78800 Federal Register / Vol. 69, No. 250 / Thursday, December 30, 2004 / Proposed Rules 

DEPARTMENT OF THE TREASURY

Internal Revenue Service 

26 CFR Part 54

[REG–130370–04] 

RIN 1545–BD51

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Part 2590

RIN 1210–AA54

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

45 CFR Part 146

RIN 0938–AL88

Notice of Proposed Rulemaking for 

Health Coverage Portability: Tolling 

Certain Time Periods and Interaction 

With the Family and Medical Leave Act 

Under HIPAA Titles I and IV

AGENCIES: Internal Revenue Service, 

Department of the Treasury; Employee 

Benefits Security Administration, 

Department of Labor; Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services.

ACTION: Notice of proposed rulemaking 

and request for comments. 

SUMMARY: These proposed rules would 

clarify certain portability requirements 

for group health plans and issuers of 

health insurance coverage offered in 

connection with a group health plan. 

These rules propose to implement 

changes made to the Internal Revenue 

Code, the Employee Retirement Income 

Security Act, and the Public Health 

Service Act enacted as part of the Health 

Insurance Portability and 

Accountability Act of 1996.

DATES: Written comments on this notice 

of proposed rulemaking are invited and 

must be received by the Departments on 

or before March 30, 2005.

ADDRESSES: Written comments should 

be submitted with a signed original and 

three copies (except for electronic 

submissions) to any of the addresses 

specified below. Any comment that is 

submitted to any Department will be 

shared with the other Departments. 

Comments to the IRS can be 

addressed to: CC:PA:LPD:PR (REG–

130370–04), Room 5203, Internal 

Revenue Service, POB 7604, Ben 

Franklin Station, Washington, DC 

20044. 

In the alternative, comments may be 

hand-delivered between the hours of 8 

a.m. and 4 p.m. to: CC:PA:LPD:PR 

(REG–130370–04), Courier’s Desk, 

Internal Revenue Service, 1111 

Constitution Avenue, NW., Washington, 

DC 20224. 

Alternatively, comments may be 

transmitted electronically via the IRS 

Internet site at: www.irs.gov/regs or via 

the Federal eRulemaking Portal at 

www.regulations.gov (IRS–REG–

130370–04). 

Comments to the Department of Labor 

can be addressed to: U.S. Department of 

Labor, Employee Benefits Security 

Administration, 200 Constitution 

Avenue NW., Room C–5331, 

Washington, DC 20210, Attention:

Proposed Portability Requirements. 

Alternatively, comments may be 

hand-delivered between the hours of 9 

a.m. and 5 p.m. to the same address. 

Comments may also be transmitted by email to: e-ohpsca.ebsa@dol.gov.

Comments to HHS can be submitted 

as described below: In commenting, 

please refer to file code CMS–2158–P. 

Because of staff and resource 

limitations, we cannot accept comments 

by facsimile (FAX) transmission. 

You may submit comments in one of 

three ways (no duplicates, please): 

1. Electronically. You may submit 

electronic comments on specific issues 

in this regulation to http://

www.cms.hhs.gov/regulations/

ecomments. (Attachments should be in 

Microsoft Word, WordPerfect, or Excel; 

however, we prefer Microsoft Word.) 

2. By mail. You may mail written 

comments (one original and two copies) 

to the following address ONLY: 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Attention: CMS–2158–

P, P.O. Box 8017, Baltimore, MD 21244–

8010. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments (one original 

and two copies) before the close of the 

comment period to one of the following 

addresses. If you intend to deliver your 

comments to the Baltimore address, 

please call telephone number (410) 786–

7195 in advance to schedule your 

arrival with one of our staff members. 

Room 445–G, Hubert H. Humphrey 

Building, 200 Independence Avenue, 

SW., Washington, DC 20201; or 7500 

Security Boulevard, Baltimore, MD 

21244–1850.

(Because access to the interior of the HHH 

Building is not readily available to persons 

without Federal Government identification, 

commenters are encouraged to leave their 

comments in the CMS drop slots located in 

the main lobby of the building. A stamp-in 

clock is available for persons wishing to 

retain a proof of filing by stamping in and 

retaining an extra copy of the comments 

being filed.)

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

Submission of comments on 

paperwork requirements. You may 

submit comments on this document’s 

paperwork requirements by mailing 

your comments to the addresses 

provided at the end of the ‘‘Collection 

of Information Requirements’’ section in 

this document. 

All submissions to the IRS will be 

open to public inspection and copying 

in room 1621, 1111 Constitution 

Avenue, NW., Washington, DC from 9 

a.m. to 4 p.m. 

All submissions to the Department of 

Labor will be open to public inspection 

and copying in the Public Disclosure 

Room, Employee Benefits Security 

Administration, U.S. Department of 

Labor, Room N–1513, 200 Constitution 

Avenue, NW., Washington, DC from 

8:30 a.m. to 4:30 p.m. 

All submissions timely submitted to 

HHS will be available for public 

inspection as they are received, 

generally beginning approximately three 

weeks after publication of a document, 

at the headquarters for the Centers for 

Medicare & Medicaid Services, 7500 

Security Boulevard, Baltimore, MD 

21244, Monday through Friday of each 

week from 8:30 a.m. to 4:00 p.m. To 

schedule an appointment to view public 

comments, phone 410–786–7195.

FOR FURTHER INFORMATION CONTACT:

Dave Mlawsky, Centers for Medicare & 

Medicaid Services (CMS), Department 

of Health and Human Services, at 1–

877–267–2323 ext. 61565; Amy Turner, 

Employee Benefits Security 

Administration, Department of Labor, at 

(202) 693–8335; or Russ Weinheimer, 

Internal Revenue Service, Department of 

the Treasury, at (202) 622–6080.

SUPPLEMENTARY INFORMATION: 

Customer Service Information 

To assist consumers and the regulated 

community, the Departments have 

issued questions and answers 

concerning HIPAA. Individuals 

interested in obtaining copies of 

Department of Labor publications 

concerning changes in health care law 

may call a toll free number, 1–866–444–

EBSA (3272), or access the publications 

Federal Register / Vol. 69, No. 250 / Thursday, December 30, 2004 / Proposed Rules 78801

on-line at www.dol.gov/ebsa, the 

Department of Labor’s Web site. These 

regulations as well as other information 

on the new health care laws are also 

available on the Department of Labor’s 

interactive web pages, Health Elaws. In 

addition, CMS’s publication entitled 

‘‘Protecting Your Health Insurance 

Coverage’’ is available by calling 1–800–

633–4227 or on the Department of 

Health and Human Services’ Web site 

(www.cms.hhs.gov/hipaa1), which 

includes the interactive webpages, 

HIPAA Online. Copies of the HIPAA 

regulations, as well as notices and press 

releases related to HIPAA and other 

health care laws, are also available at 

the above-referenced Web sites. 

A. Background 

The Health Insurance Portability and 

Accountability Act of 1996 (HIPAA), 

Public Law 104–191, was enacted on 

August 21, 1996. HIPAA amended the 

Internal Revenue Code of 1986 (Code), 

the Employee Retirement Income 

Security Act of 1974 (ERISA), and the 

Public Health Service Act (PHS Act) to 

provide for, among other things, 

improved portability and continuity of 

health coverage. Interim final 

regulations implementing the HIPAA 

provisions were first made available to 

the public on April 1, 1997 (published 

in the Federal Register on April 8, 1997, 

62 FR 16894) (April 1997 interim rules). 

On December 29, 1997, the Departments 

published a clarification of the April 

1997 interim rules as they relate to 

excepted benefits. On October 25, 1999, 

the Departments published a notice in 

the Federal Register (64 FR 57520) 

soliciting additional comments on the 

portability requirements based on the 

experience of plans and issuers 

operating under the April 1997 interim 

rules. 

After consideration of all the 

comments received on the portability 

provisions, the Departments are 

publishing final regulations elsewhere 

in this issue of the Federal Register. 

These proposed rules address additional 

and discrete issues for which the 

Departments are soliciting further 

comment before promulgating final 

regulations. 

B. Overview of the Proposed 

Regulations

1. Rules Relating to Creditable 

Coverage—26 CFR 54.9801–4, 29 CFR 

2590.701–4, 45 CFR 146.113 

Tolling of the 63-Day Break-in-Coverage 

Rule 

These proposed rules would modify 

the 63-day break-in-coverage rules with 

one significant substantive change. 

Under the proposed rules, the beginning 

of the period that is used for 

determining whether a significant break 

in coverage has occurred (generally 63 

days) is tolled in cases in which a 

certificate of creditable coverage is not 

provided on or before the day coverage 

ceases. In those cases, the significantbreak-in-coverage period is tolled until 

a certificate is provided but not beyond 

44 days after the coverage ceases. 

The Departments have fashioned this 

tolling rule (and a similar tolling rule for 

the 30-day period for requesting special 

enrollment) in an effort to address the 

inequity of individuals’ losing coverage 

without being aware that the coverage 

has ended while minimizing the 

burdens on subsequent plans and 

issuers that are not responsible for 

providing the missing or untimely 

certificates. Numerous situations have 

come to the attention of the 

Departments in which an individual’s 

health coverage is terminated but in 

which the individual does not learn of 

the termination of coverage until well 

after it occurs. The statute generally 

requires that a certificate of creditable 

coverage be provided at the time an 

individual ceases to be covered under a 

plan. The statute, the April 1997 interim 

rules, and the final regulations 

(published elsewhere in this issue of the 

Federal Register) all permit a plan or 

issuer to provide the certificate at a later 

date if it is provided at a time consistent 

with notices required under a COBRA 

continuation provision. The statute also 

directs the Secretaries to establish rules 

to prevent a plan or issuer’s failure to 

provide a certificate timely from 

adversely affecting the individual’s 

subsequent coverage. If a plan or issuer 

chooses to provide a certificate later 

than the date an individual loses 

coverage, as the regulations permit in 

certain circumstances, these proposed 

rules provide that an individual should 

not suffer from this rule of convenience 

for the plan or issuer. However, to 

prevent the abuse that might result from 

an open-ended tolling rule, an outside 

limit of 44 days is placed on this relief. 

This reflects the fact that, in most cases, 

plans and issuers are required to 

provide certificates within 44 days 

(although some plans and issuers may 

be required to provide certificates 

sooner than 44 days after coverage 

ceases and some entities are not 

required to provide certificates at all). 

The Departments have adopted this 

uniform limit on the tolling rule for 

purposes of consistency. New examples 

have been added to illustrate the tolling 

rule. 

2. Evidence of Creditable Coverage—26 

CFR 54.9801–5, 29 CFR 2590.701–5, 45 

CFR 146.115 

Information in Certificate and Model 

Certificate 

These proposed rules would modify 

the required elements for the 

educational statement in certificates of 

creditable coverage to require a 

disclosure about the Family and 

Medical Leave Act. Use of the first 

model certificate below by group health 

plans and group health insurance 

issuers, or use of the appropriate model 

certificate that appears in the preamble 

to the related final regulations 

published elsewhere in this issue of the 

Federal Register, will satisfy the 

requirements of paragraph (a)(3)(ii) in 

this section of the final regulations. 

Similarly, for purposes of complying 

with those final regulations, State 

Medicaid programs may use the second 

version below, or may use the 

appropriate model certificate that 

appears in the preamble to those final 

regulations. Thus, until this proposed 

regulation is published as a final 

regulation, entities may use either the 

model certificates published below, or 

those published elsewhere in this issue 

of the Federal Register. For entities that 

choose not to use the model certificates 

below until this proposed regulation is 

published as a final regulation, we 

welcome comments as to the 

applicability date for using them.

BILLING CODE 4830–01–P

78802 Federal Register / Vol. 69, No. 250 / Thursday, December 30, 2004 / Proposed Rules 


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BILLING CODE 4830–01–C 3. Special Enrollment Periods—26 CFR 

54.9801–6, 29 CFR 2590.701–6, 45 CFR 

146.117 

Tolling of the Special Enrollment Period 

Under HIPAA, the April 1997 interim 

rules, and the final regulations, an 

individual wishing to special enroll 

following a loss of coverage is generally 

required to request enrollment not later 

than 30 days after the loss of eligibility, 

termination of employer contributions, 

or exhaustion of COBRA continuation 


EP30DE04.014</GPH>
78806 Federal Register / Vol. 69, No. 250 / Thursday, December 30, 2004 / Proposed Rules 

coverage. For individuals whose 

coverage ceases and a certificate of 

creditable coverage is not provided on 

or before the date coverage ceases, this 

regulation provides for proposed tolling 

rules similar to those described above 

for determining a significant break. That 

is, the special enrollment period 

terminates at the end of the 30-day 

period that begins on the first day after 

the earlier of the date that a certificate 

of creditable coverage is provided or the 

date 44 days after coverage ceases. 

Modification of Special Enrollment 

Procedures and When Coverage Begins 

Under Special Enrollment 

The April 1997 interim rules did not 

establish procedures for processing 

requests for special enrollment beyond 

affirming the statutory requirement that 

requests be made not later than 30 days 

after the event giving rise to the special 

enrollment right and providing that the 

same requirements could be imposed on 

special enrollees that were imposed on 

other enrollees (e.g., that the request be 

made in writing). Some examples in the 

April 1997 interim rules could be read 

to suggest that plans and issuers could 

require individuals requesting special 

enrollment to file completed 

applications for health coverage by the 

end of the special enrollment period. 

It has been brought to the 

Departments’ attention that some plans 

and issuers were imposing application 

requirements that could not reasonably 

be completed within the special 

enrollment period (for example, 

requiring the social security number of 

a newborn within 30 days of the birth), 

effectively denying individuals their 

right to special enroll their dependents. 

In this regard, the statute merely 

requires an employee to request special 

enrollment, or an individual to seek to 

enroll, during the special enrollment 

period. These proposed regulations 

preserve individuals’ access to special 

enrollment by clarifying that during the 

special enrollment period individuals 

are only required to make an oral or 

written request for special enrollment. 

The proposed regulations provide 

further that after a timely request, the 

plan or issuer may require the 

individual to complete all enrollment 

materials within a reasonable time after 

the end of the special enrollment 

period. However, the enrollment 

procedure may only require information 

required from individuals who enroll 

when first eligible and information 

about the event giving rise to the special 

enrollment right. While a plan can 

impose a deadline for submitting the 

completed enrollment materials, the 

deadline must be extended for 

information that an individual making 

reasonable efforts cannot obtain within 

that deadline. 

Thus, even where a plan requires 

social security numbers from 

individuals who enroll when first 

eligible, the plan must provide an 

extended deadline for receiving the 

social security number in the case of a 

newborn. In no event could a plan deny 

special enrollment for newborns 

because an employee could not provide 

a social security number for the 

newborn within the special enrollment 

period. 

As regards the effective date of 

coverage for special enrollments, the 

proposed rules generally follow the 

statute, the April 1997 interim final 

rules, and the final regulations being 

published elsewhere in this issue of the 

Federal Register. However clarifications 

of the effective date of coverage are 

added to conform to the clarification of 

the special enrollment procedures. 

Where the special enrollment right 

results from a loss of eligibility for 

coverage or marriage, coverage generally 

must begin no later than the first day of 

the first calendar month after the date 

the plan or issuer receives the request 

for special enrollment. However, if the 

plan or issuer requires completion of 

additional enrollment materials, 

coverage must begin no later than the 

first day of the first calendar month after 

the plan or issuer receives enrollment 

materials that are substantially 

complete. 

Where the special enrollment right 

results from a birth, coverage must begin 

on the date of birth. In the case of 

adoption or placement for adoption, 

coverage must begin no later than the 

date of such adoption or placement for 

adoption. If a plan or issuer requires 

completion of additional enrollment 

materials, the plan or issuer must 

provide benefits once the plan or issuer 

receives substantially complete 

enrollment materials. However, the 

benefits provided at that time must be 

retroactive to the date of birth, adoption, 

or placement for adoption. 

The Departments welcome comments 

on these aspects of the proposed rule. 

4. Interaction With the Family and 

Medical Leave Act—26 CFR 54.9801–7, 

29 CFR 701–8, 45 CFR 146.120 

The proposed rules address how the 

HIPAA portability requirements apply 

in situations where a person is on leave 

under the Family and Medical Leave 

Act of 1993 (FMLA). A general principle 

of FMLA is that an employee returning 

from leave under FMLA should 

generally be in the same position the 

employee was in before taking leave. At 

issue is how to reconcile that principle 

of FMLA with the HIPAA rights and 

requirements that are triggered by an 

individual ending coverage under a 

group health plan. These proposed 

regulations provide specific rules that 

clarify how HIPAA and FMLA interact 

when the coverage of an employee or an 

employee’s dependent ends in 

connection with an employee taking 

leave under FMLA.

With respect to the rules concerning 

a significant break in coverage, if an 

employee takes FMLA leave and does 

not continue group health coverage for 

any part of the leave, the period of 

FMLA leave without coverage is not 

taken into account in determining 

whether a significant break in coverage 

has occurred for the employee or any 

dependents. To the extent an individual 

needs to demonstrate that coverage 

ceased in connection with FMLA leave 

(which would toll any significant break 

with respect to another plan or issuer), 

these regulations provide that a plan or 

issuer must take into account all 

information that it obtains about an 

employee’s FMLA leave. Further, if an 

individual attests to the period of FMLA 

leave and the individual cooperates 

with a plan’s or issuer’s efforts to verify 

the individual’s FMLA leave, the plan 

or issuer must treat the individual as 

having been on FMLA leave for the 

period attested to for purposes of 

determining if the individual had a 

significant break in coverage. 

Nonetheless, a plan or issuer is not 

prevented from modifying its initial 

determination of FMLA leave if it 

determines that the individual did not 

have the claimed FMLA leave, provided 

that the plan or issuer follows 

procedures for reconsideration similar 

to those set forth in the final rules 

governing determinations of creditable 

coverage. 

The question has arisen whether it 

would be appropriate to waive the 

general requirement to provide 

automatic certificates of creditable 

coverage in the case of an individual 

who declines coverage when electing 

FMLA leave if the individual will be 

reinstated at the end of FMLA leave. At 

the time an employee elects FMLA 

leave, the employer (as well as the 

employee) may not know if the 

employee will later return from FMLA 

leave and elect to be reinstated. 

Requiring plans and issuers to provide 

certificates when individuals cease 

health coverage in connection with 

FMLA leave may result in some 

certificates being issued when 

individuals ceasing coverage will not 

need the certificates as evidence of 

coverage (because of later 

Federal Register / Vol. 69, No. 250 / Thursday, December 30, 2004 / Proposed Rules 78807

1The rules for determining the average number of 

employees employed by an employer during a year 

are not used for counting the number employed by 

the employer on a given day, such as the first day 

of a plan year.

reinstatement). However, automatic 

issuance likely imposes less burden 

because the plan or issuer does not need 

to determine whether a certificate is 

required. Moreover, automatic issuance 

eliminates the need for remedial 

measures if an individual expected to be 

reinstated in fact is not later reinstated. 

