After wandering in the wilderness for a year, California has now come in from the cold and conformed its requirements for eligibility waiting periods to the federal standard adopted in the Affordable Care Act (ACA). Effective January 1, 2015, SB 1034 imposes a 90-day limit on eligibility waiting periods for insured health benefits issued by insurers subject to regulation by the California Department of Insurance and/or the California Department of Managed Health Care.
The ACA generally limits eligibility waiting periods for all group health plans to a maximum of 90 days, effective January 1, 2014. Under this requirement, an individual who is otherwise-eligible to participate in a group health plan must actually be able to enroll in coverage that becomes effective no later than the 90th day following his or her date of hire. Our March 2014 blog post, “The Waiting is the Hardest Part: Final Regulations on the PPACA’s 90-Day Waiting Period Released,” provides more information on the ACA waiting period requirement.
Never content to leave well enough alone, in 2013, California enacted AB 1083 to supplement the ACA requirement by imposing its own 60-day limit on eligibility waiting periods. Thanks to the preemption provision in the Employee Retirement Income Security Act (ERISA), AB 1083 was only applicable to insured health plans (more accurately, it was applicable to the underlying insurance or health maintenance organization (HMO) contracts used to fund the benefits these plans provide), and the law created unnecessary complexity for California employers that sponsored both self-funded and insured health plans.
SB 1034 addresses this inconsistency by repealing the 60-day limit created by AB 1083 and permitting health insurance issuers and HMOs to follow the ACA’s 90-day requirement. The new law makes clear that waiting periods in addition to the ACA standard are not permitted.
Although California employers have mostly adapted to the original 60-day limitation imposed by AB 1083, the adoption of SB 1034 is welcome news and will allow employers with operations in both California and other states to impose uniform eligibility rules for their health plans if they so choose.