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Content Last Revised: 12/30/2004 |
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Code of Federal Regulations Pertaining to EBSA |
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Labor |
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Pension and Welfare Benefits Administration, Department of Labor |
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Rules and Regulations for Group Health Plan Requirements |
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Requirements Relating to Access and Renewability of Coverage, and Limitations on Preexisting Condition Exclusion Periods |
29 CFR 2590.701-7 - HMO affiliation period as alternative to preexisting condition exclusion.
- Section Number: 2590.701-7
- Section Name: HMO affiliation period as alternative to preexisting condition exclusion.
(a) In general. A group health plan offering health insurance
coverage through an HMO, or an HMO that offers health insurance coverage
in connection with a group health plan, may impose an affiliation period
only if each of the following requirements is satisfied--
(1) No preexisting condition exclusion is imposed with respect to
any coverage offered by the HMO in connection with the particular group
health plan.
(2) No premium is charged to a participant or beneficiary for the
affiliation period.
(3) The affiliation period for the HMO coverage is imposed
consistent with the requirements of Sec. 2590.702 (prohibiting
discrimination based on a health factor).
(4) The affiliation period does not exceed 2 months (or 3 months in
the case of a late enrollee).
(5) The affiliation period begins on the enrollment date, or in the
case of a late enrollee, the affiliation period begins on the day that
would be the first day of coverage but for the affiliation period.
(6) The affiliation period for enrollment in the HMO under a plan
runs concurrently with any waiting period.
(b) Examples. The rules of paragraph (a) of this section are
illustrated by the following examples:
Example 1. (i) Facts. An employer sponsors a group health plan.
Benefits under the plan are provided through an HMO, which imposes a
two-month affiliation period. In order to be eligible under the plan,
employees must have worked for the employer for six months. Individual A
begins working for the employer on February 1.
(ii) Conclusion. In this Example 1, Individual A's enrollment date
is February 1 (see Sec. 2590.701-3(a)(2)), and both the waiting period
and the affiliation period begin on this date and run concurrently.
Therefore, the affiliation period ends on March 31, the waiting period
ends on July 31, and A is eligible to have coverage begin on August 1.
Example 2. (i) Facts. A group health plan has two benefit package
options, a fee-for-service option and an HMO option. The HMO imposes a
1-month affiliation period. Individual B is enrolled in the fee-for-
service option for more than one month and then decides to switch to the
HMO option at open season.
(ii) Conclusion. In this Example 2, the HMO may not impose the
affiliation period with respect to B because any affiliation period
would have to begin on B's enrollment date in the plan rather than the
date that B enrolled in the HMO option. Therefore, the affiliation
period would have expired before B switched to the HMO option.
Example 3. (i) Facts. An employer sponsors a group health plan that
provides benefits through an HMO. The plan imposes a two-month
affiliation period with respect to salaried employees, but it does not
impose an affiliation period with respect to hourly employees.
[[Page 662]]
(ii) Conclusion. In this Example 3, the plan may impose the
affiliation period with respect to salaried employees without imposing
any affiliation period with respect to hourly employees (unless, under
the circumstances, treating salaried and hourly employees differently
does not comply with the requirements of Sec. 2590.702).
(c) Alternatives to affiliation period. An HMO may use alternative
methods in lieu of an affiliation period to address adverse selection,
as approved by the State insurance commissioner or other official
designated to regulate HMOs. However, an arrangement that is in the
nature of a preexisting condition exclusion cannot be an alternative to
an affiliation period. Nothing in this part requires a State to receive
proposals for or approve alternatives to affiliation periods.
[69 FR 78763, Dec. 30, 2004]
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