Thus, these proposed regulations clarify 

there is no exception to the general rule 

requiring automatic certificates when 

coverage ends and provide that if an 

individual covered under a group health 

plan takes FMLA leave and ceases 

coverage under the plan, an automatic 

certificate must be provided. 

With respect to the special enrollment 

rules, an individual (or a dependent of 

the individual) who is covered under a 

group health plan and who takes FMLA 

leave has a loss of eligibility that results 

in a special enrollment period if the 

individual’s group health coverage is 

terminated at any time during FMLA 

leave and the individual does not return 

to work for the employer at the end of 

FMLA leave. This special enrollment 

period begins when the period of FMLA 

leave ends. Moreover, the rules that 

delay the start of the special enrollment 

period until the receipt of a certificate 

of creditable coverage continue to 

operate. 

5. Special Rules—Excepted Plans and 

Excepted Benefits—26 CFR 54.9831–1, 

29 CFR 2590.732, 45 CFR 146.145 

Determination of Number of Plans 

Various provisions in Chapter 100 of 

the Code, Part 7 of Subtitle B of Title I 

of ERISA, and Title XXVII of the PHS 

Act apply when an individual 

commences coverage or terminates 

coverage under a group health plan. For 

example, a certificate of creditable 

coverage must be provided when an 

individual ceases to be covered under a 

group health plan. Under the April 1997 

interim rules, it was not always clear 

whether an individual changing benefit 

elections among those offered by an 

employer or employee organization was 

merely switching between benefit 

packages under a single plan or was 

switching from one plan to another. 

These proposed regulations add rules to 

remove this uncertainty. 

Under these proposed regulations, all 

medical care benefits made available by 

an employer or employee organization 

(including a board of trustees of a 

multiemployer trust) are generally 

considered to constitute one group 

health plan (the default rule). However, 

the employer or employee organization 

can establish more than one group 

health plan if it is clear from the 

instruments governing the arrangements 

to provide medical care benefits that the 

benefits are being provided under 

separate plans and if the arrangements 

are operated pursuant to the 

instruments as separate plans. A 

multiemployer plan and a 

nonmultiemployer plan are always 

separate plans. Under an anti-abuse 

rule, separate plans are aggregated to the 

extent necessary to prevent the evasion 

of any legal requirement. 

These rules provide plan sponsors 

great flexibility while minimizing the 

burden of making decisions about how 

many plans to maintain. For example, 

many employers may wish to minimize 

the number of certificates of creditable 

coverage required to be furnished to 

continuing employees. Under the 

default rule, because all health benefits 

provided by an employer are considered 

a single group health plan, there is no 

need to furnish a certificate of creditable 

coverage when an employee merely 

switches coverage among the options 

made available by the employer. This 

need would arise only if the employer 

designated separate benefit packages as 

separate plans in the plan documents 

and only if the benefit packages were 

also operated pursuant to the plan 

documents as separate plans.

The anti-abuse rule limits the 

flexibility of these rules to prevent 

evasions. For example, a plan sponsor 

might design an arrangement under 

which the participation of each of many 

employees in the arrangement would be 

considered a separate plan. On the face 

of it, such an arrangement might appear 

to satisfy the requirement for a plan 

being exempt from the requirements of 

Chapter 100 of the Code, Part 7 of 

ERISA, and Title XXVII of the PHS Act 

because on the first day of the plan year 

each plan would have fewer than two 

participants who are current employees. 

This would give the impression that the 

plans would not have to comply with 

the prohibitions against discriminating 

based on one or more health factors, 

with the restrictions on preexisting 

condition exclusions, nor with any of 

the other requirements of Chapter 100 of 

the Code, Part 7 of ERISA, and Title 

XXVII of the PHS Act. The anti-abuse 

rule would require the aggregation of 

plans under such an arrangement to the 

extent necessary to make the plans 

subject to the requirements of Chapter 

100 of the Code, Part 7 of ERISA, and 

Title XXVII of the PHS Act. The antiabuse rule would apply in similar 

fashion to prevent the evasion of any 

other law that applies to group health 

plans or to the parties administering 

them or providing benefits under them. 

Counting the Average Number of 

Employees 

These proposed regulations add rules 

for counting the average number of 

employees employed by an employer 

during a year.1 Various rules in Chapter 

100 of the Code, Part 7 of ERISA, and 

Title XXVII of the PHS Act require the 

determination of such an average 

number, including the Mental Health 

Parity Act provisions, the guaranteed 

access provisions under the PHS Act for 

small employers, and the exemption 

from the excise tax under the Code for 

certain small employers.

Under these proposed regulations, the 

average number of employees employed 

by an employer is determined by using 

a full-time equivalents method. Each 

full-time employee employed for the 

entire previous calendar year counts as 

one employee. Full-time employees 

employed less than the entire previous 

calendar year and part-time employees 

are counted by totaling their 

employment hours in the previous 

calendar year (but not to exceed 40 

hours for any week) and dividing that 

number by the annual full-time hours 

under the employer’s general 

employment practices (but not 

exceeding 40 hours per week). Any 

resulting fraction is disregarded. For 

example, if these calculations produce a 

result of 50.9, the average number of 

employees is considered to be 50. If an 

employer existed for less than the entire 

previous calendar year (including not 

being in existence at all), then the 

determination of the average number of 

employees is made by estimating the 

average number of employees that it is 

reasonably expected that the employer 

will employ on business days in the 

current calendar year. For a 

multiemployer plan, the number of 

employees employed by the employer 

with the most employees is attributed to 

each employer with at least one 

employee participating in the plan. 

C. Economic Impact and Paperwork 

Burden 

Summary—Department of Labor and 

Department of Health and Human 

Services 

HIPAA’s group market portability 

provisions, which limit the scope and 

application of preexisting condition 

exclusions and establish special 

enrollment rights, provide a minimum 

standard of protection designed to 

increase access to health coverage. The 

78808 Federal Register / Vol. 69, No. 250 / Thursday, December 30, 2004 / Proposed Rules 

Departments crafted these proposed 

regulations to secure these protections 

under certain special circumstances, 

consistent with the intent of Congress, 

and to do so in a manner that is 

economically efficient. The Departments 

are unable to quantify the regulations’

economic benefits and costs, but believe 

that their benefits will justify their costs. 

HIPAA’s primary economic effects 

ensue directly from its statutory 

provisions. HIPAA’s statutory group 

market portability provisions extend 

coverage to certain individuals and 

preexisting conditions not otherwise 

covered. This extension of coverage 

entails both benefits and costs. 

Individuals enjoying expanded coverage 

will realize benefits, sometimes 

including improvements in health and 

relief from so-called ‘‘job lock.’’ The 

costs of HIPAA’s portability provisions 

generally include the cost of extending 

coverage, as well as certain attendant 

administrative costs. The Departments 

believe that the benefits of HIPAA are 

concentrated in a relatively small 

population, while the costs are 

distributed broadly across group plan 

enrollees. The economic effects of 

HIPAA’s statutory portability provisions 

are discussed in detail in the preamble 

to the final regulation under the ‘‘Effects 

of the Statute’’ of the ‘‘Basis for 

Assessment of Economic Impact’’

section, published elsewhere in this 

issue of the Federal Register. 

By clarifying and securing HIPAA’s 

statutory portability protections, these 

proposed regulations will help ensure 

that HIPAA rights are fully realized. The 

result is likely to be a small increase at 

the margin in the economic effects of 

HIPAA’s statutory portability 

provisions. 

These proposed regulations are 

intended to secure and implement 

HIPAA’s group market portability and 

special enrollment provisions under 

certain special circumstances. The 

regulations will secure HIPAA’s 

portability rights for individuals who 

are not timely notified that their 

coverage has ended and for individuals 

whose coverage ends in connection with 

the taking of leave that is guaranteed 

under FMLA. The regulations also will 

clarify and thereby secure individuals’

special enrollment rights under HIPAA, 

and clarify the methodologies to be used 

by employers to determine the number 

of plans offered and the average number 

of individuals employed during a given 

year. 

Additional economic benefits derive 

from the regulations’ clarifications of 

HIPAA requirements. The regulations 

will reduce uncertainty and costly 

disputes between employees, employers 

and issuers, and promote confidence 

among employees in health benefits’

value, thereby promoting labor market 

efficiency and fostering the 

establishment and continuation by 

employers of group health plans. 

Benefits under these regulations will 

be concentrated among a small number 

of affected individuals while costs will 

be spread thinly across group plan 

enrollees. 

Affected individuals will generally 

include those who would have lost 

access to coverage for needed medical 

care after being denied HIPAA 

portability and/or special enrollment 

rights due to time spent without 

coverage prior to receiving a certificate 

or while on FMLA-guaranteed leave. 

The benefits of these regulations for any 

particular affected individual may be 

significant. As noted above and under 

‘‘Effects of the Statute’’ in the ‘‘Basis for 

Assessment of Economic Impact’’

section of the preamble to the final 

regulation, published elsewhere in this 

issue of the Federal Register, access to 

coverage for needed medical care is 

important to individuals’ health and 

productivity. However, the number of 

affected individuals, and therefore the 

aggregate cost of extended access to 

coverage under these regulations, is 

expected to be small, for several 

reasons. First, these regulations extend 

HIPAA rights only in instances where 

individuals are not timely notified that 

their coverage has ended or their 

coverage ends in connection with the 

taking of FMLA-guaranteed leave. 

Second, the period over which this 

regulation extends rights will often be 

short, insofar as certificates are often 

provided promptly after coverage ends 

and many family leave periods are far 

shorter than the guaranteed 12 weeks. 

Third, it is generally in individuals’

interest to minimize periods of 

uninsurance. Individuals are likely to 

exercise their portability and special 

enrollment rights as soon as possible 

after coverage ends, which will often be 

before any extension of such rights 

under these regulations becomes 

effective. Fourth, only a portion of 

individuals who enroll in health plans 

in circumstances where these 

regulations alone guarantee their special 

enrollment or portability rights would 

otherwise have been denied such rights. 

Fifth, only a small minority of 

individuals who avoid a significant 

break in coverage as a direct result of 

these regulations would otherwise have 

lost coverage for needed medical care. 

(The affected minority would be those 

who suffer from preexisting conditions, 

join health plans that exclude coverage 

for such conditions, and require 

treatment of such conditions during the 

exclusion periods.) 

Affected individuals may also include 

some who would have been denied 

special enrollment rights if plans or 

issuers failed to recognize their requests 

for special enrollment or imposed 

unreasonable deadlines or requirements 

for completion of enrollment materials. 

As noted above, the Departments 

expect that these regulations will 

increase at the margin the economic 

effects of HIPAA’s statutory portability 

provisions. For the reasons stated 

immediately above, the Departments 

believe that these increases will be 

small on aggregate, adding only a small 

increment to the costs attributable to 

HIPAA’s statutory portability 

provisions, which themselves amount to 

a small fraction of one percent of health 

plan expenditures. Additionally, as with 

the cost of HIPAA’s statutory portability 

provisions, the majority of these costs 

will be borne by group plan enrollees. 

The Departments expect these 

regulations to have little or no 

perceptible negative impact on 

employers’ propensity to offer health 

benefit plans or on the generosity of 

those plans. In sum, the Departments 

expect that the benefits of these 

regulations, which can be very large for 

a particular affected individual, will 

justify their costs. The basis for the 

Departments’ conclusions is detailed 

below.

The Departments solicit comments on 

their conclusions and their basis for 

them, and empirical data or other 

information that would support a fuller 

or more accurate analysis. 

Executive Order 12866—Department of 

Labor and Department of Health and 

Human Services 

Under Executive Order 12866 (58 FR 

551735, Oct. 4, 1993), the Departments 

must determine whether a regulatory 

action is ‘‘significant’’ and therefore 

subject to the requirements of the 

Executive Order and subject to review 

by the Office of Management and 

Budget (OMB). Under section 3(f), the 

order defines a ‘‘significant regulatory 

action’’ as an action that is likely to 

result in a rule: (1) Having an annual 

effect on the economy of $100 million 

or more, or adversely and materially 

affecting a sector of the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

state, local or tribal governments or 

communities (also referred to as 

‘‘economically significant’’); (2) creating 

serious inconsistency or otherwise 

interfering with an action taken or 

planned by another agency; (3) 

materially altering the budgetary 

Federal Register / Vol. 69, No. 250 / Thursday, December 30, 2004 / Proposed Rules 78809

2Computer runs using Medical Expenditure 

Survey Household Component (MEPS-HC) and the 

Robert Wood Johnson Employer Health Benefits 

Survey determined that the share of covered 

private-sector job leavers at small firms average 35 

percent of all covered private sector job leavers. 

From this, we inferred that the financial burden 

borne by small plans is approximately 35 percent 

of the total expenditures by private-sector group 

health plans which was estimated to be $515 

million.

impacts of entitlement grants, user fees, 

or loan programs or the rights and 

obligations of recipients thereof; or (4) 

raising novel legal or policy issues 

arising out of legal mandates, the 

President’s priorities, or the principles 

set forth in the Executive Order. 

Pursuant to the terms of the Executive 

Order, the Departments have 

determined that this action raises novel 

policy issues arising out of legal 

mandates. Therefore, this notice is 

‘‘significant’’ and subject to OMB review 

under Section 3(f)(4) of the Executive 

Order. Consistent with the Executive 

Order, the Departments have assessed 

the costs and benefits of this regulatory 

action. The Departments’ assessment, 

and the analysis underlying that 

assessment, is detailed below. The 

Departments performed a 

comprehensive, unified analysis to 

estimate the costs and benefits 

attributable to the regulations for 

purposes of compliance with Executive 

Order 12866, the Regulatory Flexibility 

Act, and the Paperwork Reduction Act. 

Statement of Need for Proposed Action 

These proposed regulations clarify 

and interpret the HIPAA portability 

provisions under Section 701 of the 

Employee Retirement Income Security 

Act of 1974 (ERISA), Section 2701 of the 

Public Health Service Act, and Section 

9801 of the Internal Revenue Code of 

1986. The regulations are needed to 

secure and implement HIPAA’s 

portability rights for individuals who 

are not timely notified that their 

coverage has ended and for individuals 

whose coverage ends in connection with 

the taking of leave that is guaranteed 

under FMLA, and to clarify and secure 

individuals’ special enrollment rights 

under HIPAA. 

Economic Effects 

As noted above, HIPAA’s primary 

economic effects ensue directly from its 

statutory provisions. HIPAA’s statutory 

group market portability provisions 

extend coverage to certain individuals 

and preexisting conditions not 

otherwise covered. This extension of 

coverage entails both benefits and costs. 

The economic effects of HIPAA’s 

statutory portability provisions is 

summarized above and discussed in 

detail under the ‘‘Basis for Assessment 

of Economic Impact’’ section of the 

preamble to the final regulation, 

published elsewhere in this issue of the 

Federal Register. 

Also as noted above, by clarifying and 

securing HIPAA’s statutory portability 

protections, these regulations will help 

ensure that HIPAA rights are fully 

realized. The result is likely to be a 

small increase at the margin in the 

economic effects of HIPAA’s statutory 

portability provisions. The benefits of 

these regulations will be concentrated 

among a small number of affected 

individuals, while their costs will be 

spread thinly across plans and issuers. 

The regulations also will reduce 

uncertainty about health benefits’ scope 

and value, thereby promoting employee 

health benefit coverage and labor market 

efficiency. The Departments believe that 

the regulations’ benefits will justify 

their cost. The Departments assessment 

of the expected economic effects of the 

regulation are summarized above and 

discussed in detail below. 

Regulatory Flexibility Act—The 

Department of Labor and Department of 

Health and Human Services 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) (RFA), imposes 

certain requirements with respect to 

Federal rules that are subject to the 

notice and comment requirements of 

section 553(b) of the Administrative 

Procedure Act (5 U.S.C. 551 et seq.) and 

which are likely to have a significant 

economic impact on a substantial 

number of small entities. Section 603 of 

the RFA stipulates that an agency, 

unless it certifies that a proposed rule 

will not have a significant economic 

impact on a substantial number of small 

entities, must present an initial 

regulatory flexibility analysis at the time 

of publication of the notice of proposed 

rulemaking that describes the impact of 

the rule on small entities and seeks 

public comment on such impact. Small 

entities include small businesses, 

organizations, and governmental 

jurisdictions. 

For purposes of analysis under the 

RFA, the Departments consider a small 

entity to be an employee benefit plan 

with fewer than 100 participants. The 

basis for this definition is found in 

section 104(a)(2) of ERISA, which 

permits the Secretary of Labor to 

prescribe simplified annual reports for 

pension plans which cover fewer than 

100 participants. Under section 

104(a)(3), the Secretary may also 

provide for simplified annual reporting 

and disclosure if the statutory 

requirements of part 1 of Title I of 

ERISA would otherwise be 

inappropriate for welfare benefit plans. 

Pursuant to the authority of section 

104(a)(3), the Department of Labor has 

previously issued at 29 CFR 2520.104–

20, 2520.104–21, 2520.104–41, 

2520.104–46 and 2520.104b–10 certain 

simplified reporting provisions and 

limited exemptions from reporting and 

disclosure requirements for small plans, 

including unfunded or insured welfare 

plans covering fewer than 100 

participants and which satisfy certain 

other requirements. 

Further, while some small plans are 

maintained by large employers, most are 

maintained by small employers. Both 

small and large plans may enlist small 

third party service providers to perform 

administrative functions, but it is 

generally understood that third party 

service providers transfer their costs to 

their plan clients in the form of fees. 

Thus, the Departments believe that 

assessing the impact of this rule on 

small plans is an appropriate substitute 

for evaluating the effect on small 

entities. The definition of small entity 

considered appropriate for this purpose 

differs, however, from a definition of 

small business based on size standards 

promulgated by the Small Business 

Administration (SBA) (13 CFR 121.201) 

pursuant to the Small Business Act (5 

U.S.C. 631 et seq.). The Department of 

Labor solicited comments on the use of 

this standard for evaluating the effects 

of the proposal on small entities. No 

comments were received with respect to 

the standard. Therefore, a summary of 

the initial regulatory flexibility analysis 

based on the 100 participant size 

standard is presented below.

