[Federal Register Volume 79, Number 36 (Monday, February 24, 2014)]
[Rules and Regulations]
[Pages 10296-10317]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-03809]



[[Page 10295]]

Vol. 79

Monday,

No. 36

February 24, 2014

Part III





Department of the Treasury





Internal Revenue Service





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26 CFR Part 54





Department of Labor

Employee Benefits Security Administration





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29 CFR Part 2590





Department of Health and Human Services











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45 CFR Parts 144, 146, and 147





Ninety-Day Waiting Period Limitation and Technical Amendments to 
Certain Health Coverage Requirements Under the Affordable Care Act; 
Final Rule

  Federal Register / Vol. 79 , No. 36 / Monday, February 24, 2014 / 
Rules and Regulations  

[[Page 10296]]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 54

[T.D. 9656]
RIN 1545-BL50

DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2590

RIN 1210-AB56

DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 144, 146, and 147

[CMS-9952-F]
RIN 0938-AR77


Ninety-Day Waiting Period Limitation and Technical Amendments to 
Certain Health Coverage Requirements Under the Affordable Care Act

AGENCY: Internal Revenue Service, Department of the Treasury; Employee 
Benefits Security Administration, Department of Labor; Centers for 
Medicare & Medicaid Services, Department of Health and Human Services.

ACTION: Final rule.

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SUMMARY: These final regulations implement the 90-day waiting period 
limitation under section 2708 of the Public Health Service Act, as 
added by the Patient Protection and Affordable Care Act (Affordable 
Care Act), as amended, and incorporated into the Employee Retirement 
Income Security Act of 1974 and the Internal Revenue Code. These 
regulations also finalize amendments to existing regulations to conform 
to Affordable Care Act provisions. Specifically, these rules amend 
regulations implementing existing provisions such as some of the 
portability provisions added by the Health Insurance Portability and 
Accountability Act of 1996 (HIPAA) because those provisions of the 
HIPAA regulations have become superseded or require amendment as a 
result of the market reform protections added by the Affordable Care 
Act.

DATES: Effective date. These final regulations are effective on April 
25, 2014.
    Applicability date. The 90-day waiting period limitation provisions 
of these final regulations apply to group health plans and group health 
insurance issuers for plan years beginning on or after January 1, 2015. 
The amendments made by these final regulations to the evidence of 
creditable coverage provisions of 26 CFR 54.9801-5, 29 CFR 2590.701-5, 
and 45 CFR 146.115 apply beginning December 31, 2014. All other 
amendments made by these final regulations apply to group health plans 
and health insurance issuers for plan years beginning on or after April 
25, 2014. Until the amendments to the existing HIPAA final regulations 
become applicable, plans and issuers must continue to comply with the 
existing regulations, as applicable.

FOR FURTHER INFORMATION CONTACT: Amy Turner or Elizabeth Schumacher, 
Employee Benefits Security Administration, Department of Labor, at 
(202) 693-8335; Karen Levin, Internal Revenue Service, Department of 
the Treasury, at (202) 317-6846; or Cam Moultrie Clemmons, Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
at (410) 786-1565.
    Customer service information: Individuals interested in obtaining 
information from the Department of Labor concerning employment-based 
health coverage laws may call the EBSA Toll-Free Hotline at 1-866-444-
EBSA (3272) or visit the Department of Labor's Web site (www.dol.gov/ebsa). In addition, information from HHS on private health insurance 
for consumers can be found on the Centers for Medicare & Medicaid 
Services (CMS) Web site (www.cciio.cms.gov/) and information on health 
reform can be found at www.HealthCare.gov.

SUPPLEMENTARY INFORMATION:

I. Background

    The Patient Protection and Affordable Care Act, Public Law 111-148, 
was enacted on March 23, 2010, and the Health Care and Education 
Reconciliation Act, Public Law 111-152, was enacted on March 30, 2010. 
(They are collectively known as the ``Affordable Care Act''.) The 
Affordable Care Act reorganizes, amends, and adds to the provisions of 
part A of title XXVII of the Public Health Service Act (PHS Act) 
relating to group health plans and health insurance issuers in the 
group and individual markets. The term ``group health plan'' includes 
both insured and self-insured group health plans.\1\ The Affordable 
Care Act adds section 715(a)(1) to the Employee Retirement Income 
Security Act (ERISA) and section 9815(a)(1) to the Internal Revenue 
Code (the Code) to incorporate the provisions of part A of title XXVII 
of the PHS Act into ERISA and the Code, and to make them applicable to 
group health plans and health insurance issuers providing health 
insurance coverage in connection with group health plans. The PHS Act 
sections incorporated by these references are sections 2701 through 
2728.
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    \1\ The term ``group health plan'' is used in title XXVII of the 
PHS Act, part 7 of ERISA, and chapter 100 of the Code, and is 
distinct from the term ``health plan,'' as used in other provisions 
of title I of the Affordable Care Act. The term ``health plan'' does 
not include self-insured group health plans.
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    PHS Act section 2708, as added by the Affordable Care Act and 
incorporated into ERISA and the Code, provides that a group health plan 
or health insurance issuer offering group health insurance coverage 
shall not apply any waiting period (as defined in PHS Act section 
2704(b)(4)) that exceeds 90 days. PHS Act section 2704(b)(4), ERISA 
section 701(b)(4), and Code section 9801(b)(4) define a waiting period 
to be the period that must pass with respect to an individual before 
the individual is eligible to be covered for benefits under the terms 
of the plan. In 2004 regulations implementing the Health Insurance 
Portability and Accountability Act of 1996 (HIPAA) portability 
provisions (2004 HIPAA regulations), the Departments of Labor, Health 
and Human Services (HHS), and the Treasury (collectively, the 
Departments) \2\ defined a waiting period to mean 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.\3\ PHS Act section 2708 does not require an employer to 
offer coverage to any particular individual or class of individuals, 
including part-time employees. PHS Act section 2708 merely prevents an 
otherwise eligible employee (or dependent) from being required to wait 
more than 90 days before coverage becomes effective. PHS Act section 
2708 applies to both grandfathered and non-grandfathered group health 
plans and group health insurance coverage for plan years beginning on 
or after January 1, 2014.
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    \2\ Note, however, that in the Economic Analysis and Paperwork 
Burden section of this preamble, in sections under headings listing 
only two of the three Departments, the term ``Departments'' 
generally refers only to the two Departments listed in the heading.
    \3\ 26 CFR 54.9801-3(a)(3)(iii), 29 CFR 2590.701-3(a)(3)(iii), 
and 45 CFR 146.111(a)(3)(iii).
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    On February 9, 2012, the Departments issued guidance \4\ outlining 
various approaches under consideration with respect to both the 90-day 
waiting period limitation and the employer shared responsibility 
provisions under

[[Page 10297]]

Code section 4980H (February 2012 guidance) and requested public 
comment. On August 31, 2012, following their review of the comments on 
the February 2012 guidance, the Departments provided temporary 
guidance,\5\ to remain in effect at least through the end of 2014, 
regarding the 90-day waiting period limitation, and described the 
approach they intended to propose in future rulemaking (August 2012 
guidance). After consideration of all of the comments received in 
response to the February 2012 guidance and August 2012 guidance, the 
Departments issued proposed regulations on March 21, 2013 (78 FR 
17313).
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    \4\ Department of Labor Technical Release 2012-01, IRS Notice 
2012-17, and HHS FAQs issued February 9, 2012.
    \5\ Department of Labor Technical Release 2012-02, IRS Notice 
2012-59, and HHS FAQs issued August 31, 2012.
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    Under the proposed regulations, a group health plan and a health 
insurance issuer offering group health insurance coverage may not apply 
any waiting period that exceeds 90 days. The regulations proposed to 
define ``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. Being otherwise 
eligible to enroll in a plan means having met the plan's substantive 
eligibility conditions (such as being in an eligible job classification 
or achieving job-related licensure requirements specified in the plan's 
terms). Eligibility conditions that are based solely on the lapse of a 
time period would be permissible for no more than 90 days. Other 
conditions for eligibility under the terms of a group health plan (that 
is, those that are not based solely on the lapse of a time period) are 
generally permissible under PHS Act section 2708 and the proposed 
regulations unless the condition is designed to avoid compliance with 
the 90-day waiting period limitation.
    Among other things, the proposed regulations addressed application 
of waiting periods to certain plan eligibility conditions. The proposed 
regulations provided that if a group health plan conditions eligibility 
on an employee regularly having a specified number of hours of service 
per period (or working full-time), and it cannot be determined that a 
newly-hired employee is reasonably expected to regularly work that 
number of hours per period (or work full-time), 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 
\6\ 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 if coverage is made effective no 
later than 13 months from the employee's start date plus, if the 
employee's start date is not the first day of a calendar month, the 
time remaining until the first day of the next calendar month, and no 
waiting period that exceeds 90 days is imposed in addition to the 
measurement period.
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    \6\ See 26 CFR 54.4980H-3(d)(3)(i), at 79 FR 8544 (February 12, 
2014).
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    The proposed regulations also addressed cumulative hours-of-service 
requirements, which use more than solely the passage of a time period 
in determining whether employees are eligible for coverage. Under the 
proposed regulations, if a group health plan or group health insurance 
issuer conditions eligibility on the completion by an employee (part-
time or full-time) of a number of cumulative hours of service, the 
eligibility condition is not considered to be designed to avoid 
compliance with the 90-day waiting period limitation if the cumulative 
hours-of-service requirement does not exceed 1,200 hours.\7\ Under the 
proposed regulations, the plan's waiting period must begin once the new 
employee satisfies the plan's cumulative hours-of-service requirement 
and may not exceed 90 days. The preamble to the proposed regulations 
stated that this provision is designed to be a one-time eligibility 
requirement only and that the proposed regulations do not permit, for 
example, re-application of such a requirement to the same individual 
each year.\8\ The preamble to the proposed regulations also provided 
that the Departments would consider compliance with these proposed 
regulations to constitute compliance with PHS Act section 2708 at least 
through the end of 2014.\9\
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    \7\ See section 4980H of the Code and its implementing 
regulations for an applicable large employer's shared responsibility 
to provide health coverage to full-time employees.
    \8\ 78 FR 17313, 17316 (March 21, 2013). See also Code section 
36B and its implementing regulations, and www.healthcare.gov for 
information on an individual's eligibility for premium tax credits 
in the Affordable Insurance Exchange or ``Exchange'' (also referred 
to as Health Insurance Marketplace or ``Marketplace'') generally, as 
well as during a waiting period for coverage under a group health 
plan.
    \9\ The preamble to the proposed regulations stated that the 
proposed regulations are consistent with, and no more restrictive on 
employers than, the August 2012 guidance. See 78 FR 17313, 17317 
(March 21, 2013). The August 2012 guidance similarly provided that 
group health plans and group health insurance issuers may rely on 
the compliance guidance through at least the end of 2014. See 
Department of Labor Technical Release 2012-02, IRS Notice 2012-59, 
and HHS FAQs issued August 31, 2012.
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    The proposed regulations also included proposed amendments to 
conform to Affordable Care Act provisions already in effect as well as 
those that would become effective in 2014. The regulations proposed 
amending the 2004 HIPAA regulations implementing Code section 9801, 
ERISA section 701, and PHS Act section 2701 (as originally added by 
HIPAA), to remove provisions superseded by the prohibition on 
preexisting conditions under PHS Act section 2704, added by the 
Affordable Care Act.\10\ Additionally, the regulations proposed to 
amend examples and provisions in 26 CFR Part 54, 29 CFR Part 2590, and 
45 CFR Parts 144 and 146 to conform to other changes made by the 
Affordable Care Act, such as the elimination of lifetime and annual 
limits under PHS Act section 2711 and its implementing regulations,\11\ 
as well as the provisions governing dependent coverage of children to 
age 26 under PHS Act section 2714 and its implementing regulations.\12\
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    \10\ Affordable Care Act section 1201 also moved those 
provisions from PHS Act section 2701 to PHS Act section 2704. See 
also 75 FR 37188 (June 28, 2010).
    \11\ 75 FR 37188 (June 28, 2010).
    \12\ 75 FR 27122 (May 13, 2010).
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    After consideration of the comments and feedback received from 
stakeholders, the Departments are publishing these final regulations.

II. Overview of the Final Regulations

A. Prohibition on Waiting Periods That Exceed 90 Days

    These final regulations provide that a group health plan, and a 
health insurance issuer offering group health insurance coverage, may 
not apply a waiting period that exceeds 90 days. (Nothing in these 
final regulations requires a plan or issuer to have any waiting period, 
or prevents a plan or issuer from having a waiting period that is 
shorter than 90 days.) If, under the terms of the plan, an individual 
\13\ can elect coverage that becomes effective on a date that does not 
exceed 90 days, the coverage complies with the 90-day

[[Page 10298]]

waiting period limitation, and the plan or issuer will not be 
considered to violate the waiting period rules merely because 
individuals may take additional time (beyond the end of the 90-day 
waiting period) to elect coverage.
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    \13\ The proposed regulations used several different terms when 
referencing individuals, such as employees and dependents, and 
participants and beneficiaries. Where it is appropriate, the final 
regulations replace these references with the term ``individual'' 
for consistency purposes. This is merely a change to eliminate any 
confusion that may occur as a result of using multiple terms 
interchangeably and does not change the substance of the rules as 
PHS Act section 2708 limits applying a waiting period that exceeds 
90 days to any individual who is otherwise eligible to enroll under 
the terms of the plan.
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    These final regulations continue to define ``waiting period'' as 
the period that must pass before coverage for an individual who is 
otherwise eligible to enroll under the terms of a group health plan can 
become effective. These final regulations also continue to include the 
clarification that, if an individual enrolls as a late enrollee or 
special enrollee, any period before the late or special enrollment is 
not a waiting period. The effective date of coverage for special 
enrollees continues to be that set forth in the Departments' 2004 HIPAA 
regulations governing special enrollment \14\ (and, if applicable, in 
HHS regulations addressing guaranteed availability).\15\
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    \14\ 26 CFR 54.9801-6, 29 CFR 2590.701-6, and 45 CFR 146.117.
    \15\ 45 CFR 147.104(b)(5).
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    The final regulations set forth rules governing the relationship 
between a plan's eligibility criteria and the 90-day waiting period 
limitation. Specifically, these final regulations provide that being 
otherwise eligible to enroll in a plan means having met the plan's 
substantive eligibility conditions (such as, for example, being in an 
eligible job classification, achieving job-related licensure 
requirements specified in the plan's terms, or satisfying a reasonable 
and bona fide employment-based orientation period). The 90-day waiting 
period limitation generally does not require the plan sponsor to offer 
coverage to any particular individual or class of individuals 
(including, for example, part-time employees). Instead, these final 
regulations prohibit requiring otherwise eligible individuals to wait 
more than 90 days before coverage becomes effective.\16\
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    \16\ See also section 4980H of the Code and its implementing 
regulations for an applicable large employer's shared responsibility 
to provide health coverage to full-time employees (and their 
dependents).
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    Under these final regulations, eligibility conditions that are 
based solely on the lapse of a time period are permissible for no more 
than 90 days. Other conditions for eligibility under the terms of a 
group health plan (that is, those that are not based solely on the 
lapse of a time period) are generally permissible under PHS Act section 
2708 and these final regulations, unless the condition is designed to 
avoid compliance with the 90-day waiting period limitation.
    The proposed regulations included an approach when applying waiting 
periods to variable-hour employees in cases in which a specified number 
of hours of service per period is a plan eligibility condition. In 
general, the proposed regulations provided that, except for cases in 
which a waiting period that exceeds 90 days is imposed in addition to a 
measurement period, the time period for determining whether a variable-
hour employee meets the plan's hours of service per period eligibility 
condition will not be considered to be designed to avoid compliance 
with the 90-day waiting period limitation if coverage is made effective 
no later than 13 months from the employee's start date plus, if the 
employee's start date is not the first day of a calendar month, the 
time remaining until the first day of the next calendar month.
    Some commenters requested a rule permitting plans to impose a 90-
day waiting period in addition to the 12-month measurement period, 
arguing that restricting the period to 13 months plus the time 
remaining until the first day of the next calendar month would in 
effect be a one month waiting period and impose administrative 
hardship. Other commenters requested that the final regulations 
eliminate the allowance of a measurement period and require coverage to 
begin no later than 90 days from the employee's start date. These final 
regulations retain the approach in the proposed regulations and provide 
that if a group health plan conditions eligibility on an employee 
regularly having a specified number of hours of service per period (or 
working full-time), and it cannot be determined that a newly-hired 
employee is reasonably expected to regularly work that number of hours 
per period (or work full-time), the plan may take a reasonable period 
of time, not to exceed 12 months and beginning on any date between the 
employee's start date and the first day of the first calendar month 
following the employee's start date, 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. (This is consistent with the 
timeframe permitted for such determinations under Code section 4980H 
and its implementing regulations.) Except in cases in which a waiting 
period that exceeds 90 days is imposed in addition to a measurement 
period, the time period for determining whether a variable-hour 
employee meets the plan's hours of service per period eligibility 
condition will not be considered to be designed to avoid compliance 
with the 90-day waiting period limitation if coverage is made effective 
no later than 13 months from the employee's start date, plus if the 
employee's start date is not the first day of a calendar month, the 
time remaining until the first day of the next calendar month.
    The proposed regulations also addressed cumulative hours-of-service 
requirements, which use more than solely the passage of a time period 
in determining whether employees are eligible for coverage. These final 
regulations retain the provisions of the proposed regulations, 
described earlier in this preamble, without change. Therefore, under 
these final regulations, if a group health plan or group health 
insurance issuer conditions eligibility on the completion by an 
employee (part-time or full-time) of a number of cumulative hours of 
service, the eligibility condition is not considered to be designed to 
avoid compliance with the 90-day waiting period limitation if the 
cumulative hours-of-service requirement does not exceed 1,200 hours. 
Under the final regulations, the plan's waiting period must begin on 
the first day after the employee satisfies the plan's cumulative hours-
of-service requirement and may not exceed 90 days. Furthermore, this 
provision continues to be designed to be a one-time eligibility 
requirement only; these final regulations do not permit, for example, 
re-application of such a requirement to the same individual each year.
    In response to the proposed regulations, commenters requested 
additional clarifications to allow plans and issuers to better 
coordinate the 90-day waiting period requirements with the rules under 
Code section 4980H, which, in the case of full-time employees of 
applicable large employers, generally requires as a condition for 
avoiding a penalty that health benefits begin by the first day of the 
fourth calendar month following the month in which the full-time 
employee begins employment. Commenters argued that, without 
coordination, the PHS Act section 2708 waiting period limitation could 
effectively require coverage to begin sooner than required under the 
rules implementing section 4980H of the Code and undermine the entire 
Code section 4980H framework, which Congress could not have intended. 
Other commenters argued that some employers might offer coverage to 
employees only because of their

