Health Care Reform and Excessive Waiting Periods
The National Legal & Research Group (NLRG) has received many questions about the prohibition on excessive waiting periods under the health care reform law. A frequent question has been whether the employer can continue to offer certain health plan options with waiting periods longer than 90 days if it offers at least one option with a waiting period that does not exceed 90 days.
Under the Patient Protection and Affordable Care Act (PPACA), group health plans may not require a waiting period that exceeds 90 days before coverage is effective for employees and dependents who are otherwise eligible for the plan. The prohibition on excessive waiting periods applies to group health plans and insurers but not to certain “excepted benefits” (e.g., most dental or vision coverage and most health flexible spending accounts). A waiting period is defined as 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 plan can still have other eligibility requirements, such as being in an eligible job classification or achieving job-related licensure requirements specified in the plan’s terms, unless the condition is designed to avoid compliance with the 90-day waiting period limitation. The 90-day waiting period limit, which applies to both grandfathered and non-grandfathered plans, is effective for plans years beginning on or after January 1, 2014.
In March 2013, the federal agencies (Departments of Labor, Health and Human Services and Treasury) responsible for implementing PPACA released proposed regulations addressing the 90- day waiting period limit for group health plans. The proposed regulations generally follow the guidance provided in Internal Revenue Service Notice 2012-59 that was issued in August 2012. Plans may follow either the earlier guidance or the proposed regulations through at least the end of 2014.
Highlights of the proposed regulations include the following:
- While the regulations prohibit plans from requiring eligible participants and beneficiaries from having to wait more than 90 days for their coverage to become effective, they do not require plan sponsors to offer coverage to any particular employee or class of employees. A waiting period does not include the time before an employee or dependent enrolls as a late enrollee or special enrollee. Existing HIPAA regulations govern the effective dates of coverage for special enrollment.
- The waiting period must not extend beyond 90 days (the plan may not make the coverage effective date later than the 91st day) and all calendar days are counted beginning on the enrollment date, including weekends and holidays. The enrollment date is defined as the first day of the waiting period. When applying waiting periods to variable-hour employees for whom a specified number of hours worked is a condition for plan eligibility, the proposed regulations explain that “if a group health plan conditions eligibility on an employee regularly having a specified number of hours of service 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 of no more than 12 months that 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, so long as coverage for a variable-hour employee is made effective within 13 months of an employee’s start date, the eligibility criteria will not be viewed as a means of thwarting the 90-day waiting period limitation.
- If a group health plan conditions eligibility on any employee (part-time or full-time) having to complete a number of cumulative hours of service, the eligibility condition is not considered to be designed to avoid compliance with the 90-day waiting period limitation if the cumulative hours-of-service requirement does not exceed 1,200 hours. The waiting period must begin once the new employee satisfies the plan’s cumulative hours-of-service requirement and may not exceed 90 days. The proposed regulations further provide that this provision is intended to be a one-time eligibility requirement.
As the prohibition on excessive waiting periods applies to all group health plans, it would not be permissible for an employer to offer any health care options (other than those that are deemed to be excepted benefits) with waiting periods in excess of 90 days. Employers will want to review their current waiting periods and amend as necessary to ensure that waiting periods for eligible individuals do not extend beyond 90 days as of the requirement’s effective date.
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