Section 2708 of the Public Health Service Act (PHSA), as added by PPACA, prohibits group health plans and health insurance issuers offering group health insurance coverage from applying any waiting period that exceeds 90 days, effective beginning in 2014. (The restriction also is incorporated by reference into ERISA and the Internal Revenue Code (Code).) It is not yet clear how this restriction will apply with respect to eligibility period requirements imposed on newly hired employees, but pre-PPACA guidance under the HIPAA rules and a recent IRS Notice suggest that future guidance could allow the continued use of certain eligibility period requirements.
Section 2704(b)(4) of the PHSA (and identical definitions in the Code and ERISA) defines the term “waiting period” to mean “with respect to a group health plan and an individual who is a potential participant or beneficiary in the plan, the period that must pass with respect to the individual before the individual is eligible to be covered for benefits under the terms of the plan.” Joint final regulations issued by the Departments of Treasury, Labor, and Health and Human Services (the “Agencies”) under the HIPAA rules define the term “waiting period” 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 Agencies have not yet issued guidance regarding the PPACA waiting period limitation, but IRS Notice 2011-36 requests comments on the waiting period limitation and sheds some light on how the Agencies may apply it in future guidance. Among other things, the Notice asks for comments on which employees are subject to the limitation, when a waiting period may apply consistent with the PPACA limitation, and how the 90-day limit should be calculated. It also requests comments on the application of the waiting period limitation to common employer eligibility and enrollment practices and the interaction between the waiting period limitation and PPACA employer mandate requirements. With respect to newly hired employees, it requests comments on the following scenarios:
Employees becoming eligible to enroll in the employer’s plan after completing a service-based “probationary” period of from 3 to 6 months;
Part-time employees who are offered coverage, but only after having worked for a period longer than 90 days; and
mployees becoming eligible to enroll when they are determined to have worked an average of a certain number of hours during a look-back period, with a 90-day waiting period being applied beginning once the employee is determined to be eligible to enroll.
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Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C. She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare. She represents employers designing health plans as well as insurers designing new products. Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.
Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm’s Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.
PLEASE NOTE: This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.