[[Page 10299]]

obligations under Code section 4980H, so that an eligibility provision 
that makes an offer of coverage consistent with section 4980H should be 
permissible without requiring coverage to begin sooner than the 
regulations implementing section 4980H require.
    Some commenters stated that their systems are not capable of 
beginning coverage other than at the beginning of a month, and it is 
thus common practice to have a 90-day waiting period with coverage 
effective the first day of the first month following a 90-day waiting 
period. These commenters requested the flexibility to continue this 
approach. Similarly, several commenters specifically requested that 
plans be permitted to impose a waiting period of three calendar months 
instead of 90 days, as it would be less confusing to participants and 
easier for plans and issuers to administer.
    Under these final regulations, after an individual is determined to 
be otherwise eligible for coverage under the terms of the plan, any 
waiting period may not extend beyond 90 days, and all calendar days are 
counted beginning on the enrollment date, including weekends and 
holidays.\17\ However, as noted above, the final regulations provide 
that a requirement to successfully complete a reasonable and bona fide 
employment-based orientation period may be imposed as a condition for 
eligibility for coverage under a plan. Specifically, the final 
regulations add an example of permissible substantive eligibility 
conditions under a group health plan. The proposed regulations had 
included being in an eligible job classification and achieving job-
related licensure requirements specified in the plan's terms. The final 
regulations add a third example regarding the satisfaction of a 
reasonable and bona fide employment-based orientation period. The final 
regulations do not specify the circumstances under which the duration 
of an orientation period would not be considered ``reasonable or bona 
fide.'' However, proposed regulations published elsewhere in this issue 
of the Federal Register propose one month as the maximum length of any 
orientation period meaning generally a period that begins on any day of 
a calendar month and is determined by adding one calendar month and 
then subtracting one calendar day).\18\ Comments are invited on those 
proposed regulations and may be submitted as described in the proposed 
regulations. The Departments will consider compliance with those 
proposed regulations to constitute a reasonable and bona fide 
employment-based orientation period under PHS Act section 2708 at least 
through the end of 2014. To the extent final regulations or other 
guidance with respect to the application of the 90-day waiting period 
limitation to orientation periods is more restrictive on plans and 
issuers, the final regulations or other guidance will not be effective 
prior to January 1, 2015, and plans and issuers will be given a 
reasonable time period to comply.
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    \17\ These final regulations also note that a plan or issuer 
that imposes a 90-day waiting period may, for administrative 
convenience, choose to permit coverage to become effective earlier 
than the 91st day if the 91st day is a weekend or holiday.
    \18\ The proposed regulations provide that if there is not a 
corresponding date in the next calendar month upon adding a calendar 
month, the last permitted day of the orientation period is the last 
day of the next calendar month. For example, if the employee's start 
date is January 30, the last permitted day of the orientation period 
is February 28 (or February 29 in a leap year). Similarly, if the 
employee's start date is August 31, the last permitted day of the 
orientation period is September 30.
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    In response to the proposed regulations, several commenters 
requested clarification regarding application of the rules to employees 
that are terminated from employment and then rehired by the same 
employer. Similarly, commenters requested clarification regarding 
application of the rules when an employee moves between a job 
classification that is or is not an eligible job classification for 
coverage under the plan.
    After consideration of the comments, these final regulations 
provide that a former employee who is rehired may be treated as newly 
eligible for coverage upon rehire and, therefore, a plan or issuer may 
require that individual to meet the plan's eligibility criteria and to 
satisfy the plan's waiting period anew, if reasonable under the 
circumstances (for example, the termination and rehire cannot be a 
subterfuge to avoid compliance with the 90-day waiting period 
limitation). The same analysis would apply to an individual who moves 
to a job classification that is ineligible for coverage under the plan 
but then later moves back to an eligible job classification.
    Many commenters raised administrative concerns relating to the 
application of the rules to multiemployer plans. In the preamble to the 
proposed regulations, the Departments recognized that multiemployer 
plans maintained pursuant to collective bargaining agreements have 
unique operating structures and may include different eligibility 
conditions based on the participating employer's industry or the 
employee's occupation. For example, some multiemployer plans determine 
eligibility based on complex formulas for earnings and residuals or use 
``hours banks'' in which workers' excess hours from one measurement 
period are credited against any shortage of hours in a succeeding 
measurement period, functioning as buy-in provisions to prevent lapses 
in coverage. Some commenters on the proposed regulations pointed out 
that collectively bargained plans, owing to the nature of the 
bargaining process, often have detailed and coordinated eligibility 
provisions (some requiring aggregation of data from multiple 
contributing employers). Others stated that the unique operating 
structure of multiemployer plans often allows for continued coverage 
after an employee's employment terminates (or after an employee's hours 
are reduced) until the end of the quarter.
    On September 4, 2013, the Departments issued a set of frequently 
asked questions (FAQs) stating that, ``under the proposed rules, to the 
extent plans and issuers impose substantive eligibility requirements 
not based solely on the lapse of time, these eligibility provisions are 
permitted if they are not designed to avoid compliance with the 90-day 
waiting period limitation.'' \19\ The FAQs further provide that, 
``[t]herefore, for example, if a multiemployer plan operating pursuant 
to an arms-length collective bargaining agreement has an eligibility 
provision that allows employees to become eligible for coverage by 
working hours of covered employment across multiple contributing 
employers (which often aggregates hours by calendar quarter and then 
permits coverage to extend for the next full calendar quarter, 
regardless of whether an employee has terminated employment), the 
Departments would consider that provision designed to accommodate a 
unique operating structure, (and, therefore, not designed to avoid 
compliance with the 90-day waiting period limitation).'' These final 
regulations include an example consistent with this FAQ.
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    \19\ See FAQs about Affordable Care Act Implementation (Part 
XVI), Q2, available at http://www.dol.gov/ebsa/faqs/faq-aca16.html 
and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs16.html.
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    While the requirements of PHS Act section 2708 and these final 
regulations apply to both the plan and issuer offering coverage in 
connection with such plan, to the extent coverage under a group health 
plan is insured by a health insurance issuer, paragraph (f) of these 
regulations provides that the issuer can rely on the eligibility

[[Page 10300]]

information reported to it by an employer (or other plan sponsor) and 
will not be considered to violate the requirements of these final 
regulations in administering the 90-day waiting period limitation if: 
(1) The issuer requires the plan sponsor to make a representation 
regarding the terms of any eligibility conditions or waiting periods 
imposed by the plan sponsor before an individual is eligible to become 
covered under the terms of the plan (and requires the plan sponsor to 
update this representation with any applicable changes); and (2) the 
issuer has no specific knowledge of the imposition of a waiting period 
that would exceed the permitted 90-day period.
    Consistent with the statutory effective date of PHS Act section 
2708, the Departments proposed that the 90-day waiting period 
limitation would become applicable for plan years beginning on or after 
January 1, 2014, for both grandfathered and non-grandfathered group 
health plans and health insurance issuers offering group health 
insurance coverage. As with the applicability of the 2004 HIPAA 
regulations, the proposed regulations stated that, with respect to 
individuals who are in a waiting period for coverage before the 
applicability date of the regulations, beginning on the first day these 
rules apply to the plan, any waiting period can no longer apply in a 
manner that exceeds 90 days from the beginning of the waiting period, 
even if the waiting period began before the first day the rules apply 
to the plan.
    The August 2012 guidance provided that group health plans and 
health insurance issuers may rely on the compliance guidance through at 
least the end of 2014. The preamble to the proposed regulations stated 
that, in the Departments' view, the proposed regulations are consistent 
with, and no more restrictive on employers than, the August 2012 
guidance, and that therefore, the Departments will consider compliance 
with the proposed regulations to constitute compliance with PHS Act 
section 2708 at least through the end of 2014. The 90-day waiting 
period provisions of these final regulations apply to group health 
plans and group health insurance issuers for plan years beginning on or 
after January 1, 2015. For plan years beginning in 2014, the 
Departments will consider compliance with either the proposed 
regulations or these final regulations to constitute compliance with 
PHS Act section 2708.\20\
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    \20\ The Departments note that, with respect to individuals who 
are in a waiting period for coverage before the statutory effective 
date of PHS Act section 2708, beginning on the first day the statute 
applies to the plan, any waiting period can no longer apply in a 
manner that exceeds 90 days. This clarification was included in the 
proposed regulations, but has not been retained in the final 
regulations, because individuals will not be in a waiting period 
that exceeds 90 days by the applicability date of the final 
regulations.
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B. Conforming Changes to Existing Regulations

    The proposed regulations included proposed conforming amendments to 
the 2004 HIPAA regulations implementing Code section 9801, ERISA 
section 701, and PHS Act section 2701 (as originally added by HIPAA), 
to remove provisions superseded by the prohibition on preexisting 
conditions under PHS Act section 2704 (as added by the Affordable Care 
Act) and the implementing regulations, including elimination of the 
requirement to issue certificates of creditable coverage. The 
regulations proposed that these amendments would become applicable 
after issuance of the final regulations; however, the proposal to 
eliminate the requirement to issue certificates of creditable coverage 
was proposed to apply beginning December 31, 2014, so that individuals 
needing to offset a preexisting condition exclusion under a plan that 
will become subject to the prohibition on preexisting conditions 
starting with a plan year beginning on December 31, 2014 would still 
have access to the certificate for proof of coverage until that time. 
Commenters requested that the requirement to provide certificates of 
creditable coverage be eliminated beginning in 2014 because the 
certificates are no longer necessary. Commenters explained that the 
need for certificates after 2013 would be relatively rare and requested 
that plans and issuers be required to provide certificates in 2014 only 
upon request.
    These final regulations adopt without substantive change the 
proposed conforming amendments. A minor clarification was added to the 
Example 7 of the rules regarding limitations on preexisting condition 
exclusion periods,\21\ and Example 4 of the rules prohibiting 
discrimination against participants and beneficiaries based on a health 
factor,\22\ to clarify that any reference to essential health benefit 
for purposes of the individual and small group markets is dependent 
upon the State essential health benefits benchmark plan as defined in 
HHS regulations at 45 CFR 156.20. Additionally, HHS is not finalizing 
the proposed amendments to 45 CFR 146.145(b) because the provision was 
stricken in previous rulemaking (78 FR at 65092, October 30, 2013).
---------------------------------------------------------------------------

    \21\ 26 CFR 54.9801-3(a)(2) Example 8; 29 CFR 2590.701-3(a)(2) 
Example 8, and 45 CFR 146.111(a)(2) Example 8.
    \22\ 26 CFR 54.9802-1(b)(2)(i)(D) Example 4, 29 CFR 
2590.702(b)(2)(i)(D) Example 4, and 45 CFR 146.121(b)(2)(i)(D) 
Example 4.
---------------------------------------------------------------------------

    The prohibition with respect to adults on preexisting condition 
exclusions applies for plan years (or, in the individual market, policy 
years) beginning on or after January 1, 2014. If a plan had a plan year 
beginning December 31, 2013, the plan could impose a preexisting 
condition exclusion, and an individual could need a certificate of 
creditable coverage, through December 30, 2014.
    All other amendments made by these final regulations to the 2004 
HIPAA regulations apply to group health plans and health insurance 
issuers for plan years beginning on or after April 25, 2014. Until the 
amendments to the existing HIPAA final regulations become applicable, 
plans and issuers must continue to comply with the existing 
regulations, to the extent consistent with amendments to the statute.

III. Economic Impact and Paperwork Burden

A. Executive Order 12866 and 13563--Department of Labor and Department 
of Health and Human Services

    Executive Order 13563 emphasizes the importance of quantifying both 
costs and benefits, of reducing costs, of harmonizing and streamlining 
rules, and of promoting flexibility. It also requires federal agencies 
to develop a plan under which the agencies will periodically review 
their existing significant regulations to make the agencies' regulatory 
programs more effective or less burdensome in achieving their 
regulatory objectives.
    Under Executive Order 12866, a regulatory action deemed 
``significant'' is subject to the requirements of the Executive Order 
and review by the Office of Management and Budget (OMB). Section 3(f) 
of the Executive Order defines a ``significant regulatory action'' as 
an action that is likely to result in a rule (1) having an annual 
effect on the economy of $100 million or more, or adversely and 
materially affecting a sector of the economy, productivity, 
competition, jobs, the environment, public health or safety, or State, 
local or tribal governments or communities (also referred to as 
``economically significant''); (2) creating serious inconsistency or 
otherwise interfering with an action taken or planned by another 
agency; (3) materially altering the budgetary

[[Page 10301]]

impacts of entitlement grants, user fees, or loan programs or the 
rights and obligations of recipients thereof; or (4) raising novel 
legal or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in the Executive Order.
    These final regulations are not economically significant within the 
meaning of section 3(f)(1) of the Executive Order. However, OMB has 
determined that the actions are significant within the meaning of 
section 3(f)(4) of the Executive Order. Therefore, OMB has reviewed 
these final regulations, and the Departments \23\ have provided the 
following assessment of their impact.
---------------------------------------------------------------------------

    \23\ In section III of this preamble, some subsections have a 
heading listing one or two of the three Departments. In those 
subsections, the term ``Departments'' generally refers only to the 
Departments listed in the heading.
---------------------------------------------------------------------------

1. Summary
    As stated earlier in this preamble, these final regulations 
implement PHS Act section 2708, which provides that a group health plan 
or health insurance issuer offering group health insurance coverage 
shall not apply any waiting period that exceeds 90 days. A waiting 
period is defined to mean the period that must pass before coverage for 
an individual who is otherwise eligible to enroll under the terms of a 
group health plan can become effective. The final regulations generally 
apply to group health plans and group health insurance issuers for plan 
years beginning on or after January 1, 2015.
    The Departments have crafted these final regulations to secure the 
protections intended by Congress in an economically efficient manner. 
The Departments lack sufficient data to quantify the regulations' 
economic cost or benefits; therefore, the proposed regulations provided 
a qualitative discussion of their economic impacts and requested 
detailed comment and data that would allow for quantification of the 
costs, benefits, and transfers. While comments were received expressing 
concern about the cost to employers that currently have waiting periods 
longer than 90 days of having to change their practices and provide 
coverage sooner to comply with the 90-day waiting period limitation, no 
comments provided additional data that would help in estimating the 
economic impacts of the final regulations.
2. Estimated Number of Affected Entities
    The Departments estimate that 4.1 million new employees receive 
group health insurance coverage through private sector employers and 
1.0 million new employees receive group health insurance coverage 
through public sector employers annually.\24\ The 2013 Kaiser Family 
Foundation and Health Research and Education Trust Employer Health 
Benefits Annual Survey (the ``2013 Kaiser Survey'') finds that only 
nine percent of covered workers were subject to waiting periods of four 
months or more.\25\ If nine percent of new employees receiving health 
care coverage from their employers are subject to a waiting period of 
four months or more, then 459,000 new employees (5.1 million x 0.09) 
would potentially be affected by these regulations.\26\ However, it is 
unlikely that the survey defines the term ``waiting period'' in the 
same manner as these final regulations. For example, waiting period may 
have been defined by reference to an employee's start date, and it 
seems unlikely that the 2013 Kaiser Survey would have included the 
clarifications included in these final regulations regarding the 
measurement period for variable-hour employees or the clarification 
regarding cumulative hours-of-service requirements.
---------------------------------------------------------------------------

    \24\ This estimate is based upon internal Department of Labor 
calculations derived from the 2009 Medical Expenditure Panel Survey.
    \25\ See e.g., Kaiser Family Foundation and Health Research and 
Education Trust, Employer Health Benefits 2013 Annual Survey (2013) 
available at http://ehbs.kff.org/pdf/2013/8345.pdf.
    \26\ Approximately 373,000 private sector employees and 87,000 
State and local public sector employees.
---------------------------------------------------------------------------

