| (a) All health benefit plans that provide coverage
for small employers and their employees must comply with the following
requirements.
(1) A small employer carrier may not exclude any eligible
employee or dependent (including a late enrollee who would otherwise
be covered under a small employer health benefit plan), except to
the extent permitted under Insurance Code §1501.156 (concerning
Employee Enrollment; Waiting Period).
(2) A small employer carrier may not limit or exclude
(by use of rider, amendment, or other provision of the plan, applicable
to a specific individual) coverage by type of illness, treatment,
medical condition, or accident, except for preexisting conditions
or diseases or an affiliation period, as permitted under Insurance
Code Chapter 1501 (concerning Health Insurance Portability and Availability
Act).
(3) A preexisting condition provision in a small employer
health benefit plan may not apply to expenses incurred on or after
the expiration of the 12 months following the effective date of coverage
of the enrollee or late enrollee, except as authorized by paragraph
(9)(B) of this subsection.
(4) A small employer health benefit plan may not limit
or exclude initial coverage of a newborn child of a covered employee.
Any coverage of a newborn child of an employee under this subsection
terminates on the 32nd day after the date of the birth of the child
unless notification of the birth and any required additional premium
are received by the small employer carrier not later than the 31st
day after the date of birth. A small employer carrier must not terminate
coverage of a newborn child if the carrier's billing cycle does not
coincide with this 31-day premium payment requirement, until the next
billing cycle has occurred and there has been nonpayment of the additional
required premium, within 30 days of the due date of the premium.
(5) A small employer health benefit plan may not limit
or exclude initial coverage of an adopted child of an insured. An
adopted child of an insured may be enrolled, at the option of the
insured, within either:
(A) 31 days after the insured is a party in a suit
for adoption; or
(B) 31 days of the date the adoption is final.
(6) Coverage of an adopted child of an insured under
paragraph (5) of this subsection terminates unless notification of
the adoption and any required additional premium are received by the
small employer carrier not later than either:
(A) the 31st day after the insured becomes a party
in a suit in which the adoption of the child by the insured is sought;
or
(B) the 31st day after the date of the adoption. A
small employer carrier may not terminate coverage of an adopted child
if the carrier's billing cycle does not coincide with this 31-day
premium payment requirement, until the next billing cycle has occurred
and there has been nonpayment of the additional required premium,
within 30 days of the due date of the premium.
(7) For purposes of paragraphs (4) and (6) of this
subsection, "received by the small employer within a specified period"
means that the item(s) must be either received or postmarked by the
specified period.
(8) If a newborn or adopted child is enrolled in a
health benefit plan or other creditable coverage within the periods
specified in paragraph (4) or (5) of this subsection, and subsequently
enrolls in another health benefit plan without a significant break
in coverage, the other plan may not impose any preexisting condition
exclusion or affiliation period with regard to the child. If a newborn
or adopted child is not enrolled within the periods specified in paragraph
(4) or (5) of this subsection, then in accordance with paragraph (9)
of this subsection, the newborn or adopted child may be considered
a late enrollee or excluded from coverage until the next open enrollment
period.
(9) A small employer carrier must choose one of the
methods set forth in subparagraph (A) or (B) of this paragraph for
handling requests for enrollment as a late enrollee in any health
benefit plan subject to this subchapter. The small employer carrier
must use the same method for all small employer health benefit plans.
(A) The eligible employee or dependent may be excluded
from coverage and any application for coverage rejected until the
next annual open enrollment period and, once enrolled, may be subject
to a 12-month preexisting condition provision or, in the case of an
HMO, may be subject to a 60-day affiliation provision, as described
by Insurance Code §§1501.102 - 1501.104 (concerning Preexisting
Condition Provision; Treatment of Certain Conditions as Preexisting
Prohibited; and Affiliation Period).
(B) The eligible employee or dependent's application
may be accepted immediately and the employee or dependent enrolled
as a late enrollee during the plan year. If so enrolled, the preexisting
condition provision imposed for a late enrollee may not exceed 18
months or, in the case of an HMO, the affiliation period may not exceed
90 days from the date of the late enrollee's application for coverage.
(C) The provisions of subparagraphs (A) and (B) of
this paragraph do not apply to eligible employees or dependents under
the special circumstances listed as exceptions under the definition
of late enrollee in §26.4 of this title (relating to Definitions).
(D) Examples for applying subparagraphs (A) and (B)
of this paragraph, in the case of both insurers and HMOs: Individual
A requests coverage on October 1, 2014, after the enrollment period
of July 1, 2014, through July 31, 2014, has ended. The next annual
open enrollment period is July 1, 2015, through July 31, 2015. The
effective date of coverage for persons enrolling during an open enrollment
period is the beginning of the plan year, which is September 1 of
each year.
(i) If the carrier is an insurer and has elected to
exclude all applicants requesting late enrollment until the next open
enrollment period, Individual A must reapply for coverage in July
2015 and the carrier may apply up to a 12-month preexisting condition
period from the effective date of coverage, and as with any other
enrollee, the preexisting condition period would begin on September
1, 2015, and expire on September 1, 2016.
