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March, 26, 2013
Agencies Propose Regulations on 90-day Waiting Period Limit and Elimination of HIPAA Certificates
On March 21, 2013, the DOL, HHS and IRS published in theFederal Register a joint set of proposed regulations implementing the PPACA requirement that group health plans and health insurance issuers offering group health insurance cannot apply a waiting period that exceeds 90 days. The proposed regulations make the rules regarding 90-day waiting periods consistent with previously issued regulations implementing the employer mandate (also known as the “pay or play penalty”).
The proposed regulations define a waiting period as the period that must pass before coverage can become effective for an employee or dependent who’s otherwise eligible under the terms of the group health plan. Plan sponsors are allowed to impose substantive eligibility requirements (i.e., full-time employment) for coverage without restriction. However, waiting periods based solely on the passage of time cannot exceed 90 days. This means coverage for otherwise eligible employees and dependents must become effective on the 91st day.
Note that no extension is permitted in the event that the commencement of coverage is tied to the first day of the month. Thus, in that case, the waiting period cannot be extended to the first day of the month following the completion of a 90-day wait. Plans may still require the completion of a specified number of hours to become eligible for health coverage. The proposed regulations indicate that the specified number of hours cannot exceed 1,200 and can only be imposed on a one-time (as opposed to an annual) basis.
In addition, the proposed regulations provide some flexibility regarding variable-hour provisions for new employees. In these circumstances, the plan sponsor may apply a measurement period of up to 12 months to determine whether the new variable-hour employee satisfies the eligibility conditions. The proposed regulations explain that the plan will not violate the 90-day waiting period requirement for this limited subset of employees if coverage is effective no later than 13 months from the employee's start date, plus the time remaining until the first day of the following month if the employee started midmonth.
The proposed regulations also include several changes to conform existing regulations to other PPACA provisions. First, the proposed regulations make changes to the pre-existing condition (PEC) limitations and other portability provisions of HIPAA. The regulations would amend HIPAA to remove provisions superseded by PPACA’s prohibition on PECs. This includes eliminating the need to provide HIPAA certificates of creditable coverage. The proposed amendment to eliminate the requirement to issue a certificate of creditable coverage is proposed to apply Dec. 31, 2014 (as opposed to Jan. 1, 2014, when the prohibition on PECs takes effect). This delayed effective date is so that individuals needing to offset a PEC exclusion under a plan that operates with a plan year beginning later than Jan. 1 would still have access to the certificate for proof of coverage. Second, the regulations propose updating certain examples in other regulatory provisions — for example, to reflect the prohibition on annual and lifetime dollar limits and the provision of coverage to dependent children until age 26. Lastly, the regulations propose clarifying that a multistate plan must comply with PPACA’s federal external review process.
Federal Health Exchange Application Available
On Jan. 25, 2013, CMS released the application that will be used by individuals to apply for health insurance coverage through federally facilitated exchanges in 2014. These applications, which will be used beginning with the initial open enrollment on Oct. 1, 2013, will collect financial and demographic information. This information will be used to determine whether an individual is eligible to purchase health care coverage through the exchange, and whether the person further qualifies for a premium tax credit. Individuals will be able to submit applications online, through the mail, over the phone or in person.
In addition to paper applications, many individuals applying for affordability programs and for insurance through the exchange will apply online. CMS also released a draft list of all possible questions that could be asked in an online application. There is also information about two video demonstrations of the online application.
Please note that the paper application for health insurance (and cost assistance) contains a draft template of an employer coverage form to assist individuals with gathering the requested information on employer-sponsored coverage from their employers.
Agencies Extend Transition Period for State External Review Process
On March 15, 2013, the DOL, HHS and IRS jointly released Technical Release 2013-01. The guidance provides relief to health insurers offering non-grandfathered fully insured plans and non-grandfathered self-insured non-ERISA plans in states working to bring their external review processes into compliance with National Association of Insurance Commissioners (NAIC) standards.
Previous guidance provided a grace period until Jan. 1, 2014, for these non-grandfathered plans to provide an external review process using either the state’s process or the federal process. Typically, self-insured ERISA plans would use the federal process. Self-insured non-ERISA plans (e.g., plans sponsored by municipalities, county governments, public school systems), as well as fully insured plans, would typically use the state’s process. However, because some states either did not have external review processes in place or did not use an external review process that provided the level of protections required in the NAIC Uniform Health Carrier External Review Model Act (known as the “NAIC-parallel process”), there was concern as to whether such plans would be in compliance by Jan. 1, 2014. In June 2011, the agencies provided for a transition period where a state could use a process that meets temporary standards, (known as the “NAIC-similar process”), if the states did not have an NAIC-parallel process in place.
The additional transition relief now provides that insurers and self-insured non-ERISA plans will be treated as complying with the external review requirements if they follow a state process that meets the temporary NAIC-similar process standards, a less burdensome process than the NAIC-parallel process. Such plans may utilize the transition relief until Jan. 1, 2016, but if a state still does not adopt the NAIC-parallel process standards by that date, the plans will be required to use the federally administered external review process.
The guidance ends with clarification that the agencies intend to issue additional guidance on state external review standards, incorporating comments received. The transition relief in Technical Release 2013-01 should be relied upon for guidance until this additional guidance is released.
Corrections to the Employer Mandate Guidance
On March 15, 2013, the IRS printed in theFederal Register four corrections to the original employer mandate guidance, which was issued on Dec. 28, 2012 (and published in theFederal Register on Jan. 2, 2013). The corrections make several minor changes to the employer mandate guidance (also known as the “pay or play penalty” or “shared responsibility requirement”).
While the corrections seem minor, they provide much-needed clarification where, in two cases, an incorrect cross-referencing citation was provided. Another correction replaces language applicable to the transition relief for fiscal plan years (non-calendar-year plans) so that the word “member” is deleted. The deletion of the word “member” is vital because there was concern that the transition relief only applied to members of a controlled group, instead of all applicable large employers subject to the employer mandate guidance.
The final correction was lengthier, and applies to applicable large employer members who are required to make contributions to a multiemployer plan under a collective bargaining agreement, with respect to some or all of its employees. The IRS provided replacement text that is more easily understood and also corrects one citation (the definition of “affordable”). The correction adds a new sentence, which clarifies that such plans may also utilize the transition relief with respect to offers of coverage to dependents.
