Editor’s Note: Governor Brown signed SB 1034 into law on August 15, 2014.
California Senate Bill 1034, which will remove the 60-day limit on eligibility waiting periods under California insurance and HMO group health contracts earlier mandated by Assembly Bill 1083, is in the late stages of legislative approval in Sacramento. Senate and Assembly Floor and committee votes have been unanimous in the bill’s favor. As discussed in an earlier post, once passed the bill will:
• permit California-licensed carriers and HMOs to administer employer-imposed eligibility waiting periods so long as they do not exceed the ACA’s 90-day limit, and
• prohibit such carriers and HMOs from imposing any separate, additional affiliation or waiting periods.
Pending passage of this bill, it appears that California carriers and HMOs are writing coverage without requiring that employers limit waiting periods to 60 days in accordance with AB 1083 as codified in the California Insurance and Health and Safety Codes. Those provisions went into effect on January 1, 2014 but almost immediately met resistance from brokers and benefit advisors and their clients.
Passage of SB 1034, which is slated to take effect on January 1, 2015, will permit employers with California-issued or renewed group health coverage to simply follow the ACA’s 90-day maximum limit on eligibility waiting periods (which apply to all employers, not just “applicable large employers” with 50 or more full-time employees, counting full-time equivalents). This will simplify these employers’ lives in number of ways:
• It will remove any doubts that they may impose “substantive” eligibility requirements such as licensure or attainment of a job level (e.g., assistant manager or higher), separate and apart from the 90-day waiting period, provided that the substantive requirement is not designed to avoid compliance with the 90-day limit. The federal waiting period regulations make it quite clear that this is permitted, but the separate California waiting period rules introduced a measure of uncertainty. That will no longer be the case.
• It will permit ALEs to use a “limited non-assessment period” of up to three full calendar months after hiring a full-time employee, such that an offer of coverage can be postponed until the first day of the fourth full calendar month after hire.
On this last point, the final ACA 90-day waiting period regulations state that a 3-month period cannot be substituted for 90-days. However, separate regulations were proposed, and finalized, that permit employers to impose a bona fide and employment-based orientation period of up to one month, beginning immediately after hire or after transfer to a new, benefitted job position. After the one month orientation period is up, the eligibility waiting period of up to 90 days would begin to elapse. Therefore, if properly administered, the orientation period may be combined with the 90-day waiting /limited non-assessment period to cover the entire period between the date of hire, and the first day of the fourth full month after hire.
Note in this regard that the orientation period cannot simply be an arbitrary stretch of time but instead must be used for the new hire/transfer and the employer to evaluate each other, and for the new hire/transfer to undergo orientation and training for his or her position. There are other implementation details to be aware of, and employers should get expert benefit advice in order to ensure compliance with these brand new rules.
I understand this bill was also dependent on the passage of SB 959, which only passed the state Senate a few days ago and was presented to the Governor, but not yet signed as of August 28. While there is little chance he won’t also sign this bill, without its success SB1034 will be void. At least that’s my understanding.
I think you are right. He has 12 days to sign – until 9/9. Generally bill signatures are announced on the News section of the Governor’s website but I am also tracking w/a legislative aide.
Apparently SB 1034 stands regardless of SB 959’s fate: “Both SB 1034 and SB 959 make changes to the same section in law and in order for either one of them to not cancel each other out both bills have what’s called double-jointing language or chaptering out language. SB 1034 was signed into law and SB 959 is still pending. Regardless of the Governor’s action on SB 959, the changes in SB 1034 will still apply.”