Groups Comment On Allowable Bona Fide Employment-Based Orientation Period Under ACA

In February 2014, the Internal Revenue Service, the Department of Health and Human Services, and the Employee Benefits Security Administration (the Departments) jointly issued final regulations implementing the 90-day waiting period limitation under Public Health Service Act (PHSA) Sec. 2708. 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. Concurrently with the final rule, the Departments issued a proposed rule clarifying the calculation of the maximum allowed length of an employment orientation period relative to final regulations implementing the 90-day waiting period limitation. Recently, two groups, the American Benefits Council and the U.S. Chamber of Commerce, submitted comments on the proposed rule.

Bona fide employment-based orientation period. Under the final rules, once an employee meets his or her health plan’s substantive eligibility conditions, any waiting period for coverage may not go beyond 90 days, and this includes weekends and holidays. One of the substantive eligibility conditions can be the completion of a reasonable and bona-fide employment-based orientation period, which the Departments envision 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. This period, under the proposed regulations, would not be permitted to extend beyond one month.

American Benefits Council praises proposed rule. The American Benefits Council generally favors the proposed rule. “We believe up to one month is appropriate for the duration of an orientation period. We also support the proposal that a determination of whether an orientation period is ‘reasonable’ and ‘bona fide’ be made on a facts-and-circumstances basis, as this provides needed flexibility to employers to tailor the orientation period to the needs of their employees and business practices. We encourage the Departments to retain both the one-month limitation and the flexibility in design of the orientation period in final rulemaking,” the American Benefits Council wrote.

Chamber of Commerce requests clarification. The Chamber of Commerce also supports the majority of the provisions in the proposed rule. However, the Chamber requests clarification on how the 90-day waiting period limitation will work when combined with the ACA’s requirement that applicable large employers offer minimum essential coverage to all full-time employees (those working 30 or more hours per week) or potentially pay a penalty. According to the Chamber, “We urge the Departments to clarify the interplay between these two requirements in instances where employees are not known to be full-time employees, given the regulatory framework for determining the full–time employee status of variable-hour, part-time, and seasonal employees who are not reasonably expected or hired to work full-time.”

In its comments, the Chamber asks that the Departments clarify that the 90-day waiting period limitation does not require employers to provide minimum essential coverage effective after 90 days of employment to those employees who have not (or have not yet been determined to have) met full-time employee status, should that be an eligibility requirement. The Chamber believes that the Departments intend for the 90-day waiting period limitation to apply after eligibility criteria have been met, including in instance when eligibility is contingent on full-time employee status. The Chamber “urges the Departments to … confirm that employers of employees that have not yet been determined to be full-time employees are not required to offer those employees minimum essential coverage after 90-days of employment.”

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