Proposed Rules Implement 90-day Waiting Period Limit under the ACA

Practical Law Legal Update 4-525-2707 (Approx. 5 pages)

Proposed Rules Implement 90-day Waiting Period Limit under the ACA

by PLC Employee Benefits & Executive Compensation

90-day Waiting Period

Under an ACA rule that takes effect in 2014, group health plans and insurers are prohibited from applying waiting periods that exceed 90 days. The proposed regulations, which build on DOL DOL Technical Releases 2012-01 and 2012-02, define a waiting period as the period of time that must pass before coverage for an employee or dependent who is otherwise eligible under the plan terms can become effective (see Legal Update, Guidance Addresses 90-day Waiting Period, Full-time Employees for Employer Mandate: 90-day Waiting Period).

The proposed regulations implement this 90-day waiting period limit, which generally applies:

For plan years beginning on or after January 1, 2014.
Both to grandfathered and non-grandfathered group health plans and insurers offering group health insurance coverage (see Practice Note, Grandfathered Health Plans Under the ACA).

Under the proposed regulations, eligibility conditions based solely on the lapse of time cannot be more than 90 days. However, other eligibility conditions under governing plan terms are generally allowed unless designed to avoid compliance with the 90-day waiting period limit. For example, according to the Departments, plan provisions are substantive eligibility conditions that do not trigger the 90-day waiting period limit if they base eligibility on whether an employee is:

Meeting certain sales goals.
Earning a specified level of commission.

The proposed regulations also address how waiting periods apply to variable-hour employees when a specified number of hours of service per period is a plan eligibility condition. In this situation, if it cannot be determined that a newly-hired employee is reasonably expected to work the specified number of hours, the plan can take a reasonable period of time to determine whether the employee satisfies the plan's eligibility condition. This may include a measurement period of not more than 12 months beginning on any date between:

The employee's start date.
The first day of the first calendar month following the employee's start date.

Also, the proposed regulations clarify that:

Insurers can rely on eligibility information reported to them by employers or other plan sponsors, and will not be considered to violate the waiting period limit if the insurer:
- requires the plan sponsor to make a representation about the terms of any eligibility conditions or waiting periods imposed by the plan sponsor before an individual is eligible for coverage under the plan terms;
- requires the plan sponsor to update its representation to reflect any changes; and
- has no specific knowledge of imposition of a waiting period that exceeds 90-days.
Plan provisions may permit employees to make a self-payment, or buy-in, allowing the employees to satisfy any otherwise permissible hours-of-service requirements.
Being "otherwise eligible" to enroll in a plan means having met the plan's substantive eligibility conditions (for example, being in an eligible job classification or achieving job-related licensure requirements specified in a plan's terms).
The waiting period cannot extend beyond 90 days, and all calendar days are counted beginning on an employee's enrollment date, including weekends and holidays. If the 91st day is a weekend or holiday, a plan or insurer can allow coverage to be effective earlier than the 91st day, for administrative convenience. However, the effective date of the coverage cannot be later than the 91st day.

The proposed regulations permit an extended coverage effective date for group health plans that condition eligibility on an employee's regularly working a specified number of hours (or working full-time) where it cannot be determined if a newly hired employee is reasonably expected to work the required number of hours each period (or work full-time). Under the proposed regulations, the 90-day waiting period must begin when the new employee satisfies the plan's hours-of-service requirement, which can only be applied once to each individual employee.

Other Regulatory Changes

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

2004 HIPAA regulations to remove provisions superseded by the ACA's prohibition on preexisting conditions and its implementing regulations.
Examples in other regulations to conform to changes made under the ACA, including the elimination of lifetime and annual limits and the provisions governing dependent coverage of children up to age 26 (see Practice Notes, Lifetime Limits, Annual Limits, and Essential Health Benefits Under the ACA and Coverage for Adult Children to Age 26 Under the ACA).

The regulations also clarify that multi-state plans will be subject to the federal external review process under the ACA (see Practice Note, External Review Under the ACA). The Departments noted that they interpret the external review process to apply to all plans not subject to a state's external review process.

Practical Impact

The clarification regarding communications between plans and insurers about the 90-day limit on waiting periods will be welcome news to insurers, who must often rely on employers for information regarding whether individuals are eligible for coverage and may, in some cases, lack full knowledge of plan terms.

Proposed Rules Implement 90-day Waiting Period Limit under the ACA | Practical Law