Beginning on your renewal in 2014, your employees may not wait longer than 90 days for insurance. The proposed rules are below, and there are some surprises… – Reeve
Under a health care reform 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 Technical Release 2012-01 and Technical Release 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 Health Care Reform).
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.
- requires the plan sponsor to
- Plan provisions may permit employees to make a self payment, or buy-in,
allowing the employees to satisfy any otherwise permissible
- 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
- 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.