The economic effects of HIPAA’s 

statutory provisions on small plans are 

discussed extensively under the 

‘‘Regulatory Flexibility Act—

Department of Labor and Department of 

Health and Human Services’’ section of 

the preamble to the final regulation, 

published elsewhere in this issue of the 

Federal Register. 

By clarifying and securing HIPAA’s 

statutory portability protections, these 

regulations will help ensure that these 

benefits are fully realized. The result is 

likely to be a small increase in the 

economic effects of HIPAA’s statutory 

provisions. The Departments were 

unable to estimate the amount of this 

increase. However, the direct financial 

value of coverage extensions pursuant to 

HIPAA’s statutory portability provisions 

are estimated to be approximately $180 

million for small plans, or a small 

fraction of one percent of total small 

plan expenditures.2

The regulations also will reduce 

uncertainty about health benefits’ scope 

and value, thereby promoting employee 

78810 Federal Register / Vol. 69, No. 250 / Thursday, December 30, 2004 / Proposed Rules 

health benefit coverage, including 

coverage under small plans, and labor 

market efficiency. 

The benefits of these regulations will 

be concentrated among a small number 

of affected small group plan enrollees, 

while their costs will be spread thinly 

across small group plans enrollees. The 

benefits of these regulations for any 

particular affected individual, which 

may include improved health and 

productivity, may be significant. 

However, as previously noted, the 

number of affected individuals, and 

therefore the aggregate cost of these 

regulations, is expected to be small. The 

Departments believe that the benefits to 

affected individuals of the application 

of these regulations to small plans 

justify the cost to small plans of such 

application. The basis for the 

Departments’ conclusions is detailed 

below. 

The Departments generally expect the 

impact of the regulations on any 

particular small plan to be small. A very 

large majority of small plans are fully 

insured, so the cost will fall nominally 

on issuers rather than from plans. 

Issuers are expected to pass this cost 

back to plans and enrollees, but will 

spread much of it across a large number 

of plans, thereby minimizing the impact 

on any particular plan. However, it is 

possible that small plans that selfinsure, or fully insured small plans 

whose premiums are tied closely to 

their particular claims experience, 

might bear all or most of the cost 

associated with extensions of coverage 

attributable directly to these regulations. 

The Departments have no way to 

quantify the incidence or magnitude of 

such costs, and solicit comments on 

such incidence and magnitude, and on 

whether these regulations would have a 

significant impact on a substantial 

number of small plans. 

Special Analyses—Department of the 

Treasury 

Notwithstanding the determinations 

of the Departments of Labor and of 

Health and Human Services, for 

purposes of the Department of the 

Treasury this notice of proposed 

rulemaking is not a significant 

regulatory action. Because this notice of 

proposed rulemaking does not impose a 

collection of information on small 

entities and is not subject to section 

553(b) of the Administrative Procedure 

Act (5 U.S.C. chapter 5), the Regulatory 

Flexibility Act (5 U.S.C. chapter 6) does 

not apply pursuant to 5 U.S.C. 603(a), 

which exempts from the Regulatory 

Flexibility Act’s requirements certain 

rules involving the internal revenue 

laws. Pursuant to section 7805(f) of the 

Internal Revenue Code, this notice of 

proposed rulemaking will be submitted 

to the Chief Counsel for Advocacy of the 

Small Business Administration for 

comment on its impact on small 

business. 

Paperwork Reduction Act 

Department of Labor 

These proposed regulations include 

three separate collections of information 

as that term is defined in the Paperwork 

Reduction Act of 1995 (PRA 95), 44 

U.S.C. 3502(3): the Notice of Enrollment 

Rights, Notice of Preexisting Condition 

Exclusion, and Certificate of Creditable 

Coverage. Each of these disclosures is 

currently approved by the Office of 

Management and Budget (OMB) through 

October 31, 2006 in accordance with 

PRA 95 under control numbers 1210–

0101, 1210–0102, and 1210–0103. 

Department of the Treasury 

These proposed regulations include a 

collection of information as that term is 

defined in PRA 95: the Notice of 

Enrollment Rights, Notice of Preexisting 

Condition Exclusion, and Certificate of 

Creditable Coverage. Each of these 

disclosures is currently approved by 

OMB under control number 1545–1537. 

Department of Health and Human 

Services 

These proposed regulations include 

three separate collections of information 

as that term is defined in PRA 95: the 

Notice of Enrollment Rights, Notice of 

Preexisting Condition Exclusion, and 

Certificate of Creditable Coverage. Each 

of these disclosures is currently 

approved by OMB through June 30, 

2006 in accordance with PRA 95 under 

control number 0938–0702. 

Small Business Regulatory Enforcement 

Fairness Act 

The rule being issued here is subject 

to the provisions of the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (5 U.S.C. 801 et seq.) and, if 

finalized, will be transmitted to 

Congress and the Comptroller General 

for review. The rule is not a ‘‘major 

rule’’ as that term is defined in 5 U.S.C. 

804, because it is not likely to result in 

(1) an annual effect on the economy of 

$100 million or more; (2) a major 

increase in costs or prices for 

consumers, individual industries, or 

federal, state, or local government 

agencies, or geographic regions; or (3) 

significant adverse effects on 

competition, employment, investment, 

productivity, innovation, or on the 

ability of United States-based 

enterprises to compete with foreignbased enterprises in domestic or export 

markets. 

Unfunded Mandates Reform Act 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 requires 

that agencies assess anticipated costs 

and benefits before issuing any rule that 

may result in an expenditure in any 1 

year by state, local, or tribal 

governments, in the aggregate, or by the 

private sector, of $100 million. These 

proposed regulations have no such 

mandated consequential effect on state, 

local, or tribal governments, or on the 

private sector. 

Federalism Statement Under Executive 

Order 13132—Department of Labor and 

Department of Health and Human 

Services 

Executive Order 13132 outlines 

fundamental principles of federalism. It 

requires adherence to specific criteria by 

federal agencies in formulating and 

implementing policies that have 

‘‘substantial direct effects’’ on the 

States, the relationship between the 

national government and States, or on 

the distribution of power and 

responsibilities among the various 

levels of government. Federal agencies 

promulgating regulations that have 

these federalism implications must 

consult with State and local officials, 

and describe the extent of their 

consultation and the nature of the 

concerns of State and local officials in 

the preamble to the regulation. 

In the Departments’ view, these 

proposed regulations have federalism 

implications because they may have 

substantial direct effects on the States, 

the relationship between the national 

government and States, or on the 

distribution of power and 

responsibilities among the various 

levels of government. However, in the 

Departments’ view, the federalism 

implications of these proposed 

regulations are substantially mitigated 

because, with respect to health 

insurance issuers, the vast majority of 

States have enacted laws which meet or 

exceed the federal HIPAA portability 

standards. 

In general, through section 514, 

ERISA supersedes State laws to the 

extent that they relate to any covered 

employee benefit plan, and preserves 

State laws that regulate insurance, 

banking or securities. While ERISA 

prohibits States from regulating a plan 

as an insurance or investment company 

or bank, HIPAA added a new section to 

ERISA (as well as to the PHS Act) 

narrowly preempting State requirements 

for issuers of group health insurance 

coverage. Specifically, with respect to 

Federal Register / Vol. 69, No. 250 / Thursday, December 30, 2004 / Proposed Rules 78811

3States may shorten the six-month look-back 

period prior to the enrollment date; shorten the 12-

month and 18-month maximum preexisting 

condition exclusion periods; increase the 63-day 

significant break in coverage period; increase the 

30-day period for newborns, adopted children, and 

children placed for adoption to enroll in the plan 

with no preexisting condition exclusion; further 

limit the circumstances in which a preexisting 

condition exclusion may be applied (beyond the 

federal exceptions for certain newborns, adopted 

children, children placed for adoption, pregnancy, 

and genetic information in the absence of a 

diagnosis; require additional special enrollment 

periods; and reduce the HMO affiliation period to 

less than 2 months (3 months for late enrollees).

seven provisions of the HIPAA 

portability rules, states may impose 

stricter obligations on health insurance 

issuers.3 Moreover, with respect to other 

requirements for health insurance 

issuers, states may continue to apply 

state law requirements except to the 

extent that such requirements prevent 

the application of HIPAA’s portability, 

access, and renewability provisions.

In enacting these new preemption 

provisions, Congress intended to 

preempt State insurance requirements 

only to the extent that they prevent the 

application of the basic protections set 

forth in HIPAA. HIPAA’s conference 

report states that the conferees intended 

the narrowest preemption of State laws 

with regard to health insurance issuers. 

H.R. Conf. Rep. No. 736, 104th Cong. 2d 

Session 205 (1996). State insurance laws 

that are more stringent than the federal 

requirements are unlikely to ‘‘prevent 

the application of’’ the HIPAA 

portability provisions, and be 

preempted. Accordingly, States have 

significant latitude to impose 

requirements on health insurance 

insurers that are more restrictive than 

the federal law. 

Guidance conveying this 

interpretation of HIPAA’s preemption 

provisions was published in the Federal 

Register on April 8, 1997, 62 FR 16904. 

These proposed regulations clarify and 

implement the statute’s minimum 

standards and do not significantly 

reduce the discretion given the States by 

the statute. Moreover, the Departments 

understand that the vast majority of 

States have requirements that meet or 

exceed the minimum requirements of 

the HIPAA portability provisions. 

HIPAA provides that the States may 

enforce the provisions of HIPAA as they 

pertain to issuers, but that the Secretary 

of Health and Human Services must 

enforce any provisions that a State fails 

to substantially enforce. To date, CMS 

enforces the HIPAA portability 

provisions in only one State in 

accordance with that State’s specific 

request to do so. When exercising its 

responsibility to enforce the provisions 

of HIPAA, CMS works cooperatively 

with the State for the purpose of 

addressing the State’s concerns and 

avoiding conflicts with the exercise of 

State authority. CMS has developed 

procedures to implement its 

enforcement responsibilities, and to 

afford the States the maximum 

opportunity to enforce HIPAA’s 

requirements in the first instance. 

CMS’s procedures address the handling 

of reports that States may not be 

enforcing HIPAA’s requirements, and 

the mechanism for allocating 

responsibility between the States and 

CMS. In compliance with Executive 

Order 13132’s requirement that agencies 

examine closely any policies that may 

have federalism implications or limit 

the policymaking discretion of the 

States, the Department of Labor and 

CMS have engaged in numerous efforts 

to consult and work cooperatively with 

affected State and local officials. 

For example, the Departments sought 

and received input from State insurance 

regulators and the National Association 

of Insurance Commissioners (NAIC). 

The NAIC is a non-profit corporation 

established by the insurance 

commissioners of the 50 States, the 

District of Columbia, and the four U.S. 

territories. In most States the Insurance 

Commissioner is appointed by the 

Governor, in approximately 14 States, 

the insurance commissioner is an 

elected official. Among other activities, 

it provides a forum for the development 

of uniform policy when uniformity is 

appropriate. Its members meet, discuss 

and offer solutions to mutual problems. 

The NAIC sponsors quarterly meetings 

to provide a forum for the exchange of 

ideas and in-depth consideration of 

insurance issues by regulators, industry 

representatives and consumers. CMS 

and the Department of Labor staff have 

consistently attended these quarterly 

meetings to listen to the concerns of the 

State Insurance Departments regarding 

HIPAA portability issues. In addition to 

the general discussions, committee 

meetings, and task groups, the NAIC 

sponsors the standing CMS/DOL 

meeting on HIPAA issues for members 

during the quarterly conferences. This 

meeting provides CMS and the 

Department of Labor with the 

opportunity to provide updates on 

regulations, bulletins, enforcement 

actions, and outreach efforts regarding 

HIPAA. 

The Departments received written 

comments on the interim regulation 

from the NAIC and from ten States. In 

general, these comments raised 

technical issues that the Departments 

considered in conjunction with similar 

issues raised by other commenters. In a 

letter sent before issuance of the interim 

regulation, the NAIC expressed 

concerns that the Departments interpret 

the new preemption provisions of 

HIPAA narrowly so as to give the States 

flexibility to impose more stringent 

requirements. As discussed above, the 

Departments address this concern in the 

preamble to the interim regulation. 

In addition, the Departments 

specifically consulted with the NAIC in 

developing these proposed regulations. 

Through the NAIC, the Departments 

sought and received the input of State 

insurance departments regarding certain 

insurance industry definitions, 

enrollment procedures and standard 

coverage terms. This input is generally 

reflected in the discussion of comments 

received and changes made in Section 

B—Overview of the Regulations of the 

preamble to the final regulations 

published elsewhere in this issue of the 

Federal Register. 

The Departments have also 

cooperated with the States in several 

ongoing outreach initiatives, through 

which information on HIPAA is shared 

among federal regulators, State 

regulators and the regulated community. 

In particular, the Department of Labor 

has established a Health Benefits 

Education Campaign with more than 70 

partners, including CMS, NAIC and 

many business and consumer groups. 

CMS has sponsored conferences with 

the States—the Consumer Outreach and 

Advocacy conferences in March 1999 

and June 2000, and the Implementation 

and Enforcement of HIPAA National 

State-Federal Conferences in August 

1999, 2000, 2001, 2002, and 2003. 

Furthermore, both the Department of 

Labor and CMS Web sites offer links to 

important State web sites and other 

resources, facilitating coordination 

between the State and federal regulators 

and the regulated community. 

Throughout the process of developing 

these regulations, to the extent feasible 

within the specific preemption 

provisions of HIPAA, the Departments 

have attempted to balance the States’

interests in regulating health insurance 

issuers, and the Congress’ intent to 

provide uniform minimum protections 

to consumers in every State. By doing 

so, it is the Departments’ view that they 

have complied with the requirements of 

Executive Order 13132. 

Pursuant to the requirements set forth 

in Section 8(a) of Executive Order 

13132, and by the signatures affixed to 

proposed final regulations, the 

Departments certify that the Employee 

Benefits Security Administration and 

the Centers for Medicare & Medicaid 

Services have complied with the 

requirements of Executive Order 13132 

for the attached proposed regulation, 

78812 Federal Register / Vol. 69, No. 250 / Thursday, December 30, 2004 / Proposed Rules 

4The voluntary nature of the employment-based 

health benefit system in conjunction with the open 

and dynamic character of labor markets make 

explicit as well as implicit negotiations on 

compensation a key determinant of the prevalence 

of employee benefits coverage. It is likely that 80% 

to 100% of the cost of employee benefits is borne 

by workers through reduced wages (see for example 

Jonathan Gruber and Alan B. Krueger, ‘‘The 

Incidence of Mandated Employer-Provided 

Insurance: Lessons from Workers Compensation 

Insurance,’’ in, David Bradford, ed., Tax Policy and 

Economy, pp:111–143 (Cambridge, MA: MIT Press, 

1991); Jonathan Gruber, ‘‘The Incidence of 

Mandated Maternity Benefits,’’ American Economic 

Review, Vol. 84 no. 3 (June 1994), pp. 622–641; 

Lawrence H. Summers, ‘‘Some Simple Economics 

of Mandated Benefits,’’ American Economic 

Review, Vol. 79, No. 2 (May 1989), pp:177–183; 

Louise Sheiner, ‘‘Health Care Costs, Wages, and 

Aging,’’ Federal Reserve Board of Governors 

working paper, April 1999; Mark Pauly and Brad 

Herring, Pooling Health Insurance Risks

(Washington, DC: AEI Press, 1999), Gail A. Jensen 

and Michael A. Morrisey, ‘‘Endogenous Fringe 

Benefits, Compensating Wage Differentials and 

Older Workers,’’ International Journal of Health 

Care Finance and Economics Vol 1, No. 3–4 

(forthcoming), and Edward Montgomery, Kathryn 

Shaw, and Mary Ellen Benedict, ‘‘Pensions and 

Wages: An Hedonic Price Theory Approach,’’

International Economic Review, Vol. 33 No. 1 (Feb. 

1992.), pp:111–128.) The prevalence of benefits is 

therefore largely dependent on the efficacy of this 

exchange. If workers perceive that there is the 

potential for inappropriate denial of benefits they 

will discount their value to adjust for this risk. This 

discount drives a wedge in the compensation 

negotiation, limiting its efficiency. With workers 

unwilling to bear the full cost of the benefit, fewer 

benefits will be provided. The extent to which 

workers perceive a federal regulation supported by 

enforcement authority to improve the security and 

quality of benefits, the differential between the 

employers costs and workers willingness to accept 

wage offsets is minimized.

5Commission on Family and Medical Leave and 

U.S. Department of Labor, A Workable Balance: 

Report to Congress on Family and Medical Leave 

Policies, transmitted April 30, 1996.

Notice of Proposed Rulemaking for 

Health Coverage Portability: Tolling and 

Certain Time Periods and Interaction 

with the Family and Medical Leave Act 

under HIPAA Titles I & IV (RIN 1210–

AA54 and RIN 0938–AL88), in a 

meaningful and timely manner. 

Basis for Assessment of Economic 

Impact—Department of Labor and 

Department of Health and Human 

Services 

As noted above, the primary 

economic effects of HIPAA’s portability 

provisions ensue directly from the 

statute. The Department’s assessment of 

the economic effects of HIPAA’s 

statutory portability provisions and the 

basis for the assessment is presented in 

detail under the ‘‘Basis for Assessment 

of Economic Impact’’ section of the 

preamble to the final regulation, 

published elsewhere in this issue of the 

Federal Register. By clarifying and 

securing HIPAA’s statutory portability 

protections, these regulations will help 

ensure that HIPAA rights are fully 

realized. The result is likely to be a 

small increase in the economic effects of 

HIPAA’s statutory portability 

provisions. 

Additional economic benefits derive 

from the regulations’ clarifications of 

HIPAA’s portability requirements. The 

regulations provide clarity through both 

their provisions and their examples of 

how those provisions apply in various 

circumstances. By clarifying employees’

rights and plan sponsors’ obligations 

under HIPAA’s portability provisions, 

the regulations will reduce uncertainty 

and costly disputes over these rights 

and obligations. They will promote 

employers’ and employees’ common 

understanding of the value of group 

health plan benefits and confidence in 

the security and predictability of those 

benefits, thereby improving labor 

market efficiency and fostering the 

establishment and continuation of group 

health plans by employers.4

These proposed regulations are 

intended to secure and implement 

HIPAA’s group market portability 

provisions under certain special 

circumstances. The regulations will 

secure HIPAA’s portability rights for 

individuals who are not timely notified 

that their coverage has ended and for 

individuals whose coverage ends in 

connection with the taking of leave that 

is guaranteed under FMLA. The 

regulations also will clarify and thereby 

secure individuals’ special enrollment 

rights under HIPAA, and clarify the 

methodologies to be used by employers 

to determine the number of plans 

offered and the average number of 

individuals employed during a given 

year.

