Lapse in Coverage By Becoming Disabled From a Pre-Existing Condition at a New Job?

Question

In the US, most job-based health insurance plans include a stipulation which references the pre-existing condition exclusion period:

The time period during which a health plan won't pay for care relating to a pre-existing condition. Under a job-based plan, this cannot exceed 12 months for a regular enrollee or 18 months for a late-enrollee.

Am I correct in seeing a gap in coverage by interpreting the statement literally? If someone with a pre-existing condition were to become employed under such a plan, and the condition manifests such to render them disabled within a year of their employment, would they be legally not entitled to coverage by such a plan?

I have found some other references related to this but that link confuses me even more because it implies that insurance will not pay out at all if the claimant had a pre-existing condition from any time before the effective date that later renders them disabled.

Broadly, am I missing some other factor that would provide some relief to the claimant, like the expectation that previous insurance has paid out based on the diagnosis of a condition that would be considered pre-existing at a new insurer? Fortunately this is only an academic question, and I just don't know very much about how serious illness or injury is handled.

I am merely interested in broad strategies about how this would be handled in favor of the claimant, or if this is a known "defect" in the healthcare system.

Answer 1

Yes, you are missing the key concept of continuous coverage. Basically, if you have continuous insurance coverage, the pre-existing limits do not apply.

Prior to the Affordable Care Act (Obamacare), the Health Insurance Portability and Accountability Act dictated limits for pre-existing conditions. As your link states, pre-existing conditions could be excluded for 12 or 18 months. However, the exclusion period is reduced by creditable coverage, as long as there wasn't a "significant break" (defined as 63 days). Thus, if you were properly covered in prior jobs, and used COBRA continuation coverage when necessary, then the exclusion period would normally be eliminated when changing jobs. The portability in HIPAA refers to this.

The Affordable Care Act changed this. Under ACA, preexisting condition exclusions were removed from individual plans, could not affect rates, and the maximum waiting period for new insurance became 90 days. To prevent adverse selection, it became mandatory for everybody to have insurance at all times, the individual mandate. Originally, the penalty for not having insurance was equal to the average price of basic (bronze-tier) individual insurance.

If you got insurance like you should, then you wouldn't have a waiting period when joining an employer plan, and if you left and e.g. became self-employed, you'd have continuous coverage prior to the individual plan.

You'll find the concept of continuous coverage in other forms of insurance. For example, an extended warranty on a computer or car may require you purchase the plan before the factory warranty expires. Auto insurance may also be significantly more expensive after a gap in coverage.