(ii) If the carrier is an insurer and has elected to
accept applications for late enrollment immediately and enroll the
applicant during the plan year, the carrier may apply up to an 18-month
preexisting condition period from the date of application. If Individual
A applied for coverage on October 1, 2014, the preexisting condition
period would begin on that date and expire on April 1, 2016.
(iii) If the carrier is an HMO and has elected to exclude
all applicants requesting late enrollment until the next open enrollment
period, Individual A must reapply for coverage in July 2015, and the
carrier may apply up to a 60-day affiliation period, as with any other
enrollee.
(iv) If the carrier is an HMO and has elected to accept
applications for late enrollment immediately and enroll the applicant
during the plan year, the carrier may apply up to a 90-day affiliation
period from the day Individual A applied for coverage.
(10) A preexisting condition provision in a small employer
health benefit plan may not apply to coverage for a disease or condition
other than a disease or condition for which medical advice, diagnosis,
care, or treatment was recommended or received from an individual
licensed to provide the services under state law and operating within
the scope of practice authorized by state law during the six months
before the effective date of coverage.
(11) A small employer carrier may not treat genetic
information as a preexisting condition described by Insurance Code
§1501.002 (concerning Definitions) in the absence of a diagnosis
of the condition related to the information.
(12) A small employer carrier may not treat a pregnancy
as a preexisting condition described in Insurance Code §1501.002.
(13) A preexisting condition provision in a small employer
health benefit plan does not apply to an individual who was continuously
covered for an aggregate period of 12 months under creditable coverage
that was in effect up to a date not more than 63 days before the effective
date of coverage under the small employer health benefit plan, excluding
any waiting period under the previous coverage. For example, Individual
A has coverage under an individual policy for six months beginning
on May 1, 2014, through October 31, 2014, followed by a gap in coverage
of 61 days until December 31, 2014. Individual A is covered under
an individual health plan beginning on January 1, 2015, for six months
through June 30, 2015, followed by a gap in coverage of 62 days until
August 31, 2015. Individual A's effective date of coverage under a
small employer health benefit plan is September 1, 2015. Individual
A has 12 months of creditable coverage and would not be subject to
a preexisting condition exclusion under the small employer health
benefit plan.
(14) In determining whether a preexisting condition
provision applies to an individual covered by a small employer health
benefit plan, the small employer carrier must credit the time the
individual was covered under creditable coverage if the previous coverage
was in effect at any time during the 12 months preceding the effective
date of coverage under a small employer health benefit plan. Any waiting
period that applied before that coverage became effective also must
be credited against the preexisting condition provision period. For
instance, Individual B is covered under an individual health insurance
policy for 18 months beginning May 1, 2014, through November 30, 2015,
followed by a four-month gap in coverage from December 1, 2015, to
March 31, 2016. On April 1, 2016, Individual B is covered under a
group health plan for three months through June 30, 2016, followed
by a two-month gap in coverage until August 31, 2016. Individual B's
coverage became effective on September 1, 2016. Under this example,
since there was a significant break in coverage, to determine the
length of creditable coverage, the small employer carrier counts the
creditable coverage the individual had for the 12-month period preceding
the effective date of the individual's coverage under the small employer
health benefit plan. Individual B has creditable coverage of six months
and the issuer of the small employer health benefit plan may impose
a preexisting condition limitation for six months on Individual B.
(15) A small employer may establish a waiting period
in accordance with Insurance Code §1501.156. On completion of
the waiting period and enrollment within the time frame allowed by
§26.7(h) of this title (relating to Requirement to Insure Entire
Groups), coverage must be effective no later than the next premium
due date. Coverage may be effective at an earlier date as agreed between
the small employer and the small employer carrier.
(16) An HMO may impose an affiliation period in accordance
with Insurance Code §1501.104, if the period is applied uniformly
without regard to any health-status-related factor. The affiliation
period may not exceed two months for an enrollee, other than a late
enrollee, and may not exceed 90 days for a late enrollee. An affiliation
period under a plan must run concurrently with any applicable waiting
period under the plan. An HMO may not impose any preexisting condition
limitation, except for an affiliation period.
(17) The imposition of an affiliation period by an
HMO does not preclude application of any applicable waiting period
as determined by the employer for all new entrants under a health
benefit plan.
(18) An affiliation period provision in a small employer
health benefit plan does not apply to an individual who would not
be subject to a preexisting condition limitation in accordance with
paragraphs (12) and (13) of this subsection.
(b) To determine if preexisting conditions exist, a
small employer carrier must ascertain the source of previous or existing
coverage of each eligible employee or dependent at the time the employee
or dependent initially enrolls into the health benefit plan provided
by the small employer carrier. The small employer carrier has the
responsibility to contact the source of the previous or existing coverage
to resolve any questions about the benefits or limitations related
to that coverage in the absence of a creditable coverage certification
form.
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