3. Benefits
    Before Congress enacted PHS Act section 2708, Federal law did not 
prescribe any limits on waiting periods for group health coverage.
    If employees delay health care treatment until the expiration of a 
lengthy waiting period, detrimental health effects could result, 
especially for employees and their dependents requiring higher levels 
of health care, such as older Americans, pregnant women, young 
children, and those with chronic conditions. This could lead to lower 
work productivity and missed school days. Low-wage workers also are 
vulnerable, because they have less income to spend out-of-pocket to 
cover medical expenses. The Departments anticipate that these final 
regulations can help reduce these effects.
    As discussed earlier in this preamble, these final regulations 
amend the 2004 HIPAA regulations implementing Code section 9801, ERISA 
section 701, and PHS Act section 2701 (as originally added by HIPAA) to 
remove provisions superseded by the prohibition on preexisting 
conditions under PHS Act section 2704, added by the Affordable Care 
Act. These amendments would provide a benefit to plans by reducing the 
burden associated with complying with the several Paperwork Reduction 
Act (PRA) information collections that are associated with the 
superseded regulations. For a discussion of the affected information 
collections and the estimated cost and burden hour reduction, please 
see the PRA section, later in this preamble.
4. Transfers
    The possible transfers associated with these final regulations 
would arise if employers begin to pay their portion of premiums or 
contributions sooner than they otherwise would in the absence of PHS 
Act section 2708 and these final regulations. Recipients of the 
transfers would be covered employees and their dependents who would, 
after these final regulations become applicable, not be subject to 
excessive waiting periods during which they must forgo health coverage, 
purchase COBRA continuation coverage, or obtain an individual health 
insurance policy--all of which are options that could lead to higher 
out-of-pocket costs for employees to cover their healthcare 
expenditures. As discussed above, Federal law did not limit the 
duration of waiting periods in the group market before the enactment of 
PHS Act section 2708.
    The Departments do not believe that these final regulations, on 
their own, will cause more than a marginal number of employers to offer 
coverage earlier to their employees. That is because a relatively small 
fraction of workers have waiting periods that exceed four months and 
these final regulations afford employers flexibility to maintain or 
revise their current group health plan eligibility conditions. For 
example, as described earlier, if a group health plan or group health 
insurance issuer conditions eligibility on the completion by an 
employee (part-time or full-time) of a number of cumulative hours of 
service, the eligibility condition is not considered to be designed to 
avoid compliance with the 90-day waiting period limitation if the 
cumulative hours-of-service requirement does not exceed 1,200 hours. 
Additionally, the final regulations allow for a reasonable and bona 
fide employment-based orientation period to be imposed as a condition 
for eligibility for coverage under a plan. These provisions are 
intended to provide plan sponsors with flexibility to continue the 
common practice of utilizing a probationary or trial period to 
determine whether a new employee will be able to handle the

[[Page 10302]]

duties and challenges of the job, while providing protections against 
excessive waiting periods for such employees. Under these final 
regulations, the plan's waiting period must begin once the new employee 
satisfies the plan's cumulative hours-of-service requirement or 
orientation period and may not exceed 90 days.
    Because the 2013 Kaiser Survey reports that only nine percent of 
covered workers are in plans with waiting periods of four months or 
more and the overall average waiting period is only 1.8 months, the 
Departments are confident that such long waiting periods are rare.

B. Paperwork Reduction Act

1. Department of Labor and Department of the Treasury
    As described earlier in this preamble, these final regulations 
amend the 2004 HIPAA regulations implementing Code section 9801, ERISA 
section 701, and PHS Act section 2701 (as originally added by HIPAA) to 
remove provisions superseded by the prohibition on preexisting 
conditions under PHS Act section 2704, added by the Affordable Care 
Act.
    The Departments are discontinuing the following Information 
Collection Requests (ICRs) that are associated with the superseded 
regulations: The Notice of Preexisting Condition Exclusion Under Group 
Health Plans, which is approved under OMB Control Number 1210-0102 
through January 31, 2016, and Establishing Creditable Coverage Under 
Group Health Plans, which is approved under OMB Control Number 1210-
0103 through January 31, 2016. Additionally, the Departments are 
revising Final Regulations for Health Coverage Portability for Group 
Health Plans and Group Health Insurance Issuers under HIPAA Titles I & 
IV, which is approved under OMB Control Number 1545-1537 through 
February 28, 2014, to remove the Health Plans Imposing Pre-existing 
Condition Notification Requirements, Certification Requirements, and 
Exclusion Period Notification Information Collections within this ICR 
because they are associated with the superseded regulation.
    Discontinuing and revising these ICRs would result in a total 
burden reduction of approximately 341,000 hours (5,000 hours 
attributable to OMB Control Number 1210-0102, 74,000 hours attributable 
to OMB Control Number 1210-0103, and 262,000 hours attributable to OMB 
Control Number 1545-1537) and a total cost burden reduction of 
approximately $32.7 million ($1.1 million attributable to OMB Control 
Number 1210-0102, $12.4 million attributable to OMB Control Number 
1210-0103, and $19.2 million attributable to OMB Control Number 1545-
1537).
2. Department of Health and Human Services
    These final regulations amend the 2004 HIPAA regulations 
implementing Code section 9801, ERISA section 701, and PHS Act section 
2701 (as originally added by HIPAA) to remove provisions superseded by 
the prohibition on preexisting conditions under PHS Act section 2704, 
added by the Affordable Care Act.
    HHS will discontinue the following ICRs that are associated with 
the superseded regulations, beginning January 1, 2015: The Notice of 
Preexisting Condition Exclusion and Certifications of Creditable 
Coverage under group health plans, which are approved under OMB Control 
Number 0938-0702.
    Discontinuing these ICRs will result in a total annual burden 
reduction of approximately 2,908,569 hours and a total cost burden 
reduction of approximately $89.2 million.

C. Regulatory Flexibility Act--Department of Labor and Department of 
Health and Human Services

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) applies 
to most Federal rules that are subject to the notice and comment 
requirements of section 553(b) of the Administrative Procedure Act (5 
U.S.C. 551 et seq.). Unless an agency certifies that such a rule will 
not have a significant economic impact on a substantial number of small 
entities, section 603 of the RFA requires the agency to present an 
initial regulatory flexibility analysis at the time of the publication 
of the notice of proposed rulemaking describing the impact of the rule 
on small entities. Small entities include small businesses, 
organizations and governmental jurisdictions. In accordance with the 
RFA, the Departments prepared an initial regulatory flexibility 
analysis at the proposed rule stage and requested comments on the 
analysis. No comments were received. Below is the Department's final 
regulatory flexibility analysis and its certification that these final 
regulations do not have a significant economic impact on a substantial 
number of small entities.
    The Departments carefully considered the likely impact of the rule 
on small entities in connection with their assessment under Executive 
Order 12866. The Departments lack data to focus only on the impacts on 
small business. However, the Departments believe that the final 
regulations include flexibility that would allow small employers to 
minimize the transfers in health insurance premiums that they would 
have to pay to employees. Based on the foregoing, the Departments 
hereby certify that these final regulations will not have a significant 
economic impact on a substantial number of small entities.

D. Special Analyses--Department of the Treasury

    For purposes of the Department of the Treasury, it has been 
determined that this final rule is not a significant regulatory action 
as defined in Executive Order 12866, as supplemented by Executive Order 
13563. Therefore, a regulatory assessment is not required. It has also 
been determined that section 553(b) of the Administrative Procedure Act 
(5 U.S.C. chapter 5) does not apply to these final regulations, and, 
because these final regulations do not impose a collection of 
information requirement on small entities, a regulatory flexibility 
analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is 
not required. Pursuant to Code section 7805(f), this final rule has 
been submitted to the Small Business Administration for comment on its 
impact on small business.

E. Congressional Review Act

    These final regulations are subject to the Congressional Review Act 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801 et seq.) and will be transmitted to the Congress and 
the Comptroller General for review.

F. Unfunded Mandates Reform Act

    For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4), as well as Executive Order 12875, these final regulations do 
not include any Federal mandate that may result in expenditures by 
State, local, or tribal governments, or by the private sector, of $100 
million or more adjusted for inflation ($141 million in 2013).

G. Federalism Statement--Department of Labor and Department of Health 
and Human Services

    Executive Order 13132 outlines fundamental principles of 
federalism, and requires the adherence to specific criteria by Federal 
agencies in the process of their formulation and implementation of 
policies that have ``substantial direct effects'' on the

[[Page 10303]]

States, the relationship between the national government and States, or 
on the distribution of power and responsibilities among the various 
levels of government. Federal agencies promulgating regulations that 
have these federalism implications must consult with State and local 
officials, and describe the extent of their consultation and the nature 
of the concerns of State and local officials in the preamble to the 
regulation.
    In the Departments' view, these final regulations have federalism 
implications, because they have direct effects on the States, the 
relationship between the national government and States, or on the 
distribution of power and responsibilities among various levels of 
government. In general, through section 514, ERISA supersedes State 
laws to the extent that they relate to any covered employee benefit 
plan, and preserves State laws that regulate insurance, banking, or 
securities. While ERISA prohibits States from regulating a plan as an 
insurance or investment company or bank, the preemption provisions of 
ERISA section 731 and PHS Act section 2724 (implemented in 29 CFR 
2590.731(a) and 45 CFR 146.143(a)) apply so that the HIPAA requirements 
(including those of the Affordable Care Act) are not to be ``construed 
to supersede any provision of State law which establishes, implements, 
or continues in effect any standard or requirement solely relating to 
health insurance issuers in connection with group health insurance 
coverage except to the extent that such standard or requirement 
prevents the application of a requirement'' of a federal standard. The 
conference report accompanying HIPAA indicates that this is intended to 
be the ``narrowest'' preemption of State laws. (See House Conf. Rep. 
No. 104-736, at 205, reprinted in 1996 U.S. Code Cong. & Admin. News 
2018.)
    States may continue to apply State law requirements except to the 
extent that such requirements prevent the application of the Affordable 
Care Act requirements that are the subject of this rulemaking. State 
insurance laws that are more consumer protective than the Federal 
requirements are unlikely to ``prevent the application of'' the 
Affordable Care Act, and therefore are unlikely to be preempted. 
Accordingly, States have significant latitude to impose requirements on 
health insurance issuers that are more restrictive than the Federal 
law.
    Guidance conveying this interpretation was published in the Federal 
Register on April 8, 1997 (62 FR 16904), and December 30, 2004 (69 FR 
78720), and these final regulations clarify and implement the statute's 
minimum standards and do not significantly reduce the discretion given 
the States by the statute.
    In compliance with the requirement of Executive Order 13132 that 
agencies examine closely any policies that may have federalism 
implications or limit the policy-making discretion of the States, the 
Departments have engaged in efforts to consult with and work 
cooperatively with affected State and local officials, including 
attending conferences of the National Association of Insurance 
Commissioners and consulting with State insurance officials on an 
individual basis.
    Throughout the process of developing these final regulations, to 
the extent feasible within the specific preemption provisions of HIPAA 
as it applies to the Affordable Care Act, the Departments have 
attempted to balance the States' interests in regulating health 
insurance issuers, and Congress' intent to provide uniform minimum 
protections to consumers in every State. By doing so, it is the 
Departments' view that they have complied with the requirements of 
Executive Order 13132.

IV. Statutory Authority

    The Department of the Treasury regulations are adopted pursuant to 
the authority contained in sections 7805 and 9833 of the Code.
    The Department of Labor regulations are adopted pursuant to the 
authority contained in 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169, 
1181-1183, 1181 note, 1185, 1185a, 1185b, 1185d, 1191, 1191a, 1191b, 
and 1191c; sec. 101(g), Public Law 104-191, 110 Stat. 1936; sec. 
401(b), Public Law 105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 
512(d), Public Law 110-343, 122 Stat. 3881; sec. 1001, 1201, and 
1562(e), Public Law 111-148, 124 Stat. 119, as amended by Public Law 
111-152, 124 Stat. 1029; Secretary of Labor's Order 3-2010, 75 FR 55354 
(September 10, 2010).
    The Department of Health and Human Services regulations are 
adopted, with respect to 45 CFR Parts 144 and 146, pursuant to the 
authority contained in sections 2702 through 2705, 2711 through 2723, 
2791, and 2792 of the PHS Act (42 U.S.C. 300gg-1 through 300gg-5, 
300gg-11 through 300gg-23, 300gg-91, and 300gg-92), and, with respect 
to 45 CFR Part 147, pursuant to the authority contained in sections 
2701 through 2763, 2791, and 2792 of the PHS Act (42 U.S.C. 300gg 
through 300gg-63, 300gg-91, and 300gg-92), as amended.

List of Subjects

26 CFR Part 54

    Excise taxes, Health care, Health insurance, Pensions, Reporting 
and recordkeeping requirements.

29 CFR Part 2590

    Continuation coverage, Disclosure, Employee benefit plans, Group 
health plans, Health care, Health insurance, Medical child support, 
Reporting and recordkeeping requirements.

45 CFR Part 144

    Health care, Health insurance, Reporting and recordkeeping 
requirements.

45 CFR Parts 146 and 147

    Health care, Health insurance, Reporting and recordkeeping 
requirements, and State regulation of health insurance.

John Dalrymple,
Deputy Commissioner for Services and Enforcement, Internal Revenue 
Service.
    Approved: February 18, 2014.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
    Signed this 12th day of February 2014.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration, 
Department of Labor.
    Dated: February 11, 2014.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: February 13, 2014.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.

DEPARTMENT OF THE TREASURY

Internal Revenue Service

    Accordingly, 26 CFR part 54 is amended as follows:

PART 54--PENSION EXCISE TAXES

0
Paragraph 1. The authority citation for part 54 is amended by adding an 
entry for Sec.  54.9815-2708 in numerical order to read in part as 
follows:

    Authority: 26 U.S.C. 7805. * * *

    Section 54.9815-2708 is also issued under 26 U.S.C. 9833.
* * * * *

0
Par. 2. Section 54.9801-1 is amended by revising paragraph (b) to read 
as follows:


Sec.  54.9801-1  Basis and scope.

* * * * *
    (b) Scope. A group health plan or health insurance issuer offering 
group

[[Page 10304]]

health insurance coverage may provide greater rights to participants 
and beneficiaries than those set forth in the portability and market 
reform sections of this part 54. This part 54 sets forth minimum 
requirements for group health plans and group health insurance issuers 
offering group health insurance coverage concerning certain consumer 
protections of the Health Insurance Portability and Accountability Act 
(HIPAA), including special enrollment periods and the prohibition 
against discrimination based on a health factor, as amended by the 
Patient Protection and Affordable Care Act (Affordable Care Act). Other 
consumer protection provisions, including other protections provided by 
the Affordable Care Act and the Mental Health Parity and Addiction 
Equity Act, are set forth in this part 54.
* * * * *

0
Par. 3. Section 54.9801-2 is amended by revising the definitions of 
``enrollment date'', ``late enrollment'', and ``waiting period'', and 
by adding definitions of ``first day of coverage'' and ``late 
enrollee'' in alphabetical order, to read as follows:


Sec.  54.9801-2  Definitions.

* * * * *
    Enrollment date means the first day of coverage or, if there is a 
waiting period, the first day of the waiting period. If an individual 
receiving benefits under a group health plan changes benefit packages, 
or if the plan changes group health insurance issuers, the individual's 
enrollment date does not change.
* * * * *
    First day of coverage means, in the case of an individual covered 
for benefits under a group health plan, the first day of coverage under 
the plan and, in the case of an individual covered by health insurance 
coverage in the individual market, the first day of coverage under the 
policy or contract.
* * * * *
    Late enrollee means an individual whose enrollment in a plan is a 
late enrollment.
    Late enrollment means enrollment of an individual under a group 
health plan other than on the earliest date on which coverage can 
become effective for the individual under the terms of the plan; or 
through special enrollment. (For rules relating to special enrollment, 
see Sec.  54.9801-6.) If an individual ceases to be eligible for 
coverage under a plan, and then subsequently becomes eligible for 
coverage under the plan, only the individual's most recent period of 
eligibility is taken into account in determining whether the individual 
is a late enrollee under the plan with respect to the most recent 
period of coverage. Similar rules apply if an individual again becomes 
eligible for coverage following a suspension of coverage that applied 
generally under the plan.
* * * * *
    Waiting period means waiting period within the meaning of Sec.  
54.9815-2708(b).
* * * * *
0
Par. 4. Section 54.9801-3 is amended by:
0
A. Revising the section heading.
0
B. Removing paragraphs (a)(2), (a)(3), (c), (d), (e), and (f).
0
C. Revising the heading to paragraph (a).
0
D. Removing the heading to paragraph (a)(1), and redesignating 
paragraphs (a)(1)(i) and (a)(1)(ii) as paragraphs (a)(1) and (a)(2).
0
E. Amending newly designated paragraph (a)(2) by revising paragraph 
(ii) of Examples 1 and 2, by revising Example 3 and Example 4, and by 
revising paragraph (ii) of Examples 5, 6, 7 and 8.
0
F. Revising paragraph (b).
    The revisions read as follows:


Sec.  54.9801-3  Preexisting condition exclusions.

