Affordable Care Act: 90-Day Waiting Period Limitations and Technical Amendments

March 2014 – The U.S. Department of Labor (DOL), Treasury, and Health and Human Services recently published final regulations for the implementation of a 90-day limit on waiting periods for employee health coverage. The full DOL News Release can be found here.

We’ve created a brief summary of these new guidelines to help you understand the changes and who they affect:  

Who: Employers, as they prepare to comply with group health plan mandates

What:

• Clarification of the definition of a “waiting period,” and what individuals are eligible
• The law prevents a waiting period that exceeds 90 days after an employee becomes eligible for health coverage (employers may choose a shorter waiting period, or no waiting period)

When: 2014 Group Health Plan renewal periods

Some key provisions of the new regulations include:

Waiting Period:  “A period that must pass before coverage for an employee or dependent that is otherwise eligible to enroll under the terms of a group health plan can become effective.” Being considered “otherwise eligible” to enroll in a plan means having met the plan’s substantive eligibility conditions. These conditions include being in an eligible job classification, achieving licensure requirements specified in the plan’s terms, or satisfying a reasonable and bona fide employment-based orientation period.

Bona-Fide Employment-Based Orientation:  The final regulations do not address the duration an employer may use for a “reasonable or bona fide” orientation period. However, proposed regulations have been introduced limiting this timeframe to one month. The measurement of a month seems to be convoluted, but we expect this rule to stick with a 30-day limitation. 

Cumulative Hours-of-Service:  Plan Sponsors can make eligibility contingent upon a 1,200-hour-cumulative-hours-of-service rule. This means an employee must first meet the specific number of cumulative hours set within Plan Documents before their waiting period begins (which may not exceed 90 days, as outlined above).   

Certificate of Coverage (COC):  Carriers and Plan Sponsors will be required to provide COCs to terminated employees through December 31, 2014. This applies to all plans, because some plans may not be subject to the pre-existing conditions rule in 2014, based on the group plan renewal date.

Potential Landmines:  Language within the guidance reads: “Eligibility Conditions based solely on the lapse of a time period are not permissible beyond 90 days. Other conditions of eligibility under a group health plan are generally allowed, unless the condition is designed to avoid compliance with the 90-day waiting period limitation.” In order to illustrate that an employer is not implementing any of the aforementioned “Substantive Eligibility Conditions” strictly to avoid the 90-day waiting period limitation, it would be a wise decision for employers to use these rules for ALL employment related benefits, such as vacation accrual, PTO, and 401k plan participation.

When these rules become effective, (upon 2014 plan renewal) any employee wait period cannot exceed 90 days, even if it began prior to the employer’s 2014 plan renewal. 

For questions related to your renewal or how these requirements affect your heath coverage offerings, contact me.