The benefits of these regulations will 

be concentrated among a small number 

of affected individuals. 

Affected individuals will generally 

include those who would have lost 

access to coverage for needed medical 

care after forfeiting HIPAA portability 

and/or special enrollment rights due to 

time spent without coverage prior to 

receiving a certificate or while on 

FMLA-guaranteed leave. Affected 

individuals may also include some who 

would have been denied special 

enrollment rights if plans or issuers 

failed to recognize their requests for 

special enrollment or imposed 

unreasonable deadlines or requirements 

for completion of enrollment materials. 

The benefits of these regulations for any 

particular affected individual may be 

large. As noted above, access to 

coverage for needed medical care is 

important to individuals’ health and 

productivity. However, the number of 

affected individuals, and therefore the 

aggregate cost of extended access to 

coverage under these regulations, is 

expected to be small, for several 

reasons. 

First, these regulations extend HIPAA 

rights only in instances where 

individuals do not receive certificates 

immediately when coverage ends or 

their coverage ends in connection with 

the taking of FMLA-guaranteed leave. 

The Departments know of no source of 

data on the timeliness with which 

certificates are typically provided. The 

final regulations that accompany these 

proposed regulations permit plans to 

provide certificates with COBRA 

notices, up to 44 days after coverage 

ends. Plans, however, often do have the 

option of providing certificates 

immediately when coverage ends or 

even in advance, for example as part of 

exit packages given to terminating 

employees or in mailings to covered 

dependents in advance of birthdays that 

will end their eligibility for coverage. 

With respect to FMLA-protected leave, 

data provided in a 1996 report to 

Congress suggests that the number of 

employees who lose coverage in 

connection with FMLA-protected leave 

is likely to be small. The report notes 

that over an 18-month period just 1.2 

percent of surveyed employees took 

what they reported to be FMLA leave. 

A similar survey of employers found 

that 3.6 percent of employees took such 

leave. Nearly all of those taking leave 

continued their health coverage. (This is 

not surprising, given that FMLA 

requires covered employers to extend 

eligibility for health insurance to 

employees on FMLA-protected leave on 

the same terms that applied when the 

employees were not on leave.) Just 9 

percent of leave-takers reported that 

they lost some kind of employee benefit, 

with one-third of these reporting that 

they lost health insurance.5 Putting 

these numbers together and converting 

to an annual basis, in a given year 

between 0.02 percent and 0.07 percent 

of employees, or well under one in one 

thousand, might lose health coverage in 

connection with FMLA-protected leave. 

Many of these will ultimately exercise 

their right to be reinstated in the job 

from which they took leave and to 

exercise their FMLA-guaranteed right to 

resume their previous health coverage. 

Therefore, the number of employees 

who will lose coverage and then, later 

and at the conclusion of FMLAprotected leave, enjoy extended 

portability rights under HIPAA as a 

result of these regulations, is likely to be 

very small.

Second, the period over which this 

regulation extends rights will often be 

Federal Register / Vol. 69, No. 250 / Thursday, December 30, 2004 / Proposed Rules 78813

6U.S. General Accounting Office, Report HEHS–

95–257, ‘‘Health Insurance Portability: Reform 

Could Ensure Continued Coverage for up to 25 

Million Americans,’’ September 1995.

7We calculated these estimates using internal 

runs off the MEPS–HC. These runs gave the number 

of total job changers, total job changers that had 

employer-sponsored insurance (ESI), and whether 

this coverage had been for less than 12 months or 

not. Estimates for dependents were based off the 

ratio of policy-holders to total dependents from the 

March 2003 Current Population Survey (March 

CPS). It should be noted, however, that the EBSA 

estimate of 14 million does not include estimate of 

individuals no longer eligible for COBRA 

continuation coverage or individuals facing job 

lock, while the GAO numbers do.

short, insofar as certificates are often 

provided promptly after coverage ends 

and many family leave periods are far 

shorter than the guaranteed 12 weeks. 

As noted above, plans generally are 

required to provide certificates no later 

than 44 days after coverage ends and 

may provide them sooner. According to 

the aforementioned report to Congress 

on FMLA-protected leave, 41 percent of 

employees taking FMLA-protected leave 

did so for less than 8 days. Fifty-eight 

percent were on leave for less than 15 

days, and two-thirds were on leave for 

less than 29 days. (FMLA protects 

leaves of up to 12 weeks, or 84 days.) 

Third, it is generally in individuals’

interest to minimize periods of 

uninsurance. Individuals are likely to 

exercise their portability and special 

enrollment rights as soon as possible 

after coverage ends, which will often be 

before any extension of such rights 

under these regulations becomes 

effective. Over one 36-month period 

prior to HIPAA, 71 percent of 

Americans had continuous coverage—

that is, incurred not even a single, onemonth break in coverage. Just 4 percent 

were uninsured for the entire period. 

About one-half of observed spells 

without insurance lasted less than 5 

months. As noted above, few employees 

taking FMLA-protected leave had a 

lapse in health coverage. 

Fourth, only a portion of individuals 

who enroll in health plans in 

circumstances where these regulations 

alone guarantee their special enrollment 

or portability rights would otherwise 

have been denied such rights. HIPAA 

special enrollment and portability 

requirements, both as specified under 

the final regulations and as modified 

under these proposed regulations, are 

minimum standards. Plans are free to 

provide additional enrollment 

opportunities.

Fifth, only a small minority of 

individuals who avoid a significant 

break in coverage solely as a direct 

result of these regulations would 

otherwise have lost coverage for needed 

medical care. The affected minority 

would be those who suffer from 

preexisting conditions, join health plans 

that exclude coverage for such 

conditions, and require treatment of 

such conditions during the exclusion 

periods. GAO estimated that HIPAA 

could ensure continued coverage for up 

to 25 million Americans.6 More recent 

estimates suggest that the number of 

individual policy holders and their 

dependents which could be helped by 

HIPAA’s portability provisions are more 

in the 14 million range.7 As noted 

above, however, the number of workers 

and dependents actually gaining 

coverage for a preexisting condition due 

to credit for prior coverage following a 

job change under HIPAA will be smaller 

than this. Both GAO’s and our estimates 

of people who could benefit include all 

job changers with prior coverage and 

their dependents, irrespective of 

whether their new employer offers a 

plan, whether their new plan imposed 

a preexisting condition exclusion 

period, and whether they actually suffer 

from a preexisting condition. 

Accounting for these narrower criteria, 

CBO estimated that, at any point in 

time, about 100,000 individuals would 

have a preexisting condition exclusion 

reduced for prior creditable coverage. 

An additional 45,000 would gain added 

coverage in the individual market. The 

CBO estimate demonstrates that the 

number of individuals actually gaining 

coverage for needed medical services 

will be a small fraction of all those 

whose right to such coverage HIPAA’s 

portability provisions guarantee. 

Accordingly, the Departments expect 

that the number gaining coverage for 

needed services as a direct result of 

these regulations will be a small fraction 

of the already small number whose right 

to such coverage these regulations 

would establish.

The Departments attempted to 

estimate the number of individuals who 

might avoid a break in coverage because 

of the provision of these proposed 

regulations that tolls the break until the 

individual receives a certification but 

not more than 44 days. The Departments 

examined coverage patterns evident in 

the Survey of Income and Program 

Participation (SIPP), a longitudinal 

household survey that tracks transitions 

in coverage. SIPP interviews households 

once every four months. The 

Departments estimate that, in a given 

year, about 7 million individuals have 

breaks in coverage lasting 4 months or 

less. The survey data suffer from socalled ‘‘seam bias’’—respondents tend 

to report that status as unchanged over 

4-month increments. Of the 7 million 

reporting breaks of 4 months or less, 6.5 

million report breaks of exactly 4 

months. This finding is consistent with 

the more general finding that breaks of 

4 months or less are far more common 

than longer breaks. It seems likely that 

the 7 million breaks of 4 months or less 

actually included proportionate or 

disproportionately large shares of breaks 

of 1 or 2 months. Assuming the breaks 

are actually distributed evenly by length 

between 1 day and 4 months, then about 

one-half of the breaks, or 3.5 million 

breaks, would have lasted less than 63 

days and therefore would not have 

constituted breaks for purposes of 

HIPAA’s portability protections even 

without reference to the provision of 

this proposed regulation that tolls the 

break until the individual receives a 

certification but not more than 44 days. 

Approximately three-fourths of the 

remaining breaks or about 2.6 million 

breaks, would have lasted between 1 

and 44 additional days and thereby 

potentially have been tolled until the 

individuals received their certifications 

but not more than 44 days. Thus 2.6 

million provides a reasonable upper 

bound on the number of individuals 

who might avoid a break in coverage in 

a given year because of this tolling 

provision. It is not known what fraction 

of these would subsequently join group 

health plans that include preexisting 

condition exclusions while suffering 

from and requiring additional care for 

preexisting conditions. Comparing 

GAO’s (20 million or more) and our (14 

million) estimates of the number of 

individuals who could potentially 

benefit from HIPAA’s portability 

protections (individuals with prior 

creditable coverage who join new health 

plans in a given year) with the CBO 

estimate of the number who might 

actually have added group coverage for 

needed care (100,000) produces a ratio 

of about 1 percent. If this proportion 

holds for group health plan enrollees 

who avoid breaks because of this tolling 

provision, then an upper bound of about 

26,000 individuals annually might gain 

coverage for needed care under the 

proposed regulation’s provision treating 

coverage under such programs as 

creditable coverage. 

The Departments considered whether 

certain individuals whose HIPAA 

portability rights these proposed 

regulations would extend may be 

disproportionately likely to be in (or 

have dependents who are in) poor 

health. Specifically, individuals taking 

FMLA-protected leave, especially those 

who elect not to be reinstated in their 

prior jobs following FMLA-protected 

leave, may be so likely. On the other 

78814 Federal Register / Vol. 69, No. 250 / Thursday, December 30, 2004 / Proposed Rules 

hand, individuals in such circumstances 

are also particularly unlikely to allow 

their health insurance from their prior 

job to lapse while they are on leave. 

Accordingly, most such individuals’

special enrollment periods and 

countable breaks in coverage (if any) 

would probably have begun at the 

conclusion of the FMLA-protected leave 

even in absence of these proposed 

regulations. The Departments are 

therefore uncertain whether individuals 

who would exercise HIPAA portability 

rights extended solely by these 

regulations would be more costly to 

insure than others exercising HIPAA 

portability rights, and solicit comments 

on this question. 

Affected individuals may also include 

some who would have been denied 

special enrollment rights if plans or 

issuers failed to recognize their requests 

for special enrollment or imposed 

unreasonable deadlines or requirements 

for completion of enrollment materials. 

As noted above, the Departments 

expect that these regulations will result 

in a small increase in the economic 

effects of HIPAA’s statutory provisions. 

For the reasons stated immediately 

above, the Departments believe that this 

increase will be small on aggregate, 

adding only a small increment to the 

cost attributable to HIPAA’s statutory 

portability provisions, which 

themselves amount to a small fraction of 

one percent of health plan expenditures. 

Thus the increase will be negligible 

relative to typical year-to-year increases 

in premiums charged by issuers, which 

can amount to several percentage points 

or more. Therefore, the Departments 

expect these regulations to have little or 

no perceptible negative impact on 

employers’ propensity to offer health 

benefit plans or on the generosity of 

those plans. In sum, the Departments 

expect that the benefits of these 

regulations, which can be very large for 

a particular affected individual, will 

justify their costs.

List of Subjects 

26 CFR Part 54 

Excise taxes, Health care, Health 

insurance, Pensions, Reporting and 

recordkeeping requirements. 

29 CFR Part 2590 

Continuation coverage, Disclosure, 

Employee benefit plans, Group health 

plans, Health care, Health insurance, 

Medical child support, Reporting and 

recordkeeping requirements. 

45 CFR Part 146 

Health care, Health insurance, 

Reporting and recordkeeping 

requirements, and State regulation of 

health insurance.

Proposed Amendments to the 

Regulations 

Internal Revenue Service 

26 CFR Chapter I 

Accordingly, 26 CFR part 54 is 

proposed to be amended as follows:

PART 54—PENSION EXCISE TAXES 

Paragraph 1. The authority citation 

for part 54 is amended by: 

a. Revising the entries for §§ 54.9801–

4 and 54.9801–6. 

b. Adding an entry in numerical order 

for § 54.9801–7. 

The addition and revisions read as 

follows:

Authority: 26 U.S.C. 7805. * * *

Section 54.9801–4 also issued under 26 

U.S.C. 9801(e)(3) and 9833.* * * 

Section 54.9801–6 also issued under 26 

U.S.C. 9801(e)(3) and 9833. 

Section 54.9801–7 also issued under 26 

U.S.C. 9833.* * *

§ 54.9801–1 [Amended] 

Par. 2. Section 54.9801–1 is amended 

in paragraph (a)(1) by removing the 

language ‘‘54.9801–6’’ and adding 

‘‘54.9801–7’’ in its place.

§ 54.9801–2 [Amended] 

Par. 3. Section 54.9801–2 is amended 

in the first sentence by removing the 

language ‘‘54.9801–6’’ and adding 

‘‘54.9801–7’’ in its place. 

Par. 4. Section 54.9801–4 is amended 

by: 

a. Revising paragraphs (b)(2)(iii) and 

(b)(2)(iv). 

b. Adding Examples 4 and 6 in 

paragraph (b)(2)(v). 

The revisions and additions read as 

follows:

§ 54.9801–4 Rules relating to creditable 

coverage.

* * * * *

(b) Standard method. * * * 

(2) Counting creditable coverage.

* * * 

(iii) Significant break in coverage 

defined. A significant break in coverage

means a period of 63 consecutive days 

during each of which an individual does 

not have any creditable coverage, except 

that periods described in paragraph 

(b)(2)(iv) of this section are not taken 

into account in determining a 

significant break in coverage. (See 

section 731(b)(2)(iii) of ERISA and 

section 2723(b)(2)(iii) of the PHS Act, 

which exclude from preemption state 

insurance laws that require a break of 

more than 63 days before an individual 

has a significant break in coverage for 

purposes of state law.) 

(iv) Periods that toll a significant 

break. Days in a waiting period and 

days in an affiliation period are not 

taken into account in determining 

whether a significant break in coverage 

has occurred. In addition, for an 

individual who elects COBRA 

continuation coverage during the 

second election period provided under 

the Trade Act of 2002, the days between 

the date the individual lost group health 

plan coverage and the first day of the 

second COBRA election period are not 

taken into account in determining 

whether a significant break in coverage 

has occurred. Moreover, in the case of 

an individual whose coverage ceases, if 

a certificate of creditable coverage with 

respect to that cessation is not provided 

on or before the date coverage ceases, 

then the period that begins on the first 

date that an individual has no creditable 

coverage and that continues through the 

earlier of the following two dates is not 

taken into account in determining 

whether a significant break in coverage 

has occurred: 

(A) The date that a certificate of 

creditable coverage with respect to that 

cessation is provided; or 

(B) The date 44 days after coverage 

ceases. 

(v) Examples. * * *

Example 4. (i) Facts. Individual B

terminates coverage under a group health 

plan, and a certificate of creditable coverage 

is provided 10 days later. B begins 

employment with Employer R and begins 

enrollment in R’s plan 60 days after the 

certificate is provided. 

(ii) Conclusion. In this Example 4, even 

though B had no coverage for 69 days, the 10 

days before the certificate of creditable 

coverage is provided are not taken into 

account in determining a significant break in 

coverage. Therefore, B’s break in coverage is 

only 59 days and is not a significant break 

in coverage. Accordingly, B’s prior coverage 

must be counted by R’s plan.

* * * * *

Example 6. (i) Facts. Employer V sponsors 

a group health plan. Under the terms of the 

plan, the only benefits provided are those 

provided under an insurance policy. 

Individual D works for V and has creditable 

coverage under V’s plan. V fails to pay the 

issuer the premiums for the coverage period 

beginning March 1. Consistent with 

applicable state law, the issuer terminates the 

policy so that the last day of coverage is April 

30. V goes out of business on July 31. On 

August 15 D begins employment with 

Employer W and enrolls in W’s group health 

plan. W’s plan imposes a 12-month 

preexisting condition exclusion on all 

enrollees. D never receives a certificate of 

creditable coverage for coverage under V’s 

plan. 

(ii) Conclusion. In this Example 6, the 

period from May 1 (the first day without 

coverage) through June 13 (the date 44 days 

after coverage under V’s plan ceases) is not 

Federal Register / Vol. 69, No. 250 / Thursday, December 30, 2004 / Proposed Rules 78815

taken into account in determining a 63-day 

break in coverage. This is because, in cases 

in which a certificate of creditable coverage 

is not provided by the date coverage is lost, 

the break begins on the date the certificate is 

provided, or the date 44 days after coverage 

ceases, if earlier. Therefore, even though D’s 

actual period without coverage was 106 days 

(May 1 through August 14), because the 

period from May 1 through June 13 is not 

taken into account, D’s break in coverage is 

only 62 days (June 14 through August 14). 

Thus, D has not experienced a significant 

break in coverage, and D’s prior coverage 

must be counted by W’s plan.

* * * * *

Par. 5. Section 54.9801–5 is amended 

by: 

a. Redesignating paragraphs 

(a)(3)(ii)(H)(5) and (6) as paragraphs 

(a)(3)(ii)(H)(6) and (7), respectively. 

b. Adding a new paragraph 

(a)(3)(ii)(H)(5). 

The addition reads as follows:

§ 54.9801–5 Evidence of creditable 

coverage. 

(a) Certificate of creditable coverage.

* * * 

(3) Form and content of certificate.

* * * 

(ii) Required information. * * * 

(H) * * * 

(5) The interaction with the Family 

and Medical Leave Act;

* * * * *

Par. 6. Section 54.9801–6 is amended 

by: 

a. Revising paragraph (a)(1). 

b. Revising paragraph (a)(4). 

c. Revising paragraph (b)(1). 

d. Revising paragraph (b)(3). 

e. Revising Example 2 in paragraph 

(b)(4). 

f. Adding Examples 3, 4, and 5 in 

paragraph (b)(4). 

The additions and revisions read as 

follows:

§ 54.9801–6 Special enrollment periods. 

(a) Special enrollment for certain 

individuals who lose coverage—(1) In 

general. A group health plan is required 

to permit current employees and 

dependents (as defined in § 54.9801–2) 

who are described in paragraph (a)(2) of 

this section to enroll for coverage under 

the terms of the plan if the conditions 

in paragraph (a)(3) of this section are 

satisfied. Paragraph (a)(4) of this section 

describes procedures that a plan may 

require an employee to follow and 

describes the date by which coverage 

must begin. The special enrollment 

rights under this paragraph (a) apply 

without regard to the dates on which an 

individual would otherwise be able to 

enroll under the plan. (See section 

701(f)(1) of ERISA and section 2701(f)(1) 

of the PHS Act, under which this 

obligation is also imposed on a health 

insurance issuer offering group health 

insurance coverage.)