    (a) Preexisting condition exclusion defined--
* * * * *
    (2) * * *

    Example 1. * * *
    (ii) Conclusion. In this Example 1, the exclusion of benefits 
for any prosthesis if the body part was lost before the effective 
date of coverage 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. The exclusion of benefits, therefore, is 
prohibited.
    Example 2. * * *
    (ii) Conclusion. In this Example 2, the plan provision excluding 
cosmetic surgery benefits for individuals injured before enrolling 
in the plan is a preexisting condition exclusion because it operates 
to exclude benefits relating to a condition based on the fact that 
the condition was present before the effective date of coverage. The 
plan provision, therefore, is prohibited.
    Example 3. (i) Facts. A group health plan provides coverage for 
the treatment of diabetes, generally not subject to any requirement 
to obtain an approval for a treatment plan. However, if an 
individual was diagnosed with diabetes before the effective date of 
coverage under the plan, diabetes coverage is subject to a 
requirement to obtain approval of a treatment plan in advance.
    (ii) Conclusion. In this Example 3, the requirement to obtain 
advance approval of a treatment plan is a preexisting condition 
exclusion because it limits benefits for a condition based on the 
fact that the condition was present before the effective date of 
coverage. The plan provision, therefore, is prohibited.
    Example 4. (i) Facts. A group health plan provides coverage for 
three infertility treatments. The plan counts against the three-
treatment limit benefits provided under prior health coverage.
    (ii) Conclusion. In this Example 4, counting benefits for a 
specific condition provided under prior health coverage against a 
treatment limit for that condition is a preexisting condition 
exclusion because it operates to limit benefits for a condition 
based on the fact that the condition was present before the 
effective date of coverage. The plan provision, therefore, is 
prohibited.
    Example 5. * * *
    (ii) Conclusion. In this Example 5, the requirement to be 
covered under the plan for 12 months to be eligible for pregnancy 
benefits is a subterfuge for a preexisting condition exclusion 
because it is designed to exclude benefits for a condition 
(pregnancy) that arose before the effective date of coverage. The 
plan provision, therefore, is prohibited.
    Example 6. * * *
    (ii) Conclusion. In this Example 6, the exclusion of coverage 
for treatment of congenital heart conditions is a preexisting 
condition exclusion because it operates to exclude benefits relating 
to a condition based on the fact that the condition was present 
before the effective date of coverage. The plan provision, 
therefore, is prohibited.
    Example 7. * * *
    (ii) Conclusion. In this Example 7, the exclusion of coverage 
for treatment of cleft palate is not a preexisting condition 
exclusion because the exclusion applies regardless of when the 
condition arose relative to the effective date of coverage. The plan 
provision, therefore, is not prohibited. (But see 45 CFR 147.150, 
which may require coverage of cleft palate as an essential health 
benefit for health insurance coverage in the individual or small 
group market, depending on the essential health benefits benchmark 
plan as defined in 45 CFR 156.20).
    Example 8. * * *
    (ii) Conclusion. In this Example 8, the exclusion of coverage 
for treatment of cleft palate for individuals who have not been 
covered under the plan from the date of birth operates to exclude 
benefits in relation to a condition based on the fact that the 
condition was present before the effective date of coverage. The 
plan provision, therefore, is prohibited.

    (b) General rules. See section 2704 of the Public Health Service 
Act, incorporated into section 9815 of the Code, and its implementing 
regulations for rules prohibiting the imposition of a preexisting 
condition exclusion.
0
Par. 5. Section 54.9801-4 is amended by removing paragraphs (a)(3) and 
(c), and revising paragraph (b) to read as follows:


Sec.  54.9801-4  Rules relating to creditable coverage.

* * * * *

[[Page 10305]]

    (b) Counting creditable coverage rules superseded by prohibition on 
preexisting condition exclusion. See section 2704 of the Public Health 
Service Act, incorporated into section 9815 of the Code, and its 
implementing regulations for rules prohibiting the imposition of a 
preexisting condition exclusion.
0
Par. 6. Section 54.9801-5 is revised to read as follows:


Sec.  54.9801-5  Evidence of creditable coverage.

    (a) In general. The rules for providing certificates of creditable 
coverage and demonstrating creditable coverage have been superseded by 
the prohibition on preexisting condition exclusions. See section 2704 
of the Public Health Service Act, incorporated into section 9815 of the 
Code, and its implementing regulations for rules prohibiting the 
imposition of a preexisting condition exclusion.
    (b) Applicability. The provisions of this section apply beginning 
December 31, 2014.

0
Par. 7. Section 54.9801-6 is amended by removing paragraph (a)(3)(i)(E) 
and revising paragraphs (a)(3)(i)(C), (a)(3)(i)(D), (a)(4)(i), and 
(d)(2) to read as follows:


Sec.  54.9801-6  Special enrollment periods.

    (a) * * *
    (3) * * *
    (i) * * *
    (C) In the case of coverage offered through an HMO, or other 
arrangement, in the group market that does not provide benefits to 
individuals who no longer reside, live, or work in a service area, loss 
of coverage because an individual no longer resides, lives, or works in 
the service area (whether or not within the choice of the individual), 
and no other benefit package is available to the individual; and
    (D) A situation in which a plan no longer offers any benefits to 
the class of similarly situated individuals (as described in Sec.  
54.9802-1(d)) that includes the individual.
* * * * *
    (4) * * *
    (i) A plan or issuer must allow an employee a period of at least 30 
days after an event described in paragraph (a)(3) of this section to 
request enrollment (for the employee or the employee's dependent).
* * * * *
    (d) * * *
    (2) Special enrollees must be offered all the benefit packages 
available to similarly situated individuals who enroll when first 
eligible. For this purpose, any difference in benefits or cost-sharing 
requirements for different individuals constitutes a different benefit 
package. In addition, a special enrollee cannot be required to pay more 
for coverage than a similarly situated individual who enrolls in the 
same coverage when first eligible.
* * * * *

0
Par. 8. Section 54.9802-1 is amended by:
0
A. Revising paragraphs (b)(1)(i) and (b)(2)(i)(B).
0
B. Revising Example 1, paragraph (i) of Example 2, paragraph (ii) of 
Example 4, paragraph (ii) of Example 5, and removing Example 8, in 
paragraph (b)(2)(i)(D).
0
C. Removing paragraph (b)(3).
0
D. Revising Example 2 and paragraph (i) of Example 5 in paragraph 
(d)(4).
0
E. Revising paragraph (ii) of Example 2 in paragraph (e)(2)(i)(B).
0
F. Revising Example 1 in paragraph (g)(1)(ii).
    The revisions read as follows:


Sec.  54.9802-1  Prohibiting discrimination against participants and 
beneficiaries based on a health factor.

* * * * *
    (b) * * *
    (1) * * *
    (i) A group health plan, and a health insurance issuer offering 
health insurance coverage in connection with a group health plan, may 
not establish any rule for eligibility (including continued 
eligibility) of any individual to enroll for benefits under the terms 
of the plan or group health insurance coverage that discriminates based 
on any health factor that relates to that individual or a dependent of 
that individual. This rule is subject to the provisions of paragraph 
(b)(2) of this section (explaining how this rule applies to benefits), 
paragraph (d) of this section (containing rules for establishing groups 
of similarly situated individuals), paragraph (e) of this section 
(relating to nonconfinement, actively-at-work, and other service 
requirements), paragraph (f) of this section (relating to wellness 
programs), and paragraph (g) of this section (permitting favorable 
treatment of individuals with adverse health factors).
* * * * *
    (2) * * *
    (i) * * *
    (B) However, benefits provided under a plan must be uniformly 
available to all similarly situated individuals (as described in 
paragraph (d) of this section). Likewise, any restriction on a benefit 
or benefits must apply uniformly to all similarly situated individuals 
and must not be directed at individual participants or beneficiaries 
based on any health factor of the participants or beneficiaries 
(determined based on all the relevant facts and circumstances). Thus, 
for example, a plan may limit or exclude benefits in relation to a 
specific disease or condition, limit or exclude benefits for certain 
types of treatments or drugs, or limit or exclude benefits based on a 
determination of whether the benefits are experimental or not medically 
necessary, but only if the benefit limitation or exclusion applies 
uniformly to all similarly situated individuals and is not directed at 
individual participants or beneficiaries based on any health factor of 
the participants or beneficiaries. In addition, a plan or issuer may 
require the satisfaction of a deductible, copayment, coinsurance, or 
other cost-sharing requirement in order to obtain a benefit if the 
limit or cost-sharing requirement applies uniformly to all similarly 
situated individuals and is not directed at individual participants or 
beneficiaries based on any health factor of the participants or 
beneficiaries. In the case of a cost-sharing requirement, see also 
paragraph (b)(2)(ii) of this section, which permits variances in the 
application of a cost-sharing mechanism made available under a wellness 
program. (Whether any plan provision or practice with respect to 
benefits complies with this paragraph (b)(2)(i) does not affect whether 
the provision or practice is permitted under ERISA, the Affordable Care 
Act (including the requirements related to essential health benefits), 
the Americans With Disabilities Act, or any other law, whether State or 
Federal.)
* * * * *
    (D) * * *

    Example 1. (i) Facts. A group health plan applies a $10,000 
annual limit on a specific covered benefit that is not an essential 
health benefit to each participant or beneficiary covered under the 
plan. The limit is not directed at individual participants or 
beneficiaries.
    (ii) Conclusion. In this Example 1, the limit does not violate 
this paragraph (b)(2)(i) because coverage of the specific, non-
essential health benefit up to $10,000 is available uniformly to 
each participant and beneficiary under the plan and because the 
limit is applied uniformly to all participants and beneficiaries and 
is not directed at individual participants or beneficiaries.
    Example 2. (i) Facts. A group health plan has a $500 deductible 
on all benefits for participants covered under the plan. Participant 
B files a claim for the treatment of AIDS. At the next corporate 
board meeting of the plan sponsor, the claim is discussed. Shortly 
thereafter, the plan is modified to impose a $2,000 deductible on 
benefits for

[[Page 10306]]

the treatment of AIDS, effective before the beginning of the next 
plan year.
* * * * *
    Example 4.  * * *
    (ii) Conclusion. In this Example 4, the limit does not violate 
this paragraph (b)(2)(i) because $2,000 of benefits for the 
treatment of TMJ are available uniformly to all similarly situated 
individuals and a plan may limit benefits covered in relation to a 
specific disease or condition if the limit applies uniformly to all 
similarly situated individuals and is not directed at individual 
participants or beneficiaries. (However, applying a lifetime limit 
on TMJ may violate PHS Act section 2711 and its implementing 
regulations, if TMJ coverage is an essential health benefit, 
depending on the essential health benefits benchmark plan as defined 
in 45 CFR 156.20. This example does not address whether the plan 
provision is permissible under any other applicable law, including 
PHS Act section 2711 or the Americans with Disabilities Act.)
    Example 5.  * * *
    (ii) Conclusion. In this Example 5, the lower lifetime limit for 
participants and beneficiaries with a congenital heart defect 
violates this paragraph (b)(2)(i) because benefits under the plan 
are not uniformly available to all similarly situated individuals 
and the plan's lifetime limit on benefits does not apply uniformly 
to all similarly situated individuals. Additionally, this plan 
provision is prohibited under PHS Act section 2711 and its 
implementing regulations because it imposes a lifetime limit on 
essential health benefits.
* * * * *
    (d) * * *
    (4) * * *

    Example 2.  (i) Facts. Under a group health plan, coverage is 
made available to employees, their spouses, and their children. 
However, coverage is made available to a child only if the child is 
under age 26 (or under age 29 if the child is continuously enrolled 
full-time in an institution of higher learning (full-time 
students)). There is no evidence to suggest that these 
classifications are directed at individual participants or 
beneficiaries.
    (ii) Conclusion. In this Example 2, treating spouses and 
children differently by imposing an age limitation on children, but 
not on spouses, is permitted under this paragraph (d). Specifically, 
the distinction between spouses and children is permitted under 
paragraph (d)(2) of this section and is not prohibited under 
paragraph (d)(3) of this section because it is not directed at 
individual participants or beneficiaries. It is also permissible to 
treat children who are under age 26 (or full-time students under age 
29) as a group of similarly situated individuals separate from those 
who are age 26 or older (or age 29 or older if they are not full-
time students) because the classification is permitted under 
paragraph (d)(2) of this section and is not directed at individual 
participants or beneficiaries.
* * * * *
    Example 5. (i) Facts. An employer sponsors a group health plan 
that provides the same benefit package to all seven employees of the 
employer. Six of the seven employees have the same job title and 
responsibilities, but Employee G has a different job title and 
different responsibilities. After G files an expensive claim for 
benefits under the plan, coverage under the plan is modified so that 
employees with G's job title receive a different benefit package 
that includes a higher deductible than in the benefit package made 
available to the other six employees.
* * * * *
    (e) * * *
    (2) * * *
    (i) * * *
    (B) * * *
    Example 2.  * * *
    (ii) Conclusion. In this Example 2, the plan violates this 
paragraph (e)(2) (and thus also paragraph (b) of this section) 
because the 90-day continuous service requirement is a rule for 
eligibility based on whether an individual is actively at work. 
However, the plan would not violate this paragraph (e)(2) or 
paragraph (b) of this section if, under the plan, an absence due to 
any health factor is not considered an absence for purposes of 
measuring 90 days of continuous service. (In addition, any 
eligibility provision that is time-based must comply with the 
requirements of PHS Act section 2708 and its implementing 
regulations.)
* * * * *
    (g) * * *
    (1) * * *
    (ii) * * *
    Example 1. (i) Facts. An employer sponsors a group health plan 
that generally is available to employees, spouses of employees, and 
dependent children until age 26. However, dependent children who are 
disabled are eligible for coverage beyond age 26.
    (ii) Conclusion. In this Example 1, the plan provision allowing 
coverage for disabled dependent children beyond age 26 satisfies 
this paragraph (g)(1) (and thus does not violate this section).
* * * * *

0
Par. 9. Section 54.9815-2708 is added to read as follows:


Sec.  54.9815-2708  Prohibition on waiting periods that exceed 90 days.

    (a) General rule. A group health plan, and a health insurance 
issuer offering group health insurance coverage, must not apply any 
waiting period that exceeds 90 days, in accordance with the rules of 
this section. If, under the terms of a plan, an individual can elect 
coverage that would begin on a date that is not later than the end of 
the 90-day waiting period, this paragraph (a) is considered satisfied. 
Accordingly, in that case, a plan or issuer will not be considered to 
have violated this paragraph (a) solely because individuals take, or 
are permitted to take, additional time (beyond the end of the 90-day 
waiting period) to elect coverage.
    (b) Waiting period defined. For purposes of this part, a waiting 
period is the period that must pass before coverage for an individual 
who is otherwise eligible to enroll under the terms of a group health 
plan can become effective. If an individual enrolls as a late enrollee 
(as defined under Sec.  54.9801-2) or special enrollee (as described in 
Sec.  54.9801-6), any period before such late or special enrollment is 
not a waiting period.
    (c) Relation to a plan's eligibility criteria--(1) In general. 
Except as provided in paragraphs (c)(2) and (c)(3) of this section, 
being otherwise eligible to enroll under the terms of a group health 
plan means having met the plan's substantive eligibility conditions 
(such as, for example, being in an eligible job classification, 
achieving job-related licensure requirements specified in the plan's 
terms, or satisfying a reasonable and bona fide employment-based 
orientation period). Moreover, except as provided in paragraphs (c)(2) 
and (c)(3) of this section, nothing in this section requires a plan 
sponsor to offer coverage to any particular individual or class of 
individuals (including, for example, part-time employees). Instead, 
this section prohibits requiring otherwise eligible individuals to wait 
more than 90 days before coverage is effective. See also section 4980H 
of the Code and its implementing regulations for an applicable large 
employer's shared responsibility to provide health coverage to full-
time employees.
    (2) Eligibility conditions based solely on the lapse of time. 
Eligibility conditions that are based solely on the lapse of a time 
period are permissible for no more than 90 days.
    (3) Other conditions for eligibility. Other conditions for 
eligibility under the terms of a group health plan are generally 
permissible under PHS Act section 2708, unless the condition is 
designed to avoid compliance with the 90-day waiting period limitation, 
determined in accordance with the rules of this paragraph (c)(3).
    (i) Application to variable-hour employees in cases in which a 
specified number of hours of service per period is a plan eligibility 
condition. If a group health plan conditions eligibility on an employee 
regularly having a specified number of hours of service per period (or 
working full-time), and it cannot be determined that a newly-hired 
employee is reasonably expected to regularly work that number of hours 
per period (or work full-time), the plan may take a reasonable period 
of time, not to exceed 12 months and beginning on any date between the 
employee's start date and the first day of the first calendar month 
following the employee's start date, to determine whether the employee 
meets the plan's eligibility condition. Except in cases in which a

[[Page 10307]]

waiting period that exceeds 90 days is imposed in addition to a 
measurement period, the time period for determining whether such an 
employee meets the plan's eligibility condition will not be considered 
to be designed to avoid compliance with the 90-day waiting period 
limitation if coverage is made effective no later than 13 months from 
the employee's start date plus, if the employee's start date is not the 
first day of a calendar month, the time remaining until the first day 
of the next calendar month.
    (ii) Cumulative service requirements. If a group health plan or 
health insurance issuer conditions eligibility on an employee's having 
completed a number of cumulative hours of service, the eligibility 
condition is not considered to be designed to avoid compliance with the 
90-day waiting period limitation if the cumulative hours-of-service 
requirement does not exceed 1,200 hours.
    (d) Application to rehires. A plan or issuer may treat an employee 
whose employment has terminated and who then is rehired as newly 
eligible upon rehire and, therefore, required to meet the plan's 
eligibility criteria and waiting period anew, if reasonable under the 
circumstances (for example, the termination and rehire cannot be a 
subterfuge to avoid compliance with the 90-day waiting period 
limitation).
    (e) Counting days. Under this section, all calendar days are 
counted beginning on the enrollment date (as defined in Sec.  54.9801-
2), including weekends and holidays. A plan or issuer that imposes a 
90-day waiting period may, for administrative convenience, choose to 
permit coverage to become effective earlier than the 91st day if the 
91st day is a weekend or holiday.
    (f) Examples. The rules of this section are illustrated by the 
following examples:

