This article refers to all regulations issued through March 6, 2014. It is intended to be a summary of important issues and should not be considered legal or tax advice.
Final regulations were released on February 24, 2014 confirming and clarifying earlier guidelines relating to waiting periods for group health plans under the Affordable Care Act (ACA). The general rule is that group health plans may not apply a waiting period that exceeds 90 days.
What is a “waiting period”?
The term “waiting period” refers to the time before coverage for an “otherwise eligible” individual becomes effective. Waiting periods are not required—coverage can begin immediately—but under the ACA, if a waiting period is imposed, it cannot be longer than 90 days.
Otherwise eligible: An individual is “otherwise eligible” to enroll in a group health plan when he or she meets the plan’s eligibility requirements. Examples of these conditions include:
- obtaining a job-related license, or
- moving into an eligible job classification.
A third eligibility condition described in new proposed rules, published in February 2014, is the orientation period.
The proposed rules will allow employers to establish a period of time during which the employee and employer can evaluate whether the employment situation is satisfactory to each party. This is a time when standard orientation and training activities can take place. If an employment-based orientation period is imposed, it must be “reasonable and bona fide,” which, under the proposed rules, can be no longer than one month. The waiting period then begins on the next day.
The one-month orientation is calculated by adding one calendar month and then subtracting one calendar day. For example, if an employee starts on May 3rd, the last day of the orientation period is June 2. The 90-day waiting period would then begin on June 3rd.
If there is no corresponding date using this calculation, then the last day of the next calendar month is used. For example, if an employee starts on January 30, the last day of the orientation period is February 28 (or February 29 in a leap year). The 90-day waiting period would begin March 1.
The guidance limiting the length of employment-based orientation periods to one month are not yet final. Formal comments are due by April 25, 2014, and final rules may be issued some time after that date.
Questions about these new regulations? Leave a comment and we’ll be sure to address them in a future post.
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