The Pre-Existing Condition Clause Trap!

Imagine you have just been offered a great premium for your practice’s group locum and you are just about to switch providers . Just before you do you notice something in the small print called a ‘pre-existing condition clause’. Most companies now cover themselves with a pre-existing condition clause. This usually means that regardless of who is covered if they have been off work for 5-10 days (varies on provider) for a ‘pre-existing condition’ then they are not covered for a set period of time.

Now initially this doesn’t seem too bad (depending on time scales) but then let’s consider that recently a competitor has released a policy with a THREE year pre-existing condition clause! However what if you have a bunch of really healthy Doctors and Professionals who haven’t been off for the last 3 years? What does it matter then? Well it does, and it’s something I call the pre-existing ‘spin cycle’. Let me ask a question, who are the most expensive people to cover for?  I believe it is the individuals who are off with a recurring condition. This could be stress, back or even something like a trapped nerve. Those pesky reoccurring illness’s that just won’t go away and makes it challenging for a practice manager to cover as you never know when they are going to strike! To illustrate my point let’s look at this example:

Policy taken out on 1st Jan 2012 with a 3 year pre-existing condition clause. Dr A goes off in February 2012 with stress and returns April 2012. Practice is paid roughly 4 weeks absence (assuming policy has a 4 week deferment

(Assuming the policy is kept at renewal)

Jan 2013 (condition not covered as occurrence happened 8 months ago)

Jan 2014 (condition not covered as occurrence happened 20 months ago)

Jan 2015 (condition not covered as occurrence happened 32 months ago)

Jan 2016 (assuming no further absence underwriter may cover condition)

That’s 4 years without cover assuming you remain with the same provider! FOUR years. Something also to consider here is that it is very hard sometimes to switch to another provider if you have a professional off with a recurring illness.

The moral of this story is simple. Check the timescale of your pre-existing condition clause. A reasonable time scale is a maximum 12 months. Anything else puts your practices finances at risk.

Regards

Chris Dixon BSc (Hones) Dip PFs

Director Approachable Finance Medical and GPlocuminsurance.com