employees are required to wait in order to be eligible to enroll in the employer’s group STD/LTD Plan.
  2. The Effective Date of Coverageis the first date you are covered for disability group insurance. The Effective Date of Coverage is given on the first page of group Plans or the Summary Plan Description (“SPD”).
  3. The Date of Disabilityis the date after your last date worked, or the first date of treatment by a qualified physician.
  4. The Pre-Existing Period-the period for which you may have sought consultation or treatment, or took prescribed medications prior to your effective date of coverage.

Here is a good example. On April 23, 2005 Linda West was hired as an Administrative Assistant.  Her group LTD Plan says that her Waiting Period is also her date of hire meaning she became eligible to enroll in the company’s group Plan on the date she was hired. Linda immediately enrolled in her employer’s Plan and it became effective as of her date of hire, or April 23, 2005. Although the date of Plan coverage for the group is cited as January 1, 2005, Linda’s date of hire is used as the EDOC, or Effective Date of Coverage.

On February 18, 2006, Linda’s physician recommended she stop working due to severe COPD for which she needed immediate and on-going treatment. Does Linda have a payable claim? Or, does she have a preexisting condition? Let’s take a look.

Using a time-line approach, and the above definition of pre-existing condition in the policy, we can determine whether Linda’s claim will be subjected to a pre-existing investigation and be denied.

Since the “Waiting Period” provision policy indicates “None”, Linda’s first date of coverage for group LTD through her employer’s plan is also her date of hire of April 23, 2005. The Effective Date of Coverage listed on the cover of her Employer’s Group Plan is January 1, 2003, but Linda’s date of hire is also her Effective Date of Coverage.

The pre-existing condition provision (above) directs if Linda goes out on disability within 12 months of her effective date of coverage, AND she received treatment in the 3 months prior to her effective date of coverage, she is NOT eligible for benefits. This pre-existing provision is referred to as the 3/12 provision.

Twelve months after Linda’s effective date of coverage (4/23/2005) is 4/23/2006. Linda’s date of disability is 2/18/2006. Did she go out on disability within one year of her effective date of coverage? (4/23/2006) Yes, she did.

What is her pre-existing period then? It is three months prior to her effective date of coverage: 1/23/2005-4/23/2005. The insurance company will now conduct what is called a “pre-existing condition investigation” to determine if Linda received “treatment, consultation, care or services including diagnostic measures, or took prescribed drugs or medicines” from 1/23/2005-4/23/2005. If she did, Priced Right, Inc. will deny her claim for benefits claiming she has a pre-existing condition.

Linda was actually treated by a respiratory specialist and had a Pulmonary Function Test on 3/10/2005. Her pharmaceutical records also indicated she was prescribed medications, including medications for a nebulizer during this same period of time. Clearly, according to the definition of a pre-existing condition, Linda’s claim for benefits on 3/18/2006 is due to a pre-existing condition.

Let’s change the example slightly assuming Linda had symptoms of respiratory illness during the above three months, but did not seek treatment. If the disability insurer can prove Linda’s symptoms were severe enough so as to cause a “prudent person” to seek treatment, her claim would also be denied since she did not act as a “prudent person” by delaying treatment.

Again, let’s change the example. Assume Linda did not go out on disability until 4/25/2006. What then? Since Linda’s date of disability in NOT within 12 months of her effective date of coverage, her claim is NOT subject to a pre-existing condition investigation and her claim will be reviewed according to medical merit rather than eligibility under the pre-existing condition provision. In other words, if Linda had been able to postpone or wait until after 12 months of her effective date of coverage, it is likely her claim may not have been denied, or at least for pre-existing condition reasons.

The above pre-existing condition provision is called a 3/12 provision – date of disability within 12 months after the Effective Date of Coverage of the policy, and 3 months prior to EDOC called “the pre-existing look-back period”. A 3/12 provision is, by far, the most common, but here is another example:

“You received medical treatment, consultation, care or services including diagnostic measures, or took prescribed drugs or medicines in the 12 months just prior to your effective date of coverage; or you had symptoms for which an ordinarily prudent person would have consulted a health care provider in the 12 months just prior to your effective date of coverage; and the disability begins in the first 12 months after your effective date of coverage.”

