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Example 1.(i) Facts. Individual A has creditable coverage under Employer P's plan for 18 months before coverage ceases. A is provided a certificate of creditable coverage on A's last day of coverage. Sixty-four days after the last date of coverage under P's plan, A is hired by Employer Q and enrolls in Q's group health plan. Q's plan has a 12-month preexisting condition exclusion.(ii) Conclusion. In this Example 1, A has a break in coverage of 63 days. Because A's break in coverage is a significant break in coverage, Q's plan may disregard A's prior coverage and A may be subject to a 12-month preexisting condition exclusion.
Example 1.
(i) Facts. Individual A has creditable coverage under Employer P's plan for 18 months before coverage ceases. A is provided a certificate of creditable coverage on A's last day of coverage. Sixty-four days after the last date of coverage under P's plan, A is hired by Employer Q and enrolls in Q's group health plan. Q's plan has a 12-month preexisting condition exclusion.
(ii) Conclusion. In this Example 1, A has a break in coverage of 63 days. Because A's break in coverage is a significant break in coverage, Q's plan may disregard A's prior coverage and A may be subject to a 12-month preexisting condition exclusion.
Example 2.(i) Facts. Same facts as Example 1, except that A is hired by Q and enrolls in Q's plan on the 63rd day after the last date of coverage under P's plan.(ii) Conclusion. In this Example 2, A has a break in coverage of 62 days. Because A's break in coverage is not a significant break in coverage, Q's plan must count A's prior creditable coverage for purposes of reducing the plan's preexisting condition exclusion period that applies to A.
Example 2.
(i) Facts. Same facts as Example 1, except that A is hired by Q and enrolls in Q's plan on the 63rd day after the last date of coverage under P's plan.
(ii) Conclusion. In this Example 2, A has a break in coverage of 62 days. Because A's break in coverage is not a significant break in coverage, Q's plan must count A's prior creditable coverage for purposes of reducing the plan's preexisting condition exclusion period that applies to A.
Example 3.(i) Facts. Same facts as Example 1, except that Q's plan provides benefits through an insurance policy that, as required by applicable State insurance laws, defines a significant break in coverage as 90 days.(ii) Conclusion. In this Example 3, under State law, the issuer that provides group health insurance coverage to Q's plan must count A's period of creditable coverage prior to the 63-day break. (However, if Q's plan was a self-insured plan, the coverage would not be subject to State law. Therefore, the health coverage would not be governed by the longer break rules and A's previous health coverage could be disregarded.)
Example 3.
(i) Facts. Same facts as Example 1, except that Q's plan provides benefits through an insurance policy that, as required by applicable State insurance laws, defines a significant break in coverage as 90 days.
(ii) Conclusion. In this Example 3, under State law, the issuer that provides group health insurance coverage to Q's plan must count A's period of creditable coverage prior to the 63-day break. (However, if Q's plan was a self-insured plan, the coverage would not be subject to State law. Therefore, the health coverage would not be governed by the longer break rules and A's previous health coverage could be disregarded.)
Example 4.[Reserved]
Example 4.
[Reserved]
Example 5.(i) Facts. Individual C has creditable coverage under Employer S's plan for 200 days before coverage ceases. C is provided a certificate of creditable coverage on C's last day of coverage. C then does not have any creditable coverage for 51 days before being hired by Employer T. T's plan has a 3-month waiting period. C works for T for 2 months and then terminates employment. Eleven days after terminating employment with T, C begins working for Employer U. U's plan has no waiting period, but has a 6-month preexisting condition exclusion.(ii) Conclusion. In this Example 5, C does not have a significant break in coverage because, after disregarding the waiting period under T's plan, C had only a 62-day break in coverage (51 days plus 11 days). Accordingly, C has 200 days of creditable coverage, and U's plan may not apply its 6-month preexisting condition exclusion with respect to C.
Example 5.
(i) Facts. Individual C has creditable coverage under Employer S's plan for 200 days before coverage ceases. C is provided a certificate of creditable coverage on C's last day of coverage. C then does not have any creditable coverage for 51 days before being hired by Employer T. T's plan has a 3-month waiting period. C works for T for 2 months and then terminates employment. Eleven days after terminating employment with T, C begins working for Employer U. U's plan has no waiting period, but has a 6-month preexisting condition exclusion.
(ii) Conclusion. In this Example 5, C does not have a significant break in coverage because, after disregarding the waiting period under T's plan, C had only a 62-day break in coverage (51 days plus 11 days). Accordingly, C has 200 days of creditable coverage, and U's plan may not apply its 6-month preexisting condition exclusion with respect to C.
Example 6.[Reserved]
Example 6.
Example 7.(i) Facts. Individual E has creditable coverage under Employer X's plan. E is provided a certificate of creditable coverage on E's last day of coverage. On the 63rd day without coverage, E submits a substantially complete application for a health insurance policy in the individual market. E's application is accepted and coverage is made effective 10 days later.(ii) Conclusion. In this Example 7, because E applied for the policy before the end of the 63rd day, the period between the date of application and the first day of coverage is a waiting period and no significant break in coverage occurred even though the actual period without coverage was 73 days.
