ACA: Updated 90-Day Waiting Period Limitation Rules Available

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The U.S. Departments of Treasury, Labor, and Health and Human Services (“the Departments”) have published a proposed rule to amend the ACA regarding the 90-day waiting period limitation provision (“the provision”). Employers and health insurance companies may rely on the ruling through December 2014.

Section 2708 of the ACA mandates that employers may not impose an enrollment waiting period longer than 90 days for eligible employees and their dependents. Employers will be considered compliant with the provision as long as employees can enroll in the group’s health coverage within 90 days of eligibility. 

Group plans including self-insured and fully-insured plans (both grandfathered and non-grandfathered) with plan year coverage beginning on or after January 1, 2014 must comply with the provision.

The Waiting Game
According to 2004 HIPAA regulations, a “waiting period” is and will continue to be defined as:

“The period of time that must pass before coverage for an employee or dependent, who is otherwise eligible to enroll under the terms of the plan, can become effective.” 

In order for an employee to be eligible for coverage, he or she must satisfy any and all job-specific requirements as specified in the plan’s terms. For example, a broker may require his or her assistants to obtain a life and health license before becoming eligible for health coverage.

Employers Have Some Flexibility
In general, employers may impose conditions of eligibility as long as their goal is to not avoid the 90-day waiting limit. The proposed rules provided the following guidance regarding conditional eligibility for variable-hour employees and cumulative hours-of-service employees. 

Variable- Hour Employees
This eligibility condition refers to an employee who needs to consistently work a specific number of hours per period (or working full time). If it cannot be determined that an employee is reasonably expected to regularly work the specified number of hours, an employer may take a certain period of time (no more than 12 months) to determine the employee’s plan eligibility. This measurement period begins on any date between the employee’s start date and the first day of the first calendar month following the employee’s start date.

An employer will be considered compliant if the employee’s coverage is effective no later than 13 months from the employee’s start date.

The measurement period defined for determining eligibility for variable-hour employees is consistent with the timeframe permitted under the employer “pay or play” mandate (Section 4980H).

Cumulative Hours-of- Service
Employers may require an employee to work a certain number of hours, less than or equal to 1,200 cumulative hours, before becoming eligible for enrollment. The waiting period (not to exceed 90 days) must begin once the employee satisfies the plan’s cumulative hours-of service requirement to be considered eligible for plan enrollment. 

IMPORTANT:While the 90-day waiting period provision 1) allows employers to apply a substantive eligibility condition and 2) does not require employers to provide coverage to any particular employee, including part-timers, employers with 50 or more full time equivalents (FTEs) who do not offer coverage to an eligible employee may be liable for a tax penalty.

To learn more about large employers, possible tax penalties, and how to define employee classes, click here »

Counting the Days
The proposed rule provided the following guidelines to count the 90 days correctly: 

  • Count all calendar days including the date of enrollment
  • Holidays and weekends must be included in the count
  • If the 91st day falls on a holiday or a weekend, the employer should consider adjusting the waiting period to stay in compliance.
  • The effective date for coverage may not be later than the 91st day. 

The Ripple Effect
The provision will render HIPAA and ERISA regarding pre-existing conditions obsolete. Currently, 2004 HIPAA regulations permit limited exclusions of coverage based on pre-existing conditions.

The ACA will prohibit issuers from imposing pre-existing condition exclusions on group policies (on plan year) and individual policies (on policy year) beginning on or after January 1, 2014. However, for children under the age of 19, this restriction has been in place since September 23, 2010. Therefore, HIPAA regulations (Section 9801), and ERISA (Section 701) will be amended in the near future to remove the pre-existing condition provisions.

The Kick-off Date
In general, the 90-day provision will be effective for groups with plan year coverage beginning on or after January 1, 2014. In other words, groups need to comply by their renewal date. Let’s look at some examples:

ABC Company has a new group policy with a March 1, 2013 effective date. The provision will be effective March 1, 2014.

123Company has a December 1, 2013 renewal date. The provision will be effective December 1, 2014.

Next Steps
1. Employers should check their waiting periods to ensure the waiting period does not exceed 90 days. For example, employers with a “first of the month following 90 days” waiting period may consider changing it to “1st of the month following 60 days”.

2. Employers should review and amend plan documents, update summary plan descriptions, and revise employee communications as needed for compliance.

The GA in Your Corner
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EBN: Counting to 90: ACA and the Waiting Period

Federal Register: Ninety-Day Waiting Period Limitation and Technical Amendments to Certain Health Coverage Requirements Under the Affordable Care Act

IRS: Guidance on 90-Day Waiting Period Limitation Under Public Health Service Act § 2708     

McDermott Will & Emery: ACA Guidance on 90-Day Waiting Periods and Certificates of Creditable Coverage

Tower Watson: PPACA 90-Day Waiting Period Proposed Regulations Issued

This material is provided for informational purposes only and is not intended as tax or legal advice.  While every intention has been made to provide accurate information, please consult with the actual regulations.