Original Article from United Benefit Advisors
By Lisa deFilippis
The Patient Protection and Affordable Care Act (“PPACA”) prohibits group health plans from requiring a waiting period of longer than 90 days following the date that the plan’s eligibility requirements are met. The Proposed Regulations on the 90-day waiting period were jointly issued by the Departments of Treasury, Labor, and Health and Human Services on March 18, 2013 (“Proposed Regulations”) http://www.gpo.gov/fdsys/pkg/FR-2013-03-21/pdf/2013-06454.pdf. The Proposed Regulations also clarify that due to PPACA’s prohibition on pre-existing condition exclusions effective for plan years beginning in 2014, group health plans will no longer be required to provide the Certificates of Creditable Coverage mandated under the Health Insurance Portability and Accountability Act (“HIPAA”) after December 31, 2014.
The Proposed Regulations state that the definition of waiting period used in the 2004 HIPAA regulations will continue to apply; therefore, waiting period means “the period that must pass before coverage for an employee or dependent who is otherwise eligible to enroll under the terms of a group health plan can become effective.”
The Proposed Regulations can be relied upon at least until the end of 2014.
What plans must comply?
All health insurance issuers and group health plans, including large and small groups, fully insured, self-insured, grandfathered and non- grandfathered. In addition, the Proposed Regulations provide that where coverage under a group health plan is insured by an insurance issuer, the issuer may rely on eligibility information reported to it by the employer or other sponsor.
What is the 90-day waiting period requirement?
Employees and dependents who otherwise meet the plan’s eligibility rules under a group health plan cannot be required to wait for longer than 90 days before coverage becomes effective. The 90-day waiting period includes weekends and holidays, and the Proposed Regulations do not provide an exception for waiting periods of 3 months (which typically would exceed 90 days by 2-3 days). In addition, the Proposed Regulations provide that if an employee’s 90-day period ends mid-month and the plan enrolls participants as of the first of the month, the waiting period must be adjusted so that it does not exceed 90 days (either by providing for mid-month enrollments, or a shorter waiting period).
The 90-day waiting period requirement will not be violated if the employee does not complete enrollment within the 90-day waiting period, as long as coverage was made available during that period.
When is the 90-day requirement effective?
The 90-day waiting period requirement applies to all group health plans for plan years beginning on or after January 1, 2014. So, a non-calendar year plan has until the first day of the plan year in 2014 to comply.
Special rules and a trap for the unwary
Plans can continue to impose conditions that have the effect of delaying eligibility for health coverage as long as they are not designed to circumvent the 90-day requirement. If the plan imposes eligibility conditions, the waiting period would not begin until the eligibility conditions are satisfied. For example, a plan can condition eligibility on completing training or licensure requirements, being in a particular job classification, or on working a certain number of hours in a period. The Proposed Regulations provide that plans conditioning eligibility on working full-time or a certain number of hours in a period may use a measurement period to determine whether an employee (including a variable hour or seasonal employee) meets eligibility requirements.
Caution. Employer plans that are subject to the employer shared responsibility mandate need to be aware that the 90-day waiting period Proposed Regulations provide more flexibility than the proposed regulations on employer shared responsibility. Large employer plans must align both sets of rules to ensure that new employees who are expected to work over 30 hours per week are offered coverage under the employer’s plan within 3 months of their hire date. A large employer could be in full compliance with the 90-day waiting period rule and still be subject to shared responsibility penalties if the group health plan conditioned eligibility on a job classification, or other eligibility condition, and a new full-time employee who did not meet the eligibility condition was not offered coverage within 3 months of his date of hire.
What are the penalties for failure to comply with 90-day waiting period requirement?
Group health plans that do not comply with the 90-day waiting period requirement face penalties of up to $100 per day per affected individual, in addition to potential penalties under ERISA and the PHSA.
What actions should be taken to comply with the proposed regulations?
1. Review and amend plan documents and enrollment materials to ensure that the 90-day waiting period is not exceeded;
2. For large employers, coordinate 90- day waiting period with employer shared responsibility rules;
3. Effective December 31, 2014, discontinue process of providing Certificates of Creditable Coverage.