The Affordable Care Act prohibits a group health plan from imposing a waiting period for eligibility that exceeds 90 days. The final regulations implementing the 90-day waiting period limitation generally follow the proposed regulations issued in early 2013. While compliance with the proposed regulations is permissible through 2014, compliance with the final regulations is required for plan years beginning on or after January 1, 2015. The 90-day waiting period limitation applies to all group health plans regardless of whether the plan is fully insured, self-insured or grandfathered. In addition to other potential consequences, violating the 90-day waiting period limitation can result in an excise tax of $100 per day per failure.
A waiting period is the period that must pass before coverage is effective for an individual who is otherwise eligible to enroll under the terms of the plan. Being otherwise eligible to enroll in a plan means that the individual has met the plan’s substantive eligibility conditions, which may include (among others) being in an eligible job classification, meeting job-related licensure requirements, or satisfying a “reasonable and bona fide employment-based orientation period.” The final regulations do not specify the duration of an orientation period that would not be considered “reasonable and bona fide,” but under proposed rules issued at the same time as the final waiting period regulations, any orientation period generally would be limited to one month.
Eligibility conditions based solely on the lapse of time are permissible for no more than 90 days, and the 90-day limitation is a strict 90-day period. All calendar days (including weekends and holidays) are counted. If the 91st day is a weekend or holiday, coverage may be effective earlier than the 91st day, but not later. Note that the 90-day waiting period is an outside limitation - a group health plan is permitted to have a shorter waiting period or no waiting period at all. In addition, plans that require coverage to begin on the first of the month may need to impose a waiting period shorter than 90 days to meet the 90-day limitation.
The final rules clarify that eligibility conditions based on the completion of a certain cumulative number of hours are permissible as long as the requirement does not exceed 1,200 hours. For plans that impose a cumulative service requirement, the 90-day waiting period must begin once the employee satisfies the cumulative service requirement and the cumulative service requirement cannot be re-applied to the same individual in subsequent years.
The final rules also address when coverage must be offered to “variable-hour” employees (e.g., it cannot be determined at the time of hire whether the employee is reasonably expected to work full-time). Consistent with the employer mandate rules that permit plan sponsors to impose a measurement period of up to 12 months to determine whether a variable-hour employee is a full-time employee, the final waiting period regulations generally provide that the waiting period limitation will not be violated if coverage is made effective no later than 13 months from the variable-hour employee’s start date (plus the time between the 13-month anniversary date and the first day of the next calendar month if the start date was not the first of the month).
In a somewhat related change, the final regulations also provide that group health plans are no longer required to issue certificates of creditable coverage under HIPAA as of December 31, 2014, which is consistent with the prohibition on preexisting conditions under health care reform.