Final Rule Limits Health Care Enrollment Wait to 90 Days

A final rule under the Affordable Care Act (ACA), published in the Federal Register on Feb. 24, 2014, clarifies how to apply the 90-day maximum limit that employers can impose before health coverage becomes effective. A new proposed rule would extend the waiting period by an additional month for a bona fide employment-based orientation period.

The 90-day limit under the final rule, Ninety-Day Waiting Period Limitation and Technical Amendments to Certain Health Coverage Requirements Under the Affordable Care Act, applies to both fully insured and self-insured group plans, and is effective for plan years beginning on or after Jan. 1, 2015. For plan years beginning in 2014, federal agencies will consider compliance with either the proposed rule issued in March 2013 or the final rule to constitute compliance with the ACA's waiting period limit.

"This is a common sense measure that helps workers access employer-sponsored health insurance while providing employers flexibility," said Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi in a statement.

Under the final rule, 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.

If, under the terms of the plan, an individual may elect coverage that becomes effective on a date that does not exceed 90 days, the coverage will comply with the 90-day waiting-period limit even if the worker takes more time than that to choose coverage, the final rule states

The rule does not require the plan sponsor to offer coverage to any particular individual or class of individuals (such as part-time employees); rather, it prohibits requiring otherwise-eligible individuals to wait more than 90 days before coverage becomes effective.

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's terms, or satisfying a reasonable and bona fide employment-based orientation period).

Other conditions for eligibility are generally permissible, such as meeting certain sales goals, earning a certain level of commission or successfully completing an orientation period. Additionally, organizations generally may require employees to complete up to 1,200 hours of service before they are eligible for coverage.

The final rule also address situations in which it cannot be determined that a new employee will be working full time.

Orientation-Period Limit Proposed

The federal agencies, in addition, issued   that would allow up to an additional month for a "reasonable and bona fide" new-employment orientation period preceding the 90-day waiting period. Also published in the Feb. 24 Federal Register, this proposal is open for public comment until March 25, 2014.

If a group health plan conditioned eligibility on an employee’s having completed a reasonable and bona fide orientation period, this would be allowable if the orientation period did not exceed one month and the maximum 90-day waiting period began on the first day after the orientation period.

"Including the orientation period, employers technically have 120 days before they have to start offering health care coverage to their new employees. So it’s entirely possible for some employers to add an orientation period to their employment conditions and buy themselves an extra 30 days of not having to pay for health care coverage for new hires—as long as the feds don’t see it as trying to skirt the law’s requirements," according to an analysis by HRBenefitsAlert.com.

Moreover, an analysis by Pilot Benefits Group notes:

"The orientation period would only be permissible for new employees who are hired into a position that is benefit eligible. It would not be permissible for new variable-hour employees who are placed in an employer’s measurement period under ACA. Full time employees who are eligible for coverage at the time of hire may not have an orientation imposed for purposes of delaying the effective date of coverage."

The proposed rule does not specify the facts and circumstances under which an employment-based orientation period would be considered "reasonable and bona fide," which may be addressed in a subsequent final rule, taking into consideration comments received on the proposal.

The proposed rule does indicate that during the orientation period an organization and an employee could evaluate whether the employment situation was satisfactory for each party, and standard orientation and training processes would begin.

Auto-Enrollment Guidance Still Pending

In December 2010 the federal agencies clarified that the ACA's automatic-enrollment requirement for employer plans (originally to take effect in 2014) would not become effective until after they issued regulations implementing the requirement; those regulations were still pending.

Stephen Miller, CEBS, is an online editor/manager for SHRM.