    Example 1.  (i) Facts. A group health plan provides that full-
time employees are eligible for coverage under the plan. Employee A 
begins employment as a full-time employee on January 19.
    (ii) Conclusion. In this Example 1, any waiting period for A 
would begin on January 19 and may not exceed 90 days. Coverage under 
the plan must become effective no later than April 19 (assuming 
February lasts 28 days).
    Example 2. (i) Facts. A group health plan provides that only 
employees with job title M are eligible for coverage under the plan. 
Employee B begins employment with job title L on January 30.
    (ii) Conclusion. In this Example 2, B is not eligible for 
coverage under the plan, and the period while B is working with job 
title L and therefore not in an eligible class of employees, is not 
part of a waiting period under this section.
    Example 3. (i) Facts. Same facts as in Example 2, except that B 
transfers to a new position with job title M on April 11.
    (ii) Conclusion. In this Example 3, B becomes eligible for 
coverage on April 11, but for the waiting period. Any waiting period 
for B begins on April 11 and may not exceed 90 days; therefore, 
coverage under the plan must become effective no later than July 10.
    Example 4.  (i) Facts. A group health plan provides that only 
employees who have completed specified training and achieved 
specified certifications are eligible for coverage under the plan. 
Employee C is hired on May 3 and meets the plan's eligibility 
criteria on September 22.
    (ii) Conclusion. In this Example 4, C becomes eligible for 
coverage-on September 22, but for the waiting period. Any waiting 
period for C would begin on September 22 and may not exceed 90 days; 
therefore, coverage under the plan must become effective no later 
than December 21.
    Example 5. (i) Facts. A group health plan provides that 
employees are eligible for coverage after one year of service.
    (ii) Conclusion. In this Example 5, the plan's eligibility 
condition is based solely on the lapse of time and, therefore, is 
impermissible under paragraph (c)(2) of this section because it 
exceeds 90 days.
    Example 6. (i) Facts. Employer V's group health plan provides 
for coverage to begin on the first day of the first payroll period 
on or after the date an employee is hired and completes the 
applicable enrollment forms. Enrollment forms are distributed on an 
employee's start date and may be completed within 90 days. Employee 
D is hired and starts on October 31, which is the first day of a pay 
period. D completes the enrollment forms and submits them on the 
90th day after D's start date, which is January 28. Coverage is made 
effective 7 days later, February 4, which is the first day of the 
next pay period.
    (ii) Conclusion. In this Example 6, under the terms of V's plan, 
coverage may become effective as early as October 31, depending on 
when D completes the applicable enrollment forms. Under the terms of 
the plan, when coverage becomes effective depends solely on the 
length of time taken by D to complete the enrollment materials. 
Therefore, under the terms of the plan, D may elect coverage that 
would begin on a date that does not exceed the 90-day waiting period 
limitation, and the plan complies with this section.
    Example 7. (i) Facts. Under Employer W's group health plan, only 
employees who are full-time (defined under the plan as regularly 
averaging 30 hours of service per week) are eligible for coverage. 
Employee E begins employment for Employer W on November 26 of Year 
1. E's hours are reasonably expected to vary, with an opportunity to 
work between 20 and 45 hours per week, depending on shift 
availability and E's availability. Therefore, it cannot be 
determined at E's start date that E is reasonably expected to work 
full-time. Under the terms of the plan, variable-hour employees, 
such as E, are eligible to enroll in the plan if they are determined 
to be a full-time employee after a measurement period of 12 months 
that begins on the employee's start date. Coverage is made effective 
no later than the first day of the first calendar month after the 
applicable enrollment forms are received. E's 12-month measurement 
period ends November 25 of Year 2. E is determined to be a full-time 
employee and is notified of E's plan eligibility. If E then elects 
coverage, E's first day of coverage will be January 1 of Year 3.
    (ii) Conclusion. In this Example 7, the measurement period is 
permissible because it is not considered to be designed to avoid 
compliance with the 90-day waiting period limitation. The plan may 
use a reasonable period of time to determine whether a variable-hour 
employee is a full-time employee, provided that (a) the period of 
time is no longer than 12 months; (b) the period of time begins on a 
date between the employee's start date and the first day of the next 
calendar month (inclusive); (c) coverage is made effective no later 
than 13 months from E's start date plus, if the employee's start 
date is not the first day of a calendar month, the time remaining 
until the first day of the next calendar month; and (d) in addition 
to the measurement period, no more than 90 days elapse prior to the 
employee's eligibility for coverage.
    Example 8.  (i) Facts. Employee F begins working 25 hours per 
week for Employer X on January 6 and is considered a part-time 
employee for purposes of X's group health plan. X sponsors a group 
health plan that provides coverage to part-time employees after they 
have completed a cumulative 1,200 hours of service. F satisfies the 
plan's cumulative hours of service condition on December 15.
    (ii) Conclusion. In this Example 8, the cumulative hours of 
service condition with respect to part-time employees is not 
considered to be designed to avoid compliance with the 90-day 
waiting period limitation. Accordingly, coverage for F under the 
plan must begin no later than the 91st day after F completes 1,200 
hours. (If the plan's cumulative hours-of-service requirement was 
more than 1,200 hours, the requirement would be considered to be 
designed to avoid compliance with the 90-day waiting period 
limitation.)
    Example 9. (i) Facts. A multiemployer plan operating pursuant to 
an arms-length collective bargaining agreement has an eligibility 
provision that allows employees to become eligible for coverage by 
working a specified number of hours of covered employment for 
multiple contributing employers. The plan aggregates hours in a 
calendar quarter and then, if enough hours are earned, coverage 
begins the first day of the next calendar quarter. The plan also 
permits coverage to extend for the next full calendar quarter, 
regardless of whether an employee's employment has terminated.
    (ii) Conclusion. In this Example 9, these eligibility provisions 
are designed to accommodate a unique operating structure, and, 
therefore, are not considered to be designed to avoid compliance 
with the 90-day waiting period limitation, and the plan complies 
with this section.
    Example 10. (i) Facts. Employee G retires at age 55 after 30 
years of employment with

[[Page 10308]]

Employer Y with no expectation of providing further services to 
Employer Y. Three months later, Y recruits G to return to work as an 
employee providing advice and transition assistance for G's 
replacement under a one-year employment contract. Y's plan imposes a 
90-day waiting period from an employee's start date before coverage 
becomes effective.
    (ii) Conclusion. In this Example 10, Y's plan may treat G as 
newly eligible for coverage under the plan upon rehire and therefore 
may impose the 90-day waiting period with respect to G for coverage 
offered in connection with G's rehire.

    (g) Special rule for health insurance issuers. To the extent 
coverage under a group health plan is insured by a health insurance 
issuer, the issuer is permitted to rely on the eligibility information 
reported to it by the employer (or other plan sponsor) and will not be 
considered to violate the requirements of this section with respect to 
its administration of any waiting period, if both of the following 
conditions are satisfied:
    (1) The issuer requires the plan sponsor to make a representation 
regarding the terms of any eligibility conditions or waiting periods 
imposed by the plan sponsor before an individual is eligible to become 
covered under the terms of the plan (and requires the plan sponsor to 
update this representation with any changes), and
    (2) The issuer has no specific knowledge of the imposition of a 
waiting period that would exceed the permitted 90-day period.
    (h) No effect on other laws. Compliance with this section is not 
determinative of compliance with any other provision of State or 
Federal law (including ERISA, the Code, or other provisions of the 
Patient Protection and Affordable Care Act). See e.g., Sec.  54.9802-1, 
which prohibits discrimination in eligibility for coverage based on a 
health factor and section 4980H, which generally requires applicable 
large employers to offer coverage to full-time employees and their 
dependents or make an assessable payment.
    (i) Applicability date. The provisions of this section apply for 
plan years beginning on or after January 1, 2015. See section 1251 of 
the Affordable Care Act, as amended by section 10103 of the Affordable 
Care Act and section 2301 of the Health Care and Education 
Reconciliation Act, and its implementing regulations providing that the 
prohibition on waiting periods exceeding 90 days applies to all group 
health plans and group health insurance issuers, including 
grandfathered health plans.


Sec.  54.9831-1  [Amended]

0
Par. 10. Section 54.9831-1 is amended by removing paragraph (b)(2)(i), 
and redesignating paragraphs (b)(2)(ii) through (b)(2)(viii) as 
(b)(2)(i) through (b)(2)(vii).

Department of Labor

Employee Benefits Security Administration

29 CFR Chapter XXV

    For the reasons stated in the preamble, the Department of Labor 
amends 29 CFR part 2590 as follows:

PART 2590--RULES AND REGULATIONS FOR GROUP HEALTH PLANS

0
11. The authority citation for Part 2590 continues to read as follows:

    Authority: 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169, 1181-
1183, 1181 note, 1185, 1185a, 1185b, 1185c, 1185d, 1191, 1191a, 
1191b, and 1191c; sec. 101(g), Pub. L.104-191, 110 Stat. 1936; sec. 
401(b), Pub. L. 105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 
512(d), Pub. L. 110-343, 122 Stat. 3881; sec. 1001, 1201, and 
1562(e), Pub. L. 111-148, 124 Stat. 119, as amended by Pub. L. 111-
152, 124 Stat. 1029; Secretary of Labor's Order 3-2010, 75 FR 55354 
(September 10, 2010).


0
12. Section 2590.701-1 is amended by revising paragraph (b) to read as 
follows:


Sec.  2590.701-1  Basis and scope.

* * * * *
    (b) Scope. A group health plan or health insurance issuer offering 
group health insurance coverage may provide greater rights to 
participants and beneficiaries than those set forth in this Subpart B. 
This Subpart B sets forth minimum requirements for group health plans 
and group health insurance issuers offering group health insurance 
coverage concerning certain consumer protections of the Health 
Insurance Portability and Accountability Act (HIPAA), including special 
enrollment periods and the prohibition against discrimination based on 
a health factor, as amended by the Patient Protection and Affordable 
Care Act (Affordable Care Act). Other consumer protection provisions, 
including other protections provided by the Affordable Care Act and the 
Mental Health Parity and Addiction Equity Act, are set forth in Subpart 
C of this part.

0
13. Section 2590.701-2 is amended by revising the definitions of 
``enrollment date'', ``late enrollment'', and ``waiting period'', and 
by adding definitions of ``first day of coverage'' and ``late 
enrollee'' in alphabetical order, to read as follows:


Sec.  2590.701-2  Definitions.

* * * * *
    Enrollment date means the first day of coverage or, if there is a 
waiting period, the first day of the waiting period. If an individual 
receiving benefits under a group health plan changes benefit packages, 
or if the plan changes group health insurance issuers, the individual's 
enrollment date does not change.
* * * * *
    First day of coverage means, in the case of an individual covered 
for benefits under a group health plan, the first day of coverage under 
the plan and, in the case of an individual covered by health insurance 
coverage in the individual market, the first day of coverage under the 
policy or contract.
* * * * *
    Late enrollee means an individual whose enrollment in a plan is a 
late enrollment.
    Late enrollment means enrollment of an individual under a group 
health plan other than on the earliest date on which coverage can 
become effective for the individual under the terms of the plan; or 
through special enrollment. (For rules relating to special enrollment, 
see Sec.  2590.701-6.) If an individual ceases to be eligible for 
coverage under a plan, and then subsequently becomes eligible for 
coverage under the plan, only the individual's most recent period of 
eligibility is taken into account in determining whether the individual 
is a late enrollee under the plan with respect to the most recent 
period of coverage. Similar rules apply if an individual again becomes 
eligible for coverage following a suspension of coverage that applied 
generally under the plan.
* * * * *
    Waiting period means waiting period within the meaning of Sec.  
2590.715-2708(b).

0
14. Section 2590.701-3 is amended by:
0
A. Revising the section heading.
0
B. Removing paragraphs (a)(2), (a)(3), (c), (d), (e), and (f).
0
C. Revising the heading to paragraph (a).
0
D. Removing the heading to paragraph (a)(1), and redesignating 
paragraphs (a)(1)(i) and (a)(1)(ii) as paragraphs (a)(1) and (a)(2).
0
E. Amending newly designated paragraph (a)(2) by revising paragraph 
(ii) of Examples 1 and 2, by revising Example 3 and Example 4, and by 
revising paragraph (ii) of Examples 5, 6, 7 and 8.
0
F. Revising paragraph (b).
    The revisions read as follows:

[[Page 10309]]

Sec.  2590.701-3  Preexisting condition exclusions.

    (a) Preexisting condition exclusion defined--
* * * * *
    (2) * * *

    Example 1.  * * *
    (ii) Conclusion. In this Example 1, the exclusion of benefits 
for any prosthesis if the body part was lost before the effective 
date of coverage 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. The exclusion of benefits, therefore, is 
prohibited.
    Example 2.  * * *
    (ii) Conclusion. In this Example 2, the plan provision excluding 
cosmetic surgery benefits for individuals injured before enrolling 
in the plan is a preexisting condition exclusion because it operates 
to exclude benefits relating to a condition based on the fact that 
the condition was present before the effective date of coverage. The 
plan provision, therefore, is prohibited.
    Example 3.  (i) Facts. A group health plan provides coverage for 
the treatment of diabetes, generally not subject to any requirement 
to obtain an approval for a treatment plan. However, if an 
individual was diagnosed with diabetes before the effective date of 
coverage under the plan, diabetes coverage is subject to a 
requirement to obtain approval of a treatment plan in advance.
    (ii) Conclusion. In this Example 3, the requirement to obtain 
advance approval of a treatment plan is a preexisting condition 
exclusion because it limits benefits for a condition based on the 
fact that the condition was present before the effective date of 
coverage. The plan provision, therefore, is prohibited.
    Example 4.  (i) Facts. A group health plan provides coverage for 
three infertility treatments. The plan counts against the three-
treatment limit benefits provided under prior health coverage.
    (ii) Conclusion. In this Example 4, counting benefits for a 
specific condition provided under prior health coverage against a 
treatment limit for that condition is a preexisting condition 
exclusion because it operates to limit benefits for a condition 
based on the fact that the condition was present before the 
effective date of coverage. The plan provision, therefore, is 
prohibited.
    Example 5.  * * *
    (ii) Conclusion. In this Example 5, the requirement to be 
covered under the plan for 12 months to be eligible for pregnancy 
benefits is a subterfuge for a preexisting condition exclusion 
because it is designed to exclude benefits for a condition 
(pregnancy) that arose before the effective date of coverage. The 
plan provision, therefore, is prohibited.
    Example 6.  * * *
    (ii) Conclusion. In this Example 6, the exclusion of coverage 
for treatment of congenital heart conditions is a preexisting 
condition exclusion because it operates to exclude benefits relating 
to a condition based on the fact that the condition was present 
before the effective date of coverage. The plan provision, 
therefore, is prohibited.
    Example 7.  * * *
    (ii) Conclusion. In this Example 7, the exclusion of coverage 
for treatment of cleft palate is not a preexisting condition 
exclusion because the exclusion applies regardless of when the 
condition arose relative to the effective date of coverage. The plan 
provision, therefore, is not prohibited. (But see 45 CFR 147.150, 
which may require coverage of cleft palate as an essential health 
benefit for health insurance coverage in the individual or small 
group market, depending on the essential health benefits benchmark 
plan as defined in 45 CFR 156.20).
    Example 8.  * * *
    (ii) Conclusion. In this Example 8, the exclusion of coverage 
for treatment of cleft palate for individuals who have not been 
covered under the plan from the date of birth operates to exclude 
benefits in relation to a condition based on the fact that the 
condition was present before the effective date of coverage. The 
plan provision, therefore, is prohibited.

    (b) General rules. See Sec.  2590.715-2704 for rules prohibiting 
the imposition of a preexisting condition exclusion.
0
15. Section 2590.701-4 is amended by removing paragraphs (a)(3) and 
(c), and revising paragraph (b) to read as follows:


Sec.  2590.701-4  Rules relating to creditable coverage.

* * * * *
    (b) Counting creditable coverage rules superseded by prohibition on 
preexisting condition exclusion. See Sec.  2590.715-2704 for rules 
prohibiting the imposition of a preexisting condition exclusion.

0
16. Section 2590.701-5 is revised to read as follows:


Sec.  2590.701-5  Evidence of creditable coverage.

    (a) In general. The rules for providing certificates of creditable 
coverage and demonstrating creditable coverage have been superseded by 
the prohibition on preexisting condition exclusions. See Sec.  
2590.715-2704 for rules prohibiting the imposition of a preexisting 
condition exclusion.
    (b) Applicability. The provisions of this section apply beginning 
December 31, 2014.

0
17. Section 2590.701-6 is amended by removing paragraph (a)(3)(i)(E) 
and revising paragraphs (a)(3)(i)(C), (a)(3)(i)(D), (a)(4)(i), and 
(d)(2) to read as follows:


Sec.  2590.701-6  Special enrollment periods.

* * * * *
    (a) * * *
    (3) * * *
    (i) * * *
    (C) In the case of coverage offered through an HMO, or other 
arrangement, in the group market that does not provide benefits to 
individuals who no longer reside, live, or work in a service area, loss 
of coverage because an individual no longer resides, lives, or works in 
the service area (whether or not within the choice of the individual), 
and no other benefit package is available to the individual; and
    (D) A situation in which a plan no longer offers any benefits to 
the class of similarly situated individuals (as described in Sec.  
2590.702(d)) that includes the individual.

* * * * *
    (4) * * *
    (i) A plan or issuer must allow an employee a period of at least 30 
days after an event described in paragraph (a)(3) of this section to 
request enrollment (for the employee or the employee's dependent).

