Ninety-Day Waiting Period Limitation, 10319-10325 [2014-03811]

Agencies

• Employee Benefits Security Administration
• DEPARTMENT OF HEALTH AND HUMAN SERVICES
• Internal Revenue Service
• DEPARTMENT OF LABOR
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 79, Number 36 (Monday, February 24, 2014)]
[Proposed Rules]
[Pages 10319-10325]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-03811]



[[Page 10319]]

Vol. 79

Monday,

No. 36

February 24, 2014

Part IV





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 Part 147





Ninety-Day Waiting Period Limitation; Proposed Rule

Federal Register / Vol. 79 , No. 36 / Monday, February 24, 2014 / 
Proposed Rules

[[Page 10320]]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 54

[REG-122706-12]
RIN 1545-BL97

DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2590

RIN 1210-AB61

DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Part 147

[CMS-9952-P2]
RIN 0938-AR77


Ninety-Day Waiting Period Limitation

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: Proposed rules.

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SUMMARY: These proposed regulations would clarify the maximum allowed 
length of any reasonable and bona fide employment-based orientation 
period, consistent with the 90-day waiting period limitation set forth 
in 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.

DATES: Written comments on this notice of proposed rulemaking are 
invited and must be received by April 25, 2014.

ADDRESSES: Written comments may be submitted to the Department of Labor 
as specified below. Any comment that is submitted will be shared with 
the other Departments and will also be made available to the public. 
Warning: Do not include any personally identifiable information (such 
as name, address, or other contact information) or confidential 
business information that you do not want publicly disclosed. All 
comments may be posted on the Internet and can be retrieved by most 
Internet search engines. No deletions, modifications, or redactions 
will be made to the comments received, as they are public records. 
Comments may be submitted anonymously.
    Comments, identified by ``Ninety-day waiting period limitation,'' 
may be submitted by one of the following methods:
    Federal eRulemaking Portal: https://www.regulations.gov. Follow the 
instructions for submitting comments.
    Mail or Hand Delivery: Office of Health Plan Standards and 
Compliance Assistance, Employee Benefits Security Administration, Room 
N-5653, U.S. Department of Labor, 200 Constitution Avenue NW., 
Washington, DC 20210, Attention: Ninety-day waiting period limitation.
    Comments received will be posted without change to 
www.regulations.gov and available for public inspection at the Public 
Disclosure Room, N-1513, Employee Benefits Security Administration, 200 
Constitution Avenue NW., Washington, DC 20210, including any personal 
information provided.

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 (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 
individual 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

[[Page 10321]]

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 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). After consideration of comments on the proposed regulations, 
the Departments are publishing final regulations elsewhere in this 
issue of the Federal Register. These proposed regulations address 
orientation periods under the 90-day waiting period limitation of PHS 
Act section 2708 and solicit comment before promulgation of final 
regulations on this discrete issue.

II. Overview of the Proposed Regulations

A. Orientation Periods

    Final regulations published elsewhere in this edition of the 
Federal Register set forth rules governing the relationship between a 
plan's eligibility criteria and the 90-day waiting period limitation. 
Specifically, the 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). Under the 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.\6\
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    \6\ The 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 of holiday.
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    The final regulations do not specify the facts and circumstances 
under which an employment-based orientation period would not be 
considered ``reasonable and bona fide.'' These proposed regulations 
would provide that one month is the maximum allowed length of any 
reasonable and bona fide employment-based orientation period. During an 
orientation period, the Departments envision that an employer and 
employee could evaluate whether the employment situation was 
satisfactory for each party, and standard orientation and training 
processes would begin. Under these proposed regulations, one month 
would be determined by adding one calendar month and subtracting one 
calendar day, measured from an employee's start date in a position that 
is otherwise eligible for coverage. For example, if an employee's start 
date in an otherwise eligible position is May 3, the last permitted day 
of the orientation period is June 2. Similarly, if an employee's start 
date in an otherwise eligible position is October 1, the last permitted 
day of the orientation period is October 31. 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. If a group health plan conditions 
eligibility on an employee's having completed a reasonable and bona 
fide employment-based orientation period, the eligibility condition 
would not be considered to be designed to avoid compliance with the 90-
day waiting period limitation if the orientation period did not exceed 
one month and the maximum 90-day waiting period would begin on the 
first day after the orientation period.

B. Comment Invitation and Reliance

    The Departments invite comments on these proposed regulations. The 
Departments will consider compliance with these proposed regulations to 
constitute compliance with 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 will provide plans and issuers a reasonable time period to 
comply.

