March 2014 – The U.S.
Department of Labor (DOL), Treasury, and Health and Human Services recently
published final regulations for the implementation of a
90-day limit on waiting periods for employee health coverage. The full
DOL News Release can be found
here.
We’ve created a brief
summary of these new guidelines to help you understand the changes and who they
affect:
Who: Employers, as they prepare to comply with group health plan
mandates
What:
- Clarification of the definition of a “waiting
period,” and what individuals are eligible
- The law prevents a waiting period that exceeds
90 days after an employee becomes eligible for health coverage (employers may
choose a shorter waiting period, or no waiting period)
When: 2014 Group Health Plan renewal periods
Some key provisions
of the new regulations include:
Waiting Period: “A period that must pass before coverage for
an employee or dependent that is otherwise eligible to enroll under the terms
of a group health plan can become effective.” Being considered “otherwise
eligible” to enroll in a plan means having met the plan’s substantive eligibility conditions. These conditions include
being in an eligible job classification, achieving licensure requirements
specified in the plan’s terms, or satisfying a reasonable and bona fide
employment-based orientation period.
Bona-Fide
Employment-Based Orientation: The
final regulations do not address the duration an employer may use for a “reasonable
or bona fide” orientation period. However, proposed regulations have been
introduced limiting this timeframe to one month. The measurement of a month
seems to be convoluted, but we expect this rule to stick with a 30-day
limitation.
Cumulative
Hours-of-Service: Plan Sponsors can make
eligibility contingent upon a 1,200-hour-cumulative-hours-of-service rule. This
means an employee must first meet the specific number of cumulative hours set
within Plan Documents before their waiting period begins (which may not exceed
90 days, as outlined above).
Certificate of
Coverage (COC): Carriers and Plan Sponsors
will be required to provide COCs to terminated employees through December 31,
2014. This applies to all plans, because
some plans may not be subject to the pre-existing conditions rule in 2014,
based on the group plan renewal date.
Potential Landmines: Language within the guidance reads: “Eligibility
Conditions based solely on the lapse of a time period are not permissible
beyond 90 days. Other conditions of eligibility
under a group health plan are generally allowed, unless the condition is
designed to avoid compliance with the 90-day waiting period limitation.” In order to illustrate that an employer is not
implementing any of the aforementioned “Substantive Eligibility Conditions”
strictly to avoid the 90-day waiting period limitation, it would be a wise
decision for employers to use these rules for ALL employment related benefits,
such as vacation accrual, PTO, and 401k plan participation.
When these rules become effective, (upon 2014 plan renewal)
any employee wait period cannot exceed 90 days, even if it began prior to the
employer’s 2014 plan renewal.
For questions related to your
renewal or how these requirements affect your heath coverage offerings, contact me.
