Newsletter Vol. 1, No. 1 September 1997

The 1996 tax legislation included provisions to limit preexisting condition limitations, prohibit discrimination based on health status, and guarantee availability and renewability of coverage. These provisions are generally applicable for plan years beginning after June 30, 1997. DOL, IRS and HHS have issued proposed regulations to implement these provisions.

Preexisting conditions are limited to 12 months (18 months for late enrollees) reduced by the employee's prior "creditable coverage" unless the employee had a break in coverage of more than 63 days. "Creditable coverage" is coverage under a group heath plan (including a governmental or church plan), health insurance coverage, Medicare and other government- sponsored programs. An employee coming to work will present a certification from his or her old employer or health plan regarding coverage occurring after July 1,1996.

Under the interim regulations, certificates are to be provided to (a) qualifying beneficiaries (for COBRA purposes) when such persons lose coverage but for COBRA continuation coverage, (b) such persons when they lose COBRA coverage, (c) other individuals when coverage under the plan ceases and (d) upon request. A model notice has been provided. The certificate requirement is effective for events occurring on and after July 1, 1996, except that no certificate is required to be provided before June 1, 1997 or to reflect coverage before July 1, 1996. For events occurring on or after July 1, 1996 but before October 1, 1996, a certificate is required only upon written request. For events occurring after October 1, 1996 andbefore June 1, 1997,a certificate must be furnished no later than June 1, 1997. There is an option whereby a group notice may be provided before June 1, 1997 for events occurring before June 1, 1997. The basic penalty is $100 for each affected individual for each noncompliance day, with an exemption for reasonable cause. No enforcement action is to begin before January 1, 1998 if there has been good faith compliance. Plan sponsors and administrators should combine these requirements with their COBRA procedures.

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