I’ve been asked the above question several times recently, as employers deal with the practical implementation issues of the Affordable Care Act (ACA). The answer is specifically addressed in the proposed regulations, which were issued March 21, 2013.
The answer is: For a calendar year plan, the applicable effective date is January 1, 2014, and the waiting period includes days the employee worked prior to January 1, 2014. That is, an employee must be offered coverage as of January 1, 2014 if the employee has worked in an eligible position for at least 90 days.
Example from the Proposed Regulations
The proposed regulations provide the following example. (This is at *Prop. Treas. Reg. § 54.9815-2708(h)(2)(ii); Prop. DOL Reg. § 2590.715-2708(h)(2)(ii); Prop. HHS Reg. § 147.116(h)(2)(ii).)
Example. (i) Facts. A group health plan is a calendar year plan. Prior to January 1, 2014, the plan provides that full-time employees are eligible for coverage after a 6-month waiting period. Employee A begins work as a full-time employee on October 1, 2013.
(ii) Conclusion. In this Example 1, the first day of A’s waiting period is October 1, 2013 because that is the first day A is otherwise eligible to enroll under the plan’s substantive eligibility provisions, but for the waiting period. Beginning January 1, 2014, the plan may not apply a waiting period that exceeds 90 days. Accordingly, A must be given the opportunity to elect coverage that begins no later than January 1, 2014 (which is 93 days after A’s start date) because otherwise, on January 1, 2014, the plan would be applying a waiting period that exceeds 90 days. The plan is not required to make coverage effective before January 1, 2014 under the rules of this section.
Background on the Waiting Period Limits
PHS Act section 2708 provides that a group health plan or health insurance issuer offering group health insurance coverage may not impose a waiting period that exceeds 90 days, if eligibility is based solely on the lapse of time. This applies for employees who are otherwise eligible to enroll. Being “otherwise eligible to enroll” in a plan generally means having met the plan’s substantive eligibility conditions (such as being in an eligible job classification or achieving job-related licensure requirements specified in the plan’s terms). To the extent plans and issuers impose substantive eligibility requirements not based solely on the lapse of time, these eligibility provisions are permitted even if they keep an individual out of the plan for more than 90 days, so long as they are not designed to avoid compliance with the 90-day waiting period limitation.
Prior guidance the federal Departments (DOL, HHS & IRS) have issued on the 90-day waiting period limitation:
- February 9, 2012 – guidance outlining various approaches under consideration
- August 31, 2012 – temporary guidance on the 90-day waiting period limitation
- March 21, 2013 – proposed regulations on the 90-day waiting period limitation
- September 4, 2013 – ACA FAQs part XVI addressing the 90-day waiting period limitation
Additional Information on Waiting Period Limitations
- The limits apply to both grandfathered and non-grandfathered plans.
- The limits apply to ERISA plan years beginning on or after January 1, 2014. For small plans that do not file Form 5500 and do not otherwise specify their ERISA plan year, the contract renewal year generally will be considered the plan year.
- The California 60-day limits apply to insured plans in California, and it appears (after much confusion) that the 60-day limit applies to insured plans in both the large and small group markets.
- We generally have advised plan sponsors to change their eligibility waiting period in 2014 to the first of the month following 30 or 60 days of coverage, since most insurers only allow enrollment as of the first of the month. Just recently, however, several carriers told us informally that they are changing their enrollment systems to allow enrollment as of the 60th or 90th day. Stay tuned, I think most carriers will be allowing enrollment as of the 60th or 90th day after date of hire.
- The waiting period limits apply to both plans and issuers. Issuers can rely on certifications by plan sponsors (that they are complying with the waiting period limits), if the issuer does not have evidence to the contrary and also requires plan sponsors to re-certify if plan changes are made.
- Plans and issuers can rely on current guidance (March 2013 proposed rules) at least through 2014. The Departments will be issuing final regulations at some undisclosed future date. To the extent final regulations are more restrictive on plans or issuers than the proposed regulations, they will not be effective prior to January 1, 2015, and plans and issuers will have sufficient time to comply.
- To the extent plans and issuers impose substantive eligibility requirements not based solely on the lapse of time, these eligibility provisions are permitted if they are not designed to avoid compliance with the 90-day waiting period limitation. The ACA FAQs Part XVI include the following example, which the Departments would consider allowable: a multi employer plan that, pursuant to a collective bargaining agreement, includes an eligibility provision that allows employees to become eligible for coverage by working hours of covered employment for various contributing employers (which often aggregates hours by calendar quarter and then permits coverage to extend for the next full calendar quarter, regardless of whether an employee has terminated employment). Such eligibility requirements would not be designed to avoid compliance with the 90-day waiting period limitation, but would be considered as designed to accommodate a unique operating structure.