Guidance released on 90-day waiting period for health coverage

On March 21, 2013, the U.S. Departments of Health and Human Services, Labor, and Treasury published proposed regulations to implement the 90-day waiting period limitation required by the Patient Protection and Affordable Care Act (ACA) for grandfathered and non-grandfathered group health plans and insurance. The proposed rule, which when published in final form would be effective for plan years beginning in 2014, is generally consistent with the agencies’ guidance (IRS Notice 2012-59) published in August 2012 and modifies existing requirements such as preexisting condition limitations.

The agencies indicate that group health plans and health insurance issuers may rely on the proposed rule at least through the end of 2014, just as they may on the August 2012 guidance.

The ACA prohibits a group health plan or health insurance issuer offering group health coverage from applying any waiting period longer than 90 days for an individual to be covered for benefits. One plan eligibility requirement that multiemployer health plans frequently apply is the cumulative hours-of-service requirement. The newly published proposed rule includes several clarifications regarding this:

• If a group health plan conditions eligibility on any employee’s (part-time or full-time) having completed a number of “cumulative hours of service,” the plan will not be deemed as designed to avoid compliance with the 90-day waiting period limitation if the cumulative hours of service does not exceed 1,200 hours
• A plan’s waiting period must begin once the employee satisfies the cumulative service requirement and cannot exceed 90 days
• The same individual must not be subject to multiple eligibility requirements annually (i.e., this provision is designed to be a one-time eligibility requirement)
• Other conditions for eligibility (i.e., those that are not based solely on the lapse of a time period, such as compensation) are generally permissible unless the condition is designed to avoid compliance with the 90-day waiting period limitation

The proposed rule does not include a “three month” replacement for the 90-day requirement nor grant plan sponsors the ability to provide coverage effective the first of the month after 90 days. The regulators stated that because the ACA specifies 90 days, they did not have the flexibility to modify the waiting period, and all calendar days—including weekends and holidays—are counted beginning on the individual’s enrollment date.

The proposed rule also provides another clarification of interest to multiemployer plan sponsors: Plans with “hour banks” or eligibility provisions that allow workers to bank excess hours from one measurement period and draw down those hours in another to prevent lapses in coverage are permitted to allow participants to make a “self-payment” or “buy in” to satisfy any otherwise permissible hours-of-service requirement.

The proposed rule also would amend ACA regulations already in effect, as well as those that will become effective beginning in 2014. For example, it makes conforming amendments to the preexisting condition limitations and other portability provisions under HIPAA, as well as to some implementing regulations because they have become moot or need revisions because of the ACA’s new market reform protections. Under the proposed rule, a technical amendment eliminates the need for plan sponsors to provide HIPAA certificates of creditable coverage beginning on December 31, 2014.

For more information about the federal agencies’ announcement, please contact your Milliman consultant.

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