* * * * *

(4) Applying for special enrollment 

and effective date of coverage—(i) 

Request. A plan must allow an 

employee a period of at least 30 days 

after an event described in paragraph 

(a)(3) of this section (loss of eligibility 

for coverage, termination of employer 

contributions, or exhaustion of COBRA 

continuation coverage) to request 

enrollment (for the employee or the 

employee’s dependent). For this 

purpose, any written or oral request 

made to any of the following constitutes 

a request for enrollment —

(A) The plan administrator; 

(B) An issuer offering health 

insurance coverage under the plan; 

(C) A person who customarily handles 

claims for the plan (such as a third party 

administrator); or 

(D) Any other designated 

representative. 

(ii) Tolling of period for requesting 

special enrollment. (A) In the case of an 

individual whose coverage ceases, if a 

certificate of creditable coverage with 

respect to that cessation is not provided 

on or before the date coverage ceases, 

then the period for requesting special 

enrollment described in paragraph 

(a)(4)(i) of this section does not end 

until 30 days after the earlier of —

(1) The date that a certificate of 

creditable coverage with respect to that 

cessation is provided; or 

(2) The date 44 days after coverage 

ceases. 

(B) For purposes of this paragraph 

(a)(4), if an individual’s coverage ceases 

due to the operation of a lifetime limit 

on all benefits, coverage is considered to 

cease on the earliest date that a claim is 

denied due to the operation of the 

lifetime limit. (Nonetheless, the date of 

a loss of eligibility for coverage is 

determined under the rules of paragraph 

(a)(3) of this section, which provides 

that a loss of eligibility occurs when a 

claim that would meet or exceed a 

lifetime limit on all benefits is incurred, 

not when it is denied.) 

(C) The rules of this paragraph 

(a)(4)(ii) are illustrated by the following 

examples:

Example 1. (i) Facts. Employer V provides 

group health coverage through a policy 

provided by Issuer M. Individual D works for 

V and is covered under V’s plan. V fails to 

pay M the premiums for the coverage period 

beginning March 1. Consistent with 

applicable state law, M terminates the policy 

so that the last day of coverage is April 30. 

On May 15, M provides D with a certificate 

of creditable coverage with respect to D’s 

cessation of coverage under V’s plan. 

(ii) Conclusion. In this Example 1, the 

period to request special enrollment ends no 

earlier than June 14 (which is 30 days after 

May 15, the day a certificate of creditable 

coverage is provided with respect to D).

Example 2. (i) Facts. Same facts as 

Example 1, except D is never provided with 

a certificate of creditable coverage. 

(ii) Conclusion. In this Example 2, the 

period to request special enrollment ends no 

earlier than July 13. (July 13 is 74 days after 

April 30, the date coverage ceases. That is, 

July 13 is 30 days after the end of the 44-day 

maximum tolling period.)

Example 3. (i) Facts. Individual E works for 

Employer W and has coverage under W’s 

plan. W’s plan has a lifetime limit of $1 

million on all benefits under the plan. On 

September 13, E incurs a claim that would 

exceed the plan’s lifetime limit. On 

September 28, W denies the claim due to the 

operation of the lifetime limit and a 

certificate of creditable coverage is provided 

on October 3. E is otherwise eligible to enroll 

in the group health plan of the employer of 

E’s spouse. 

(ii) Conclusion. In this Example 3, the 

period to request special enrollment in the 

plan of the employer of E’s spouse ends no 

earlier than November 2 (30 days after the 

date the certificate is provided) and begins 

not later than September 13, the date E lost 

eligibility for coverage.

(iii) Reasonable procedures for special 

enrollment. After an individual has 

requested enrollment under paragraph 

(a)(4)(i) of this section, a plan may 

require the individual to complete 

enrollment materials within a 

reasonable time after the end of the 30-

day period described in paragraph 

(a)(4)(i) of this section. In these 

enrollment materials, the plan may 

require the individual only to provide 

information required of individuals who 

enroll when first eligible and 

information about the event giving rise 

to the special enrollment right. A plan 

may establish a deadline for receiving 

completed enrollment materials, but 

such a deadline must be extended for 

information that an individual making 

reasonable efforts does not obtain by 

that deadline. 

(iv) Date coverage must begin. If the 

plan requires completion of additional 

enrollment materials in accordance with 

paragraph (a)(4)(iii) of this section, 

coverage must begin no later than the 

first day of the first calendar month 

beginning after the date the plan 

receives enrollment materials that are 

substantially complete. If the plan does 

not require completion of additional 

enrollment materials, coverage must 

begin no later than the first day of the 

first calendar month beginning after the 

date the plan receives the request for 

special enrollment under paragraph 

(a)(4)(i) of this section. 

78816 Federal Register / Vol. 69, No. 250 / Thursday, December 30, 2004 / Proposed Rules 

(b) Special enrollment with respect to 

certain dependent beneficiaries—(1) In 

general. A group health plan that makes 

coverage available with respect to 

dependents is required to permit 

individuals described in paragraph 

(b)(2) of this section to be enrolled for 

coverage in a benefit package under the 

terms of the plan. Paragraph (b)(3) of 

this section describes procedures that a 

plan may require an individual to 

follow and describes the date by which 

coverage must begin. The special 

enrollment rights under this paragraph 

(b) apply without regard to the dates on 

which an individual would otherwise 

be able to enroll under the plan. (See 29 

CFR 2590.701–6(b) and 45 CFR 

146.117(b), under which this obligation 

is also imposed on a health insurance 

issuer offering group health insurance 

coverage.)

* * * * *

(3) Applying for special enrollment 

and effective date of coverage—(i) 

Request. A plan must allow an 

individual a period of at least 30 days 

after the date of the marriage, birth, 

adoption, or placement for adoption (or, 

if dependent coverage is not generally 

made available at the time of the 

marriage, birth, adoption, or placement 

for adoption, a period of at least 30 days 

after the date the plan makes dependent 

coverage generally available) to request 

enrollment (for the individual or the 

individual’s dependent). For this 

purpose, any written or oral request 

made to any of the following constitutes 

a request for enrollment—

(A) The plan administrator; 

(B) An issuer offering health 

insurance coverage under the plan;

(C) A person who customarily handles 

claims for the plan (such as a third party 

administrator); or 

(D) Any other designated 

representative. 

(ii) Reasonable procedures for special 

enrollment. After an individual has 

requested enrollment under paragraph 

(b)(3)(i) of this section, a plan may 

require the individual to complete 

enrollment materials within a 

reasonable time after the end of the 30-

day period described in paragraph 

(b)(3)(i) of this section. In these 

enrollment materials, the plan may 

require the individual only to provide 

information required of individuals who 

enroll when first eligible and 

information about the event giving rise 

to the special enrollment right. A plan 

may establish a deadline for receiving 

completed enrollment materials, but 

such a deadline must be extended for 

information that an individual making 

reasonable efforts does not obtain by 

that deadline. 

(iii) Date coverage must begin—(A) 

Marriage. In the case of marriage, if the 

plan requires completion of additional 

enrollment materials in accordance with 

paragraph (b)(3)(ii) of this section, 

coverage must begin no later than the 

first day of the first calendar month 

beginning after the date the plan 

receives enrollment materials that are 

substantially complete. If the plan does 

not require such additional enrollment 

materials, coverage must begin no later 

than the first day of the first calendar 

month beginning after the date the plan 

receives the request for special 

enrollment under paragraph (b)(3)(i) of 

this section. 

(B) Birth, adoption, or placement for 

adoption. Coverage must begin in the 

case of a dependent’s birth on the date 

of birth and in the case of a dependent’s 

adoption or placement for adoption no 

later than the date of such adoption or 

placement for adoption (or, if dependent 

coverage is not made generally available 

at the time of the birth, adoption, or 

placement for adoption, the date the 

plan makes dependent coverage 

available). If the plan requires 

completion of additional enrollment 

materials in accordance with paragraph 

(b)(3)(ii) of this section, the plan must 

provide benefits (including benefits 

retroactively to the date of birth, 

adoption, or placement for adoption) 

once the plan receives enrollment 

materials that are substantially 

complete.

(4) Examples. ***

Example 2. (i) Facts. Individual D works 

for Employer X. X maintains a group health 

plan with two benefit packages—an HMO 

option and an indemnity option. Self-only 

and family coverage are available under both 

options. D enrolls for self-only coverage in 

the HMO option. Then, a child, E, is placed 

for adoption with D. Within 30 days of the 

placement of E for adoption, D requests 

enrollment for D and E under the plan’s 

indemnity option and submits completed 

enrollment materials timely. 

(ii) Conclusion. In this Example 2, D and 

E satisfy the conditions for special 

enrollment under paragraphs (b)(2)(v) and 

(b)(3) of this section. Therefore, the plan 

must allow D and E to enroll in the 

indemnity coverage, effective as of the date 

of the placement for adoption.

Example 3. (i) Facts. Same facts as 

Example 1. On March 17 (two days after the 

birth of C), A telephones the plan 

administrator and requests special 

enrollment of A, B, and C. The plan 

administrator sends A an enrollment form. 

Under the terms of the plan, enrollment is 

denied unless a completed form is submitted 

within 30 days of the event giving rise to the 

special enrollment right (in this case, C’s 

birth). 

(ii) Conclusion. In this Example 3, the plan 

does not satisfy paragraph (b)(3) of this 

section. The plan may require only that A

request enrollment during the 30-day period 

after C’s birth. A did so by telephoning the 

plan administrator. The plan may not 

condition special enrollment on filing 

additional enrollment materials during the 

30-day period. To comply with paragraph 

(b)(3) of this section, the plan must allow A

a reasonable time after the end of the 30-day 

period to submit any additional enrollment 

materials. Once these enrollment materials 

are received, the plan must allow whatever 

coverage is chosen to begin on March 15, the 

date of C’s birth.

Example 4. (i) Facts. Same facts as 

Example 3, except that A telephones the plan 

administrator to request enrollment on April 

13 (29 days after C’s birth). Also, under the 

terms of the plan, the deadline for submitting 

the enrollment form is 14 days after the end 

of the 30-day period for requesting special 

enrollment (thus, in this case, April 28, 

which is 44 days after C’s birth). The form 

requests the same information for A, B, and 

C (name, date of birth, and place of birth) as 

well as a copy of C’s birth certificate. A fills 

out the enrollment form and delivers it to the 

plan administrator on April 28. At that time 

A does not have a birth certificate for C but 

applies on that day for one from the 

appropriate government office. A receives the 

birth certificate on June 1 and furnishes a 

copy of the birth certificate to the plan 

administrator shortly thereafter. 

(ii) Conclusion. In this Example 4, A, B,

and C are entitled to special enrollment 

under the plan even though A did not satisfy 

the plan’s requirement of providing a copy of 

C’s birth certificate by the plan’s 14-day 

deadline. While a plan may establish such a 

deadline, the plan must extend the deadline 

for information that an individual making 

reasonable efforts does not obtain by that 

deadline. A delivered the enrollment form to 

the plan administrator by the deadline and 

made reasonable efforts to furnish the birth 

certificate that the plan requires.

Example 5. (i) Facts. Same facts as 

Example 4. On May 3 (after A has delivered 

the enrollment form to the plan administrator 

but before A provides the birth certificate) A

submits claims for all medical expenses 

incurred for B and C from the date of C’s 

birth. 

(ii) Conclusion. In this Example 5, the plan 

must pay all of the claims submitted by A.

Because the plan requires that individuals 

seeking special enrollment complete 

additional enrollment materials, it is required 

to provide benefits once it receives 

enrollment materials that are substantially 

complete. The form that A submitted on 

April 28 was substantially complete. Because 

C’s birth is the event giving rise to the special 

enrollment right, on April 28 A, B, and C

become entitled to benefits under the plan 

retroactive to the date of C’s birth.

* * * * *

Par. 7. A new § 54.9801–7 is added to 

read as follows:

§ 54.9801–7 Interaction with the Family 

and Medical Leave Act. 

(a) In general. The rules of 

§§ 54.9801–1 through 54.9801–6 apply 

Federal Register / Vol. 69, No. 250 / Thursday, December 30, 2004 / Proposed Rules 78817

with respect to an individual on leave 

under the Family and Medical Leave 

Act of 1993 (29 U.S.C. 2601) (FMLA), 

and apply with respect to a dependent 

of such an individual, except to the 

extent otherwise provided in this 

section. 

(b) Tolling of significant break in 

coverage during FMLA leave. In the case 

of an individual (or a dependent of the 

individual) who is covered under a 

group health plan, if the individual 

takes FMLA leave and does not 

continue group health coverage for any 

period of FMLA leave, that period is not 

taken into account in determining 

whether a significant break in coverage 

has occurred under § 54.9801–

4(b)(2)(iii). 

(c) Application of certification 

provisions—(1) Timing of issuance of 

certificate—(i) In the case of an 

individual (or a dependent of the 

individual) who is covered under a 

group health plan, if the individual 

takes FMLA leave and the individual’s 

group health coverage is terminated 

during FMLA leave, an automatic 

certificate must be provided in 

accordance with the timing rules set 

forth in § 54.9801–5(a)(2)(ii)(B) (which 

generally require plans to provide 

certificates within a reasonable time 

after coverage ceases). 

(ii) In the case of an individual (or a 

dependent of the individual) who is 

covered under a group health plan, if 

the individual takes FMLA leave and 

continues group health coverage for the 

period of FMLA leave, but then ceases 

coverage under the plan at the end of 

FMLA leave, an automatic certificate 

must be provided in accordance with 

the timing rules set forth in § 54.9801–

5(a)(2)(ii)(A) (which generally require 

plans to provide a certificate no later 

than the time a notice is required to be 

furnished for a qualifying event under a 

COBRA continuation provision). 

(2) Demonstrating FMLA leave. (i) A 

plan is required to take into account all 

information about FMLA leave that it 

obtains or that is presented on behalf of 

an individual. A plan must treat the 

individual as having been on FMLA 

leave for a period if —

(A) The individual attests to the 

period of FMLA leave; and 

(B) The individual cooperates with 

the plan’s efforts to verify the 

individual’s FMLA leave.

(ii) Nothing in this section prevents a 

plan from modifying its initial 

determination of FMLA leave if it 

determines that the individual did not 

have the claimed FMLA leave, provided 

that the plan follows procedures for 

reconsideration similar to those set forth 

in § 54.9801–3(f). 

(d) Relationship to loss of eligibility 

special enrollment rules. In the case of 

an individual (or a dependent of the 

individual) who is covered under a 

group health plan and who takes FMLA 

leave, a loss of eligibility for coverage 

under § 54.9801–6(a) occurs when the 

period of FMLA leave ends if—

(1) The individual’s group health 

coverage is terminated at any time 

during FMLA leave; and 

(2) The individual does not return to 

work for the employer at the end of 

FMLA leave. 

Par. 8. Section 54.9831–1 is amended 

by: 

a. Adding paragraph (a)(2). 

b. Revising paragraph (b). 

c. Revising paragraph (c)(1). 

d. By adding paragraph (e). 

The additions and revisions read as 

follows:

§ 54.9831–1 Special rules relating to group 

health plans. 

(a) Group health plan. * * * 

(2) Determination of number of plans.

The number of group health plans that 

an employer or employee organization 

(including for this purpose a joint board 

of trustees of a multiemployer trust 

affiliated with one or more 

multiemployer plans) maintains is 

determined under the rules of this 

paragraph (a)(2). 

(i) Except as provided in paragraph 

(a)(2)(ii) or (iii) of this section, health 

care benefits provided by a corporation, 

partnership, or other entity or trade or 

business, or by an employee 

organization, constitute one group 

health plan, unless—

(A) It is clear from the instruments 

governing the arrangement or 

arrangements to provide health care 

benefits that the benefits are being 

provided under separate plans; and 

(B) The arrangement or arrangements 

are operated pursuant to such 

instruments as separate plans. 

(ii) A multiemployer plan and a 

nonmultiemployer plan are always 

separate plans. 

(iii) If a principal purpose of 

establishing separate plans is to evade 

any requirement of law, then the 

separate plans will be considered a 

single plan to the extent necessary to 

prevent the evasion. 

(b) General exception for certain small 

group health plans. The requirements of 

§§ 54.9801–1 through 54.9801–7, 

54.9802–1, 54.9802–2, 54.9811–1T, 

54.9812–1T, and 54.9833–1 do not 

apply to any group health plan for any 

plan year if, on the first day of the plan 

year, the plan has fewer than two 

participants who are current employees. 

(c) Excepted benefits—(1) In general.

The requirements of §§ 54.9801–1 

through 54.9801–7, 54.9802–1, 54.9802–

2, 54.9811–1T, 54.9812–1T, and 

54.9833–1 do not apply to any group 

health plan in relation to its provision 

of the benefits described in paragraph 

(c)(2), (3), (4), or (5) of this section (or 

any combination of these benefits).

* * * * *

(e) Determining the average number of 

employees—(1) Scope. Whenever the 

application of a rule in this part 

depends upon the average number of 

employees employed by an employer, 

the determination of that number is 

made in accordance with the rules of 

this paragraph (e). 

(2) Full-time equivalents. The average 

number of employees is determined by 

calculating the average number of fulltime equivalents on business days 

during the preceding calendar year. 

(3) Methodology. For the preceding 

calendar year, the average number of 

full-time equivalents is determined by—

(i) Determining the number of 

employees who were employed fulltime by the employer throughout the 

entire calendar year; 

(ii) Totaling all employment hours 

(not to exceed 40 hours per week) for 

each part-time employee, and for each 

full-time employee who was not 

employed full-time with the employer 

throughout the entire calendar year; 

(iii) Dividing the total determined 

under paragraph (e)(3)(ii) of this section 

by a figure that represents the annual 

full-time hours under the employer’s 

general employment practices, such as 

2,080 hours (although for this purpose 

not more than 40 hours per week may 

be used); and 

(iv) Adding the quotient determined 

under paragraph (e)(3)(iii) of this section 

to the number determined under 

paragraph (e)(3)(i). 

(4) Rounding. For purposes of 

paragraph (e)(3)(iv) of this section, all 

fractions are disregarded. For instance, 

a figure of 50.9 is deemed to be 50. 