This provision is called a 12/12 provision. It means if you received treatment within 12 months of your EDOC, your claim is considered pre-existing – a much tougher condition to meet. Notice this provision, as I’ve cited it, also includes the “prudent person” wording. Another version of this provision is 12/24 that is also difficult to meet since your date of disability needs to fall greater than 24 months after your effective date of coverage.

Another variation, 6/12/24, for example, allows a treatment free period. If your disability falls within 24 months of your EDOC, AND you were treatment free for 12 months after your EDOC, you are not subject to the pre-existing condition.

Here is just one example of a “treatment free” pre-existing provision:

“You have a pre-existing condition if:

The condition you have 12 months prior to the policy effective date will not be covered for 24 months or until you are treatment free for 12 continuous months.”

 “TREATMENT FREE MEANS you have not received medical treatment, consultation, care or services including diagnostic measures, or taken prescribed drugs or medicines for the pre-existing condition.”

The above provision is a 12/12/24 provision that means you are not subject to a pre-existing condition investigation if you are “treatment free” for the 12 months prior to your EDOC.

There are other variations of pre-existing condition provisions, but it is extremely important to locate the wording in your own policy and determine your pre-existing period before attempting any application for benefits.

The most common mistake claimants make in determining whether a claim is pre-existing or not is using the date of disability instead of the Effective Date of Coverage cited in the policy to determine a future 12-month period. The policy EDOC should always be used as the beginning date in determining whether a disability occurred within the first 12 months of the policy becoming effective, NOT the date of disability.

Except for catastrophic and sudden illness, pre-existing condition investigations should not occur. Anytime a new employee claims disability within 12 months of the Effective Date of Coverage there is risk of not getting paid since it is likely treatment was received, or medications were taken just prior to the EDOC, or within 3 months during the “pre-existing period.”

If it is possible to remain at work for at least 12 months no pre-existing investigation will be conducted. Employees recently hired should obtain copies of the Certificate Booklet or SPD to determine when disabilities would be considered pre-existing. It won’t do much good to file for disability only to be denied for a pre-existing condition.

In addition, it is very difficult to litigate or defend matters involving pre-existing conditions since the determinations made by insurers are the result of objective information gathering – either claimants received treatment or took prescribed medications within the pre-existing period or they didn’t. Insurers will request copies of all patient treatment notes to determine if treatment was received and for what time period.

Virtually there are only two legitimate reasons to challenge pre-existing conditions; 1) on those occasions when claims specialists miscalculate the pre-existing period, and frankly this doesn’t happen very often, and/or 2) when employers change insurers and include “continuity of coverage” provisions in their Plans so that former employees are exempted from pre-existing investigations.

Claims specialists are not well trained in understanding “continuity of coverage” and often conduct inaccurate reviews as a result. The process of pre-existing review with continuity of coverage provisions should include a determination whether insureds are “pre-existing” under the new policy first, followed by an additional review to determine whether employees are “pre-existing” under the old policy.

Recently hired employees found to be “pre-existing” under both policies will be denied. However, most employees, although found to be “pre-existing” under the new policy, are not “pre-existing” under the old, therefore there would be no need for a pre-existing condition investigation. It’s very important for insureds to be aware of “continuity of coverage” provisions and its relevancy to pre-existing condition determinations. Many disability claims handlers will not know how to manage continuity of coverage issues resulting in untimely delays paying claims.

Disability Income Replacement policies often cause more complex problems when the incontestability clause comes into conflict with the policy’s pre-existing condition and “first manifest” provisions.

Thankfully, these are not issues faced by claimants participating in their employer’s group Plans since there are no provisions in group policies for “incontestability” and “first manifest” although it is assumed that compensable sickness or injury must have occurred after employees became enrolled in their employers’ Plan.