* * * * *
    (d) * * *
    (2) Special enrollees must be offered all the benefit packages 
available to similarly situated individuals who enroll when first 
eligible. For this purpose, any difference in benefits or cost-sharing 
requirements for different individuals constitutes a different benefit 
package. In addition, a special enrollee cannot be required to pay more 
for coverage than a similarly situated individual who enrolls in the 
same coverage when first eligible.

* * * * *

0
18. Section 2590.701-7 is revised to read as follows:


Sec.  2590.701-7  HMO affiliation period as an alternative to a 
preexisting condition exclusion.

    The rules for HMO affiliation periods have been superseded by the 
prohibition on preexisting condition exclusions. See Sec.  2590.715-
2704 for rules prohibiting the imposition of a preexisting condition 
exclusion.

0
19. Section 2590.702 is amended by:
0
A. Revising paragraphs (b)(1)(i) and (b)(2)(i)(B).
0
B. Revising Example 1, paragraph (i) of Example 2, paragraph (ii) of 
Example 4, paragraph (ii) of Example 5, and removing Example 8, in 
paragraph (b)(2)(i)(D).
0
C. Removing paragraph (b)(3).
0
D. Revising Example 2 and paragraph (i) of Example 5 in paragraph 
(d)(4).
0
E. Revising paragraph (ii) of Example 2 in paragraph (e)(2)(i)(B).
0
F. Revising Example 1 in paragraph (g)(1)(ii).
    The revisions read as follows:

[[Page 10310]]

Sec.  2590.702  Prohibiting discrimination against participants and 
beneficiaries based on a health factor.

* * * * *
    (b) * * *
    (1) * * *
    (i) A group health plan, and a health insurance issuer offering 
health insurance coverage in connection with a group health plan, may 
not establish any rule for eligibility (including continued 
eligibility) of any individual to enroll for benefits under the terms 
of the plan or group health insurance coverage that discriminates based 
on any health factor that relates to that individual or a dependent of 
that individual. This rule is subject to the provisions of paragraph 
(b)(2) of this section (explaining how this rule applies to benefits), 
paragraph (d) of this section (containing rules for establishing groups 
of similarly situated individuals), paragraph (e) of this section 
(relating to nonconfinement, actively-at-work, and other service 
requirements), paragraph (f) of this section (relating to wellness 
programs), and paragraph (g) of this section (permitting favorable 
treatment of individuals with adverse health factors).
* * * * *
    (2) * * *
    (i) * * *
    (B) However, benefits provided under a plan must be uniformly 
available to all similarly situated individuals (as described in 
paragraph (d) of this section). Likewise, any restriction on a benefit 
or benefits must apply uniformly to all similarly situated individuals 
and must not be directed at individual participants or beneficiaries 
based on any health factor of the participants or beneficiaries 
(determined based on all the relevant facts and circumstances). Thus, 
for example, a plan may limit or exclude benefits in relation to a 
specific disease or condition, limit or exclude benefits for certain 
types of treatments or drugs, or limit or exclude benefits based on a 
determination of whether the benefits are experimental or not medically 
necessary, but only if the benefit limitation or exclusion applies 
uniformly to all similarly situated individuals and is not directed at 
individual participants or beneficiaries based on any health factor of 
the participants or beneficiaries. In addition, a plan or issuer may 
require the satisfaction of a deductible, copayment, coinsurance, or 
other cost-sharing requirement in order to obtain a benefit if the 
limit or cost-sharing requirement applies uniformly to all similarly 
situated individuals and is not directed at individual participants or 
beneficiaries based on any health factor of the participants or 
beneficiaries. In the case of a cost-sharing requirement, see also 
paragraph (b)(2)(ii) of this section, which permits variances in the 
application of a cost-sharing mechanism made available under a wellness 
program. (Whether any plan provision or practice with respect to 
benefits complies with this paragraph (b)(2)(i) does not affect whether 
the provision or practice is permitted under ERISA, the Affordable Care 
Act (including the requirements related to essential health benefits), 
the Americans with Disabilities Act, or any other law, whether State or 
Federal.)
* * * * *
    (D) * * *

    Example 1.  (i) Facts. A group health plan applies a $10,000 
annual limit on a specific covered benefit that is not an essential 
health benefit to each participant or beneficiary covered under the 
plan. The limit is not directed at individual participants or 
beneficiaries.
    (ii) Conclusion. In this Example 1, the limit does not violate 
this paragraph (b)(2)(i) because coverage of the specific, non-
essential health benefit up to $10,000 is available uniformly to 
each participant and beneficiary under the plan and because the 
limit is applied uniformly to all participants and beneficiaries and 
is not directed at individual participants or beneficiaries.
    Example 2.  (i) Facts. A group health plan has a $500 deductible 
on all benefits for participants covered under the plan. Participant 
B files a claim for the treatment of AIDS. At the next corporate 
board meeting of the plan sponsor, the claim is discussed. Shortly 
thereafter, the plan is modified to impose a $2,000 deductible on 
benefits for the treatment of AIDS, effective before the beginning 
of the next plan year.
* * * * *
    Example 4. * * *
    (ii) Conclusion. In this Example 4, the limit does not violate 
this paragraph (b)(2)(i) because $2,000 of benefits for the 
treatment of TMJ are available uniformly to all similarly situated 
individuals and a plan may limit benefits covered in relation to a 
specific disease or condition if the limit applies uniformly to all 
similarly situated individuals and is not directed at individual 
participants or beneficiaries. (However, applying a lifetime limit 
on TMJ may violate Sec.  2590.715-2711, if TMJ coverage is an 
essential health benefit, depending on the essential health benefits 
benchmark plan as defined in 45 CFR 156.20. This example does not 
address whether the plan provision is permissible under any other 
applicable law, including PHS Act section 2711 or the Americans with 
Disabilities Act.)
    Example 5. * * *
    (ii) Conclusion. In this Example 5, the lower lifetime limit for 
participants and beneficiaries with a congenital heart defect 
violates this paragraph (b)(2)(i) because benefits under the plan 
are not uniformly available to all similarly situated individuals 
and the plan's lifetime limit on benefits does not apply uniformly 
to all similarly situated individuals. Additionally, this plan 
provision is prohibited under Sec.  2590.715-2711 because it imposes 
a lifetime limit on essential health benefits.
* * * * *
    (d) * * *
    (4) * * *
    Example 2.  (i) Facts. Under a group health plan, coverage is 
made available to employees, their spouses, and their children. 
However, coverage is made available to a child only if the child is 
under age 26 (or under age 29 if the child is continuously enrolled 
full-time in an institution of higher learning (full-time 
students)). There is no evidence to suggest that these 
classifications are directed at individual participants or 
beneficiaries.
    (ii) Conclusion. In this Example 2, treating spouses and 
children differently by imposing an age limitation on children, but 
not on spouses, is permitted under this paragraph (d). Specifically, 
the distinction between spouses and children is permitted under 
paragraph (d)(2) of this section and is not prohibited under 
paragraph (d)(3) of this section because it is not directed at 
individual participants or beneficiaries. It is also permissible to 
treat children who are under age 26 (or full-time students under age 
29) as a group of similarly situated individuals separate from those 
who are age 26 or older (or age 29 or older if they are not full-
time students) because the classification is permitted under 
paragraph (d)(2) of this section and is not directed at individual 
participants or beneficiaries.
* * * * *
    Example 5. (i) Facts. An employer sponsors a group health plan 
that provides the same benefit package to all seven employees of the 
employer. Six of the seven employees have the same job title and 
responsibilities, but Employee G has a different job title and 
different responsibilities. After G files an expensive claim for 
benefits under the plan, coverage under the plan is modified so that 
employees with G's job title receive a different benefit package 
that includes a higher deductible than in the benefit package made 
available to the other six employees.
* * * * *
    (e) * * *
    (2) * * *
    (i) * * *
    (B) * * *
    Example 2. * * *
    (ii) Conclusion. In this Example 2, the plan violates this 
paragraph (e)(2) (and thus also paragraph (b) of this section) 
because the 90-day continuous service requirement is a rule for 
eligibility based on whether an individual is actively at work. 
However, the plan would not violate this paragraph (e)(2) or 
paragraph (b) of this section if, under the plan, an absence due to 
any health factor is not considered an absence for purposes of 
measuring 90 days of continuous service. (In addition, any 
eligibility provision that is time-based must comply with the 
requirements of PHS Act section 2708 and its implementing 
regulations.)
* * * * *
    (g) * * *

[[Page 10311]]

    (1) * * *
    (ii) * * *
    Example 1. (i) Facts. An employer sponsors a group health plan 
that generally is available to employees, spouses of employees, and 
dependent children until age 26. However, dependent children who are 
disabled are eligible for coverage beyond age 26.
    (ii) Conclusion. In this Example 1, the plan provision allowing 
coverage for disabled dependent children beyond age 26 satisfies 
this paragraph (g)(1) (and thus does not violate this section).
* * * * *


0
20. Section 2590.715-2708 is added to read as follows:


Sec.  2590.715-2708  Prohibition on waiting periods that exceed 90 
days.

    (a) General rule. A group health plan, and a health insurance 
issuer offering group health insurance coverage, must not apply any 
waiting period that exceeds 90 days, in accordance with the rules of 
this section. If, under the terms of a plan, an individual can elect 
coverage that would begin on a date that is not later than the end of 
the 90-day waiting period, this paragraph (a) is considered satisfied. 
Accordingly, in that case, a plan or issuer will not be considered to 
have violated this paragraph (a) solely because individuals take, or 
are permitted to take, additional time (beyond the end of the 90-day 
waiting period) to elect coverage.
    (b) Waiting period defined. For purposes of this part, a waiting 
period is the period that must pass before coverage for an individual 
who is otherwise eligible to enroll under the terms of a group health 
plan can become effective. If an individual enrolls as a late enrollee 
(as defined under Sec.  2590.701-2) or special enrollee (as described 
in Sec.  2590.701-6), any period before such late or special enrollment 
is not a waiting period.
    (c) Relation to a plan's eligibility criteria--(1) In general. 
Except as provided in paragraphs (c)(2) and (c)(3) of this section, 
being otherwise eligible to enroll under the terms of a group health 
plan means having met the plan's substantive eligibility conditions 
(such as, for example, being in an eligible job classification, 
achieving job-related licensure requirements specified in the plan's 
terms, or satisfying a reasonable and bona fide employment-based 
orientation period). Moreover, except as provided in paragraphs (c)(2) 
and (c)(3) of this section, nothing in this section requires a plan 
sponsor to offer coverage to any particular individual or class of 
individuals (including, for example, part-time employees). Instead, 
this section prohibits requiring otherwise eligible individuals to wait 
more than 90 days before coverage is effective. See also section 4980H 
of the Code and its implementing regulations for an applicable large 
employer's shared responsibility to provide health coverage to full-
time employees.
    (2) Eligibility conditions based solely on the lapse of time. 
Eligibility conditions that are based solely on the lapse of a time 
period are permissible for no more than 90 days.
    (3) Other conditions for eligibility. Other conditions for 
eligibility under the terms of a group health plan are generally 
permissible under PHS Act section 2708, unless the condition is 
designed to avoid compliance with the 90-day waiting period limitation, 
determined in accordance with the rules of this paragraph (c)(3).
    (i) Application to variable-hour employees in cases in which a 
specified number of hours of service per period is a plan eligibility 
condition. If a group health plan conditions eligibility on an employee 
regularly having a specified number of hours of service per period (or 
working full-time), and it cannot be determined that a newly-hired 
employee is reasonably expected to regularly work that number of hours 
per period (or work full-time), the plan may take a reasonable period 
of time, not to exceed 12 months and beginning on any date between the 
employee's start date and the first day of the first calendar month 
following the employee's start date, to determine whether the employee 
meets the plan's eligibility condition. Except in cases in which a 
waiting period that exceeds 90 days is imposed in addition to a 
measurement period, the time period for determining whether such an 
employee meets the plan's eligibility condition will not be considered 
to be designed to avoid compliance with the 90-day waiting period 
limitation if coverage is made effective no later than 13 months from 
the employee's start date plus, if the employee's start date is not the 
first day of a calendar month, the time remaining until the first day 
of the next calendar month.
    (ii) Cumulative service requirements. If a group health plan or 
health insurance issuer conditions eligibility on an employee's having 
completed a number of cumulative hours of service, the eligibility 
condition is not considered to be designed to avoid compliance with the 
90-day waiting period limitation if the cumulative hours-of-service 
requirement does not exceed 1,200 hours.
    (d) Application to rehires. A plan or issuer may treat an employee 
whose employment has terminated and who then is rehired as newly 
eligible upon rehire and, therefore, required to meet the plan's 
eligibility criteria and waiting period anew, if reasonable under the 
circumstances (for example, the termination and rehire cannot be a 
subterfuge to avoid compliance with the 90-day waiting period 
limitation).
    (e) Counting days. Under this section, all calendar days are 
counted beginning on the enrollment date (as defined in Sec.  2590.701-
2), including weekends and holidays. A plan or issuer that imposes a 
90-day waiting period may, for administrative convenience, choose to 
permit coverage to become effective earlier than the 91st day if the 
91st day is a weekend or holiday.
    (f) Examples. The rules of this section are illustrated by the 
following examples:

    Example 1. (i) Facts. A group health plan provides that full-
time employees are eligible for coverage under the plan. Employee A 
begins employment as a full-time employee on January 19.
    (ii) Conclusion. In this Example 1, any waiting period for A 
would begin on January 19 and may not exceed 90 days. Coverage under 
the plan must become effective no later than April 19 (assuming 
February lasts 28 days).
    Example 2. (i) Facts. A group health plan provides that only 
employees with job title M are eligible for coverage under the plan. 
Employee B begins employment with job title L on January 30.
    (ii) Conclusion. In this Example 2, B is not eligible for 
coverage under the plan, and the period while B is working with job 
title L and therefore not in an eligible class of employees, is not 
part of a waiting period under this section.
    Example 3. (i) Facts. Same facts as in Example 2, except that B 
transfers to a new position with job title M on April 11.
    (ii) Conclusion. In this Example 3, B becomes eligible for 
coverage on April 11, but for the waiting period. Any waiting period 
for B begins on April 11 and may not exceed 90 days; therefore, 
coverage under the plan must become effective no later than July 10.
    Example 4. (i) Facts. A group health plan provides that only 
employees who have completed specified training and achieved 
specified certifications are eligible for coverage under the plan. 
Employee C is hired on May 3 and meets the plan's eligibility 
criteria on September 22.
    (ii) Conclusion. In this Example 4, C becomes eligible for 
coverage on September 22, but for the waiting period. Any waiting 
period for C would begin on September 22 and may not exceed 90 days; 
therefore, coverage under the plan must become effective no later 
than December 21.
    Example 5. (i) Facts. A group health plan provides that 
employees are eligible for coverage after one year of service.
    (ii) Conclusion. In this Example 5, the plan's eligibility 
condition is based solely on the lapse of time and, therefore, is 
impermissible under paragraph (c)(2) of this section because it 
exceeds 90 days.

[[Page 10312]]

    Example 6.  (i) Facts. Employer V's group health plan provides 
for coverage to begin on the first day of the first payroll period 
on or after the date an employee is hired and completes the 
applicable enrollment forms. Enrollment forms are distributed on an 
employee's start date and may be completed within 90 days. Employee 
D is hired and starts on October 31, which is the first day of a pay 
period. D completes the enrollment forms and submits them on the 
90th day after D's start date, which is January 28. Coverage is made 
effective 7 days later, February 4, which is the first day of the 
next pay period.
    (ii) Conclusion. In this Example 6, under the terms of V's plan, 
coverage may become effective as early as October 31, depending on 
when D completes the applicable enrollment forms. Under the terms of 
the plan, when coverage becomes effective depends solely on the 
length of time taken by D to complete the enrollment materials. 
Therefore, under the terms of the plan, D may elect coverage that 
would begin on a date that does not exceed the 90-day waiting period 
limitation, and the plan complies with this section.
    Example 7.  (i) Facts. Under Employer W's group health plan, 
only employees who are full-time (defined under the plan as 
regularly averaging 30 hours of service per week) are eligible for 
coverage. Employee E begins employment for Employer W on November 26 
of Year 1. E's hours are reasonably expected to vary, with an 
opportunity to work between 20 and 45 hours per week, depending on 
shift availability and E's availability. Therefore, it cannot be 
determined at E's start date that E is reasonably expected to work 
full-time. Under the terms of the plan, variable-hour employees, 
such as E, are eligible to enroll in the plan if they are determined 
to be a full-time employee after a measurement period of 12 months 
that begins on the employee's start date. Coverage is made effective 
no later than the first day of the first calendar month after the 
applicable enrollment forms are received. E's 12-month measurement 
period ends November 25 of Year 2. E is determined to be a full-time 
employee and is notified of E's plan eligibility. If E then elects 
coverage, E's first day of coverage will be January 1 of Year 3.
    (ii) Conclusion. In this Example 7, the measurement period is 
permissible because it is not considered to be designed to avoid 
compliance with the 90-day waiting period limitation. The plan may 
use a reasonable period of time to determine whether a variable-hour 
employee is a full-time employee, provided that (a) the period of 
time is no longer than 12 months; (b) the period of time begins on a 
date between the employee's start date and the first day of the next 
calendar month (inclusive); (c) coverage is made effective no later 
than 13 months from E's start date plus, if the employee's start 
date is not the first day of a calendar month, the time remaining 
until the first day of the next calendar month; and (d) in addition 
to the measurement period, no more than 90 days elapse prior to the 
employee's eligibility for coverage.
    Example 8.  (i) Facts. Employee F begins working 25 hours per 
week for Employer X on January 6 and is considered a part-time 
employee for purposes of X's group health plan. X sponsors a group 
health plan that provides coverage to part-time employees after they 
have completed a cumulative 1,200 hours of service. F satisfies the 
plan's cumulative hours of service condition on December 15.
    (ii) Conclusion. In this Example 8, the cumulative hours of 
service condition with respect to part-time employees is not 
considered to be designed to avoid compliance with the 90-day 
waiting period limitation. Accordingly, coverage for F under the 
plan must begin no later than the 91st day after F completes 1,200 
hours. (If the plan's cumulative hours-of-service requirement was 
more than 1,200 hours, the requirement would be considered to be 
designed to avoid compliance with the 90-day waiting period 
limitation.)
    Example 9. (i) Facts. A multiemployer plan operating pursuant to 
an arms-length collective bargaining agreement has an eligibility 
provision that allows employees to become eligible for coverage by 
working a specified number of hours of covered employment for 
multiple contributing employers. The plan aggregates hours in a 
calendar quarter and then, if enough hours are earned, coverage 
begins the first day of the next calendar quarter. The plan also 
permits coverage to extend for the next full calendar quarter, 
regardless of whether an employee's employment has terminated.
    (ii) Conclusion. In this Example 9, these eligibility provisions 
are designed to accommodate a unique operating structure, and, 
therefore, are not considered to be designed to avoid compliance 
with the 90-day waiting period limitation, and the plan complies 
with this section.
    Example 10. (i) Facts. Employee G retires at age 55 after 30 
years of employment with Employer Y with no expectation of providing 
further services to Employer Y. Three months later, Y recruits G to 
return to work as an employee providing advice and transition 
assistance for G's replacement under a one-year employment contract. 
Y's plan imposes a 90-day waiting period from an employee's start 
date before coverage becomes effective.
    (ii) Conclusion. In this Example 10, Y's plan may treat G as 
newly eligible for coverage under the plan upon rehire and therefore 
may impose the 90-day waiting period with respect to G for coverage 
offered in connection with G's rehire.

