| (a) Subject to the conditions set forth in subsection (b) of this section, a policy subject to this subchapter may contain provisions limiting or denying coverage based on the existence of a preexisting condition or conditions. "Preexisting condition" may not be defined to be more restrictive than the following: Preexisting condition means the existence of symptoms which would cause an ordinarily prudent person to seek diagnosis, care or treatment within a five year period preceding the effective date of the coverage of the insured person or a condition for which medical advice or treatment was recommended by a physician or received from a physician within a five year period preceding the effective date of the coverage of the insured person. This does not prohibit an insurer, using an application form designed to ask questions concerning the health or medical history of a prospective insured and on the basis of the answers on that application, from fully underwriting in
accordance with that insurer's established standards. It does, however, prohibit an insurer that elects to use a simplified application from reducing or denying a claim on the basis of the existence of a preexisting condition that is defined more restrictively than above. (b) In regards to individual hospital, medical or surgical coverage: (1) no preexisting condition provision shall apply to an individual who was continuously covered for an aggregate period of 18 months by creditable coverage (as defined in §3.3002 of this title (relating to Definitions)) that was in effect up to a date not more than 63 days before the effective date of the coverage, excluding any waiting period, and whose most recent creditable coverage was under a group health plan, governmental plan or church plan, as such plans are defined in §3.3002 of this title. (2) In determining whether a preexisting condition provision applies to an
individual whose most recent creditable coverage was under a group health plan, governmental plan or church plan, but who does not have aggregate creditable coverage totaling 18 months, the insurer shall credit the time the individual was previously covered under creditable coverage if the previous coverage was in effect at any time during the 18 months preceding: (A) the first day coverage is effective, if there is not a waiting period; or (B) the day that the individual files a substantially complete application for coverage, if there is a waiting period. (3) When determining the applicability of preexisting condition provisions in accordance with paragraphs (1) and (2) of this subsection, an insurer of individual hospital, medical or surgical coverage shall comply with required notices, disclosures and other applicable provisions of Chapter 21, Subchapter K of this title (relating to Certification of Creditable
Coverage). (4) The application of paragraphs (1) and (2) of this subsection are demonstrated by the following examples: (A) Individual A: Not subject to any preexisting condition limitation: (i) Relevant insurance history: Individual A was covered under an individual policy for 12 months beginning on January 1, 1996, through December 31, 1996, followed by a gap in coverage of 58 days until February 28, 1997. Individual A then was covered under a group health plan beginning on March 1, 1997, for six months through August 30, 1997, followed by a gap in coverage of 61 days until October 31, 1997. (ii) Present coverage: Individual A applies for individual hospital, medical and surgical coverage on November 1, 1997, and the insurer issues the coverage on December 1, 1997. (iii) Applicability of preexisting condition prohibited: Pursuant to paragraph (1) of this subsection, the insurer
offering the individual hospital, medical and surgical coverage cannot apply any preexisting condition provision to Individual A because: A's most recent past creditable coverage was under a group health plan; A has 18 months of creditable coverage--six months under the group plan and 12 months under the previous individual plan--up to a date not more than 63 days from the effective date of the coverage (excluding the one-month waiting period); and there were no significant breaks--i.e., more than 63 days--in the 18 months of creditable coverage. (B) Individual B: Subject to preexisting condition provision: (i) Relevant insurance history: Individual B had coverage under a group health plan for 12 months beginning on January 1, 1996, through December 31, 1996, followed by a gap in coverage of 58 days until February 28, 1997. Individual B then was covered under an individual health insurance policy beginning on March 1, 1997, for six months
through August 30, 1997, followed by a gap in coverage of 61 days until October 31, 1997. (ii) Present coverage: Individual B applies for a policy offering individual hospital, medical and surgical coverage on November 1, 1997, and is issued coverage on December 1, 1997. (iii) No exemption from preexisting condition provisions: Under paragraph (1) of this subsection, the insurer offering the individual hospital, medical and surgical coverage can fully apply any preexisting condition provision to Individual B, because B's most recent coverage was under an individual health plan, rather than a group health plan, governmental plan or church plan. Unless an insured's most recent creditable coverage was under a group health plan, governmental plan or church plan, the insurer is not required to take into account any of the insured's past creditable coverage under either paragraphs (1) or (2) of this subsection.
(C) Individual C: Twelve-month credit against preexisting condition period: (i) Relevant insurance history: Individual C was covered under an individual health insurance policy for 18 months beginning January 1, 1996, through June 30, 1997, followed by a four-month gap in coverage from July 1, 1997, to October 31, 1997. On November 1, 1997, Individual C was covered under a group health plan for three months, through January 31, 1998, followed by a two-month gap in coverage. (ii) Present coverage: Individual C applies for a policy offering individual hospital, medical and surgical coverage on March 1, 1998, and is issued coverage on June 1, 1998. (iii) Twelve-month credit applied: Individual C's most recent creditable coverage was under a group health plan, so the insurer must perform a creditable coverage analysis. However, C is not eligible to be exempt from a preexisting condition provision under
paragraph (1) of this subsection, because of the significant break (four months) in C's creditable coverage. Under paragraph (2) of this subsection, an insurer must then total up the creditable coverage in the 18 months preceding the effective date of the policy, excluding the waiting period. Because the waiting period in this scenario is three months, the insurer essentially must look back to the start of the waiting period--i.e., the application date of March 1, 1998--and count back 18 months from there. In the 18 months between September 1, 1996, and March 1, 1998, Individual C had total of 12 months creditable coverage--nine months from September 1, 1996, to June 1, 1997, and three months from October 1, 1997, to January 31, 1998. Accordingly, the insurer must credit 12 months against any preexisting condition period. (D) Individual D: Six months credit against preexisting condition period: (i) Relevant insurance history: After being
uninsured for a number of years, Individual D was covered under a governmental plan from March 1, 1997, to September 30, 1997, followed by a 31-day gap in coverage. (ii) Present coverage: Individual D applies for a policy offering individual hospital, medical and surgical coverage on November 1, 1997, and is issued coverage on December 1, 1997. (iii) Six-month credit applied: Individual D's most recent creditable coverage was under a governmental plan, so the insurer must perform a creditable coverage analysis. However, D is not eligible to be exempt from a preexisting condition provision under paragraph (1) of this subsection, because D has no other past coverage that could count towards an 18-month aggregate total of creditable coverage. Under paragraph (2) of this subsection, an insurer must give Individual D a six-month credit against any preexisting condition period.
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