Introduction. The responsible government agencies-namely the Internal Revenue Service, the Department of Labor and the Department of Health and Human Services-have jointly issued proposed regulations, which implement the 90-day waiting period limitation for group health plans. This limitation is found in section 2708 of the Public Health Service Act, as added by Affordable Care Act and as incorporated into ERISA and the Internal Revenue Code. The statutory limitation becomes effective for plan years beginning on or after January 1, 2014, so employers should start thinking about it now. The proposed regulations would likewise apply for plan years beginning on or after January 1, 2014. Employers may rely on the proposed regulations until at least the end of 2014. If final regulations or other guidance with respect to the 90-day waiting period limitation is more restrictive on group health plans than the proposed regulations, then the final regulations or other guidance will not be effective prior to January 1, 2015.
Rules in the Proposed Regulations.
In General. In sum, the regulations propose that a group health plan may not apply any waiting period that exceeds 90 days. A plan is not required to have any waiting period. If, under the terms of the plan, an employee can elect coverage that becomes effective on a date that does not exceed the 90-day waiting period limitation, the coverage complies with the waiting period rules, and a violation does not occur merely because individuals choose to elect coverage after the end of the 90-day waiting period.
Definition. Under the proposed regulations, “waiting period” would be 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. If an employee or dependent enrolls as a late enrollee or special enrollee, any period before such late or special enrollment is not a waiting period. Being “otherwise eligible to enroll in a plan” means having met the plan’s substantive eligibility conditions (such as being in an eligible job classification or achieving job-related licensure requirements specified in the plan’s terms).
Counting Days. Under the proposed regulations, the waiting period may not extend beyond 90 days, and all calendar days are counted beginning on the enrollment date, including weekends and holidays. The “enrollment date”‘ is the first day of the waiting period. That first day is generally the day on which the employee satisfies enrollment requirements. If the 91st day falls on a weekend or holiday, the plan may choose to permit coverage to be effective earlier than the 91st day, for administrative convenience, but the plan may not make the effective date of coverage later than the 91st day.
IMPORTANT POINT: 3 months are NOT the same as 90 days.
Certain Eligibility Conditions. Under these proposed regulations, eligibility conditions that are based solely on the lapse of a time period would be permissible for no more than 90 days. Other conditions for eligibility are permissible, unless the condition is designed to avoid compliance with the 90-day waiting period limitation. The proposed regulations have special rules for variable hour employees. 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 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 plan’s waiting period must begin once a new employee satisfies the plan’s cumulative hours-of-service requirement, and may not exceed 90 days. The proposed regulations do not prohibit plan procedures permitting self-payment (or buy-in), in lieu of actually working hours, to satisfy any otherwise permissible hours-of-service requirement.