The 90-day Maximum Rule
For all size group plans for new business and upon renewal for existing plans, waiting periods in excess of 90 days are prohibited for fully-insured, self-funded, grandfathered and non-grandfathered plans.
Please note, the state law supersedes ACA; for example, in California the maximum waiting period is 60 days.
SHOP Exchange Marketplace Rules
Since new hire coverage is only effectuated on the first of the month, the maximum waiting period will be 60 days. In 2018, the maximum waiting period in the SHOP is 60 days.
Changes to reduce the waiting period for the sake of ACA compliance will not trigger the loss in grandfather status.
This provision does not apply to excepted benefits (i.e., standalone dental or vision plans).
IRS Notices 2012-02, 17, and 59 provide latitude for employers using number of hours worked for eligibility and addresses when employees work variable hours. It permits an employer to delay eligibility for a health plan pending licensure if that is the practice of the business.
As long as the policy is not designed to avoid compliance, HHS, the DOL and IRS state that using the following methods will be acceptable:
- If the plan conditions eligibility on a specified number of hours per period (or working full-time), and it cannot be determined what the new employee is expected to regularly work, the plan may include a measurement period of up to 12 months if coverage is effective no later than 13 months from the employee’s start date; plus, if the start date is not the first day of the calendar month, the time remaining until the first day of the next calendar month.
- This works well when the number of hours varies.
- If the plan conditions eligibility on a specified number of hours (e.g., the plan provides part-time employees with coverage after a cumulative 1,200 hours of service), it would be permissible for coverage to begin the 91st day after the 1,200 hours is satisfied.
For ease of administration, it might be best to recommend 1st of the month after 60 days as it’s not easy to determine exactly when the 90 days is satisfied. Also, you may not use 3 months—for example, June, July and August would equal 92 days.
The 90 days interacts with the individual mandate exception of short-term loss of insurance so that if the employee is in a waiting period no penalty will apply.
Under HIPAA, an absence during the waiting period for health status related factors may not delay eligibility for the group health plan. Typically, this means that the employee would be offered coverage at the end of the waiting period and if still not back to work would be offered COBRA the following day.
Orientation Period
Employers may use a “reasonable and bona fide employment-related orientation period,” not to exceed one month, in addition to the 90-day waiting period.
- Orientation is only available for new employees who are hired to work at least 30 hours per week.
- The month would be determined from the date of hire and includes weekends and holidays. The time is measured by adding one month to the date of hire and subtracting one day.
- During an orientation period, an employer and employee can evaluate whether the employment situation is satisfactory for each party, and the employer can begin standard orientation and training processes.
- The rule acknowledges that an applicable large employer plan may not impose a full one-month employee orientation period and the full 90-day waiting period without falling out of compliance with the Employer Shared Responsibility / Play or Pay.
Enforcement
If a non-governmental group health plan fails to comply with the 90-day waiting period limitation, Code Section 4980D generally imposes a penalty of $100 for each day of the failure as to each individual to whom the failure relates. Such a penalty is payable by the employer sponsoring a single-employer plan and by the plan itself in the case of a multiemployer plan.
Additionally, under Section 2723 of the Public Health Service Act, as to non-federal governmental plans, a civil penalty of up to $100 per day is payable as to each individual for whom a failure to comply with the 90-day limitation occurs.
Lastly, as to a plan subject to ERISA, a plan participant or the Department of Labor may bring suit under ERISA Section 502 to enjoin the failure of the plan or its insurer to comply with the 90-day limitation or for other appropriate equitable relief.
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