In our last post we shared a few features that can give your employee benefits plan a competitive edge, including critical illness coverage and long-term disability. Both of these employee benefits include a pre-existing condition clause, but a lot of people don’t necessarily know or understand how this works.
Read on to learn all about pre-existing condition clauses, the length of time associated with a clause, and differences between how the clause works whether it’s a long-term disability or critical illness insurance component of your employee benefits plan.
1. How Pre-Existing Condition Clauses Work
A pre-existing condition clause essentially states that certain coverage may not be applicable for a person if they had a medical condition that started before enrollment in their employee benefits plan. This means that if a person applies for a certain type of coverage, the carrier will launch an investigation to determine if the requested coverage is related to an illness that was pre-existing.
Investigation usually includes a request to see doctor’s records so the carrier can determine if there was any kind of indication that a particular condition might be present. If the carrier determines that it was a pre-existing condition, they may decline coverage. What’s important to understand is that every carrier is different, so the definition and timeframes related to a pre-existing condition will vary depending on the type of coverage.
2. Long-Term Disability Clause: 12 Months/ 90 days
Long-term disability coverage typically includes a pre-existing condition clause which is effective in the first 12 months from the effective date of enrollment in an employee benefits plan. If a person applies for long-term disability coverage, the carrier will only investigate their medical records for the 90 days prior to their effective date on the plan. Through the course of investigation, if the carrier finds that the disability claim is completely unrelated to a pre-existing condition, a person could still receive the benefit.
The pre-existing condition clause expires after a person has had insurance for 12 months. If someone were to apply for long-term disability after that period of time, there would be no investigation by the carrier into whether the claim might be related to a pre-existing condition. The same applies if a person tests for something more than 90 days prior to enrollment in the plan.
3. Critical Illness Pre-Existing Condition Clause: 24 Months
There are some key differences between how the pre-existing condition clause works with critical illness coverage compared to long-term disability. While the investigation process is the same as long-term disability, the pre-existing condition timeframe for critical illness coverage is 24 months.
A claim for Critical illness in the first 24 months of being insured will be investigated for a pre existing condition. The period of time they investigate medical records is the 24 months just prior to being effective on the plan. Because critical illnesses tend to take a longer time to diagnose, the length of time a person might be running tests and seeing their doctor is generally longer. By comparison, long-term disability claims are more straight-forward as they usually come up in response to a specific event that prevents a person from being able to work. The pre-existing condition clause for critical illness coverage is more complicated as carriers tend to have unique specifications around certain illnesses that need to be met in order for coverage to go through.
When it comes to pre-existing condition clauses, keep in mind that every carrier is different. The 12-month clause for long-term disability and 24-month clause for critical illness are both fairly standard but there are often carrier-specific details related to each clause that you should be aware of. Contact us to get the full scoop.