(5) Employers not in existence in the 

preceding year. In the case of an 

employer that was in existence for less 

than the entire preceding calendar year 

(including an employer that was not in 

existence at all), a determination of the 

average number of employees that the 

employer employs is based on the 

average number of employees that it is 

reasonably expected the employer will 

employ on business days in the current 

calendar year. 

(6) Scope of the term ‘‘employer.’’ For 

purposes of this paragraph (e), employer 

includes any predecessor of the 

employer. In addition, all persons 

treated as a single employer under 

section 414(b), (c), (m), or (o) are treated 

as one employer. 

78818 Federal Register / Vol. 69, No. 250 / Thursday, December 30, 2004 / Proposed Rules 

(7) Special rule for multiemployer 

plans. (i) With respect to the application 

of a rule in this part to a multiemployer 

plan (as defined in section 3(37) of 

ERISA), each employer with at least one 

employee participating in the plan is 

considered to employ the same average 

number of employees. That number is 

the highest number that results by 

applying the rules of paragraphs (e)(1) 

through (6) of this section separately to 

each of the employers. 

(ii) The rules of this paragraph (e)(7) 

are illustrated by the following example:

Example. (i) Facts. Twenty five employers 

have at least one employee who participates 

in Multiemployer Plan M. Among these 25 

employers, Employer K has 51 employees, 

determined under the rules of paragraphs 

(e)(1) through (6) of this section. Each of the 

other 24 employers has fewer than 50 

employees. 

(ii) Conclusion. With respect to the 

application of a rule in this part to M, each 

of the 25 employers is considered to employ 

51 employees.

Mark E. Matthews, 

Deputy Commissioner for Services and 

Enforcement, Internal Revenue Service.

Employee Benefits Security 

Administration 

29 CFR Chapter XXV 

For the reasons set forth above, 29 

CFR Part 2590 is proposed to be 

amended as follows:

PART 2590—RULES AND 

REGULATIONS FOR GROUP HEALTH 

PLANS 

1. The authority citation for Part 2590 

continues to read as follows:

Authority: 29 U.S.C. 1027, 1059, 1135, 

1161–1168, 1169, 1181–1183, 1181 note, 

1185, 1185a, 1185b, 1191, 1191a, 1191b, and 

1191c, sec. 101(g), Pub. L. 104–191, 101 Stat. 

1936; sec. 401(b), Pub. L. 105–200, 112 Stat. 

645 (42 U.S.C. 651 note); Secretary of Labor’s 

Order 1–2003, 68 FR 5374 (Feb. 3, 2003).

2. Section 2590.701–4 is amended by 

revising paragraphs (b)(2)(iii) and 

(b)(2)(iv) and adding Examples 4 and 6

in paragraph (b)(2)(v) as follows:

§ 2590.701–4 Rules relating to creditable 

coverage.

* * * * *

(b) Standard method. * * * 

(2) Counting creditable coverage.

* * * 

(iii) Significant break in coverage 

defined. A significant break in coverage

means a period of 63 consecutive days 

during each of which an individual does 

not have any creditable coverage, except 

that periods described in paragraph 

(b)(2)(iv) of this section are not taken 

into account in determining a 

significant break in coverage. (See also 

§ 2590.731(c)(2)(iii) regarding the 

applicability to issuers of state 

insurance laws that require a break of 

more than 63 days before an individual 

has a significant break in coverage for 

purposes of state insurance law.) 

(iv) Periods that toll a significant 

break. Days in a waiting period and 

days in an affiliation period are not 

taken into account in determining 

whether a significant break in coverage 

has occurred. In addition, for an 

individual who elects COBRA 

continuation coverage during the 

second election period provided under 

the Trade Act of 2002, the days between 

the date the individual lost group health 

plan coverage and the first day of the 

second COBRA election period are not 

taken into account in determining 

whether a significant break in coverage 

has occurred. Moreover, in the case of 

an individual whose coverage ceases, if 

a certificate of creditable coverage with 

respect to that cessation is not provided 

on or before the date coverage ceases, 

then the period that begins on the first 

date that an individual has no creditable 

coverage and that continues through the 

earlier of the following two dates is not 

taken into account in determining 

whether a significant break in coverage 

has occurred: 

(A) The date that a certificate of 

creditable coverage with respect to that 

cessation is provided; or 

(B) The date 44 days after coverage 

ceases. 

(v) Examples. The rules of this 

paragraph (b)(2) are illustrated by the 

following examples:

* * * * *

Example 4. (i) Facts. Individual B

terminates coverage under a group health 

plan, and a certificate of creditable coverage 

is provided 10 days later. B begins 

employment with Employer R and begins 

enrollment in R’s plan 60 days after the 

certificate is provided. 

(ii) Conclusion. In this Example 4, even 

though B had no coverage for 69 days, the 10 

days before the certificate of creditable 

coverage is provided are not taken into 

account in determining a significant break in 

coverage. Therefore, B’s break in coverage is 

only 59 days and is not a significant break 

in coverage. Accordingly, B’s prior coverage 

must be counted by R’s plan.

* * * * *

Example 6. (i) Facts. Employer V sponsors 

a group health plan. Under the terms of the 

plan, the only benefits provided are those 

provided under an insurance policy. 

Individual D works for V and has creditable 

coverage under V’s plan. V fails to pay the 

issuer the premiums for the coverage period 

beginning March 1. Consistent with 

applicable state law, the issuer terminates the 

policy so that the last day of coverage is April 

30. V goes out of business on July 31. On 

August 15 D begins employment with 

Employer W and enrolls in W’s group health 

plan. W’s plan imposes a 12-month 

preexisting condition exclusion on all 

enrollees. D never receives a certificate of 

creditable coverage for coverage under V’s 

plan. 

(ii) Conclusion. In this Example 6, the 

period from May 1 (the first day without 

coverage) through June 13 (the date 44 days 

after coverage under V’s plan ceases) is not 

taken into account in determining a 63-day 

break in coverage. This is because, in cases 

in which a certificate of creditable coverage 

is not provided by the date coverage is lost, 

the break begins on the date the certificate is 

provided, or the date 44 days after coverage 

ceases, if earlier. Therefore, even though D’s 

actual period without coverage was 106 days 

(May 1 through August 14), because the 

period from May 1 through June 13 is not 

taken into account, D’s break in coverage is 

only 62 days (June 14 through August 14). 

Thus, D has not experienced a significant 

break in coverage, and D’s prior coverage 

must be counted by W’s plan.

* * * * *

3. Section 2590.701–5 is amended by 

redesignating paragraphs (a)(3)(ii)(H)(5) 

and (6) as paragraphs (a)(3)(ii)(H)(6) and 

(7), respectively, and by adding a new 

paragraph (a)(3)(ii)(H)(5) as follows:

§ 2590.701–5 Evidence of creditable 

coverage. 

(a) Certificate of creditable coverage.

* * * 

(3) Form and content of certificate.

* * * 

(ii) Required information. * * * 

(H) * * * 

(5) The interaction with the Family 

and Medical Leave Act;

* * * * *

4. Section 2590.701–6 is amended by 

revising paragraphs (a)(1), (a)(4), (b)(1), 

(b)(3), and Example 2 in paragraph 

(b)(4), and adding Examples 3, 4, and 5

in paragraph (b)(4) as follows:

§ 2590.701–6 Special enrollment periods. 

(a) Special enrollment for certain 

individuals who lose coverage—(1) In 

general. A group health plan, and a 

health insurance issuer offering health 

insurance coverage in connection with a 

group health plan, is required to permit 

current employees and dependents (as 

defined in § 2590.701–2) who are 

described in paragraph (a)(2) of this 

section to enroll for coverage under the 

terms of the plan if the conditions in 

paragraph (a)(3) of this section are 

satisfied. Paragraph (a)(4) of this section 

describes procedures that a plan or 

issuer may require an employee to 

follow and describes the date by which 

coverage must begin. The special 

enrollment rights under this paragraph 

(a) apply without regard to the dates on 

Federal Register / Vol. 69, No. 250 / Thursday, December 30, 2004 / Proposed Rules 78819

which an individual would otherwise 

be able to enroll under the plan.

* * * * *

(4) Applying for special enrollment 

and effective date of coverage—(i) 

Request. A plan or issuer must allow an 

employee a period of at least 30 days 

after an event described in paragraph 

(a)(3) of this section (loss of eligibility 

for coverage, termination of employer 

contributions, or exhaustion of COBRA 

continuation coverage) to request 

enrollment (for the employee or the 

employee’s dependent). For this 

purpose, any written or oral request 

made to any of the following constitutes 

a request for enrollment—

(A) The plan administrator; 

(B) The issuer;

(C) A person who customarily handles 

claims for the plan (such as a third party 

administrator); or 

(D) Any other designated 

representative. 

(ii) Tolling of period for requesting 

special enrollment. (A) In the case of an 

individual whose coverage ceases, if a 

certificate of creditable coverage with 

respect to that cessation is not provided 

on or before the date coverage ceases, 

then the period for requesting special 

enrollment described in paragraph 

(a)(4)(i) of this section does not end 

until 30 days after the earlier of —

(1) The date that a certificate of 

creditable coverage with respect to that 

cessation is provided; or 

(2) The date 44 days after coverage 

ceases. 

(B) For purposes of this paragraph 

(a)(4), if an individual’s coverage ceases 

due to the operation of a lifetime limit 

on all benefits, coverage is considered to 

cease on the earliest date that a claim is 

denied due to the operation of the 

lifetime limit. (Nonetheless, the date of 

a loss of eligibility for coverage is 

determined under the rules of paragraph 

(a)(3) of this section, which provides 

that a loss of eligibility occurs when a 

claim that would meet or exceed a 

lifetime limit on all benefits is incurred, 

not when it is denied.) 

(C) The rules of this paragraph 

(a)(4)(ii) are illustrated by the following 

examples:

Example 1. (i) Facts. Employer V provides 

group health coverage through a policy 

provided by Issuer M. Individual D works for 

V and is covered under V’s plan. V fails to 

pay M the premiums for the coverage period 

beginning March 1. Consistent with 

applicable state law, M terminates the policy 

so that the last day of coverage is April 30. 

On May 15, M provides D with a certificate 

of creditable coverage with respect to D’s 

cessation of coverage under V’s plan. 

(ii) Conclusion. In this Example 1, the 

period to request special enrollment ends no 

earlier than June 14 (which is 30 days after 

May 15, the day a certificate of creditable 

coverage is provided with respect to D).

Example 2. (i) Facts. Same facts as 

Example 1, except D is never provided with 

a certificate of creditable coverage. 

(ii) Conclusion. In this Example 2, the 

period to request special enrollment ends no 

earlier than July 13. (July 13 is 74 days after 

April 30, the date coverage ceases. That is, 

July 13 is 30 days after the end of the 44-day 

maximum tolling period.)

Example 3. (i) Facts. Individual E works for 

Employer W and has coverage under W’s 

plan. W’s plan has a lifetime limit of $1 

million on all benefits under the plan. On 

September 13, E incurs a claim that would 

exceed the plan’s lifetime limit. On 

September 28, W denies the claim due to the 

operation of the lifetime limit and a 

certificate of creditable coverage is provided 

on October 3. E is otherwise eligible to enroll 

in the group health plan of the employer of 

E’s spouse. 

(ii) Conclusion. In this Example 3, the 

period to request special enrollment in the 

plan of the employer of E’s spouse ends no 

earlier than November 2 (30 days after the 

date the certificate is provided) and begins 

not later than September 13, the date E lost 

eligibility for coverage.

(iii) Reasonable procedures for special 

enrollment. After an individual has 

requested enrollment under paragraph 

(a)(4)(i) of this section, a plan or issuer 

may require the individual to complete 

enrollment materials within a 

reasonable time after the end of the 30-

day period described in paragraph 

(a)(4)(i) of this section. In these 

enrollment materials, the plan or issuer 

may require the individual only to 

provide information required of 

individuals who enroll when first 

eligible and information about the event 

giving rise to the special enrollment 

right. A plan or issuer may establish a 

deadline for receiving completed 

enrollment materials, but such a 

deadline must be extended for 

information that an individual making 

reasonable efforts does not obtain by 

that deadline. 

(iv) Date coverage must begin. If the 

plan or issuer requires completion of 

additional enrollment materials in 

accordance with paragraph (a)(4)(iii) of 

this section, coverage must begin no 

later than the first day of the first 

calendar month beginning after the date 

the plan or issuer receives enrollment 

materials that are substantially 

complete. If the plan or issuer does not 

require completion of additional 

enrollment materials, coverage must 

begin no later than the first day of the 

first calendar month beginning after the 

date the plan or issuer receives the 

request for special enrollment under 

paragraph (a)(4)(i) of this section. 

(b) Special enrollment with respect to 

certain dependent beneficiaries—(1) In 

general. A group health plan, and a 

health insurance issuer offering health 

insurance coverage in connection with a 

group health plan, that makes coverage 

available with respect to dependents is 

required to permit individuals described 

in paragraph (b)(2) of this section to be 

enrolled for coverage in a benefit 

package under the terms of the plan. 

Paragraph (b)(3) of this section describes 

procedures that a plan or issuer may 

require an individual to follow and 

describes the date by which coverage 

must begin. The special enrollment 

rights under this paragraph (b) apply 

without regard to the dates on which an 

individual would otherwise be able to 

enroll under the plan.

* * * * *

(3) Applying for special enrollment 

and effective date of coverage—(i) 

Request. A plan or issuer must allow an 

individual a period of at least 30 days 

after the date of the marriage, birth, 

adoption, or placement for adoption (or, 

if dependent coverage is not generally 

made available at the time of the 

marriage, birth, adoption, or placement 

for adoption, a period of at least 30 days 

after the date the plan makes dependent 

coverage generally available) to request 

enrollment (for the individual or the 

individual’s dependent). For this 

purpose, any written or oral request 

made to any of the following constitutes 

a request for enrollment—

(A) The plan administrator; 

(B) The issuer; 

(C) A person who customarily handles 

claims for the plan (such as a third party 

administrator); or 

(D) Any other designated 

representative. 

(ii) Reasonable procedures for special 

enrollment. After an individual has 

requested enrollment under paragraph 

(b)(3)(i) of this section, a plan or issuer 

may require the individual to complete 

enrollment materials within a 

reasonable time after the end of the 30-

day period described in paragraph 

(b)(3)(i) of this section. In these 

enrollment materials, the plan or issuer 

may require the individual only to 

provide information required of 

individuals who enroll when first 

eligible and information about the event 

giving rise to the special enrollment 

right. A plan or issuer may establish a 

deadline for receiving completed 

enrollment materials, but such a 

deadline must be extended for 

information that an individual making 

reasonable efforts does not obtain by 

that deadline.

(iii) Date coverage must begin—(A) 

Marriage. In the case of marriage, if the 

plan or issuer requires completion of 

78820 Federal Register / Vol. 69, No. 250 / Thursday, December 30, 2004 / Proposed Rules 

additional enrollment materials in 

accordance with paragraph (b)(3)(ii) of 

this section, coverage must begin no 

later than the first day of the first 

calendar month beginning after the date 

the plan or issuer receives enrollment 

materials that are substantially 

complete. If the plan or issuer does not 

require such additional enrollment 

materials, coverage must begin no later 

than the first day of the first calendar 

month beginning after the date the plan 

or issuer receives the request for special 

enrollment under paragraph (b)(3)(i) of 

this section. 

(B) Birth, adoption, or placement for 

adoption. Coverage must begin in the 

case of a dependent’s birth on the date 

of birth and in the case of a dependent’s 

adoption or placement for adoption no 

later than the date of such adoption or 

placement for adoption (or, if dependent 

coverage is not made generally available 

at the time of the birth, adoption, or 

placement for adoption, the date the 

plan makes dependent coverage 

available). If the plan or issuer requires 

completion of additional enrollment 

materials in accordance with paragraph 

(b)(3)(ii) of this section, the plan or 

issuer must provide benefits (including 

benefits retroactively to the date of 

birth, adoption, or placement for 

adoption) once the plan or issuer 

receives enrollment materials that are 

substantially complete. 

(4) Examples. ***

Example 2. (i) Facts. Individual D works 

for Employer X. X maintains a group health 

plan with two benefit packages—an HMO 

option and an indemnity option. Self-only 

and family coverage are available under both 

options. D enrolls for self-only coverage in 

the HMO option. Then, a child, E, is placed 

for adoption with D. Within 30 days of the 

placement of E for adoption, D requests 

enrollment for D and E under the plan’s 

indemnity option and submits completed 

enrollment materials timely. 

(ii) Conclusion. In this Example 2, D and 

E satisfy the conditions for special 

enrollment under paragraphs (b)(2)(v) and 

(b)(3) of this section. Therefore, the plan 

must allow D and E to enroll in the 

indemnity coverage, effective as of the date 

of the placement for adoption.

Example 3. (i) Facts. Same facts as 

Example 1. On March 17 (two days after the 

birth of C), A telephones the plan 

administrator and requests special 

enrollment of A, B, and C. The plan 

administrator sends A an enrollment form. 

Under the terms of the plan, enrollment is 

denied unless a completed form is submitted 

within 30 days of the event giving rise to the 

special enrollment right (in this case, C’s 

birth). 

(ii) Conclusion. In this Example 3, the plan 

does not satisfy paragraph (b)(3) of this 

section. The plan may require only that A

request enrollment during the 30-day period 

after C’s birth. A did so by telephoning the 

plan administrator. The plan may not 

condition special enrollment on filing 

additional enrollment materials during the 

30-day period. To comply with paragraph 

(b)(3) of this section, the plan must allow A

a reasonable time after the end of the 30-day 

period to submit any additional enrollment 

materials. Once these enrollment materials 

are received, the plan must allow whatever 

coverage is chosen to begin on March 15, the 

date of C’s birth.

Example 4. (i) Facts. Same facts as 

Example 3, except that A telephones the plan 

administrator to request enrollment on April 

13 (29 days after C’s birth). Also, under the 

terms of the plan, the deadline for submitting 

the enrollment form is 14 days after the end 

of the 30-day period for requesting special 

enrollment (thus, in this case, April 28, 

which is 44 days after C’s birth). The form 

requests the same information for A, B, and 

C (name, date of birth, and place of birth) as 

well as a copy of C’s birth certificate. A fills 

out the enrollment form and delivers it to the 

plan administrator on April 28. At that time 

A does not have a birth certificate for C but 

applies on that day for one from the 

appropriate government office. A receives the 

birth certificate on June 1 and furnishes a 

copy of the birth certificate to the plan 

administrator shortly thereafter. 