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 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

[[Page 10322]]

President's priorities, or the principles set forth in the Executive 
Order.
    These proposed 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 proposed regulations, and the Departments \7\ have provided the 
following assessment of their impact.
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    \7\ 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.
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1. Summary
    As stated earlier in this preamble, these proposed regulations 
address reasonable and bona fide employment-based orientation periods 
under the 90-day waiting period limitation of PHS Act section 2708. The 
Departments have crafted these proposed 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. The proposed regulations implementing PHS 
Act section 2708 \8\ provided a qualitative discussion of economic 
impacts of proposed limits on waiting periods and requested detailed 
comments and data that would allow for quantification of the costs, 
benefits, and transfers. Comments were received expressing concern 
about the cost to employers that currently have waiting periods longer 
than 90 days, and explaining that they would have to change their 
practices and often have to provide coverage sooner than the 90-day 
waiting period limitation. No comments provided additional data that 
would help in estimating the economic impacts of the proposed 
regulations. The Departments request comments that would allow them to 
quantify the impacts of these proposed regulations on the discrete 
issue of orientation periods.
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    \8\ 78 FR 17313 (March 21, 2013).
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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.\9\ The 2013 Kaiser Family 
Foundation and Health Research and Education Trust Employer Health 
Benefits Annual Survey (the ``2013 Kaiser Survey'') finds that 30 
percent of covered workers were subject to waiting periods of three 
months or more.\10\ The Departments do not have any data, and therefore 
invite public comment, on the number of employees subject to 
orientation periods, as described earlier in this preamble.
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    \9\ This estimate is based upon internal Department of Labor 
calculations derived from the 2009 Medical Expenditure Panel Survey.
    \10\ See e.g., Kaiser Family Foundation and Health Research and 
Education Trust, Employer Health Benefits 2013 Annual Survey (2013) 
available at https://ehbs.kff.org/pdf/2013/8345.pdf.
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2. Benefits
    The 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). These proposed regulations would 
provide that one month is the maximum allowed length of any reasonable 
and bona fide employment-based orientation period. During an 
orientation period, the Departments envision that an employer and 
employee could evaluate whether the employment situation was 
satisfactory for each party, and standard orientation and training 
processes would begin. If a group health plan conditions eligibility on 
an employee's having completed a reasonable and bona fide employment-
based orientation period, the eligibility condition would not be 
considered to be designed to avoid compliance with the 90-day waiting 
period limitation if the orientation period did not exceed one month 
and the maximum 90-day waiting period would begin on the first day 
after the orientation period.
3. Costs
    These proposed regulations could extend the time between an 
employee beginning work and obtaining health care coverage relative to 
the time before the issuance of the final regulations and these 
proposed regulations. If employees delay health care treatment until 
the expiration of the orientation period and waiting period, 
detrimental health effects can 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 proposed regulations could lead to 
these effects, although the overall cost may be limited because few 
employees are likely to be affected and it is anticipated that 
conditioning eligibility on an employee's having completed an 
orientation period will not result in most employees facing a full 
additional month between being hired and obtaining coverage.
4. Transfers
    The possible transfers associated with these proposed regulations 
would arise from employers beginning to pay their portion of premiums 
or contributions later than they did before the issuance of the final 
regulations and these proposed regulations. Recipients of the transfer 
would be employers who implement an orientation period in addition to 
the 90-day waiting period, thus delaying having to pay premiums. The 
source of the transfers would be covered employees who, after these 
proposed regulations become applicable, will have to wait longer 
between being employed and obtaining health coverage, 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.
    The Departments believe that under these proposed regulations only 
a small number of employers would further delay offering coverage to 
their employees because a relatively small fraction of workers have an 
orientation period in addition to a waiting periods that runs for 90 
days.

