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Disability Ins Problem


Guest Zephyr
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I do some work in benefits, so a friend approached me for advice about a situation. I'm hoping that some others may have ideas as well! Friend's husband had a medical condition that resulted in him receiving short term disability through his employer last year. Shortly after returning to work, his company was bought out by another company (Husband has remained in the same position throughout this ordeal). Several months later, New Company decided to consolidate benefits and moved all Old Company employees to New Company benefits, including STD. Husband then had a recurrence of medical condition and filed for STD. His claims was denied as pre-existing because New Company's policy states that it doesn't cover pre-existing conditions until the employee has been covered by the policy for 12 months. Based on initial conversations with me, Friend and Husband requested SPD, plan document, and any minutes, records, or resolutions during the company sale related to benefits. The company sent a certificate of insurance and the generic communication materials sent to employees (neither of which comply with ERISA SPD content requirements). They declined to send any corporate records; however, they recently told Friend that the broker was to have processed the benefits as a transfer and not a new group. So, now what? The insurance company is following the terms of the policy, the employer is not keen to get involved with the insurance company's decision, and I'm not sure how to help Friend and Husband from here--any thoughts? :(

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I have been involved in a few similar situations and have some thoughts, but not any concrete answers.

I doubt you will get any of the information/documents pertaining to the sale. You should be able to get copies of the plan documents, both the old plan and the new plan.

The statement about "the broker was to have processed the benefits as a transfer and not a new group" is strange. Hard for me to imagine that an employer would be so clueless that they were not able to realize that a new carrier/plan was installed.

Whether there is a new carrier or not, a pre-ex does sound strange also. (I do not know all the details and particulars about your friends contract, state of issue, etc. so I cannot make a judgement) But let's assume that the employer was clueless about the introduction of a new carrier. Most carriers will usually waive the pre-ex for existing employees, even in a situation where a employer merges employees within a new company.

Again, I cannot make any concrete statements about this, but it does feel strange to me. You may need an attorney to get involved.

Good luck.

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Here's what I would do.....

Get SPD for old plan, look up appeal section. Write detailed appeal based on old SPD since that is the only one you have to use . Send it to plan administrator for new plan be sure to get a return receipt. Include a request of copy of new SPD with appeal letter.

Wait and see what happens. If you don't get SPD or a response to your appeal in 30 days it would be time to find legal help.

JanetM CPA, MBA

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Have they tried contacting the Broker who was supposed to process it as a transfer? I would attempt to get them involved and find out how this was supposed to work. We changed STD carriers just over a year ago, and both of our plans also have 12 month pre-ex conditions, but if you were covered under the prior plan for 12 months, it is waived, except for a no loss/no gain provision.

Was there possibly a question on the claim form about having prior insurance?

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As suggested file an appeal using the procedure etc in the old SPD.

Make written request (Return Receipt Requested) for the new SPD.

File an appeal against the denial under the new policy. The claims denial should have contained the Appeal procedure to be followed. If not, make a written request (RRR) for the appeal procedure. Also request a look at the Plan Document (not the STD Master policy).

In the meantime check your state law regarding continuation of coverage (state version of HIPAA) and pre-ex in group health plans. I think that if you were issued new coverage under new terms, pre-ex should have been waived, or might be required to be waived under state law. This is almost certain if this is group coverage but is also applicable under individual coverage. There is also the question of the Certificate of Creditable Coverage which should have been issued if the old policy was terminated. There could also be questions regarding state requirements for Replacement of Insurance Coverage and Notice of Termination of Coverage.

As far as I remember, but I have not looked it up, HIPAA also requires that the pre-ex be waived.

I would also contact the agent, it seems that he/she might have to intervene to protect themself, if you eventually file reports with the state Dept of Insurance and DoL.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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Thanks for the responses so far. I too have normally seen pre-ex waived for employees in this situation, but I can't find where it's required. Because this a disability and not a health policy, HIPAA isn't a factor. The denial did have the appropriate appeal language, but I would like to have more to go on for an appeal than just "It's standard practice". My understanding is that the broker has essentially said "Whoops, well this is what the policy says now, move along." Also, for clarification, there is no SPD or plan document. I don't expect there ever was. As with many insured disability plans, I think everyone involved figures the certificate is all that's needed. The Old Company's plan is terminated and New Company is with a different disability carrier, so I'm not sure how an appeal under the old policy would help.

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Disability Insurance IS a health plan (actually an accident or health plan) just like major mediacal is.

While DI might be exempted from HIPAA it might not be exempted under your state version.

Your DI policy most likely is state Dept of Insurance regulated and has to meet state law requirements including those regarding pre-existing conditions. That is where you find what is required for pre-existing conditions. Also as I pointed out before there are state law required procedures that are required to be followed for cancellation, termination and replacement of coverage, that most likely are applicable in this situation.

Making assumptions about what state insurance law requires serves you no purpose, find out what both the law and the actual contract state. The Certificate of Coverage is not enough.

You said that this DI was provided through your employer. Why then would it not be subject to ERISA and required to have an SPD? How would an employer have a plan to provide a benefit and have no Plan Document? It is not the DI Policy that has the SPD and the Plan Document it is the employer's plan that has them. It does not matter what everyone figures nor whether it is insured or not, it matters what the law actually requires.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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The disability insurance is provided through Husband's employer and the certificate says that it is intended to be governed by ERISA, but that's as far as they go. I am well aware of the requirements for ERISA plans, however, that does not mean that this employer or insurance company are actually following them. So yes, Friend can make a stink about the fact that they are not in compliance with the documentary requirements of ERISA, on the other hand, they just really need the STD money. Friend has called the state DOI and was told that there was nothing they could do.

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The response given by any state DoI is dependent on what information is given, How it is explained and most of all by the level that the responder is at. Speaking to a telephone customer service rep. will usually get no meaningfull response. I do not know to whom your Friend spoke nor do I know what was said.

All that I can tell you is that I have been a licensed insurance agent for 20 years and have sold mainly group plans including group STD. I am licensed in Florida and a few other states. I have enrolled thousands into STD programs and I have replaced the coverage of many groups and had my coverage replaced by others.

As a result I have had and seen many complaints against me and others. Your Friend's situation is not uncommon in the world of supplemental STD. What I told you was not speculation. It is what has solved many cases.

That they did not follow ERISA is what can be used against them, NOT what you should accept.

That they did not follow state rules is what can be used against them, NOT what you should accept.

It was not suggested that your Friend make a stink to the insurance company or the employer or the plan. It was suggested that your friend make a stink to those who enforce the laws. It is a simple procedure to find out what the law requires the agent to do in replacing your Friend's coverage and to report any violations of law.

It is entirely up to you and your Friend to either bark at the moon or to use the regulators to sole a simple problem.

Good luck.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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