    (g) Special rule for health insurance issuers. To the extent 
coverage under a group health plan is insured by a health insurance 
issuer, the issuer is permitted to rely on the eligibility information 
reported to it by the employer (or other plan sponsor) and will not be 
considered to violate the requirements of this section with respect to 
its administration of any waiting period, if both of the following 
conditions are satisfied:
    (1) The issuer requires the plan sponsor to make a representation 
regarding the terms of any eligibility conditions or waiting periods 
imposed by the plan sponsor before an individual is eligible to become 
covered under the terms of the plan (and requires the plan sponsor to 
update this representation with any changes), and
    (2) The issuer has no specific knowledge of the imposition of a 
waiting period that would exceed the permitted 90-day period.
    (h) No effect on other laws. Compliance with this section is not 
determinative of compliance with any other provision of State or 
Federal law (including ERISA, the Code, or other provisions of the 
Patient Protection and Affordable Care Act). See e.g., Sec.  2590.702, 
which prohibits discrimination in eligibility for coverage based on a 
health factor and Code section 4980H, which generally requires 
applicable large employers to offer coverage to full-time employees and 
their dependents or make an assessable payment.
    (i) Applicability date. The provisions of this section apply for 
plan years beginning on or after January 1, 2015. See Sec.  2590.715-
1251 providing that the prohibition on waiting periods exceeding 90 
days applies to all group health plans and group health insurance 
issuers, including grandfathered health plans.
0
21. Section 2590.731 by revising paragraph (c)(2) to read as follows:


Sec.  2590.731  Preemption; State flexibility; construction.

* * * * *
    (c) * * *
    (2) Exceptions. Only in relation to health insurance coverage 
offered by a health insurance issuer, the provisions of this part do 
not supersede any provision of State law to the extent that such 
provision requires special enrollment periods in addition to those 
required under section 701(f) of the Act.
* * * * *


Sec.  2590.732  [Amended]

0
22. Section 2590.732 is amended by removing paragraph (b)(2)(i), and 
redesignating paragraphs (b)(2)(ii) through (b)(2)(ix) as (b)(2)(i) 
through (b)(2)(viii).

Department of Health and Human Services

45 CFR Subtitle A

    For the reasons set forth in the preamble, the Department of Health 
and Human Services amends 45 CFR parts 144, 146, and 147 as set forth 
below:

[[Page 10313]]

PART 144--REQUIREMENTS RELATING TO HEALTH INSURANCE COVERAGE

0
23. The authority citation for part 144 continues to read as follows:

    Authority: Secs. 2701 through 2763, 2791, and 2792 of the Public 
Health Service Act (42 U.S.C. 300gg through 300gg-63, 300gg-91, and 
300gg-92).


0
24. Section 144.103 is amended by revising the definitions of 
``enrollment date'', ``late enrollment'', and ``waiting period'', and 
by adding definitions of ``first day of coverage'' and ``late 
enrollee'' in alphabetical order, to read as follows:


Sec.  144.103  Definitions.

* * * * *
    Enrollment date means the first day of coverage or, if there is a 
waiting period, the first day of the waiting period. If an individual 
receiving benefits under a group health plan changes benefit packages, 
or if the plan changes group health insurance issuers, the individual's 
enrollment date does not change.
* * * * *
    First day of coverage means, in the case of an individual covered 
for benefits under a group health plan, the first day of coverage under 
the plan and, in the case of an individual covered by health insurance 
coverage in the individual market, the first day of coverage under the 
policy or contract.
* * * * *
    Late enrollee means an individual whose enrollment in a plan is a 
late enrollment.
    Late enrollment means enrollment of an individual under a group 
health plan other than on the earliest date on which coverage can 
become effective for the individual under the terms of the plan; or 
through special enrollment. (For rules relating to special enrollment 
and limited open enrollment, see Sec.  146.117 and Sec.  147.104 of 
this subchapter.) If an individual ceases to be eligible for coverage 
under a plan, and then subsequently becomes eligible for coverage under 
the plan, only the individual's most recent period of eligibility is 
taken into account in determining whether the individual is a late 
enrollee under the plan with respect to the most recent period of 
coverage. Similar rules apply if an individual again becomes eligible 
for coverage following a suspension of coverage that applied generally 
under the plan.
* * * * *
    Waiting period has the meaning given the term in 45 CFR 147.116(b).

PART 146--REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET

0
25. The authority citation for part 146 continues to read as follows:

    Authority: Secs. 2702 through 2705, 2711 through 2723, 2791, and 
2792 of the PHS Act (42 U.S.C. 300gg-1 through 300gg-5, 300gg-11 
through 300gg-23, 300gg-91, and 300gg-92).



0
26. Section 146.101 is amended by revising paragraph (b)(1) to read as 
follows:


Sec.  146.101  Basis and scope.

* * * * *
    (b) * * *
    (1) Subpart B. Subpart B of this part sets forth minimum 
requirements for group health plans and group health insurance issuers 
offering group health insurance coverage concerning certain consumer 
protections of the Health Insurance Portability and Accountability Act 
(HIPAA), as amended, including special enrollment periods, prohibiting 
discrimination against participants and beneficiaries based on a health 
factor, and additional requirements prohibiting discrimination against 
participants and beneficiaries based on genetic information.
* * * * *

0
27. Section 146.111 is amended by:
0
A. Revising the section heading.
0
B. Removing paragraphs (a)(2), (a)(3), (c), (d), (e), and (f).
0
C. Revising the heading to paragraph (a).
0
D. Removing the heading to paragraph (a)(1), and redesignating 
paragraphs (a)(1)(i) and (a)(1)(ii) as paragraphs (a)(1) and (a)(2).
0
E. Amending newly designated paragraph (a)(2) by revising paragraph 
(ii) of Examples 1 and 2, by revising Example 3 and Example 4, and by 
revising paragraph (ii) of Examples 5, 6, 7 and 8.
0
F. Revising paragraph (b).
    The revisions read as follows:


Sec.   146.111 Preexisting condition exclusions.

    (a) Preexisting condition exclusion defined--
* * * * *
    (2) * * *

    Example 1. * * *
    (ii) Conclusion. In this Example 1, the exclusion of benefits 
for any prosthesis if the body part was lost before the effective 
date of coverage 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. The exclusion of benefits, therefore, is 
prohibited.
    Example 2. * * *
    (ii) Conclusion. In this Example 2, the plan provision excluding 
cosmetic surgery benefits for individuals injured before enrolling 
in the plan is a preexisting condition exclusion because it operates 
to exclude benefits relating to a condition based on the fact that 
the condition was present before the effective date of coverage. The 
plan provision, therefore, is prohibited.
    Example 3. (i) Facts. A group health plan provides coverage for 
the treatment of diabetes, generally not subject to any requirement 
to obtain an approval for a treatment plan. However, if an 
individual was diagnosed with diabetes before the effective date of 
coverage under the plan, diabetes coverage is subject to a 
requirement to obtain approval of a treatment plan in advance.
    (ii) Conclusion. In this Example 3, the requirement to obtain 
advance approval of a treatment plan is a preexisting condition 
exclusion because it limits benefits for a condition based on the 
fact that the condition was present before the effective date of 
coverage. The plan provision, therefore, is prohibited.
    Example 4.  (i) Facts. A group health plan provides coverage for 
three infertility treatments. The plan counts against the three-
treatment limit benefits provided under prior health coverage.
    (ii) Conclusion. In this Example 4, counting benefits for a 
specific condition provided under prior health coverage against a 
treatment limit for that condition is a preexisting condition 
exclusion because it operates to limit benefits for a condition 
based on the fact that the condition was present before the 
effective date of coverage. The plan provision, therefore, is 
prohibited.
    Example 5.  * * *
    (ii) Conclusion. In this Example 5, the requirement to be 
covered under the plan for 12 months to be eligible for pregnancy 
benefits is a subterfuge for a preexisting condition exclusion 
because it is designed to exclude benefits for a condition 
(pregnancy) that arose before the effective date of coverage. The 
plan provision, therefore, is prohibited.
    Example 6.  * * *
    (ii) Conclusion. In this Example 6, the exclusion of coverage 
for treatment of congenital heart conditions is a preexisting 
condition exclusion because it operates to exclude benefits relating 
to a condition based on the fact that the condition was present 
before the effective date of coverage. The plan provision, 
therefore, is prohibited.
    Example 7. * * *
    (ii) Conclusion. In this Example 7, the exclusion of coverage 
for treatment of cleft palate is not a preexisting condition 
exclusion because the exclusion applies regardless of when the 
condition arose relative to the effective date of coverage. The plan 
provision, therefore, is not prohibited. (But see 45 CFR 147.150, 
which may require coverage of cleft palate as an essential health 
benefit for health insurance coverage in the individual or small 
group market, depending on the essential health benefits benchmark 
plan as defined in Sec.  156.20 of this subchapter).

[[Page 10314]]

    Example 8. * * *
    (ii) Conclusion. In this Example 8, the exclusion of coverage 
for treatment of cleft palate for individuals who have not been 
covered under the plan from the date of birth operates to exclude 
benefits in relation to a condition based on the fact that the 
condition was present before the effective date of coverage. The 
plan provision, therefore, is prohibited.
* * * * *
    (b) General rules. See Sec.  147.108 of this subchapter for rules 
prohibiting the imposition of a preexisting condition exclusion.

0
28. Section 146.113 is amended by removing paragraphs (a)(3) and (c), 
and revising paragraph (b) to read as follows:


Sec.  146.113  Rules relating to creditable coverage.

* * * * *
    (b) Counting creditable coverage rules superseded by prohibition on 
preexisting condition exclusion. See Sec.  147.108 of this subchapter 
for rules prohibiting the imposition of a preexisting condition 
exclusion.

0
29. Section 146.115 is revised to read as follows:


Sec.  146.115  Certification and disclosure of previous coverage.

    (a) In general. The rules for providing certificates of creditable 
coverage and demonstrating creditable coverage have been superseded by 
the prohibition on preexisting condition exclusions. See Sec.  147.108 
of this subchapter for rules prohibiting the imposition of a 
preexisting condition exclusion.
    (b) Applicability. The provisions of this section apply beginning 
December 31, 2014.

0
30. Section 146.117 is amended by removing paragraph (a)(3)(i)(E) and 
revising paragraphs (a)(3)(i)(C), (a)(3)(i)(D), (a)(4)(i), and (d)(2) 
to read as follows:


Sec.  146.117  Special enrollment periods.

* * * * *
    (a) * * *
    (3) * * *
    (i) * * *
    (C) In the case of coverage offered through an HMO, or other 
arrangement, in the group market that does not provide benefits to 
individuals who no longer reside, live, or work in a service area, loss 
of coverage because an individual no longer resides, lives, or works in 
the service area (whether or not within the choice of the individual), 
and no other benefit package is available to the individual; and
    (D) A situation in which a plan no longer offers any benefits to 
the class of similarly situated individuals (as described in Sec.  
146.121(d)) that includes the individual.
* * * * *
    (4) * * *
    (i) A plan or issuer must allow an employee a period of at least 30 
days after an event described in paragraph (a)(3) of this section to 
request enrollment (for the employee or the employee's dependent).
* * * * *
    (d) * * *
    (2) Special enrollees must be offered all the benefit packages 
available to similarly situated individuals who enroll when first 
eligible. For this purpose, any difference in benefits or cost-sharing 
requirements for different individuals constitutes a different benefit 
package. In addition, a special enrollee cannot be required to pay more 
for coverage than a similarly situated individual who enrolls in the 
same coverage when first eligible.
* * * * *

0
31. Section 146.119 is revised to read as follows:


Sec.  146.119  HMO affiliation period as an alternative to a 
preexisting condition exclusion.

    The rules for HMO affiliation periods have been superseded by the 
prohibition on preexisting condition exclusions. See Sec.  147.108 of 
this subchapter for rules prohibiting the imposition of a preexisting 
condition exclusion.

0
32. Section 146.121 is amended by:
0
A. Revising paragraphs (b)(1)(i) and (b)(2)(i)(B).
0
B. Revising Example 1, paragraph (i) of Example 2, paragraph (ii) of 
Example 4, paragraph (ii) of Example 5, and removing Example 8, in 
paragraph (b)(2)(i)(D).
0
C. Removing paragraph (b)(3).
0
D. Revising Example 2 and paragraph (i) of Example 5 in paragraph 
(d)(4).
0
E. Revising paragraph (ii) of Example 2 in paragraph (e)(2)(i)(B).
0
F. Revising Example 1 in paragraph (g)(1)(ii).
    The revisions read as follows:


Sec.  146.121  Prohibiting discrimination against participants and 
beneficiaries based on a health factor.

* * * * *
    (b) * * *
    (1) * * *
    (i) A group health plan, and a health insurance issuer offering 
health insurance coverage in connection with a group health plan, may 
not establish any rule for eligibility (including continued 
eligibility) of any individual to enroll for benefits under the terms 
of the plan or group health insurance coverage that discriminates based 
on any health factor that relates to that individual or a dependent of 
that individual. This rule is subject to the provisions of paragraph 
(b)(2) of this section (explaining how this rule applies to benefits), 
paragraph (d) of this section (containing rules for establishing groups 
of similarly situated individuals), paragraph (e) of this section 
(relating to nonconfinement, actively-at-work, and other service 
requirements), paragraph (f) of this section (relating to wellness 
programs), and paragraph (g) of this section (permitting favorable 
treatment of individuals with adverse health factors).
* * * * *
    (2) * * *
    (i) * * *
    (B) However, benefits provided under a plan must be uniformly 
available to all similarly situated individuals (as described in 
paragraph (d) of this section). Likewise, any restriction on a benefit 
or benefits must apply uniformly to all similarly situated individuals 
and must not be directed at individual participants or beneficiaries 
based on any health factor of the participants or beneficiaries 
(determined based on all the relevant facts and circumstances). Thus, 
for example, a plan may limit or exclude benefits in relation to a 
specific disease or condition, limit or exclude benefits for certain 
types of treatments or drugs, or limit or exclude benefits based on a 
determination of whether the benefits are experimental or not medically 
necessary, but only if the benefit limitation or exclusion applies 
uniformly to all similarly situated individuals and is not directed at 
individual participants or beneficiaries based on any health factor of 
the participants or beneficiaries. In addition, a plan or issuer may 
require the satisfaction of a deductible, copayment, coinsurance, or 
other cost-sharing requirement in order to obtain a benefit if the 
limit or cost-sharing requirement applies uniformly to all similarly 
situated individuals and is not directed at individual participants or 
beneficiaries based on any health factor of the participants or 
beneficiaries. In the case of a cost-sharing requirement, see also 
paragraph (b)(2)(ii) of this section, which permits variances in the 
application of a cost-sharing mechanism made available under a wellness 
program. (Whether any plan provision or practice with respect to 
benefits complies with this paragraph (b)(2)(i) does not affect whether 
the provision or practice is permitted under ERISA, the Affordable Care 
Act (including the

[[Page 10315]]

requirements related to essential health benefits), the Americans with 
Disabilities Act, or any other law, whether State or Federal.)
* * * * *
    (D) * * *