B. 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

[[Page 10323]]

small businesses, organizations and governmental jurisdictions.
    For purposes of analysis under the RFA, the Departments propose to 
continue to consider a small entity to be an employee benefit plan with 
fewer than 100 participants. The basis of this definition is found in 
section 104(a)(3) of ERISA, which permits the Secretary of Labor to 
prescribe simplified annual reports for welfare benefit plans that 
cover fewer than 100 participants.\11\
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    \11\ Under ERISA section 104(a)(2), the Secretary may also 
provide exemptions or simplified reporting and disclosure 
requirements for pension plans. Pursuant to the authority of ERISA 
section 104(a)(3), the Department of Labor has previously issued at 
29 CFR 2520.104-20, 2520.104-21, 2520.104-41, 2520.104-46, and 
2520.104b-10 certain simplified reporting provisions and limited 
exemptions from reporting and disclosure requirements for small 
plans, including unfunded or insured welfare plans, that cover fewer 
than 100 participants and satisfy certain other requirements.
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    Further, while some large employers may have small plans, in 
general, small employers maintain most small plans. Thus, the 
Departments believe that assessing the impact of these proposed 
regulations on small plans is an appropriate substitute for evaluating 
the effect on small entities.
    The definition of small entity considered appropriate for this 
purpose differs, however, from a definition of small business that is 
based on size standards promulgated by the Small Business 
Administration (SBA) (13 CFR 121.201) pursuant to the Small Business 
Act (15 U.S.C. 631 et seq.). The Departments therefore request comments 
on the appropriateness of the size standard used in evaluating the 
impact of these proposed regulations on 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 proposed 
regulations include flexibility that would minimize the transfers in 
health insurance premiums that would occur due to the orientation 
period.
    The Departments hereby certify that these proposed regulations will 
not have a significant economic impact on a substantial number of small 
entities. Consistent with the policy of the RFA, the Departments 
encourage the public to submit comments that would allow the 
Departments to assess the impacts specifically on small plans or 
suggest alternative rules that accomplish the stated purpose of PHS Act 
section 2708 and minimize the impact on small entities.

C. Special Analyses--Department of the Treasury

    For purposes of the Department of the Treasury, it has been 
determined that this proposed 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 proposed regulations, and, because these proposed 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 proposed rule has been submitted to the Small Business 
Administration for comment on its impact on small business.

D. Congressional Review Act

    These proposed 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, if finalized, will be 
transmitted to the Congress and the Comptroller General for review.

E. 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 proposed 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.

F. 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 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 proposed 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 proposed regulations would clarify and implement the 
statute's minimum standards and would 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

[[Page 10324]]

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 proposed 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 proposed to be 
adopted pursuant to the authority contained in sections 7805 and 9833 
of the Code.
    The Department of Labor regulations are proposed to be 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 
proposed to be adopted 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 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.
    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 14, 2014.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.

Department of the Treasury

Internal Revenue Service

    Accordingly, 26 CFR Part 54, as amended by the final rule titled, 
Ninety-Day Waiting Period Limitation and Technical Amendments to 
Certain Health Coverage Requirements Under the Affordable Care Act, 
published elsewhere in this issue of the Federal Register, is proposed 
to be further amended as follows:

PART 54--PENSION EXCISE TAXES

0
Paragraph 1. The authority citation for Part 54 continues 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 54.9815-2708 is amended by adding paragraph (c)(3)(iii) 
and a new Example 11 in paragraph (f) to read as follows:


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

* * * * *
    (c) * * *
    (3) * * *
    (iii) Limitation on orientation periods. To ensure that an 
orientation period is not used as a subterfuge for the passage of time, 
or designed to avoid compliance with the 90-day waiting period 
limitation, an orientation period is permitted only if it does not 
exceed one month. For this purpose, one month is determined by adding 
one calendar month and subtracting one calendar day, measured from an 
employee's start date in a position that is otherwise eligible for 
coverage. For example, if an employee's start date in an otherwise 
eligible position is May 3, the last permitted day of the orientation 
period is June 2. Similarly, if an employee's start date in an 
otherwise eligible position is October 1, the last permitted day of the 
orientation period is October 31. 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.
* * * * *
    (f) * * *
    Example 11. (i) Facts. Employee H begins working full time for 
Employer Z on October 16. Z sponsors a group health plan, under 
which full time employees are eligible for coverage after they have 
successfully completed a one-month orientation period. H completes 
the orientation period on November 15.
    (ii) Conclusion. In this Example 11, the orientation period is 
not considered a subterfuge for the passage of time and is not 
considered to be designed to avoid compliance with the 90-day 
waiting period limitation. Accordingly, plan coverage for H must 
begin no later than February 14, which is the 91st day after H 
completes the orientation period. (If the orientation period was 
more than one month, it would be considered to be considered a 
subterfuge for the passage of time and designed to avoid compliance 
with the 90-day waiting period limitation. Accordingly it would 
violate the rules of this section.)
* * * * *

Department of Labor

Employee Benefits Security Administration

29 CFR Chapter XXV

    For the reasons stated in the preamble, the Department of Labor 
proposes to further amend 29 CFR part 2590, as amended by the final 
rule titled, Ninety-Day Waiting Period Limitation and Technical 
Amendments to Certain Health Coverage Requirements Under the Affordable 
Care Act, published elsewhere in this issue of the Federal Register, as 
follows:

PART 2590--RULES AND REGULATIONS FOR GROUP HEALTH PLANS

0
3. 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.

