Group health plans are not be permitted to apply any waiting periods that exceed 90 days. (This is a strict 90 days and not 3 months.) This 90 day period includes weekends and holidays. Plans are still allowed to not have a waiting period or have a waiting period less than 90 days.
A waiting period is defined as “a period of time 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”.
If, with respect to a plan imposing a 90-day waiting period, the 91st day is a weekend or holiday, the plan may choose to permit coverage to be effective earlier than the 91st day, for administrative convenience. However, a plan may not make the effective date of coverage later than the 91st day.
According to the regulations issued, employers are not allowed to wait until the first of the month after the 90 days have passed in order to begin coverage. If employers wish to have coverage begin the first of the month following a waiting period, then the waiting period cannot exceed 60 days.
This provision is applicable to all group health plans regardless of the employer’s large employer status under the Pay or Play mandate.
Certain plan eligibility conditions are generally permitted before a waiting period can begin. The final regulations provide that being otherwise eligible to enroll in a plan means having met the plans substantive eligibility conditions.
Eligibility conditions include items such as:
Eligibility conditions that are based solely on the lapse of a time period are permissible for no more than 90 days.
Other conditions for eligibility that are not based solely on the lapse of a time period are generally permissible. An example would be cumulative hours-of-service requirements.
If a group health plan conditions eligibility on the completion by an employee on a number of cumulative hours of services, the eligibility condition is not considered to be designed to avoid compliance with the 90-day waiting period limitation if the cumulative hours of service requirement does not exceed 1,200 hours. The waiting period must begin on the first day after the employee satisfies the hour requirement. The cumulative hour requirement can only be a one-time requirement; it is not permitted for re-application of the same individual each year.
Potential Problems. Even though the cumulative hours of service plan design may not violate the ACA’s waiting period rules, it could expose the employer to penalties under the ACA’s employer shared responsibility rules if it applies to full-time employees.
If an employee regularly scheduled to work 40 hours per week (i.e., a full-time employee for purposes of the employer shared responsibility rules) must complete 1,200 cumulative hours of service before becoming eligible to participate in the employer’s health plan, the employee would not be offered coverage for at least 30 weeks following his or her date of hire. That period is longer than the limited non-assessment period permitted under the employer shared responsibility rules.
In certain situations, an employer may condition health plan eligibility on an employee’s completion of a “reasonable and bona fide employment-based orientation period.” The employer’s use of an orientation period will be permitted under the waiting period rules if: (1) the orientation period does not exceed one month and (2) the plan’s waiting period (if any) begins on the first day after the orientation period ends. The regulations do not require the completion of any specific activities during an orientation period. This point suggests that an orientation period will qualify as a “reasonable and bona fide employment-based orientation period” as long as the employer uses it to conduct generally accepted orientation activities (e.g., evaluating whether the employment situation is suitable to the employee).
Potential Problems. As with conditioning an employee’s eligibility to participate in the employer’s health plan on the completion of a set number of hours of service, the orientation period practice does not violate the waiting period rules. However, the employer could face penalties under the employer shared responsibility rules if its use of an orientation period results in the employee not being offered qualifying coverage until after the first day of the limited non-assessment period.
An employer may condition an employee’s eligibility for its group health plan on the employee’s status as a full-time employee.
Under certain circumstances, an employer may delay a newly hired employee’s participation in its group health plan until after the 90-day waiting period if the employer cannot determine whether the employee is a full-time employee (e.g., variable hour employees). This practice will not violate the ACA’s waiting period limitations if:
This rule corresponds with the methods and time frames permitted for a similar determination under the employer shared responsibility rules’ “look back” method.
Employers may require rehired employees to complete a waiting period again upon their rehire if: (1) doing so is reasonable under the circumstances and (2) the practice is not being used to avoid compliance with the ACA’s waiting period rules.
An employer would likely violate these requirements if it terminated an employee on day 89 of a 90-day waiting period, and then rehired the same employee a week later, requiring the employee to complete the full 90-day waiting period following his or her rehire.
Potential Problems. There is some conflict between the ACA’s waiting period rules and the employer shared responsibility rules, as the employer shared responsibility rules are less flexible than the waiting period rules regarding rehires. Under the employer shared responsibility rules, a new three-month penalty grace period/limited non-assessment period will generally be unavailable unless an employee experiences a break-in-service of at least 13 weeks (26 weeks for educational organizations). So, even if the employer concludes that application of a waiting period to an employee who is rehired less than 13 weeks following his or her termination is reasonable for purposes of the waiting period rules, the practice could expose the employer to penalties under the employer shared responsibility rules.
The ACA’s employer shared responsibility rules also contain an optional “rule of parity” that allows an employer to reapply the waiting period to an employee who experiences a break-in-service lasting at least four weeks, provided the break-in-service also exceeds the number of weeks the employee was employed immediately before the break-in-service began. For example, if an employee resigns after working for four weeks, and is later rehired by the employer after a six-week break-in-service, the employer may reapply the waiting period. The rule of parity is likely to be of little use to employers with a stable workforce, but may be useful to employers with a short-term, temporary workforce.