    Example 1. (i) Facts. A group health plan applies a $10,000 
annual limit on a specific covered benefit that is not an essential 
health benefit to each participant or beneficiary covered under the 
plan. The limit is not directed at individual participants or 
beneficiaries.
    (ii) Conclusion. In this Example 1, the limit does not violate 
this paragraph (b)(2)(i) because coverage of the specific, non-
essential health benefit up to $10,000 is available uniformly to 
each participant and beneficiary under the plan and because the 
limit is applied uniformly to all participants and beneficiaries and 
is not directed at individual participants or beneficiaries.
    Example 2. (i) Facts. A group health plan has a $500 deductible 
on all benefits for participants covered under the plan. Participant 
B files a claim for the treatment of AIDS. At the next corporate 
board meeting of the plan sponsor, the claim is discussed. Shortly 
thereafter, the plan is modified to impose a $2,000 deductible on 
benefits for the treatment of AIDS, effective before the beginning 
of the next plan year.
* * * * *
    Example 4. * * *
    (ii) Conclusion. In this Example 4, the limit does not violate 
this paragraph (b)(2)(i) because $2,000 of benefits for the 
treatment of TMJ are available uniformly to all similarly situated 
individuals and a plan may limit benefits covered in relation to a 
specific disease or condition if the limit applies uniformly to all 
similarly situated individuals and is not directed at individual 
participants or beneficiaries. (However, applying a lifetime limit 
on TMJ may violate Sec.  147.126 of this subchapter, if TMJ coverage 
is an essential health benefit, depending on the essential health 
benefits benchmark plan as defined in Sec.  156.20 of this 
subchapter. This example does not address whether the plan provision 
is permissible under any other applicable law, including PHS Act 
section 2711 or the Americans with Disabilities Act.)
    Example 5. * * *
    (ii) Conclusion. In this Example 5, the lower lifetime limit for 
participants and beneficiaries with a congenital heart defect 
violates this paragraph (b)(2)(i) because benefits under the plan 
are not uniformly available to all similarly situated individuals 
and the plan's lifetime limit on benefits does not apply uniformly 
to all similarly situated individuals. Additionally, this plan 
provision is prohibited under Sec.  147.126 of this subchapter 
because it imposes a lifetime limit on essential health benefits.
* * * * *
    (d) * * *
    (4) * * *

    Example 2. (i) Facts. Under a group health plan, coverage is 
made available to employees, their spouses, and their children. 
However, coverage is made available to a child only if the child is 
under age 26 (or under age 29 if the child is continuously enrolled 
full-time in an institution of higher learning (full-time 
students)). There is no evidence to suggest that these 
classifications are directed at individual participants or 
beneficiaries.
    (ii) Conclusion. In this Example 2, treating spouses and 
children differently by imposing an age limitation on children, but 
not on spouses, is permitted under this paragraph (d). Specifically, 
the distinction between spouses and children is permitted under 
paragraph (d)(2) of this section and is not prohibited under 
paragraph (d)(3) of this section because it is not directed at 
individual participants or beneficiaries. It is also permissible to 
treat children who are under age 26 (or full-time students under age 
29) as a group of similarly situated individuals separate from those 
who are age 26 or older (or age 29 or older if they are not full-
time students) because the classification is permitted under 
paragraph (d)(2) of this section and is not directed at individual 
participants or beneficiaries.
* * * * *
    Example 5. (i) Facts. An employer sponsors a group health plan 
that provides the same benefit package to all seven employees of the 
employer. Six of the seven employees have the same job title and 
responsibilities, but Employee G has a different job title and 
different responsibilities. After G files an expensive claim for 
benefits under the plan, coverage under the plan is modified so that 
employees with G's job title receive a different benefit package 
that includes a higher deductible than in the benefit package made 
available to the other six employees.

* * * * *
    (e) * * *
    (2) * * *
    (i) * * *
    (B) * * *

    Example 2. * * *
    (ii) Conclusion. In this Example 2, the plan violates this 
paragraph (e)(2) (and thus also paragraph (b) of this section) 
because the 90-day continuous service requirement is a rule for 
eligibility based on whether an individual is actively at work. 
However, the plan would not violate this paragraph (e)(2) or 
paragraph (b) of this section if, under the plan, an absence due to 
any health factor is not considered an absence for purposes of 
measuring 90 days of continuous service. (In addition, any 
eligibility provision that is time-based must comply with the 
requirements of PHS Act section 2708 and its implementing 
regulations.)

* * * * *
    (g) * * *
    (1) * * *
    (ii) * * *

    Example 1. (i) Facts. An employer sponsors a group health plan 
that generally is available to employees, spouses of employees, and 
dependent children until age 26. However, dependent children who are 
disabled are eligible for coverage beyond age 26.
    (ii) Conclusion. In this Example 1, the plan provision allowing 
coverage for disabled dependent children beyond age 26 satisfies 
this paragraph (g)(1) (and thus does not violate this section).

* * * * *
0
33. Section 146.143 is amended by revising paragraph (c)(2) to read as 
follows:


Sec.  146.143  Preemption; State flexibility; construction.

* * * * *
    (c) * * *
    (2) Exceptions. Only in relation to health insurance coverage 
offered by a health insurance issuer, the provisions of this part do 
not supersede any provision of State law to the extent that such 
provision requires special enrollment periods in addition to those 
required under section 2702 of the Act.
* * * * *

PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND 
INDIVIDUAL HEALTH INSURANCE MARKETS

0
34. The authority citation for part 147 continues to read as follows:

    Authority: Secs. 2701 through 2763, 2791, and 2792 of the Public 
Health Service Act (42 U.S.C. 300gg through 300gg-63, 300gg-91, and 
300gg-92), as amended.


0
35. Section 147.116 is added to read as follows:


Sec.   147.116 Prohibition on waiting periods that exceed 90 days.

    (a) General rule. A group health plan, and a health insurance 
issuer offering group health insurance coverage, must not apply any 
waiting period that exceeds 90 days, in accordance with the rules of 
this section. If, under the terms of a plan, an individual can elect 
coverage that would begin on a date that is not later than the end of 
the 90-day waiting period, this paragraph (a) is considered satisfied. 
Accordingly, in that case, a plan or issuer will not be considered to 
have violated this paragraph (a) solely because individuals take, or 
are permitted to take, additional time (beyond the end of the 90-day 
waiting period) to elect coverage.
    (b) Waiting period defined. For purposes of this part, a waiting 
period is the period that must pass before coverage for an individual 
who is otherwise eligible to enroll under the terms of a group health 
plan can become effective. If an individual enrolls as a late enrollee 
(as defined under Sec.  144.103 of this subchapter) or special enrollee 
(as described in Sec.  146.117 of this subchapter), any period before 
such late or special enrollment is not a waiting period.
    (c) Relation to a plan's eligibility criteria--(1) In general. 
Except as

[[Page 10316]]

provided in paragraphs (c)(2) and (c)(3) of this section, being 
otherwise eligible to enroll under the terms of a group health plan 
means having met the plan's substantive eligibility conditions (such 
as, for example, being in an eligible job classification, achieving 
job-related licensure requirements specified in the plan's terms, or 
satisfying a reasonable and bona fide employment-based orientation 
period). Moreover, except as provided in paragraphs (c)(2) and (c)(3) 
of this section, nothing in this section requires a plan sponsor to 
offer coverage to any particular individual or class of individuals 
(including, for example, part-time employees). Instead, this section 
prohibits requiring otherwise eligible individuals to wait more than 90 
days before coverage is effective. See also section 4980H of the Code 
and its implementing regulations for an applicable large employer's 
shared responsibility to provide health coverage to full-time 
employees.
    (2) Eligibility conditions based solely on the lapse of time. 
Eligibility conditions that are based solely on the lapse of a time 
period are permissible for no more than 90 days.
    (3) Other conditions for eligibility. Other conditions for 
eligibility under the terms of a group health plan are generally 
permissible under PHS Act section 2708, unless the condition is 
designed to avoid compliance with the 90-day waiting period limitation, 
determined in accordance with the rules of this paragraph (c)(3).
    (i) Application to variable-hour employees in cases in which a 
specified number of hours of service per period is a plan eligibility 
condition. If a group health plan conditions eligibility on an employee 
regularly having a specified number of hours of service per period (or 
working full-time), and it cannot be determined that a newly-hired 
employee is reasonably expected to regularly work that number of hours 
per period (or work full-time), the plan may take a reasonable period 
of time, not to exceed 12 months and beginning on any date between the 
employee's start date and the first day of the first calendar month 
following the employee's start date, to determine whether the employee 
meets the plan's eligibility condition. Except in cases in which a 
waiting period that exceeds 90 days is imposed in addition to a 
measurement period, the time period for determining whether such an 
employee meets the plan's eligibility condition will not be considered 
to be designed to avoid compliance with the 90-day waiting period 
limitation if coverage is made effective no later than 13 months from 
the employee's start date plus, if the employee's start date is not the 
first day of a calendar month, the time remaining until the first day 
of the next calendar month.
    (ii) Cumulative service requirements. If a group health plan or 
health insurance issuer conditions eligibility on an employee's having 
completed a number of cumulative hours of service, the eligibility 
condition is not considered to be designed to avoid compliance with the 
90-day waiting period limitation if the cumulative hours-of-service 
requirement does not exceed 1,200 hours.
    (d) Application to rehires. A plan or issuer may treat an employee 
whose employment has terminated and who then is rehired as newly 
eligible upon rehire and, therefore, required to meet the plan's 
eligibility criteria and waiting period anew, if reasonable under the 
circumstances (for example, the termination and rehire cannot be a 
subterfuge to avoid compliance with the 90-day waiting period 
limitation).
    (e) Counting days. Under this section, all calendar days are 
counted beginning on the enrollment date (as defined in Sec.  144.103), 
including weekends and holidays. A plan or issuer that imposes a 90-day 
waiting period may, for administrative convenience, choose to permit 
coverage to become effective earlier than the 91st day if the 91st day 
is a weekend or holiday.
    (f) Examples. The rules of this section are illustrated by the 
following examples:

    Example 1. (i) Facts. A group health plan provides that full-
time employees are eligible for coverage under the plan. Employee A 
begins employment as a full-time employee on January 19.
    (ii) Conclusion. In this Example 1, any waiting period for A 
would begin on January 19 and may not exceed 90 days. Coverage under 
the plan must become effective no later than April 19 (assuming 
February lasts 28 days).
    Example 2. (i) Facts. A group health plan provides that only 
employees with job title M are eligible for coverage under the plan. 
Employee B begins employment with job title L on January 30.
    (ii) Conclusion. In this Example 2, B is not eligible for 
coverage under the plan, and the period while B is working with job 
title L and therefore not in an eligible class of employees, is not 
part of a waiting period under this section.
    Example 3. (i) Facts. Same facts as in Example 2, except that B 
transfers to a new position with job title M on April 11.
    (ii) Conclusion. In this Example 3, B becomes eligible for 
coverage on April 11, but for the waiting period. Any waiting period 
for B begins on April 11 and may not exceed 90 days; therefore, 
coverage under the plan must become effective no later than July 10.
    Example 4. (i) Facts. A group health plan provides that only 
employees who have completed specified training and achieved 
specified certifications are eligible for coverage under the plan. 
Employee C is hired on May 3 and meets the plan's eligibility 
criteria on September 22.
    (ii) Conclusion. In this Example 4, C becomes eligible for 
coverage on September 22, but for the waiting period. Any waiting 
period for C would begin on September 22 and may not exceed 90 days; 
therefore, coverage under the plan must become effective no later 
than December 21.
    Example 5. (i) Facts. A group health plan provides that 
employees are eligible for coverage after one year of service.
    (ii) Conclusion. In this Example 5, the plan's eligibility 
condition is based solely on the lapse of time and, therefore, is 
impermissible under paragraph (c)(2) of this section because it 
exceeds 90 days.
    Example 6. (i) Facts. Employer V's group health plan provides 
for coverage to begin on the first day of the first payroll period 
on or after the date an employee is hired and completes the 
applicable enrollment forms. Enrollment forms are distributed on an 
employee's start date and may be completed within 90 days. Employee 
D is hired and starts on October 31, which is the first day of a pay 
period. D completes the enrollment forms and submits them on the 
90th day after D's start date, which is January 28. Coverage is made 
effective 7 days later, February 4, which is the first day of the 
next pay period.
    (ii) Conclusion. In this Example 6, under the terms of V's plan, 
coverage may become effective as early as October 31, depending on 
when D completes the applicable enrollment forms. Under the terms of 
the plan, when coverage becomes effective depends solely on the 
length of time taken by D to complete the enrollment materials. 
Therefore, under the terms of the plan, D may elect coverage that 
would begin on a date that does not exceed the 90-day waiting period 
limitation, and the plan complies with this section.
    Example 7.  (i) Facts. Under Employer W's group health plan, 
only employees who are full-time (defined under the plan as 
regularly averaging 30 hours of service per week) are eligible for 
coverage. Employee E begins employment for Employer W on November 26 
of Year 1. E's hours are reasonably expected to vary, with an 
opportunity to work between 20 and 45 hours per week, depending on 
shift availability and E's availability. Therefore, it cannot be 
determined at E's start date that E is reasonably expected to work 
full-time. Under the terms of the plan, variable-hour employees, 
such as E, are eligible to enroll in the plan if they are determined 
to be a full-time employee after a measurement period of 12 months 
that begins on the employee's start date. Coverage is made effective 
no later than the first day of the first calendar month after the 
applicable enrollment forms are received. E's 12-month measurement 
period ends November 25 of Year 2. E is determined to be a full-time 
employee and is notified of E's plan eligibility. If E then elects 
coverage, E's first day of coverage will be January 1 of Year 3.

[[Page 10317]]

    (ii) Conclusion. In this Example 7, the measurement period is 
permissible because it is not considered to be designed to avoid 
compliance with the 90-day waiting period limitation. The plan may 
use a reasonable period of time to determine whether a variable-hour 
employee is a full-time employee, provided that (a) the period of 
time is no longer than 12 months; (b) the period of time begins on a 
date between the employee's start date and the first day of the next 
calendar month (inclusive); (c) coverage is made effective no later 
than 13 months from E's start date plus, if the employee's start 
date is not the first day of a calendar month, the time remaining 
until the first day of the next calendar month; and (d) in addition 
to the measurement period, no more than 90 days elapse prior to the 
employee's eligibility for coverage.
    Example 8. (i) Facts. Employee F begins working 25 hours per 
week for Employer X on January 6 and is considered a part-time 
employee for purposes of X's group health plan. X sponsors a group 
health plan that provides coverage to part-time employees after they 
have completed a cumulative 1,200 hours of service. F satisfies the 
plan's cumulative hours of service condition on December 15.
    (ii) Conclusion. In this Example 8, the cumulative hours of 
service condition with respect to part-time employees is not 
considered to be designed to avoid compliance with the 90-day 
waiting period limitation. Accordingly, coverage for F under the 
plan must begin no later than the 91st day after F completes 1,200 
hours. (If the plan's cumulative hours-of-service requirement was 
more than 1,200 hours, the requirement would be considered to be 
designed to avoid compliance with the 90-day waiting period 
limitation.)
    Example 9. (i) Facts. A multiemployer plan operating pursuant to 
an arms-length collective bargaining agreement has an eligibility 
provision that allows employees to become eligible for coverage by 
working a specified number of hours of covered employment for 
multiple contributing employers. The plan aggregates hours in a 
calendar quarter and then, if enough hours are earned, coverage 
begins the first day of the next calendar quarter. The plan also 
permits coverage to extend for the next full calendar quarter, 
regardless of whether an employee's employment has terminated.
    (ii) Conclusion. In this Example 9, these eligibility provisions 
are designed to accommodate a unique operating structure, and, 
therefore, are not considered to be designed to avoid compliance 
with the 90-day waiting period limitation, and the plan complies 
with this section.
    Example 10. (i) Facts. Employee G retires at age 55 after 30 
years of employment with Employer Y with no expectation of providing 
further services to Employer Y. Three months later, Y recruits G to 
return to work as an employee providing advice and transition 
assistance for G's replacement under a one-year employment contract. 
Y's plan imposes a 90-day waiting period from an employee's start 
date before coverage becomes effective.
    (ii) Conclusion. In this Example 10, Y's plan may treat G as 
newly eligible for coverage under the plan upon rehire and therefore 
may impose the 90-day waiting period with respect to G for coverage 
offered in connection with G's rehire.

    (g) Special rule for health insurance issuers. To the extent 
coverage under a group health plan is insured by a health insurance 
issuer, the issuer is permitted to rely on the eligibility information 
reported to it by the employer (or other plan sponsor) and will not be 
considered to violate the requirements of this section with respect to 
its administration of any waiting period, if both of the following 
conditions are satisfied:
    (1) The issuer requires the plan sponsor to make a representation 
regarding the terms of any eligibility conditions or waiting periods 
imposed by the plan sponsor before an individual is eligible to become 
covered under the terms of the plan (and requires the plan sponsor to 
update this representation with any changes), and
    (2) The issuer has no specific knowledge of the imposition of a 
waiting period that would exceed the permitted 90-day period.
    (h) No effect on other laws. Compliance with this section is not 
determinative of compliance with any other provision of State or 
Federal law (including ERISA, the Code, or other provisions of the 
Patient Protection and Affordable Care Act). See e.g., Sec.  146.121 of 
this subchapter and Sec.  147.110, which prohibits discrimination in 
eligibility for coverage based on a health factor and Code section 
4980H, which generally requires applicable large employers to offer 
coverage to full-time employees and their dependents or make an 
assessable payment.
    (i) Applicability date. The provisions of this section apply for 
plan years beginning on or after January 1, 2015. See Sec.  147.140 
providing that the prohibition on waiting periods exceeding 90 days 
applies to all group health plans and group health insurance issuers, 
including grandfathered health plans.

[FR Doc. 2014-03809 Filed 2-20-14; 11:15 am]
BILLING CODE 4830-01- 4510-029- 4120-01-6325-64-P