EBSA Final Rules

Ninety-Day Waiting Period Limitation   [6/25/2014]
[PDF]
Federal Register, Volume 79 Issue 122 (Wednesday, June 25, 2014)
[Federal Register Volume 79, Number 122 (Wednesday, June 25, 2014)]
[Rules and Regulations]
[Pages 35942-35948]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-14795]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 54

[TD 9671]
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-F2]
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: Final rules.

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SUMMARY: These final regulations 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

[[Page 35943]]

amended, and incorporated into the Employee Retirement Income Security 
Act of 1974 and the Internal Revenue Code.

DATES: Effective date. These final regulations are effective on August 
25, 2014.
    Applicability date. These final regulations apply to group health 
plans and group health insurance issuers for plan years beginning on or 
after January 1, 2015.

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 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 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). After consideration of comments on the proposed regulations, 
the Departments published final regulations on February 24, 2014 (79 FR 
10295).
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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 final 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 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, 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).
    Contemporaneous with the publication of the final regulations, the 
Departments published proposed regulations (79 FR 10319) to 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 specific issue. The proposed regulations provided 
that one month would be the maximum allowed length of any reasonable 
and bona fide employment-based orientation period. The Departments 
stated that, during an orientation period, they envisioned 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 the proposed regulations, 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

[[Page 35944]]

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.
    Many commenters were generally supportive of the proposed rule. 
Commenters agreed that a limitation on the length of an orientation 
period of one month was appropriate and also agreed with the proposal 
that determining whether an orientation period is ``reasonable'' and 
``bona fide'' should be a facts and circumstances analysis. Some 
commenters urged the Departments to clarify the interplay between the 
90-day waiting period provision and the employer shared responsibility 
provisions.
    After consideration of the comments and feedback received from 
stakeholders, the Departments are publishing these final regulations 
that incorporate the proposed regulations without any substantive 
changes.

II. Overview of the Final Regulations

    The final regulations implementing PHS Act section 2708 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 (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 or holiday.
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    Orientation periods are commonplace and the Departments do not 
intend to call into question the reasonableness of short, bona fide 
orientation periods. The danger of abuse increases, however, as the 
length of the period expands. Accordingly, the final regulations 
provide that one month is the maximum allowed length of an employment-
based orientation period. The creation of a clear maximum prevents 
abuse and facilitates compliance.
    During an orientation period, the Departments envision that an 
employer and employee will evaluate whether the employment situation is 
satisfactory for each party, and standard orientation and training 
processes will begin. For any period longer than one month that 
precedes a waiting period, the Departments refer back to the general 
rule, which provides that the 90-day period begins after an individual 
is otherwise eligible to enroll under the terms of a group health plan. 
While a plan may impose substantive eligibility criteria, such as 
requiring the worker to fit within an eligible job classification or to 
achieve job-related licensure requirements, it may not impose 
conditions that are mere subterfuges for the passage of time.
    Under these final 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 is not considered to be 
designed to avoid compliance with the 90-day waiting period limitation 
if the orientation period does not exceed one month and the maximum 90-
day waiting period begins on the first day after the orientation 
period.
    Compliance with these final regulations is not determinative of 
compliance with section 4980H of the Code, under which an applicable 
large employer may be subject to an assessable payment if it fails to 
offer affordable minimum value coverage to certain newly-hired full-
time employees by the first day of the fourth full calendar month of 
employment. For example, an applicable large employer that has a one-
month orientation period may comply with both PHS Act section 2708 and 
Code section 4980H by offering coverage no later than the first day of 
the fourth full calendar month of employment. However, an applicable 
large employer plan may not be able to impose the full one-month 
orientation period and the full 90-day waiting period without 
potentially becoming subject to an assessable payment under Code 
section 4980H. For example, if an employee is hired as a full-time 
employee on January 6, a plan may offer coverage May 1 and comply with 
both provisions. However, if the employer is an applicable large 
employer and starts coverage May 6, which is one month plus 90 days 
after date of hire, the employer may be subject to an assessable 
payment under Code section 4980H.
    These final regulations apply to group health plans and health 
insurance issuers for plan years beginning on or after January 1, 2015. 
Until these final rules are applicable, as stated in the preamble to 
the proposed rules, the Departments will consider compliance with the 
proposed regulations to constitute compliance with PHS Act section 
2708. See 79 FR 10320, 10321 (February 24, 2014).