(ii) Conclusion. In this Example 4, A, B,

and C are entitled to special enrollment 

under the plan even though A did not satisfy 

the plan’s requirement of providing a copy of 

C’s birth certificate by the plan’s 14-day 

deadline. While a plan may establish such a 

deadline, the plan must extend the deadline 

for information that an individual making 

reasonable efforts does not obtain by that 

deadline. A delivered the enrollment form to 

the plan administrator by the deadline and 

made reasonable efforts to furnish the birth 

certificate that the plan requires.

Example 5. (i) Facts. Same facts as 

Example 4. On May 3 (after A has delivered 

the enrollment form to the plan administrator 

but before A provides the birth certificate), A

submits claims for all medical expenses 

incurred for B and C from the date of C’s 

birth. 

(ii) Conclusion. In this Example 5, the plan 

must pay all of the claims submitted by A.

Because the plan requires that individuals 

seeking special enrollment complete 

additional enrollment materials, it is required 

to provide benefits once it receives 

enrollment materials that are substantially 

complete. The form that A submitted on 

April 28 was substantially complete. Because 

C’s birth is the event giving rise to the special 

enrollment right, on April 28 A, B, and C

become entitled to benefits under the plan 

retroactive to the date of C’s birth.

* * * * *

5. Section 2590.701–8 is added to 

read as follows:

§ 2590.701–8 Interaction with the Family 

and Medical Leave Act. 

(a) In general. The rules of 

§§ 2590.701–1 through 2590.701–7 

apply with respect to an individual on 

leave under the Family and Medical 

Leave Act of 1993 (29 U.S.C. 2601) 

(FMLA), and apply with respect to a 

dependent of such an individual, except 

to the extent otherwise provided in this 

section. 

(b) Tolling of significant break in 

coverage during FMLA leave. In the case 

of an individual (or a dependent of the 

individual) who is covered under a 

group health plan, if the individual 

takes FMLA leave and does not 

continue group health coverage for any 

period of FMLA leave, that period is not 

taken into account in determining 

whether a significant break in coverage 

has occurred under § 2590.701–

4(b)(2)(iii). 

(c) Application of certification 

provisions—(1) Timing of issuance of 

certificate—(i) In the case of an 

individual (or a dependent of the 

individual) who is covered under a 

group health plan, if the individual 

takes FMLA leave and the individual’s 

group health coverage is terminated 

during FMLA leave, an automatic 

certificate must be provided in 

accordance with the timing rules set 

forth in § 2590.701–5(a)(2)(ii)(B) (which 

generally require plans and issuers to 

provide certificates within a reasonable 

time after coverage ceases). 

(ii) In the case of an individual (or a 

dependent of the individual) who is 

covered under a group health plan, if 

the individual takes FMLA leave and 

continues group health coverage for the 

period of FMLA leave, but then ceases 

coverage under the plan at the end of 

FMLA leave, an automatic certificate 

must be provided in accordance with 

the timing rules set forth in § 2590.701–

5(a)(2)(ii)(A) (which generally require 

plans and issuers to provide a certificate 

no later than the time a notice is 

required to be furnished for a qualifying 

event under a COBRA continuation 

provision). 

(2) Demonstrating FMLA leave. (i) A 

plan or issuer is required to take into 

account all information about FMLA 

leave that it obtains or that is presented 

on behalf of an individual. A plan or 

issuer must treat the individual as 

having been on FMLA leave for a period 

if—

(A) The individual attests to the 

period of FMLA leave; and 

(B) The individual cooperates with 

the plan’s or issuer’s efforts to verify the 

individual’s FMLA leave. 

(ii) Nothing in this section prevents a 

plan or issuer from modifying its initial 

determination of FMLA leave if it 

determines that the individual did not 

have the claimed FMLA leave, provided 

that the plan or issuer follows 

procedures for reconsideration similar 

to those set forth in § 2590.701–3(f). 

Federal Register / Vol. 69, No. 250 / Thursday, December 30, 2004 / Proposed Rules 78821

(d) Relationship to loss of eligibility 

special enrollment rules. In the case of 

an individual (or a dependent of the 

individual) who is covered under a 

group health plan and who takes FMLA 

leave, a loss of eligibility for coverage 

under § 2590.701–6(a) occurs when the 

period of FMLA leave ends if —

(1) The individual’s group health 

coverage is terminated at any time 

during FMLA leave; and 

(2) The individual does not return to 

work for the employer at the end of 

FMLA leave. 

6. Section 2590.732 is amended by 

adding paragraphs (a)(2) and (e) to read 

as follows:

§ 2590.732 Special rules relating to group 

health plans. 

(a) Group health plan. * * * 

(2) Determination of number of plans.

The number of group health plans that 

an employer or employee organization 

(including for this purpose a joint board 

of trustees of a multiemployer trust 

affiliated with one or more 

multiemployer plans) maintains is 

determined under the rules of this 

paragraph (a)(2). 

(i) Except as provided in paragraph 

(a)(2)(ii) or (iii) of this section, medical 

care benefits provided by a corporation, 

partnership, or other entity or trade or 

business, or by an employee 

organization, constitute one group 

health plan, unless—

(A) It is clear from the instruments 

governing the arrangement or 

arrangements to provide medical care 

benefits that the benefits are being 

provided under separate plans; and 

(B) The arrangement or arrangements 

are operated pursuant to such 

instruments as separate plans. 

(ii) A multiemployer plan and a 

nonmultiemployer plan are always 

separate plans.

(iii) If a principal purpose of 

establishing separate plans is to evade 

any requirement of law, then the 

separate plans will be considered a 

single plan to the extent necessary to 

prevent the evasion.

* * * * *

(e) Determining the average number of 

employees—(1) Scope. Whenever the 

application of a rule in this part 

depends upon the average number of 

employees employed by an employer, 

the determination of that number is 

made in accordance with the rules of 

this paragraph (e). 

(2) Full-time equivalents. The average 

number of employees is determined by 

calculating the average number of fulltime equivalents on business days 

during the preceding calendar year. 

(3) Methodology. For the preceding 

calendar year, the average number of 

full-time equivalents is determined by—

(i) Determining the number of 

employees who were employed fulltime by the employer throughout the 

entire calendar year; 

(ii) Totaling all employment hours 

(not to exceed 40 hours per week) for 

each part-time employee, and for each 

full-time employee who was not 

employed full-time with the employer 

throughout the entire calendar year; 

(iii) Dividing the total determined 

under paragraph (e)(3)(ii) of this section 

by a figure that represents the annual 

full-time hours under the employer’s 

general employment practices, such as 

2,080 hours (although for this purpose 

not more than 40 hours per week may 

be used); and 

(iv) Adding the quotient determined 

under paragraph (e)(3)(iii) of this section 

to the number determined under 

paragraph (e)(3)(i). 

(4) Rounding. For purposes of 

paragraph (e)(3)(iv) of this section, all 

fractions are disregarded. For instance, 

a figure of 50.9 is deemed to be 50. 

(5) Employers not in existence in the 

preceding year. In the case of an 

employer that was in existence for less 

than the entire preceding calendar year 

(including an employer that was not in 

existence at all), a determination of the 

average number of employees that the 

employer employs is based on the 

average number of employees that it is 

reasonably expected the employer will 

employ on business days in the current 

calendar year. 

(6) Scope of the term ‘‘employer’’. For 

purposes of this paragraph (e), employer 

includes any predecessor of the 

employer. In addition, all persons 

treated as a single employer under 

section 414(b), (c), (m), or (o) of the 

Internal Revenue Code are treated as 

one employer. 

(7) Special rule for multiemployer 

plans. (i) With respect to the application 

of a rule in this part to a multiemployer 

plan (as defined in section 3(37) of the 

Act), each employer with at least one 

employee participating in the plan is 

considered to employ the same average 

number of employees. That number is 

the highest number that results by 

applying the rules of paragraphs (e)(1) 

through (6) of this section separately to 

each of the employers. 

(ii) The rules of this paragraph (e)(7) 

are illustrated by the following example:

Example. (i) Facts. Twenty five employers 

have at least one employee who participates 

in Multiemployer Plan M. Among these 25 

employers, Employer K has 51 employees, 

determined under the rules of paragraphs 

(e)(1) through (6) of this section. Each of the 

other 24 employers has fewer than 50 

employees. 

(ii) Conclusion. With respect to the 

application of a rule in this part to M, each 

of the 25 employers is considered to employ 

51 employees.

Signed at Washington, DC, this 1st day of 

December, 2004. 

Ann L. Combs, 

Assistant Secretary, Employee Benefits 

Security Administration, U.S. Department of 

Labor.

Department of Health and Human 

Services 

45 CFR Subtitle A 

For the reasons set forth in the 

preamble, the Department of Health and 

Human Services proposes to amend 45 

CFR Part 146 follows:

PART 146—REQUIREMENTS FOR THE 

GROUP HEALTH INSURANCE 

MARKET 

1. The authority citation for Part 146 

is revised to read as follows:

Authority: Secs. 2701 through 2763, 2791, 

and 2792 of the Public Health Service Act, 

42 U.S.C. 300gg through 300gg–63, 300gg–91, 

300gg–92 as amended by HIPAA (Pub. L. 

104–191, 110 Stat. 1936), MHPA (Pub. L. 

104–204, 110 Stat. 2944, as amended by Pub. 

L. 107–116, 115 Stat. 2177), NMHPA (Pub. L. 

104–204, 110 Stat. 2935), WHCRA (Pub. L. 

105–277, 112 Stat. 2681–436), and section 

103(c)(4) of HIPAA.

2. In § 146.113, revise paragraphs 

(b)(2)(iii) and (b)(2)(iv), and Examples 4

and 6 in paragraph (b)(2)(v) to read as 

follows:

§ 146.113 Rules relating to creditable 

coverage.

* * * * *

(b) Standard method. * * * 

(2) Counting creditable coverage.

* * * 

(iii) Significant break in coverage 

defined. A significant break in coverage

means a period of 63 consecutive days 

during each of which an individual does 

not have any creditable coverage, except 

that periods described in paragraph 

(b)(2)(iv) of this section are not taken 

into account in determining a 

significant break in coverage. (See also

§ 146.143(c)(2)(iii) regarding the 

applicability to issuers of State 

insurance laws that require a break of 

more than 63 days before an individual 

has a significant break in coverage for 

purposes of State insurance law.) 

(iv) Periods that toll a significant 

break. Days in a waiting period and 

days in an affiliation period are not 

taken into account in determining 

whether a significant break in coverage 

has occurred. In addition, for an 

individual who elects COBRA

78822 Federal Register / Vol. 69, No. 250 / Thursday, December 30, 2004 / Proposed Rules 

continuation coverage during the 

second election period provided under 

the Trade Act of 2002, the days between 

the date the individual lost group health 

plan coverage and the first day of the 

second COBRA election period are not 

taken into account in determining 

whether a significant break in coverage 

has occurred. Moreover, in the case of 

an individual whose coverage ceases, if 

a certificate of creditable coverage with 

respect to that cessation is not provided 

on or before the date coverage ceases, 

then the period that begins on the first 

date that an individual has no creditable 

coverage and that continues through the 

earlier of the following two dates is not 

taken into account in determining 

whether a significant break in coverage 

has occurred: 

(A) The date that a certificate of 

creditable coverage with respect to that 

cessation is provided; or 

(B) The date 44 days after coverage 

ceases. 

(v) Examples. ***

Example 4. (i) Facts. Individual B

terminates coverage under a group health 

plan, and a certificate of creditable coverage 

is provided 10 days later. B begins 

employment with Employer R and begins 

enrollment in R’s plan 60 days after the 

certificate is provided. 

(ii) Conclusion. In this Example 4, even 

though B had no coverage for 69 days, the 10 

days before the certificate of creditable 

coverage is provided are not taken into 

account in determining a significant break in 

coverage. Therefore, B’s break in coverage is 

only 59 days and is not a significant break 

in coverage. Accordingly, B’s prior coverage 

must be counted by R’s plan.

* * * * *

Example 6. (i) Facts. Employer V sponsors 

a group health plan. Under the terms of the 

plan, the only benefits provided are those 

provided under an insurance policy. 

Individual D works for V and has creditable 

coverage under V’s plan. V fails to pay the 

issuer the premiums for the coverage period 

beginning March 1. Consistent with 

applicable State law, the issuer terminates 

the policy so that the last day of coverage is 

April 30. V goes out of business on July 31. 

On August 15 D begins employment with 

Employer W and enrolls in W’s group health 

plan. W’s plan imposes a 12-month 

preexisting condition exclusion on all 

enrollees. D never receives a certificate of 

creditable coverage for coverage under V’s 

plan. 

(ii) Conclusion. In this Example 6, the 

period from May 1 (the first day without 

coverage) through June 13 (the date 44 days 

after coverage under V’s plan ceases) is not 

taken into account in determining a 63-day 

break in coverage. This is because, in cases 

in which a certificate of creditable coverage 

is not provided by the date coverage is lost, 

the break begins on the date the certificate is 

provided, or the date 44 days after coverage 

ceases, if earlier. Therefore, even though D’s 

actual period without coverage was 106 days 

(May 1 through August 14), because the 

period from May 1 through June 13 is not 

taken into account, D’s break in coverage is 

only 62 days (June 14 through August 14). 

Thus, D has not experienced a significant 

break in coverage, and D’s prior coverage 

must be counted by W’s plan.

* * * * *

3. In § 146.115, revise paragraphs 

(a)(3)(ii)(H)(5) and (6) and add 

paragraph (a)(3)(ii)(H)(7) to read as 

follows:

§ 146.115 Certification and disclosure of 

previous coverage. 

(a) Certificate of creditable coverage.

* * * 

(3) Form and content of certificate.

***

(ii) Required information. * * * 

(H) * * *

(5) The interaction with the Family 

and Medical Leave Act; 

(6) The fact that State law may require 

issuers to provide additional protections 

to individuals in that State; and 

(7) Where to get more information.

* * * * *

4. In § 146.117, revise paragraphs 

(a)(1), (a)(4), (b)(1), (b)(3), and example 

2 in paragraph (b)(4), and add examples 

3, 4, and 5 in paragraph (b)(4), to read 

as follows:

§ 146.117 Special enrollment periods. 

(a) Special enrollment for certain 

individuals who lose coverage—(1) In 

general. A group health plan, and a 

health insurance issuer offering health 

insurance coverage in connection with a 

group health plan, is required to permit 

current employees and dependents (as 

defined in § 144.103 of this chapter) 

who are described in paragraph (a)(2) of 

this section to enroll for coverage under 

the terms of the plan if the conditions 

in paragraph (a)(3) of this section are 

satisfied. Paragraph (a)(4) of this section 

describes procedures that a plan or 

issuer may require an employee to 

follow and describes the date by which 

coverage must begin. The special 

enrollment rights under this paragraph 

(a) apply without regard to the dates on 

which an individual would otherwise 

be able to enroll under the plan.

* * * * *

(4) Applying for special enrollment 

and effective date of coverage—(i) 

Request. A plan or issuer must allow an 

employee a period of at least 30 days 

after an event described in paragraph 

(a)(3) of this section (loss of eligibility 

for coverage, termination of employer 

contributions, or exhaustion of COBRA 

continuation coverage) to request 

enrollment (for the employee or the 

employee’s dependent). For this 

purpose, any written or oral request 

made to any of the following constitutes 

a request for enrollment —

(A) The plan administrator; 

(B) The issuer; 

(C) A person who customarily handles 

claims for the plan (such as a third party 

administrator); or 

(D) Any other designated 

representative. 

(ii) Tolling of period for requesting 

special enrollment. (A) In the case of an 

individual whose coverage ceases, if a 

certificate of creditable coverage with 

respect to that cessation is not provided 

on or before the date coverage ceases, 

then the period for requesting special 

enrollment described in paragraph 

(a)(4)(i) of this section does not end 

until 30 days after the earlier of—

(1) The date that a certificate of 

creditable coverage with respect to that 

cessation is provided; or 

(2) The date 44 days after coverage 

ceases. 

(B) For purposes of this paragraph 

(a)(4), if an individual’s coverage ceases 

due to the operation of a lifetime limit 

on all benefits, coverage is considered to 

cease on the earliest date that a claim is 

denied due to the operation of the 

lifetime limit.

(Nonetheless, the date of a loss of 

eligibility for coverage is determined 

under the rules of paragraph (a)(3) of 

this section, which provides that a loss 

of eligibility occurs when a claim that 

would meet or exceed a lifetime limit on 

all benefits is incurred, not when it is 

denied.) 

(C) The rules of this paragraph 

(a)(4)(ii) are illustrated by the following 

examples:

Example 1. (i) Facts. Employer V provides 

group health coverage through a policy 

provided by Issuer M. Individual D works for 

V and is covered under V’s plan. V fails to 

pay M the premiums for the coverage period 

beginning March 1. Consistent with 

applicable state law, M terminates the policy 

so that the last day of coverage is April 30. 

On May 15, M provides D with a certificate 

of creditable coverage with respect to D’s 

cessation of coverage under V’s plan. 

(ii) Conclusion. In this Example 1, the 

period to request special enrollment ends no 

earlier than June 14 (which is 30 days after 

May 15, the day a certificate of creditable 

coverage is provided with respect to D).

Example 2. (i) Facts. Same facts as 

Example 1, except D is never provided with 

a certificate of creditable coverage. 

(ii) Conclusion. In this Example 2, the 

period to request special enrollment ends no 

earlier than July 13. (July 13 is 74 days after 

April 30, the date coverage ceases. That is, 

July 13 is 30 days after the end of the 44-day 

maximum tolling period.)

Example 3. (i) Facts. Individual E works for 

Employer W and has coverage under W’s 

plan. W’s plan has a lifetime limit of $1 

million on all benefits under the plan. On 

Federal Register / Vol. 69, No. 250 / Thursday, December 30, 2004 / Proposed Rules 78823

September 13, E incurs a claim that would 

exceed the plan’s lifetime limit. On 

September 28, W denies the claim due to the 

operation of the lifetime limit and a 

certificate of creditable coverage is provided 

on October 3. E is otherwise eligible to enroll 

in the group health plan of the employer of 

E’s spouse. 

(ii) Conclusion. In this Example 3, the 

period to request special enrollment in the 

plan of the employer of E’s spouse ends no 

earlier than November 2 (30 days after the 

date the certificate is provided) and begins 

not later than September 13, the date E lost 

eligibility for coverage.

(iii) Reasonable procedures for special 

enrollment. After an individual has 

requested enrollment under paragraph 

(a)(4)(i) of this section, a plan or issuer 

may require the individual to complete 

enrollment materials within a 

reasonable time after the end of the 30-

day period described in paragraph 

(a)(4)(i) of this section. In these 

enrollment materials, the plan or issuer 

may require the individual only to 

provide information required of 

individuals who enroll when first 

eligible and information about the event 

giving rise to the special enrollment 

right. A plan or issuer may establish a 

deadline for receiving completed 

enrollment materials, but such a 

deadline must be extended for 

information that an individual making 

reasonable efforts does not obtain by 

that deadline. 