[[Page 10325]]

L. 111-152, 124 Stat. 1029; Secretary of Labor's Order 3-2010, 75 FR 
55354 (September 10, 2010).

0
4. Section 2590.715-2708 is amended by adding paragraph (c)(3)(iii) and 
a new Example 11 in paragraph (f) to read as follows:


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

* * * * *
    (c) * * *
    (3) * * *
    (iii) Limitation on orientation periods. To ensure that an 
orientation period is not used as a subterfuge for the passage of time, 
or designed to avoid compliance with the 90-day waiting period 
limitation, an orientation period is permitted only if it does not 
exceed one month. For this purpose, one month is determined by adding 
one calendar month and subtracting one calendar day, measured from an 
employee's start date in a position that is otherwise eligible for 
coverage. For example, if an employee's start date in an otherwise 
eligible position is May 3, the last permitted day of the orientation 
period is June 2. Similarly, if an employee's start date in an 
otherwise eligible position is October 1, the last permitted day of the 
orientation period is October 31. 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.
* * * * *
    (f) * * *
    Example 11. (i) Facts. Employee H begins working full time for 
Employer Z on October 16. Z sponsors a group health plan, under 
which full time employees are eligible for coverage after they have 
successfully completed a one-month orientation period. H completes 
the orientation period on November 15.
    (ii) Conclusion. In this Example 11, the orientation period is 
not considered a subterfuge for the passage of time and is not 
considered to be designed to avoid compliance with the 90-day 
waiting period limitation. Accordingly, plan coverage for H must 
begin no later than February 14, which is the 91st day after H 
completes the orientation period. (If the orientation period was 
more than one month, it would be considered to be considered a 
subterfuge for the passage of time and designed to avoid compliance 
with the 90-day waiting period limitation. Accordingly it would 
violate the rules of this section.)
* * * * *

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 proposes to further amend 45 CFR part 147, as 
amended by the final rule titled, Ninety-Day Waiting Period Limitation 
and Technical Amendments to Certain Health Coverage Requirements Under 
the Affordable Care Act, published elsewhere in this issue of the 
Federal Register, as set forth below:

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

0
5. 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).

0
6. Section 147.116 is amended by--
0
A. Adding paragraph (c)(3)(iii); and
0
B. Adding Example 11 in paragraph (f).
    The additions read as follows:


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

* * * * *
    (c) * * *
    (3) * * *
    (iii) Limitation on orientation periods. To ensure that an 
orientation period is not used as a subterfuge for the passage of time, 
or designed to avoid compliance with the 90-day waiting period 
limitation, an orientation period is permitted only if it does not 
exceed one month. For this purpose, one month is determined by adding 
one calendar month and subtracting one calendar day, measured from an 
employee's start date in a position that is otherwise eligible for 
coverage. For example, if an employee's start date in an otherwise 
eligible position is May 3, the last permitted day of the orientation 
period is June 2. Similarly, if an employee's start date in an 
otherwise eligible position is October 1, the last permitted day of the 
orientation period is October 31. 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.
* * * * *
    (f) * * *
    Example 11. (i) Facts. Employee H begins working full time for 
Employer Z on October 16. Z sponsors a group health plan, under 
which full time employees are eligible for coverage after they have 
successfully completed a one-month orientation period. H completes 
the orientation period on November 15.
    (ii) Conclusion. In this Example 11, the orientation period is 
not considered a subterfuge for the passage of time and is not 
considered to be designed to avoid compliance with the 90-day 
waiting period limitation. Accordingly, plan coverage for H must 
begin no later than February 14, which is the 91st day after H 
completes the orientation period. (If the orientation period was 
more than one month, it would be considered to be considered a 
subterfuge for the passage of time and designed to avoid compliance 
with the 90-day waiting period limitation. Accordingly it would 
violate the rules of this section.)
* * * * *
[FR Doc. 2014-03811 Filed 2-20-14; 11:15 am]
BILLING CODE 4830-01-P; 4510-29-P; 4120-01-P; 6325-64-P