90-Day Waiting Period Limitation — Final Rule


The full implementation of the Employer Responsibility Penalty begins in a few months for all “applicable large employers” with more than 100 full-time equivalent employees. Make sure you understand the new rule and what it means for you.

What is it?
On June 25, 2014, the Departments of Labor, Health and Human Services, and the Treasury published a final rule on the 90-day waiting period limitation and the allowed employee orientation period.

The final rule adopts the language in the proposed rule from February 2012: The maximum length of the waiting period for all eligible employees remains a90 days, and any orientation period is one month. This final rule applies for plan years beginning on or after January 1, 2015.

What does it say?
Under the final regulations, a group health plan and a health insurance issuer offering group health insurance coverage may not apply any waiting period that exceeds 90 days.

 Here are some terms and their definitions to help you wade through this final rule.

Waiting Period: This is the period that must pass before coverage for an employee or dependent who is otherwise eligible to enroll under the terms of the group health plan can become effective. Being “otherwise eligible to enroll” is defined as having met the plan’s substantive eligibility conditions such as being in an eligible job classification, achieving job-related licensure requirements specified in the plan terms, or satisfying a reasonable and bona fide employment-based orientation period. This last part, the addition that a plan can require that an individual “satisfy a reasonable and bona fide employment-based orientation period” prior to receiving an offer of coverage, has been incorporated into the final rules without any substantive changes.    

Is 90 days REALLY 90 days: Ninety days refers to calendar days — not three months or a quarter — and includes weekends and holidays.

Orientation Period: The departments envision that an employer and employee will evaluate whether the employment situation is satisfactory for each party, and standard orientation and training processes will begin. This period is limited to one month. One month would be determined 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.

So, does that mean the offer of coverage can be made after the one-month orientation period and a 90-day wait without triggering the Employer Responsibility Penalty?

Compliance with these final regulations IS NOT DETERMINATIVE of compliance with section 4980H of the code. In other words, an employer plan may not be able to impose the full one-month orientation period and the full 90-day waiting period without potentially becoming subject to an assessable payment. So, yes, an orientation period may be imposed, but you must ensure that coverage is effective on the first day of the fourth full calendar month to avoid a possible penalty.

Here’s an example: If an employee is hired as a full-time employee on January 6, a plan may offer coverage effective May 6 (one month orientation plus a 90-day wait period). This employer may be subject to a penalty, however, as this does not meet the offer of coverage on the first day of the fourth calendar month.

Eligibility: A group plan may impose conditions on plan eligibility as long as those conditions are not used to circumvent the 90-day limitation.     

Cumulative Hours of Service Requirements: Plans that require completion of cumulative hours of service may do so as long as the hours-of-service requirement does not exceed 1,200 hours.

Variable Hour Employees: If on an employee’s start date, it cannot be determined that he or she is reasonably expected to regularly work on average 30 or more hours per week, the plan may have up to 12 months to measure whether the employee meets the eligibility criteria. In that case, coverage must begin no later than 13 months from the employee’s start date (if the start date was not the first day of the month, then the time remaining until the first day of the next month).

Operating Structures: The departments recognized that multi-employer plans, due to collective bargaining agreements, may have eligibility arrangements that differ from individual employer plans. The final regulations allow union plan rules and structures that are not designed to avoid compliance with the 90-day limitation for waiting periods.

Preexisting Condition Prohibition and the Elimination of Certificates of Creditable Coverage: After December 31, 2014, plans will no longer be required to issue certificates of creditable coverage, which were introduced by the Health Insurance Portability and Accountability Act of 1996 (HIPAA). Since some plans were able to impose some preexisting limitation exclusions through December 31, 2014, these certificates were required to be continued. Any services that are handled by a third-party vendor should be discontinued at the end of 2014.



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