[Code of Federal Regulations]
[Title 45, Volume 1]
[Revised as of October 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 45CFR146.119]

[Page 617-618]
 
                        TITLE 45--PUBLIC WELFARE
 
                           AND HUMAN SERVICES
 
PART 146_REQUIREMENTS FOR THE GROUP HEALTH INSURANCE
MARKET--Table of Contents
 
Subpart B_Requirements Relating to Access and Renewability of Coverage, 
       and Limitations on Preexisting Condition Exclusion Periods
 
Sec. 146.119  HMO affiliation period as an alternative to a 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. 146.121 (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. 146.111(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

[[Page 618]]

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.
    (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. 146.121).

    (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 78797, Dec. 30, 2004]