Document Archive > California's 60-Day Eligibility Rule Repealed

California's 60-Day Eligibility Rule Repealed

S.B. 1034 (1034) brings formal relief to anxious plan sponsors of both large and small, insured employer plans in California with the repeal of the notorious 60-Day eligibility rule, originally promulgated as a part of California's A.B. 1083 (1083). 1083's eligibility rule would have superseded the Affordable Care Act's (ACA's) 90-day eligibility rule.

Important Background

Both 1034 and 1083 are insurance carrier compliance rules for policies issued in California. They do not apply to plan sponsors nor do they apply to self-funded health plans, even though they might be located in California.

In 2013, a number of medical plan insurance carriers began to require California policyholders (both small and large group) to meet the 60-day limit on eligibility, despite the more liberal ACA rule. Last Spring, the Department of Managed Health Care (DMHC) provided informal guidance to the California insurance carriers and health care service organizations affected. If the insurance policy or HMO contract does not contain the policyholder's actual eligibility rules, the policyholders would be free to follow the 90-day rule, if they want. This meant plan sponsors could set eligibility anywhere between date of hire and the 90-day limit established by the federal rules (liberalized now to include an orientation period not to exceed 30 days beyond the 90th day). Carriers notified their policyholders that the policies will no longer (or never did) contain specific eligibility rules.

More About 1034

1.     Effective Date. It is our understanding that the Department of Insurance (DOI), and the DMHC will continue a non-enforcement policy with regard to the 60-day provision prior to the legislation's effective date of January 1, 2015.

2.     The Confusion. In recent months, the ACA Agencies have published liberalizations with regard to its 90-day rule, such as the orientation periods, other substantive criteria (e.g. licensing) for eligibility, rules on re-hires, etc. It's important to note that none of those rules would have applied to the California 60-day rule, but plan sponsors needed immediate answers to assure compliance. The California rule was to go into effect for plan years beginning on or after January 1, 2014!

3.     Additional Provisions in 1034. The legislature has made edits to California's pre-existing condition limitations, carrier notice requirements, along with clarification that insurance plans may not contain affiliation period. For your reference and night time reading, here is 1034.

Action Plan

1.     Plan Sponsors who have Implemented the 60-Day Rule. There would be nothing wrong to keep the rule in place or to change the rule any time or on policy renewal. Needless to say, there are notice requirements. ERISA most likely requires that the change would only apply to new hires on or after August 15, 2014, the date when Governor Brown signed the legislation. Plan sponsors must take their own facts and circumstances into consideration, in planning their course of action.

2.     Plan Sponsors who did not Implement the 60-Day Rule. Be mindful of the ACA 90-day rule and its liberalizations.