Departments Finalize Allowable Bona Fide Orientation Period Under ACA’s 90-Day Waiting Period Limitation

The Internal Revenue Service, the Department of Health and Human Services (HHS), and the Employee Benefits Security Administration (EBSA) (the Departments) have issued final regulations clarifying the calculation of the maximum allowable length of an employment orientation period under Public Health Service Act (PHSA) Sec. 2708’s 90-day waiting period limitation. The final rules were published in the June 25 Federal Register.

Background. PHSA Sec. 2708, as added by the Patient Protection and Affordable Care Act (ACA), prohibits group health plans and health insurance issuers offering group coverage from applying any waiting period of more than 90 days before coverage starts. PHSA Sec. 2708 applies to both grandfathered and non-grandfathered plans. Final rules on the 90-day waiting period limitation were issued in February 2014. The final regulations define “waiting period” as 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. Being otherwise eligible to enroll in a plan means having met the plan’s substantive eligibility conditions (such as, for example, being in an eligible job classification, achieving job-related licensure requirements specified in the plan’s terms, or satisfying a reasonable and bona fide employment-based orientation period).

Bona fide orientation period. Along with the final rules on the 90-day waiting period limitation, the Departments also issued proposed rules on bona fide employment-based orientation periods. The final rules issued on June 25 incorporate the proposed regulations without any substantive changes.

A reasonable and bona-fide employment-based orientation period may not extend beyond one month. The Departments envision the orientation period as a period during which employers and employees could determine if the employment situation was satisfactory and during which standard orientation and training processes could begin.

The final regulations stipulate that the acceptable one month orientation period would be calculated by adding one calendar month and subtracting one calendar day from the employee’s start date. For example, if the start date is May 3, June 2 is the last acceptable orientation day. If the employee starts October 1, then October 31 must be the last orientation day. However, in instances in which the following month does not have a corresponding date, such as January 30, then the last permitted day of orientation is the last day of the next calendar month, which in this example would be February 28 (or February 29 during leap year).

Plans with orientation dates not exceeding one month and with a waiting period for health coverage that does not exceed 90 days, beginning on the first day after the orientation period, will not be considered to be designed to avoid compliance with PHSA Sec. 2708’s 90-day waiting period limit. The final regulations apply to group health plans and group health insurance issuers for plan years beginning on or after Jan. 1, 2015.

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