CHA News Article

IRS Issues Final Rule on ACA’s Employer-Sponsored Health Insurance ‘Waiting Period’

Last month, the Internal Revenue Service issued a final rule interpreting the Affordable Care Act’s (ACA) requirement prohibiting group health plans from imposing a waiting period that exceeds 90 days from the date a full-time employee becomes eligible for coverage. This federal rule is already in effect but was enforced through draft guidance. It is important to remember, however, that in 2012, California passed AB 1083 (Chapter 852), which established a shorter, 60-day maximum waiting period on group health insurance policies and HMO contracts, effective Jan. 1, 2014.

While there was some debate over the interpretation and application of AB 1083, the Department of Managed Health Care (DMHC) has taken the position that the time period effectively shortens the employer’s waiting period, as well as the plans’ waiting periods, and that it applies to all group health plans. More information is available on the DMHC’s website.

This year, Sen. Monning has introduced SB 1034, which would eliminate the state provision limiting the group health plan 60-day waiting period. The CalChamber is also seeking language that would make it explicit that plans would be subject to the ACA 90-day waiting period. Given the dynamic nature of this issue, hospitals should monitor SB 1034 and consult with benefits counsel.

The IRS final rule also contains other provisions with varied effective dates. For example, the rule establishes a 1,200-hour cap on the period of time an individual is required to work before becoming eligible for employer-sponsored insurance. That provision is effective April 25, 2014.

Hospitals should review their plan terms and benefit policies to ensure compliance with the new rules. A copy of the IRS rule is attached.