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March 14, 2014

Final Rule Implementing the Affordable Care Act’s 90-Day Waiting Period Limit

The Departments of Labor, Treasury and Health and Human Services (collectively, the “Departments”), which are responsible for implementing the Affordable Care Act,1 have issued a final regulation implementing the law’s ban on waiting periods exceeding 90 days.2 The final rule is applicable for plan years beginning on or after January 1, 2015, and is very similar to the proposed rule published last year.3

The Departments also issued a proposed rule that coordinates with the final rule to address “orientation periods,” which can be used in addition to the 90-day waiting period.4 The Departments have requested comments on the proposed rule by April 25, 2014.

This Capital Checkup summarizes both the final rule and the proposed rule, which provide practical guidance for sponsors of group health plans. It concludes with a list of steps plan sponsors should take to implement the Affordable Care Act’s 90-day waiting period rule.

The Final Rule

A summary of the key interpretations in the final rule, which follow the guidance in last year’s proposed rule, follows:

  • Definition of the “Waiting Period”  Group health plans must cover participants within 90 days of the date on which the individual is “otherwise eligible.” Being “otherwise eligible to enroll” means that the employee has met the plan’s substantive eligibility conditions, such as being in an eligible job classification or achieving job-related licensure requirements specified in the plan’s terms. A new provision in the final rule adds that a plan can require that an individual “satisfy a reasonable and bona fide employment-based orientation period” prior to receiving an offer of coverage. The orientation period is further defined by the new proposed rule, discussed below.
  • Definition of “90 Days”  Ninety days refers to calendar days — not three months or a quarter.
  • Limit on Eligibility Conditions Based Solely on the Lapse of a Time Period  Such eligibility conditions are permissible for no more than 90 days.
  • Limit on Cumulative-Service Requirements  Plans that require completion of cumulative hours of service may do so provided the hours-of-service requirement does not exceed 1,200 hours.
  • Requirements for Variable Hour Employees  If the plan conditions eligibility on a specified number of hours of service, and it cannot be determined that an employee is reasonably expected to regularly work that number of hours, the plan may have up to 12 months to measure whether the employee meets the eligibility criteria. In that case, coverage must begin no later than 13 months from the employee’s start date, plus, if the start date was not the first day of the month, the time remaining until the first day of the next month.
  • Certificates of Creditable Coverage Eliminated  After December 31, 2014, plans will no longer be required to issue certificates of creditable coverage, which were introduced by Health Insurance Portability and Accountability Act of 1996 (HIPAA).

The Proposed Rule

The new proposed rule would provide that if a group health plan conditions eligibility on an employee’s having completed a “reasonable and bona fide employment-based orientation period,” the maximum 90-day waiting period would begin on the first day after the orientation period. Under this proposed rule, an orientation period would be considered reasonable and bona fide if it is no longer than one month. The one-month period would be determined by adding one calendar month and subtracting one calendar day, measured from an employee’s start date.

For example, if an employee’s start date is October 16, the orientation period could last until November 15. The 90-day waiting period would begin on the first day after the orientation period. The employee would have to be offered coverage beginning no later than February 14 (the 91st day after the employee completes the orientation period).

The proposed rule is apparently intended to address concerns related to the inflexibility of the 90-day measurement period — particularly in light of the fact that coverage often starts at the beginning of the third or fourth month after employment begins. As noted at the beginning of this Capital Checkup, the Departments have requested comments on the proposed rule, which must be received by April 25, 2014.

Implications for Plan Sponsors

Because the Affordable Care Act’s 90-day waiting period rule took effect for plan years beginning on or after January 1, 2014, many plan sponsors have already implemented it. Those that have not yet done so should:

  • Review all eligibility requirements to determine if any are based solely on the lapse of time. Eliminate any requirements that exceed 90 calendar days, and ensure that employees already in a waiting period when the ban takes effect are not subject to a waiting period that exceeds 90 calendar days.
  • Determine which groups of employees will meet the plan’s eligibility requirements as of their start date and which groups should be classified as variable hour employees.
  • For employees who will meet the plan’s eligibility requirements as of their start date (e.g., full-time employees), ensure that the waiting period between the employee’s start date and the date that health coverage begins is no longer than 90 calendar days (including any election period).
  • For employees who are offered health coverage once they work a certain number of hours, make sure that the hours requirement does not exceed 1,200 hours.
  • Coordinate the plan’s approach to the 90-day rule with the approach adopted by the employer to avoid or minimize the employer penalty. For example, consider whether similar measurement periods should be used for both determining full-time status for purposes of the employer penalty and determining whether the employee meets the plan’s eligibility requirements.

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As with all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their legal counsel for authoritative advice on the interpretation and application of the Affordable Care Act and related guidance, including the guidance summarized in this Capital Checkup. Sibson Consulting can be retained to work with plan sponsors and their attorneys on compliance issues.

1
The Affordable Care Act is the shorthand name for the Patient Protection and Affordable Care Act (PPACA), Public Law No. 111-48, as modified by the subsequently enacted Health Care and Education Reconciliation Act (HCERA), Public Law No. 111-152. The Affordable Care Act added Section 2708 to the Public Health Service Act, which provides that, effective for plan years beginning on or after January 1, 2014, a group health plan or health insurer offering group health insurance coverage shall not apply any waiting period that exceeds 90 days. (Return to the Capital Checkup.)
2
The final rule was published in the February 24, 2014 Federal Register. (Return to the Capital Checkup.)
3
The proposed rule was discussed in Sibson’s April 23, 2013 Capital Checkup, Proposed Rule on the Affordable Care Act’s 90-Day Waiting Period Provides Flexibility for Employers.” (Return to the Capital Checkup.)
4
The proposed rule was published in the February 24, 2014 Federal Register. (Return to the Capital Checkup.)

Capital Checkup is Sibson Consulting's periodic electronic newsletter summarizing activity in Washington with respect to health care and related subjects. Capital Checkup is for informational purposes only and should not be construed as legal advice. It is not intended to provide guidance on current laws or pending legislation. On all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their attorneys for legal advice.

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