Second Opinions
year or $500,000. In the case of a multi-employer plan, the tax is levied upon
the plan itself. There is an exception for
small employers with between 2 and 50
employees.
ERISA/DoL: DoL may enforce the
coverage mandates against group health
plans by bringing a civil action to enjoin
a noncompliant act or practice or for
appropriate equitable relief under Part 7
of ERISA. ERISA also provides a private
cause of action by which participants,
beneficiaries and fiduciaries may sue plan
fiduciaries to enforce Part 7 of ERISA
(into which the PPACA reforms are incorporated by reference).
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.”
PHSA: There may be civil money penalties
of $100 per day per individual discriminated against for each day the plan does
not comply with the coverage mandate
(capped at 10% of the aggregate amount
paid or incurred by the employer during
the preceding taxable year for the group
health plan or $500,000, whichever is
less). This penalty appears to be limited in
this context to nonfederal governmental
group health plans.
The Agencies have not yet issued guidance
regarding the PPACA waiting period limi-
tation, but IRS Notice 2011-36 asks for
comments on which employees are subject
to the limitation, when a waiting period
may apply consistent with the PPACA limi-
tation, and how the 90-day limit should
be calculated. It also requests comments
on the application of the waiting period
limitation to common employer eligi-
bility 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 “proba-
tionary” period of three to six months;
part-time employees who are offered
coverage, but only after having worked
for a period longer than 90 days; and
employees 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. —PS
CoNtrIButors
Does the PPACA regulate eligibility
periods imposed by individual
companies for new hires to wait
before they can participate in a
company-sponsored health plan?
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. 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.
Christy Tinnes is a principal in the Health & Welfare Group of Groom Law
Group in Washington. 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.
These Q&As first appeared on www.plansponsor.com in December 2011.
As healthcare law is evolving rapidly, there may be further developments since
the initial publication.
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.
Got a healthcare reform question? You can ask your healthcare reform legislation
question online at www.surveymonkey.com/s/second_opinions.
You can find a handy list of Key Provisions of the Patient Protection and
Affordable Care Act and their effective dates at www.groom.com/HCr-Chart.html