Example 7.
(i) Facts. Individual E has creditable coverage under Employer X's plan. E is provided a certificate of creditable coverage on E's last day of coverage. On the 63rd day without coverage, E submits a substantially complete application for a health insurance policy in the individual market. E's application is accepted and coverage is made effective 10 days later.
(ii) Conclusion. In this Example 7, because E applied for the policy before the end of the 63rd day, the period between the date of application and the first day of coverage is a waiting period and no significant break in coverage occurred even though the actual period without coverage was 73 days.
Example 8.(i) Facts. Same facts as Example 7, except that E's application for a policy in the individual market is denied.(ii) Conclusion. In this Example 8, even though E did not obtain coverage following application, the period between the date of application and the date the coverage was denied is a waiting period. However, to avoid a significant break in coverage, no later than the day after the application for the policy is denied E would need to do one of the following: submit a substantially complete application for a different individual market policy; obtain coverage in the group market; or be in a waiting period for coverage in the group market.
Example 8.
(i) Facts. Same facts as Example 7, except that E's application for a policy in the individual market is denied.
(ii) Conclusion. In this Example 8, even though E did not obtain coverage following application, the period between the date of application and the date the coverage was denied is a waiting period. However, to avoid a significant break in coverage, no later than the day after the application for the policy is denied E would need to do one of the following: submit a substantially complete application for a different individual market policy; obtain coverage in the group market; or be in a waiting period for coverage in the group market.
Example.(i) Facts. Individual F has coverage under Group Health Plan Y from January 3, 1997 through March 25, 1997. F then becomes covered by Group Health Plan Z. F's enrollment date in Plan Z is May 1, 1997. Plan Z has a 12-month preexisting condition exclusion.(ii) Conclusion. In this Example, Plan Z may determine, in accordance with the rules prescribed in paragraphs (b)(2)(i), (ii), and (iii) of this section, that F has 82 days of creditable coverage (29 days in January, 28 days in February, and 25 days in March). Thus, the preexisting condition exclusion will no longer apply to F on February 8, 1998 (82 days before the 12-month anniversary of F's enrollment (May 1)). For administrative convenience, however, Plan Z may consider that the preexisting condition exclusion will no longer apply to F on the first day of the month (February 1).
Example.
(i) Facts. Individual F has coverage under Group Health Plan Y from January 3, 1997 through March 25, 1997. F then becomes covered by Group Health Plan Z. F's enrollment date in Plan Z is May 1, 1997. Plan Z has a 12-month preexisting condition exclusion.
(ii) Conclusion. In this Example, Plan Z may determine, in accordance with the rules prescribed in paragraphs (b)(2)(i), (ii), and (iii) of this section, that F has 82 days of creditable coverage (29 days in January, 28 days in February, and 25 days in March). Thus, the preexisting condition exclusion will no longer apply to F on February 8, 1998 (82 days before the 12-month anniversary of F's enrollment (May 1)). For administrative convenience, however, Plan Z may consider that the preexisting condition exclusion will no longer apply to F on the first day of the month (February 1).
Example.(i) Facts. Individual D enrolls in Employer V's plan on January 1, 2001. Coverage under the plan includes prescription drug benefits. On April 1, 2001, the plan ceases providing prescription drug benefits. D's employment with Employer V ends on January 1, 2002, after D was covered under Employer V's group health plan for 365 days. D enrolls in Employer Y's plan on February 1, 2002 (D's enrollment date). Employer Y's plan uses the alternative method of counting creditable coverage and imposes a 12-month preexisting condition exclusion on prescription drug benefits.(ii) Conclusion. In this Example, Employer Y's plan may impose a 275-day preexisting condition exclusion with respect to D for prescription drug benefits because D had 90 days of creditable coverage relating to prescription drug benefits within D's determination period.
(i) Facts. Individual D enrolls in Employer V's plan on January 1, 2001. Coverage under the plan includes prescription drug benefits. On April 1, 2001, the plan ceases providing prescription drug benefits. D's employment with Employer V ends on January 1, 2002, after D was covered under Employer V's group health plan for 365 days. D enrolls in Employer Y's plan on February 1, 2002 (D's enrollment date). Employer Y's plan uses the alternative method of counting creditable coverage and imposes a 12-month preexisting condition exclusion on prescription drug benefits.
(ii) Conclusion. In this Example, Employer Y's plan may impose a 275-day preexisting condition exclusion with respect to D for prescription drug benefits because D had 90 days of creditable coverage relating to prescription drug benefits within D's determination period.
Effective Date Note:
At 79 FR 10304, Feb. 24, 2014, § 54.9801-4 was amended by removing paragraphs (a)(3) and (c) and revising paragraph (b), effective Apr. 25, 2014. For the convenience of the user, the revised text is set forth as follows:
(b) Counting creditable coverage rules superseded by prohibition on preexisting condition exclusion. See section 2704 of the Public Health Service Act, incorporated into section 9815 of the Code, and its implementing regulations for rules prohibiting the imposition of a preexisting condition exclusion.
[T.D. 9166, 69 FR 78746, Dec. 30, 2004]
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