Proposed regulations implementing the 90-day waiting period

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Provided by Larry Grudzien, JD

March 24, 2013 On March 18, 2013, the Departments of Labor, Health and Human Services and Treasury (the “Departments”) issued proposed regulations implementing the 90-day waiting period limit under health care reform. The regulations also amend existing regulations, including those relating to preexisting condition limits and other HIPAA portability provisions, to reflect changes made by health care reform.

90-Day Waiting Period Requirement – Background

Effective as of plan years beginning on or after January 1, 2014, group health plans and insurers are prohibited from applying a waiting period that exceeds 90 days, as provided in PHSA Section 2708, as added by PPACA, Pub. L. No. 111-148, Section 1201 (2010).

Who Must Comply?

The prohibition on excessive waiting periods applies to group health plans and insurers (as defined by applicable provisions of the PHSA, ERISA, or the Code) but not to certain “excepted benefits,” as provided by PHSA Section 2708, as added by PPACA, Pub. L. No. 111-148, Section 1201 (2010).

Unlike the employer mandate provisions, the prohibition on excessive waiting periods applies to all group health plans (and insurers) regardless of the size of the employer/plan sponsor.

What Is a Waiting Period?

In IRS Notice 2012-59; DOL Tech. Rel. 2012-02; HHS: Guidance on 90-DayWaiting Period Limitation PHSA § 2708, the Departments issued substantially identical guidance on what initially will be considered compliance with the prohibition on excessive waiting periods for coverage.

In that guidance, a waiting period was defined as the period of time that must pass before coverage for an employee or dependent who is otherwise eligible to enroll under the terms of the plan can become effective. For this purpose, being eligible for coverage means having met the plan’s substantive eligibility conditions (such as being in an eligible job classification or achieving job-related licensure requirements specified in the plan’s terms).

In the guidance, the Departments also indicated that eligibility conditions that are based solely on the lapse of a time period are permissible for no more than 90 days. Other conditions for eligibility under the terms of a group health plan are generally permissible unless the condition is designed to avoid compliance with the 90-day waiting period limitation. Furthermore, if, under the terms of a plan, an employee may elect coverage that would begin on a date that does not exceed the 90-day waiting period limitation, the 90-day waiting period limitation is considered satisfied. Accordingly, a plan or insurer will not be considered to have violated the excessive waiting period prohibition merely because employees take additional time to elect coverage.

Application to Part-Time and Variable Hour Employees.

If a plan conditions eligibility on an employee regularly working a specified number of hours per period (or working full-time), and it cannot be determined that a newly hired employee is reasonably expected to regularly work that number of hours per period (or work full-time), the plan may take a reasonable period of time to determine whether the employee meets the plan’s eligibility condition, which may include a measurement period that is consistent with the timeframe used for purposes of the employer mandate provisions.

In general, a period will be considered reasonable if coverage is effective no later than 13 months from the employee’s start date, plus, if applicable, the time remaining until the first day of the next calendar month. In general, a period will be considered reasonable if coverage is effective no later than 13 months from the employee’s start date, plus, if applicable, the time remaining until the first day of the next calendar month. Where cumulative hours of service are required for eligibility, up to 1,200 hours may be required; more than 1,200 hours would be considered designed to avoid compliance with the 90-day waiting period limitation.

The Proposed Regulations

The proposed rule follows the guidance in IRS Notice 2012-59; DOL Tech. Rel. 2012-02; HHS: Guidance on 90-Day Waiting Period Limitation PHSA § 2708 on the waiting period requirement and contains no surprises. Conditions based solely on the lapse of a time period before an employee or dependent becomes eligible for group health coverage cannot exceed 90 days. This requirement is absolute – the period cannot be extended past 90 days because the 90th day falls on a weekend or holiday and is not synonymous with three months. The prohibition does not mean, however, that an employee cannot take more than 90 days to sign up for coverage, as long as the employee could have begun coverage after 90 days. If an employee or dependent enrolls as a late enrollee or during a special enrollment period, the period before enrollment is not a waiting period.

The running of the 90-day waiting period may be delayed until a cumulative hours-of-service requirement has been met. The preamble notes that the 90-day limit does not bar hour-banking arrangements in multi-employer plans or buy-in arrangements where employees may pay part of the cost of insurance when they do not have enough hours in a pay period to qualify for full coverage. Insurers may rely on representations of employers as to eligibility information provided by employers as long as they have no specific knowledge that a waiting period in excess of 90 days is being imposed.

Other Changes

The proposed regulations also update existing regulations to conform to changes made by health care reform. Specifically, the proposed regulations amend:

  • 2004 HIPAA regulations to remove provisions superseded by health care reform’s prohibition on preexisting conditions and its implementing regulations.
  • Examples in other regulations to conform to changes made under health care reform, including the elimination of lifetime and annual limits and the provisions governing dependent coverage of children up to age 26.

The proposed regulations also clarify that multi-state plans will be subject to the federal external review process under health care reform. For a copy of the proposed regulations, please click on the link below: http://www.gpo.gov/fdsys/pkg/FR-2013-03-21/pdf/2013-06454.pdf