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Regulation and Compliance > Federal Regulation

Feds draft group plan waiting period, exclusion regs

By Allison Bell

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Federal regulators are trying to keep employers from using long coverage waiting periods to thwart Patient Protection and Affordable Care Act (PPACA) group coverage access expansion goals.

Regulators also are trying to keep employers from coming up with clever ways to disguise coverage limits created to violate PPACA antidiscrimination rules by.

The regulators have included efforts to achieve those goals in a new batch of draft regulations, “Ninety-Day Waiting Period Limitation and Technical Amendments to Certain Health  Coverage Requirements Under the Affordable Care Act” (CMS-9952-P, RIN 1210-AB56).

The agencies that developed the regulations are Internal Revenue Service (IRS), an arm of the U.S. Treasury Department; the Employee Benefits Security Administration (EBSA), an arm of the U.S. Labor Department; and the U.S. Department of Health and Human Services (HHS).

The PPACA pay-or-play provisions, which are officially known as the  “employer shared responsibility provisions,” will require large and midsize employers to choose between providing health coverage for full-time employees or paying a penalty.

Employers will not have to offer coverage to any employees, but a coverage access section that’s separate from the play-or-play provision will require employers that do offer major medical coverage to limit any waiting periods that occur before coverage begins to 90 or fewer days.

The PPACA waiting period limit rules are now expressed in Public Health Service Act (PHS Act) Section 2708; Employee Retirement Income Security Act (ERISA) Section 7010(b)(4); and Internal Revenue Code (IRC) Section 9801(b)(4).

In the proposed regulations, officials have tried to answer questions employers have asked about treatment of employees with unusual work schedules.

Officials said in the preamble to the regulations that the proposed regulations should help employers that use unusual but “substantive” indicators when determining whether workers are eligible for benefits.

Employer plan provisions that base eligibility for health coverage “on whether an employee is, for example, meeting certain sales goals or earning a  certain level of commission, are generally substantive eligibility provisions that do not trigger the  90-day waiting period limitation,” officials said. “Some plan eligibility provisions, such as whether an employee  has a specified number of hours of service per period (such as 30 hours per week or 250 hours  per quarter) necessarily require the passage of time in order to determine whether the plan’s substantive eligibility provision has been met.”

If an employer is not sure whether a new employee will work enough hours to qualify for coverage, “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,” officials said.

Officials also proposed regulations implementing PPACA provisions that prohibit plans from imposing restrictions on group plan coverage for pre-existing conditions and plan provisions that discriminate against enrollees with expensive health problems.

Officials have included many examples in the text of the regulations.

One example given is a group plan that tries to exclude benefits for a prosthesis, such as a worker’s artificial leg, if the body part was lost before the effective date of coverage.

The artificial leg coverage exclusion “is a preexisting condition exclusion because it  operates to exclude benefits for a condition based on the fact that the condition was present  before the effective date of coverage under the policy,” officials said.

Similarly, if a plan tried to exclude coverage for cosmetic surgery needed due to an injury that occurred before an individual joined a plan, officials would view that as a pre-existing condition exclusion provision, officials said.

The proposed regulations are set to appear in the Federal Register Thursday.

Comments on the proposed regulations will be due 60 days after the official Federal Register publication date.

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