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)

[[Page 35945]]

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 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 \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 final regulations provide 
that one month is the maximum allowed length of any reasonable and bona 
fide employment-based orientation period. 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. The preamble to the proposed rules 
implementing PHS Act section 2708, published \8\ in the Federal 
Register on February 24, 2014 provided a qualitative discussion of 
economic impacts of clarifying the maximum allowed length of any 
reasonable and bona fide orientation period and requested detailed 
comment and data that would allow for quantification of the costs, 
benefits, and transfers associated with the term. The Departments 
received no comments providing additional data that would help it 
estimate the economic impacts of the final regulations.
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    \8\ 79 FR 10321.
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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\ If 30 percent of new employees receiving health 
care coverage from their employers are subject to a waiting period of 
three months or more, then 1.5 million new employees (5.1 million x 
0.30) would potentially be affected by these regulations.\11\ However, 
it is unlikely that the survey defines the term ``waiting period'' in 
the same manner as the final regulations. For example, the term 
``waiting period'' may have been defined by reference to an employee's 
start date, not matching the definition in the final regulations.
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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 http://ehbs.kff.org/pdf/2013/8345.pdf.
    \11\ Approximately 1.2 million private sector employees and 
287,000 State and local public sector employees.
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3. Benefits
    The final regulations implementing PHS Act section 2708 \12\ 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). These final regulations provide that one month is 
the maximum allowed length of any reasonable and bona fide employment-
based orientation period. This period of no longer than one month is 
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 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 
maximum one month orientation period requirement and the waiting period 
may not exceed 90 days.
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    \12\ 79 FR 10295 (February 24, 2014).
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4. Costs
    These final regulations extend the maximum amount of time between 
an employee beginning work and obtaining health care coverage relative 
to the time before the issuance of the final regulations implementing 
PHS Act section 2708 and these final regulations. If employees delay 
health care treatment until the expiration of the orientation period 
and waiting period, detrimental health effects could result, especially 
for low-wage employees and their dependents and those requiring higher 
levels of health care, such as those with chronic conditions. This 
could lead to lower work productivity and missed school days. However, 
the Departments anticipate that such effects may be limited because few 
employees are likely to be affected and it is anticipated that the 
inclusion of an orientation period will not result in most employees 
facing a full additional month between being hired and obtaining 
coverage.
5. Transfers
    The possible transfers associated with these final regulations 
would arise when employers begin to pay their portion of premiums or 
contributions later than they did before the issuance of these final 
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 final regulations 
become applicable, would have to wait longer between being employed and 
obtaining health coverage. During this period, affected employees might 
obtain an individual health insurance policy, purchase COBRA 
continuation coverage, or forgo health coverage--which could, depending 
on the policy, have higher out-of-pocket costs for their healthcare 
expenditures.
    The Departments expect these transfers to be minimal because under 
these final regulations, only a small number of employers would further 
effectively extend start date for coverage to their employees. That is 
because a relatively small fraction of workers have waiting periods 
that exceed three months; this rule does not create an incentive that 
is not in the system already.

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

[[Page 35946]]

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 by providing 
small businesses with flexibility to design reasonable and bona fide 
employment-based orientation periods, consistent with the 90-day 
waiting period limitation set forth in PHS Act section 2708, the final 
regulations reduce the burden on such businesses to comply with the 
provision. 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.

C. 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), the proposed rule was 
submitted to the Small Business Administration for comment on its 
impact on small business.

D. Paperwork Reduction Act

    This final rule is not subject to the requirements of the Paperwork 
Reduction Act of 1995 (PRA 95) (44 U.S.C. 3501 et seq.), because it 
does not contain a collection of information as defined in 44 U.S.C. 
3502(3).

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.

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 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 stringent than the Federal requirements 
are unlikely to ``prevent the application of'' the Affordable Care Act, 
and 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 rules 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 
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.

[[Page 35947]]

    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 
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.
    Approved: June 18, 2014.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
    Signed this 18th day of June, 2014.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration, 
Department of Labor.
    Dated: June 19, 2014.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: June 19, 2014.
Sylvia Burwell,
Secretary, Department of Health and Human Services.

Department of the Treasury

Internal Revenue Service

26 CFR Chapter I

    Accordingly, 26 CFR part 54 is 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 bona fide 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 
longer than one month, it would be considered to be 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 
amends 29 CFR part 2590 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. 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

[[Page 35948]]

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 bona fide 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 
longer than one month, it would be considered to be 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 amends 45 CFR part 147 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 adding paragraph (c)(3)(iii) and a new 
Example 11 in paragraph (f) to 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 bona fide 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 
longer than one month, it would be considered to be 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. 2014-14795 Filed 6-20-14; 4:15 pm]
BILLING CODE 4830-01-P; 4510-29-P; 4120-01-P; 6325-64-P