Regulations Implement 90-Day Waiting Period Limitation

The Internal Revenue Service, the Department of Health and Human Services, and Employee Benefits Security Administration (the Departments) have 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. Proposed regulations were issued on March 21, 2013. The final regulations adopt the proposed rules, with some changes. The Departments simultaneously issued proposed regulations clarifying the calculation of the maximum allowed length of an employment orientation period relative to final regulations implementing the 90-day waiting period limitation. The final and proposed regulations were published in the February 24 Federal Register.

90-day limit. The final regulations provide that a group health plan and health insurance issuer offering group health insurance coverage may not apply a waiting period that exceeds 90 days. However, the Departments note that nothing in the final regulations prevents a plan from having a waiting period that is shorter than 90 days. If under the terms of the plan, an individual can elect coverage that becomes effective on a date that does not exceed 90 days, the coverage complies with the 90-day waiting period limitation, and the plan or issuer will not be considered to violate the waiting period rules merely because individuals may take additional time (beyond the end of the 90-day waiting period) to elect coverage.

“Waiting period” continues to be defined as the period that must pass before coverage for an individual who is otherwise eligible to enroll can become effective. The final regulations clarify that if an individual enrolls as a late enrollee or special enrollee, any period before the late or special enrollment is not a waiting period.

Under the final regulations, after an individual is determined to be otherwise eligible for coverage under the terms of the plan, any waiting period may not extend beyond 90 days, and all calendar days are counted beginning on the enrollment date, including weekends and holidays. Being otherwise eligible to enroll in a plan means having met the plan’s substantive eligibility conditions, for example, being in an eligible job classification, achieving job-related licensure requirements specified in the plan, or satisfying a reasonable and bona fide employment-based orientation (as clarified in the proposed regulations, see below).

Additionally, requiring employees to complete a certain number of hours before becoming eligible for coverage is generally allowed as long as the requirement is capped at 1,200 hours. The rules also address situations in which it cannot be determined that a new employee will be working full-time.

The 90-day waiting period limitation provisions apply to group health plans and group health insurance issuers for plan years beginning on or after Jan. 1, 2015. All other amendments apply for plan years beginning on or after April 24, 2014. For plan years beginning in 2014, the Departments will consider compliance with these final regulations to constitute compliance with PHSA Sec. 2708.

Proposed Rules

The final rules allow a reasonable and bona fide employment-based orientation period may be imposed as a condition for eligibility for coverage under a plan. Therefore, 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. In the proposed regulations, the IRS, HHS, and EBSA envision the orientation period to be 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.

The proposed 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. So, 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. 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 IRS, HHS, and EBSA concede that the orientation period allowed by the proposed regulations could certainly extend the time before an employee obtains employer-provided health insurance. They anticipate, however, that few employees will be affected because only a small fraction of workers have such orientation periods.

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