# Prop. Treas. Reg. § 2590.701-4: Rules relating to creditable coverage.

Proposed regulation, not in force. REG-130370-04, 69 FR 78800, published 2004-12-30 <https://www.federalregister.gov/documents/2004/12/30/04-28113/notice-of-proposed-rulemaking-for-health-coverage-portability-tolling-certain-time-periods-and>.

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:

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(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:

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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.

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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.

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