Column 62

Column 62: August 24 2014


As you may recall from prior columns, I have adopted the mantra:  "Nothing is so constant as change".  It continues to prove to be true.  Small employers are experiencing the biggest changes as they face renewals of their employer sponsored health plans. 

The Affordable Care Act (ACA) also known as Obamacare, is a wide reaching law enacted on the federal level.  Part of that law includes a provision that waiting periods for new employees could not exceed 90 days. 

California passed its own law that said the waiting period could not exceed 60 days, as reported earlier in this column.  The effect of that law was to create a 30 day waiting period because most plans are effective on the 1st of the month and some months have more than 31 days.  Small employers who have renewed this year have been subject to the CA rules and changed waiting periods. We agents have been lobbying the legislature for two years, asking that they not complicate things even further with this rule and return to the federal standard of 90 days.

So, the good news is that SB1034 was signed last week. The intention is to resolve the confusion between the state and federal laws. The bill is effective on 1/1/2015 but we are hearing that many carriers are going to advance the provision.  They will include the ability to use the 90-day waiting period in coming renewals.  I expect we should have notices from our carriers in the next couple of weeks.  We are also looking for clarification on those that have already renewed and when they can change back to the longer waiting period.

CAHU (California Association of Health Underwriters provides the following details:

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.


The proposed new federal regulations provided that one month would be the maximum allowed length of any reasonable and bona fide employment-based orientation period. During an orientation period, 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 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.


The federal orientation period rule becomes effective on all group policies issued or renewed after January 1, 2015 and the ruling was released on June 25, 2014.


Small employers should look forward to having some clarification from their insurers as to what they will allow in the very near future.  Since many small employers restructured their renewals to be effective 12/1, it should be resolved for them well before that renewal is received on 10/1.


The next big issue facing us in California is the rate regulation initiative.  This measure will be on the ballot in the fall.  As you watch the industry try to comply with all of the laws and then the changes, you are smart enough to know that all of these costs are passed on to the consumer. 


Most simply this law is another unnecessary law that is politically motivated.  Proponents present it as a way to stop the insurance companies from gouging us.  But the reality is that the ACA already has a provision called MLR or Minimum Loss Ration, that makes the insurers accountable for their rate actions.  I will write more about this as we get closer to the election.  



Note: All information in this column is provided" to the best of my knowledge" subject to final regulation by the respective agencies.