Can Our Health Care Plan Impose Benefit-Specific Waiting Periods?

Question: To comply with the Affordable Care Act (ACA), we changed the maximum waiting period under our calendar-year self-insured health plan to no more than 60 days. But the plan continues to impose some benefit-specific waiting periods of up to six months. Is our plan design compliant with legal requirements?

Answer: Your plan’s general 60-day waiting period would comply with the ACA’s prohibition on “excessive” eligibility waiting periods. (The act generally limits waiting periods to 90 days, effective for plan years beginning on or after Jan. 1, 2014.) However, as we’ll explain further, benefit-specific waiting periods — which typically make certain benefits available to participants only after they’ve been covered under the plan for a certain period — raise additional compliance issues.

Anti-abuse rule

The ACA’s maximum 90-day eligibility waiting period appears to apply to plan coverage as a whole, rather than to specific benefits. The act doesn’t expressly prohibit benefit-specific waiting periods. But the final regulations do contain an anti-abuse rule, which prohibits a plan from imposing eligibility conditions that are designed to sidestep compliance with the 90-day waiting period limitation.

For example, a plan that imposes several benefit-specific waiting periods exceeding 90 days may be found to violate the anti-abuse rule — even if its overall waiting period is less than 90 days.

2 key legal requirements

Along with abiding by the ACA’s prohibition on excessive waiting periods, plans need to consider whether benefit-specific waiting periods comply with other legal requirements. Two prime examples:

  1. Nondiscrimination requirements under the Health Insurance Portability and Accountability Act (HIPAA) and the Americans with Disabilities Act (ADA), and
  2. Limits on pre-existing conditions exclusions (PCEs) under HIPAA and the ACA.

HIPAA’s nondiscrimination rules don’t prohibit plans from excluding or limiting benefits for a specific disease or condition as long as the exclusion or limitation applies uniformly to all similarly situated individuals — for example, participants in a certain employment classification. Benefit exclusions or limitations generally are permissible under the ADA so long as coverage is equally available to the disabled and nondisabled.

Thus, these nondiscrimination rules should allow a benefit-specific waiting period as long as it’s not directed at certain individuals because of their health status or disabilities. Generally, a waiting period that targets a particular illness or disability shortly after a claim related to the illness or disability is submitted is more likely to violate HIPAA’s nondiscrimination provisions, the ADA or other nondiscrimination laws.

For example, a plan that adopts a waiting period for HIV treatment shortly after receiving a claim for an HIV medication would likely violate the rules. On the other hand, a waiting period for a service that’s used to treat a wide variety of conditions — such as chiropractic services — probably wouldn’t be found to impermissibly discriminate.

HIPAA-restricted PCEs

Remember that HIPAA restricts PCEs — and the ACA prohibits PCEs for plan years beginning on or after Jan. 1, 2014. A benefit-specific waiting period wouldn’t violate these PCE limitations if it applies regardless of whether the treated condition was present before the first day of coverage.

But some benefit-specific waiting periods can be “hidden” PCEs, because their primary effect is to exclude coverage for individuals whose conditions existed before they were enrolled in the plan. One example is a 12-month waiting period for pregnancy benefits.

More specific questions

What we’ve discussed here are the general guidelines regarding benefit-specific waiting periods. If you have more specific questions, it would be wise to review your specific plan design with your benefits advisor and legal counsel.

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