Business First | June 28, 2013
By Sharon Mattingly
The primary focus of employers over the last several months has been the “pay or play” mandate of the Patient Protection and Affordable Care Act.
However, another provision takes effect Jan. 1, 2014, for calendar-year plans — the 90-day waiting period.
Employers that offer health coverage, whether the coverage is grandfathered under the act or not, will need to be aware of this rule and how it operates.
What is a waiting period?
The proposed regulations define a “waiting period” as any period of time that must pass before the health coverage becomes effective for an employee or dependent who is otherwise eligible to enroll for coverage.
For most employers, a full-time employee’s waiting period begins on the hire date.
Under the new provision, if an employee is eligible for coverage solely based on time, that time period can’t exceed 90 calendar days.
If you are an employer currently using a 90-day eligibility period and then allowing employees to enter the health plan on the first day of the following month, are you complying with this new provision?
The answer likely would be “no.”
The waiting period of 90 days, plus additional days until the first day of the following month, would cause the waiting period to exceed 90 days.
Since the new law requires that the employee wait no longer than 90 days, the coverage date in this situation would need to be the 91st day following date of hire.
Alternatively, the employer might change to a coverage date of the first day of the month after completing 60 days of employment.
This change would provide coverage up to 30 days earlier, but the company would continue to maintain 12 entry dates rather than a potential 365 entry dates.
What about part-time employees?
How part-time employees are affected will depend upon which employees an employer covers under its health plan. If coverage is offered only to full-time employees, then part-time employees need not be offered coverage unless they eventually meet the definition of a full-time employee.
For purposes of the ACA, a full-time employee generally will be one who works an average of 30 hours per week or 130 hours per month.
If the employer does offer health coverage to part-time employees based solely on the passage of time from date of hire, the waiting period cannot exceed 90 days.
For example, if the only requirement for coverage for full-time employees is a waiting period of two months and the only requirement for coverage for part-time employees is a waiting period of six months, the employer no longer will be able to maintain the six-month waiting period for part-time employees.
What about newly hired employees?
When an employer hires an employee, that employee might be hired on a variable hour basis.
The employer might not know whether the employee will average the required hours to be considered a full-time employee for health coverage purposes.
Proposed regulations explain how the 90-day waiting period applies.
Generally, the employer might use a reasonable period of time to determine whether the employee meets the full-time employee eligibility requirement. Coverage must begin no later than 13 months from the employee’s date of hire.
Can an employer use eligibility conditions other than the passage of time?
The proposed regulations allow an employer to continue to use other substantive eligibility requirements.
Examples of such requirements are job classification, job-related licensure requirements, or the one-time completion of a specific number of hours, not to exceed 1,200.
However, these eligibility requirements cannot be designed for the purpose of avoiding compliance with the 90-day waiting period, and they also should be reviewed for compliance with the “pay or play” mandate for large employers.
Group health plans that do not comply with the 90-day waiting period requirement could be subject to penalties of up to $100 per day for each affected individual.
What actions are employers able to take now?
Employers should be working with their insurance and/or benefits advisors to review eligibility provisions for health coverage under their plans.
Plan documents might need to be amended and procedures revised.
Also, if the employer is using a first-day-of-the-month-following-90-days-of-employment coverage requirement for its health plan and for other benefit plans, those plans will need to be reviewed for any changes if the coverage dates are to remain consistent across benefit plans.
Sharon Mattingly is an attorney at Stoll Keenon Ogden PLLC. She can be reached at email@example.com.