|March 21, 2014|
Previously published on March 18, 2014
On February 24, 2014, the Internal Revenue Service (IRS), the Employee Benefits Security Administration (EBSA) of the U.S. Department of Labor (DOL), and the U.S. Department of Health and Human Services (HHS) jointly released final regulations implementing the 90-day waiting period limitation required by the Patient Protection and Affordable Care Act (PPACA).
The new final regulations are substantially similar to proposed regulations released in 2013, and provide that group health plans or issuers of group health insurance cannot require individuals, who are otherwise eligible for a plan, to wait longer than 90 calendar days before becoming eligible for plan benefits. Specifically, the final regulations define “waiting period” as the period that must pass before coverage can become effective for an individual who is otherwise eligible to enroll in the plan. A plan may impose a waiting period of less than 90 days, or may decline to impose a waiting period at all.
Plans are subject to the 90-day waiting period limitation effective on the first day of the plan year beginning on or after January 1, 2014. Plans may comply with either the 2013 proposed regulations or the final regulations through the end of the 2014 plan year. The final regulations are effective for plan years beginning on or after January 1, 2015.
Substantive Eligibility Conditions
Previously, the 2013 proposed regulations provided that a plan could impose substantive eligibility conditions such as being in an eligible job classification or achieving job-related licensure requirements. The final regulations also allow a plan to require that an individual complete a reasonable and bona fide employment-based orientation period. Separately published proposed regulations describe circumstances under which the duration of an orientation period would be reasonable or bona fide. In general, the maximum length of such an orientation period will be one calendar month, less one calendar day, measured from the start date of an employee in a position which is otherwise eligible for health coverage.
Coordination with Employer Shared Responsibility
The final regulations provide for coordination with initial measurement period rules in the Employer Shared Responsibility regulations. In cases where a plan imposes a requirement that a participant perform a certain number of hours of service per period to be eligible for coverage, and it cannot be determined that a newly-hired employee is reasonably expected to regularly work that number of hours, the final regulations allow a plan to use an initial measurement period of up to 12 months to determine whether an employee will meet such an hour requirement. The 12-month period begins on any date between the employee’s start date and the first day of the first calendar month following the employee’s start date. Generally, such a measurement period will not be considered to be designed to avoid compliance with the waiting period rules if the employee’s coverage is effective no later than 13 months from his start date, plus the time remaining until the first day of the next calendar month (but only in situations in which the employee’s start date is not the first day of a month).
Cumulative Service Requirements
Plans may also impose cumulative service requirements. The final rules state that a cumulative hours of service requirement will not be considered to be designed to avoid the waiting period rules if the cumulative hours of service do not exceed 1,200 hours.
The final regulations allow a plan to treat a rehired former employee as newly eligible for coverage and thus may require the employee to satisfy the waiting period again. The final regulations state that such a requirement must be reasonable and must not be used to avoid compliance with the 90-day waiting period rule. Similarly, an employee who transfers to a job classification that is not eligible for coverage, and later is reassigned to a job classification which is eligible for coverage, may be required to satisfy a waiting period.
HIPAA Conforming Changes
Finally, the final regulations confirm that certificates of creditable coverage issued in accordance with the Health Insurance Portability and Accountability Act of 1996 (HIPAA) will no longer be required, effective December 31, 2014. The final regulations also provide for changes to examples in the HIPAA portability rules that reflect the impact of the PPACA.
As previously explained, the final regulations generally adopt the scope of the 2013 proposed regulations. However, the establishment of orientation periods gives employers added flexibility in structuring their group health plan enrollment processes.