(iv) Date coverage must begin. If the 

plan or issuer requires completion of 

additional enrollment materials in 

accordance with paragraph (a)(4)(iii) of 

this section, coverage must begin no 

later than the first day of the first 

calendar month beginning after the date 

the plan or issuer receives enrollment 

materials that are substantially 

complete. If the plan or issuer does not 

require completion of additional 

enrollment materials, coverage must 

begin no later than the first day of the 

first calendar month beginning after the 

date the plan or issuer receives the 

request for special enrollment under 

paragraph (a)(4)(i) of this section. 

(b) Special enrollment with respect to 

certain dependent beneficiaries—(1) In 

general. A group health plan, and a 

health insurance issuer offering health 

insurance coverage in connection with a 

group health plan, that makes coverage 

available with respect to dependents is 

required to permit individuals described 

in paragraph (b)(2) of this section to be 

enrolled for coverage in a benefit 

package under the terms of the plan. 

Paragraph (b)(3) of this section describes 

procedures that a plan or issuer may 

require an individual to follow and 

describes the date by which coverage 

must begin. The special enrollment 

rights under this paragraph (b) apply 

without regard to the dates on which an 

individual would otherwise be able to 

enroll under the plan.

* * * * *

(3) Applying for special enrollment 

and effective date of coverage—(i) 

Request. A plan or issuer must allow an 

individual a period of at least 30 days 

after the date of the marriage, birth, 

adoption, or placement for adoption (or, 

if dependent coverage is not generally 

made available at the time of the 

marriage, birth, adoption, or placement 

for adoption, a period of at least 30 days 

after the date the plan makes dependent 

coverage generally available) to request 

enrollment (for the individual or the 

individual’s dependent). For this 

purpose, any written or oral request 

made to any of the following constitutes 

a request for enrollment—

(A) The plan administrator; 

(B) The issuer; 

(C) A person who customarily handles 

claims for the plan (such as a third party 

administrator); or 

(D) Any other designated 

representative. 

(ii) Reasonable procedures for special 

enrollment. After an individual has 

requested enrollment under paragraph 

(b)(3)(i) of this section, a plan or issuer 

may require the individual to complete 

enrollment materials within a 

reasonable time after the end of the 30-

day period described in paragraph 

(b)(3)(i) of this section. In these 

enrollment materials, the plan or issuer 

may require the individual only to 

provide information required of 

individuals who enroll when first 

eligible and information about the event 

giving rise to the special enrollment 

right. A plan or issuer may establish a 

deadline for receiving completed 

enrollment materials, but such a 

deadline must be extended for 

information that an individual making 

reasonable efforts does not obtain by 

that deadline. 

(iii) Date coverage must begin—(A) 

Marriage. In the case of marriage, if the 

plan or issuer requires completion of 

additional enrollment materials in 

accordance with paragraph (b)(3)(ii) of 

this section, coverage must begin no 

later than the first day of the first 

calendar month beginning after the date 

the plan or issuer receives enrollment 

materials that are substantially 

complete. If the plan or issuer does not 

require such additional enrollment 

materials, coverage must begin no later 

than the first day of the first calendar 

month beginning after the date the plan 

or issuer receives the request for special 

enrollment under paragraph (b)(3)(i) of 

this section. 

(B) Birth, adoption, or placement for 

adoption. Coverage must begin in the 

case of a dependent’s birth on the date 

of birth and in the case of a dependent’s 

adoption or placement for adoption no 

later than the date of such adoption or 

placement for adoption (or, if dependent 

coverage is not made generally available 

at the time of the birth, adoption, or 

placement for adoption, the date the 

plan makes dependent coverage 

available). If the plan or issuer requires 

completion of additional enrollment 

materials in accordance with paragraph 

(b)(3)(ii) of this section, the plan or 

issuer must provide benefits (including 

benefits retroactively to the date of 

birth, adoption, or placement for 

adoption) once the plan or issuer 

receives enrollment materials that are 

substantially complete. 

(4) Examples. ***

Example 2. (i) Facts. Individual D works 

for Employer X. X maintains a group health 

plan with two benefit packages—an HMO 

option and an indemnity option. Self-only 

and family coverage are available under both 

options. D enrolls for self-only coverage in 

the HMO option. Then, a child, E, is placed 

for adoption with D. Within 30 days of the 

placement of E for adoption, D requests 

enrollment for D and E under the plan’s 

indemnity option and submits completed 

enrollment materials timely. 

(ii) Conclusion. In this Example 2, D and 

E satisfy the conditions for special 

enrollment under paragraphs (b)(2)(v) and 

(b)(3) of this section. Therefore, the plan 

must allow D and E to enroll in the 

indemnity coverage, effective as of the date 

of the placement for adoption.

Example 3. (i) Facts. Same facts as 

Example 1. On March 17 (two days after the 

birth of C), A telephones the plan 

administrator and requests special 

enrollment of A, B, and C. The plan 

administrator sends A an enrollment form. 

Under the terms of the plan, enrollment is 

denied unless a completed form is submitted 

within 30 days of the event giving rise to the 

special enrollment right (in this case, C’s 

birth). 

(ii) Conclusion. In this Example 3, the plan 

does not satisfy paragraph (b)(3) of this 

section. The plan may require only that A

request enrollment during the 30-day period 

after C’s birth. A did so by telephoning the 

plan administrator. The plan may not 

condition special enrollment on filing 

additional enrollment materials during the 

30-day period. To comply with paragraph 

(b)(3) of this section, the plan must allow A

a reasonable time after the end of the 30-day 

period to submit any additional enrollment 

materials. Once these enrollment materials 

are received, the plan must allow whatever 

coverage is chosen to begin on March 15, the 

date of C’s birth.

Example 4. (i) Facts. Same facts as 

Example 3, except that A telephones the plan 

administrator to request enrollment on April 

13 (29 days after C’s birth). Also, under the 

terms of the plan, the deadline for submitting 

78824 Federal Register / Vol. 69, No. 250 / Thursday, December 30, 2004 / Proposed Rules 

the enrollment form is 14 days after the end 

of the 30-day period for requesting special 

enrollment (thus, in this case, April 28, 

which is 44 days after C’s birth). The form 

requests the same information for A, B, and 

C (name, date of birth, and place of birth) as 

well as a copy of C’s birth certificate. A fills 

out the enrollment form and delivers it to the 

plan administrator on April 28. At that time 

A does not have a birth certificate for C but 

applies on that day for one from the 

appropriate government office. A receives the 

birth certificate on June 1 and furnishes a 

copy of the birth certificate to the plan 

administrator shortly thereafter. 

(ii) Conclusion. In this Example 4, A, B,

and C are entitled to special enrollment 

under the plan even though A did not satisfy 

the plan’s requirement of providing a copy of 

C’s birth certificate by the plan’s 14-day 

deadline. While a plan may establish such a 

deadline, the plan must extend the deadline 

for information that an individual making 

reasonable efforts does not obtain by that 

deadline. A delivered the enrollment form to 

the plan administrator by the deadline and 

made reasonable efforts to furnish the birth 

certificate that the plan requires.

Example 5. (i) Facts. Same facts as 

Example 4. On May 3 (after A has delivered 

the enrollment form to the plan administrator 

but before A provides the birth certificate) A

submits claims for all medical expenses 

incurred for B and C from the date of C’s 

birth. 

(ii) Conclusion. In this Example 5, the plan 

must pay all of the claims submitted by A.

Because the plan requires that individuals 

seeking special enrollment complete 

additional enrollment materials, it is required 

to provide benefits once it receives 

enrollment materials that are substantially 

complete. The form that A submitted on 

April 28 was substantially complete. Because 

C’s birth is the event giving rise to the special 

enrollment right, on April 28 A, B, and C

become entitled to benefits under the plan 

retroactive to the date of C’s birth.

* * * * *

5. Add new § 146.120 to read as 

follows:

§ 146.120 Interaction with the Family and 

Medical Leave Act. 

(a) In general. The rules of this part 

apply with respect to an individual on 

leave under the Family and Medical 

Leave Act of 1993 (29 U.S.C. 2601) 

(FMLA), and apply with respect to a 

dependent of such an individual, except 

to the extent otherwise provided in this 

section. 

(b) Tolling of significant break in 

coverage during FMLA leave. In the case 

of an individual (or a dependent of the 

individual) who is covered under a 

group health plan, if the individual 

takes FMLA leave and does not 

continue group health coverage for any 

period of FMLA leave, that period is not 

taken into account in determining 

whether a significant break in coverage 

has occurred under § 146.113(b)(2)(iii). 

(c) Application of certification 

provisions—(1) Timing of issuance of 

certificate—(i) In the case of an 

individual (or a dependent of the 

individual) who is covered under a 

group health plan, if the individual 

takes FMLA leave and the individual’s 

group health coverage is terminated 

during FMLA leave, an automatic 

certificate must be provided in 

accordance with the timing rules set 

forth in § 146.115(a)(2)(ii)(B) (which 

generally require plans and issuers to 

provide certificates within a reasonable 

time after coverage ceases). 

(ii) In the case of an individual (or a 

dependent of the individual) who is 

covered under a group health plan, if 

the individual takes FMLA leave and 

continues group health coverage for the 

period of FMLA leave, but then ceases 

coverage under the plan at the end of 

FMLA leave, an automatic certificate 

must be provided in accordance with 

the timing rules set forth in 

§ 146.115(a)(2)(ii)(A) (which generally 

require plans and issuers to provide a 

certificate no later than the time a notice 

is required to be furnished for a 

qualifying event under a COBRA 

continuation provision). 

(2) Demonstrating FMLA leave. (i) A 

plan or issuer is required to take into 

account all information about FMLA 

leave that it obtains or that is presented 

on behalf of an individual. A plan or 

issuer must treat the individual as 

having been on FMLA leave for a period 

if—

(A) The individual attests to the 

period of FMLA leave; and 

(B) The individual cooperates with 

the plan’s or issuer’s efforts to verify the 

individual’s FMLA leave. 

(ii) Nothing in this section prevents a 

plan or issuer from modifying its initial 

determination of FMLA leave if it 

determines that the individual did not 

have the claimed FMLA leave, provided 

that the plan or issuer follows 

procedures for reconsideration similar 

to those set forth in § 146.111(f). 

(d) Relationship to loss of eligibility 

special enrollment rules. In the case of 

an individual (or a dependent of the 

individual) who is covered under a 

group health plan and who takes FMLA 

leave, a loss of eligibility for coverage 

under § 146.117(a) occurs when the 

period of FMLA leave ends if—

(1) The individual’s group health 

coverage is terminated at any time 

during FMLA leave; and 

(2) The individual does not return to 

work for the employer at the end of 

FMLA leave. 

6. In § 146.145, add paragraphs (a)(2) 

and (e) to read as follows:

§ 146.145 Special rules relating to group 

health plans. 

(a) Group health plan. ***

(2) Determination of number of plans.

The number of group health plans that 

an employer or employee organization 

(including for this purpose a joint board 

of trustees of a multiemployer trust 

affiliated with one or more 

multiemployer plans) maintains is 

determined under the rules of this 

paragraph (a)(2).

(i) Except as provided in paragraph 

(a)(2)(ii) or (iii) of this section, medical 

care benefits provided by a corporation, 

partnership, or other entity or trade or 

business, or by an employee 

organization, constitute one group 

health plan, unless—

(A) It is clear from the instruments 

governing the arrangement or 

arrangements to provide medical care 

benefits that the benefits are being 

provided under separate plans; and 

(B) The arrangement or arrangements 

are operated pursuant to such 

instruments as separate plans. 

(ii) A multiemployer plan and a 

nonmultiemployer plan are always 

separate plans. 

(iii) If a principal purpose of 

establishing separate plans is to evade 

any requirement of law, then the 

separate plans will be considered a 

single plan to the extent necessary to 

prevent the evasion.

* * * * *

(e) Determining the average number of 

employees—(1) Scope. Whenever the 

application of a rule in this part 

depends upon the average number of 

employees employed by an employer, 

the determination of that number is 

made in accordance with the rules of 

this paragraph (e). 

(2) Full-time equivalents. The average 

number of employees is determined by 

calculating the average number of fulltime equivalents on business days 

during the preceding calendar year. 

(3) Methodology. For the preceding 

calendar year, the average number of 

full-time equivalents is determined by—

(i) Determining the number of 

employees who were employed fulltime by the employer throughout the 

entire calendar year; 

(ii) Totaling all employment hours 

(not to exceed 40 hours per week) for 

each part-time employee, and for each 

full-time employee who was not 

employed full-time with the employer 

throughout the entire calendar year; 

(iii) Dividing the total determined 

under paragraph (e)(3)(ii) of this section 

by a figure that represents the annual 

full-time hours under the employer’s 

general employment practices, such as 

Federal Register / Vol. 69, No. 250 / Thursday, December 30, 2004 / Proposed Rules 78825

2,080 hours (although for this purpose 

not more than 40 hours per week may 

be used); and 

(iv) Adding the quotient determined 

under paragraph (e)(3)(iii) of this section 

to the number determined under 

paragraph (e)(3)(i). 

(4) Rounding. For purposes of 

paragraph (e)(3)(iv) of this section, all 

fractions are disregarded. For instance, 

a figure of 50.9 is deemed to be 50. 

(5) Employers not in existence in the 

preceding year. In the case of an 

employer that was in existence for less 

than the entire preceding calendar year 

(including an employer that was not in 

existence at all), a determination of the 

average number of employees that the 

employer employs is based on the 

average number of employees that it is 

reasonably expected the employer will 

employ on business days in the current 

calendar year. 

(6) Scope of the term ‘‘employer’’. For 

purposes of this paragraph (e), employer 

includes any predecessor of the 

employer. In addition, all persons 

treated as a single employer under 

section 414(b), (c), (m), or (o) of the 

Internal Revenue Code are treated as 

one employer. 

(7) Special rule for multiemployer 

plans. (i) With respect to the application 

of a rule in this part to a multiemployer 

plan (as defined in section 3(37) of 

ERISA), each employer with at least one 

employee participating in the plan is 

considered to employ the same average 

number of employees. That number is 

the highest number that results by 

applying the rules of paragraphs (e)(1) 

through (6) of this section separately to 

each of the employers. 

(ii) The rules of this paragraph (e)(7) 

are illustrated by the following example:

Example. (i) Facts. Twenty five employers 

have at least one employee who participates 

in Multiemployer Plan M. Among these 25 

employers, Employer K has 51 employees, 

determined under the rules of paragraphs 

(e)(1) through (6) of this section. Each of the 

other 24 employers has fewer than 50 

employees. 

(ii) Conclusion. With respect to the 

application of a rule in this part to M, each 

of the 25 employers is considered to employ 

51 employees.

Dated: November 24, 2004. 

Mark B. McClellan, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: December 2, 2004. 

Tommy G. Thompson, 

Secretary, Department of Health and Human 

Services.

[FR Doc. 04–28113 Filed 12–29–04; 8:45 am] 

BILLING CODE 4830–01–P; 4510–29–P; 4120–01–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service 

26 CFR Part 54 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Part 2590 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

45 CFR Part 146 

RIN 0938–AL64 

Request for Information on BenefitSpecific Waiting Periods Under HIPAA 

Titles I & IV

AGENCIES: Internal Revenue Service, 

Department of the Treasury; Employee 

Benefits Security Administration, 

Department of Labor; Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services.

ACTION: Request for information.

SUMMARY: The Departments invite 

comments about benefit-specific waiting 

periods. This solicitation is to ensure 

that the public can provide input into 

any criteria used to determine whether 

a benefit-specific waiting period utilized 

by a group health plan or issuer is a 

preexisting condition exclusion under 

HIPAA. The Departments are requesting 

this information to help decide whether 

to issue any guidance on this question, 

and the content of any such guidance.

DATES: The Departments request that 

comments be submitted on or before 

March 30, 2005.

ADDRESSES: Written comments should 

be submitted with a signed original and 

three copies (except for electronic 

submissions) to any of the addresses 

specified below. Any comment that is 

submitted to any Department will be 

shared with the other Departments. 

Comments to the IRS can be 

addressed to: CC:PA:LPD:PR (REG–

130370–04), Room 5203, Internal 

Revenue Service, POB 7604, Ben 

Franklin Station, Washington, DC 

20044.

In the alternative, comments may be 

hand-delivered between the hours of 8 

a.m. and 5 p.m. to: CC:PA:LPD:PR 

(REG–130370–04), Courier’s Desk, 

Internal Revenue Service, 1111 

Constitution Avenue, NW., Washington 

DC 20224. 

Alternatively, comments may be 

transmitted electronically via the IRS 

Internet site at: www.irs.gov/regs.

Comments to the Department of Labor 

can be addressed to: U.S. Department of 

Labor, Employee Benefits Security 

Administration, 200 Constitution 

Avenue NW., Room C–5331, 

Washington, DC 20210, Attention:

Benefit-Specific Waiting Period 

Comments. 

Alternatively, comments may be 

hand-delivered between the hours of 9 

a.m. and 5 p.m. to the same address. 

Comments may also be transmitted to 

the Department of Labor by e-mail to: E–

OHPSCA.EBSA@dol.gov.

Comments to HHS can be submitted 

as described below: 

In commenting, please refer to file 

code CMS 2150–NC. Because of staff 

and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

three ways (no duplicates, please): 

Electronically. You may submit 

electronic comments to http://

www.cms.hhs.gov/regulations/

ecomments (attachments should be in 

Microsoft Word, WordPerfect, or Excel; 

however, we prefer Microsoft Word). 

By mail. You may mail written 

comments (one original and two copies) 

to the following address ONLY: Centers 

for Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–2150–NC, 

P.O. Box 8017, Baltimore, MD 21244–

8010. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments (one original 

and two copies) before the close of the 

comment period to one of the following 

addresses. If you intend to deliver your 

comments to the Baltimore address, 

please call telephone number (410) 786–

7195 in advance to schedule your 

arrival with one of our staff members. 

Room 445–G, Hubert H. Humphrey 

Building, 200 Independence Avenue, 

SW., Washington, DC 20201; or 7500 

Security Boulevard, Baltimore, MD 

21244–1850. 

(Because access to the interior of the 

HHH Building is not readily available to 

persons without Federal Government 

identification, commenters are 

encouraged to leave their comments in 

the CMS drop slots located in the main 

lobby of the building. A stamp-in clock 

is available for persons wishing to retain 

a proof of filing by stamping in and