California has done the federal health reform law one better, and limited waiting periods under insured health plans to 60 days (the federal health reform law limits waiting periods to 90 days, beginning in 2014). The new rule applies to insurance contracts issued, delivered or renewed in California an
d applies on and after January 1, 2014 (it’s a bit unclear whether the new rule applies January 1, 2014, in every case, or only to plan years beginning on or after January 1, 2014; the insurer will settle upon an interpretation, and apply its insurance contract accordingly).
After some initial confusion, it’s now clear that the 60-day waiting period in California’s Assembly Bill 1083 applies to both small and large insured health plans, including HMO plans. The new law will apply to insured group benefit plans that provide benefits to California residents, regardless of where the contract is issued. The 60-day waiting period rule does not apply, however, to self-insured plans subject to ERISA. In addition, it does not apply to dental or vsion plans.
Note also that the new rule applies to insurers, not employers. Therefore, insurers will begin conforming their insurance contracts to reflect the new 60-day limit.
The bill states that the maximum 60-day waiting period “applies equally to all eligible employees and dependents.” Like the 90-day federal limit, the 60-day limit begins when an individual becomes eligible for coverage, and is a maximum consecutive days limit; employers may not delay enrollment until “first of the month following” attainment of the 60-day anniversary of the date on which an individual meets all eligibility requirements. As a result, many California employers who begin health coverage for eligible employees on the first of the month are using the first of the month following 30 days after eligibility as the enrollment deadline.
In order to determine whether a waiting period applies to any employee, it appears that under certain circumstances the insurer must credit the time the employee was covered under a prior health plan (creditable coverage), if: (1) the employee becomes eligible for coverage under the new employer’s coverage within a certain period of time after termination of his or her prior coverage, without counting the waiting period; and (2) the employee applies for coverage with the employer’s plan within the relevant enrollment period. The insurer must also credit any time an eligible employee must wait before enrolling in the health plan, including any post-enrollment or other employer-imposed waiting period. This suggests closer coordination between insurers and their group contractholders, to ensure the employer’s enrollment practices are consistent with the terms of the group insurance contract.