On February 20, 2014, the IRS, DOL and HHS jointly released two sets of regulations on the 90-day waiting period limit under the Affordable Care Act (ACA). The final regulations generally finalize the provisions in the proposed regulations that were issued March 21, 2013, and also allow for a “reasonable and bona fide employment-related orientation period.” The proposed regulations specify that the maximum allowable orientation period cannot exceed one month from the date an employee starts in an eligible position.
The 90-day limit on waiting periods applies to both grandfathered and non-grandfathered plans, and to both insured and self-funded plans. State law can supercede the ACA 90-day limit, however, so long as it is consistent with the ACA. An example would be California state law (AB 1083), which limits waiting periods to 60 days for California insured plans and HMOs.
Section 2708 of the Public Health Service Act (PHSA) provides that a group health plan or a health insurance issuer offering group health insurance shall not apply any eligibility waiting period that exceeds 90 days. A “waiting period” is the period that must pass before coverage for an employee or dependent who is otherwise eligible to enroll under the terms of a group health plan can become effective. An employee is otherwise eligible to enroll if he or she has 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.
The final regulations implement the regulations that were proposed in March 2013 plus include two additional provisions. In implementing the proposed regulations, the final regulations confirm the following:
- The 90-day maximum waiting period is calculated by counting all calendar days, including weekends and holidays. Coverage must be offered no later than the 91st day; this does not mean the first of the month after 90 days of employment. Even if the 91st day is a weekend, coverage must be available on or before that day.
- If an employee is eligible on or before the 91st day but is not enrolled by the 91st day because the individual does not timely elect coverage, the employer is not held in violation of the 90-day rule.
- If an individual enrolls as a late or special enrollee, any days before the enrollment date are not counted as part of the waiting period.
- The employer can define the eligibility criteria. Some examples of permissible eligibility criteria (other than those listed above and in the proposed regulations) include: meeting certain sales goals, earning a certain level of commission, or successfully completing an orientation period.
- The employer generally can require employees to complete a minimum number of hours before becoming eligible for coverage, but the requirement cannot exceed 1200 hours.
- The maximum waiting period rules do not require any employer to offer coverage to any particular category of employees. They only limit the maximum period of time that an otherwise eligible employee can be required to wait before being eligible for coverage.
The two new provisions in the final regulations are:
- Employers can impose a “reasonable and bona fide employment-related orientation period,” (the proposed regulations clarify what length is reasonable); and
- Employees who are terminated and rehired can be treated as new employees and thus be subject to a new waiting period. The same applies to employees who transfer from benefit-eligible to non-eligible positions and then back to eligible positions.
The proposed regulations provide that one month is the maximum allowed length of any reasonable and bona fide employment-based orientation period. A bona fide orientation period is one that is not designed to avoid compliance with the 90-day waiting period maximum. During an orientation period, an employer and employee can evaluate whether the employment situation is satisfactory for each party, and the employer can begin standard orientation and training processes.
The one-month orientation period is calculated by adding one calendar month and subtracting one calendar day, measured from an employee’s start date in a position that is otherwise eligible for coverage. If the next month does not have a corresponding date, then the last day of the orientation period is the last day of that calendar month. For example, if an employee is hired February 28, the last day of the orientation period would be March 27 (one calendar month minus one day). If an employee is hired January 30, however, the last day of the orientation period would be February 28 (or February 29 on leap year).
An orientation period will not be considered to be designed to avoid compliance with the 90 day waiting period limit if the orientation period is not more than one month and the waiting period is not more than 90 days and it begins on the first day after the orientation period.
HIPAA Certificates of Creditable Coverage
The final regulations also clarify that all plans must continue to provide HIPAA Certificates of Creditable Coverage until December 31, 2014. The ACA prohibition on plans imposing pre-existing conditions limitations applies as of the first day of the 2014 plan year (not as of January 1, 2014). This means a plan with a December 1 start date could continue to impose pre-existing conditions limits until December 1, 2014. Thus, individuals who lose coverage in 2014 might still need a HIPAA Certificate from their prior plan in order to receive credit (for their prior period of coverage) from their new plan.
The final and new proposed regulations are effective for plan years beginning on or after January 1, 2015. However, the March 2013 proposed regulations were effective for plan years beginning on or after January 1, 2014, so for 2014 a plan will be in compliance if it complies with either the 2013 proposed or the 2014 final regulations.
Link to the Regulations and News Release
News release, available at http://www.dol.gov/opa/media/press/ebsa/EBSA20140297.htm
Both the final and proposed rules will be published in the Feb. 24, 2014 edition of the Federal Register and can also be viewed at the links below.
Notice of proposed rulemaking, http://www.dol.gov/opa/media/press/ebsa/20140220-redfeg2.pdf.