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Barriers to Entitlement Pre-Existing Exclusions

Almost all group LTD policies contain pre-existing condition exclusions. The claimants rarely understand that they face such exclusions, and they certainly rarely understand how they operate. Because pre-existing condition exclusions do not usually operate during a STD claim, when it is raised once the claim becomes LTD, it creates a great deal of confusion, disappointment and anger.

The rationale behind the pre-ex clauses seems to be focused on the fact that group LTD policies are very rarely underwritten on an individual employee basis and therefore insurers aren’t given the opportunity to assess the risk of new employees who may have a significant health history that could result in them becoming disabled within a short period of time after qualifying to be covered under the group benefit plan. The rationale seems less viable in situations where a medical form has been completed in order to obtain coverage beyond the non-evidence limit. In such cases, employees complete a medical form and once scrutinized are either approved or not for a higher coverage amount. Non-evidence limits are still not all that common-place, but as new group business is being written, this method of limiting exposure is becoming increasingly popular in order to contain the premium cost of such plans. There often seems to be a failure of the agent or broker in completely understanding their obligations in making sure that employees know about the requirements to qualify for coverage beyond the non-evidence limit, but that is properly the subject of a different presentation or paper.

In the context of mental health disability claims, the pre-existing condition exclusion presents some unique challenges. The specific wording of the exclusion will be significant in predicting how effective such clauses are to bar certain claims. It is not unusual for people suffering from depression and other mental health problems to have had similar problems in the past. Mental health conditions are frequently recurring although not always disabling. The key factor in overcoming this exclusion is being able to establish a difference in any pre-disability claim condition to the symptoms that have now resulted in the disability claim. Of course, this is not always possible from a medical perspective, but in the murky area of mental health conditions, what was before can often be separated from what is now. There is no simplicity in mental health conditions, such as might be the case with other health conditions. For instance, it would arguably be easier to establish the applicability of a pre-existing condition exclusion for someone suffering a recurrent form of cancer or a heart condition than in the mental health area.