Healthcare Reform - Waiting Periods
A waiting period is the period of time that must pass before an eligible individual's health coverage can become effective, absent a late or special enrollment. This particular healthcare reform mandate does not require that coverage be offered, but simply requires that if coverage is offered, the waiting period may not exceed 90 calendar days, including weekends and holidays.
Applicability and Effective Date
Beginning with the first plan year on or after January 1, 2014, plans, regardless of grandfathered status and funding, became prohibited from implementing a waiting period which exceeds 90 calendar days. Excepted benefit plans, such as standalone dental or vision plans, are exempt from this requirement.
Cumulative Service Requirement and Waiting Periods
Health plans which base their eligibility on cumulative hours of service may continue to do so provided that the hour requirement does not exceed 1,200 hours. Any number of hours exceeding this amount will be deemed as avoiding compliance with the 90 day waiting period rule. It is important to note that this cumulative hour requirement should be a one time requirement and may not be imposed each year.
Permissible Eligibility Conditions and the 90 Day Waiting Period Rule
In the event that plans and issuers have additional eligibility requirements which are not based solely on the lapse of time, those eligibility provisions are permitted if they are not designed to avoid compliance with the 90-day waiting period limitation. Examples of additional eligibility conditions include obtaining licensure requirements or satisfying a reasonable and bona fide employment-based orientation period.
An example regarding multiemployer plans: A multiemployer plan which operates pursuant to an arms-length collective bargaining agreement which has an eligibility provision that allows employees to become eligible for coverage by working a specified number of hours of covered employment for multiple contributing employers. The plan aggregates hours in a calendar quarter and then, if enough hours are earned, coverage begins the first day of the next calendar quarter. The plan also permits coverage to extend for the next full calendar quarter, regardless of whether an employee’s employment has terminated.
In this example, these eligibility provisions are designed to accommodate a unique operating structure, and, therefore, are not considered to be designed to avoid compliance with the 90- day waiting period limitation.
Orientation Periods Preceding a Waiting Period
The orientation period regulations related to the 90 day waiting period went into effect for plan years beginning on or after January 1, 2015. Orientation periods are a common practice and regulators will not question the reasonableness of a short orientation period. The rule does not include any qualifications that an employer must meet in order to impose an orientation period, but it is important that orientation periods are administered consistently within job classifications. A one month limit has been put in place to limit abuse in using this time to prolong offering coverage to employees. One month is generally determined by adding one calendar month and then subtracting one calendar day, measured from an employee’s start date in a position that is otherwise eligible for coverage. The waiting period must begin the day after the orientation period ends.
If a plan sponsor has a reasonable and bona fide employment-based orientation period, the new hire start date provided to Meritain by the plan sponsor should be the first day following the end of that orientation period. Meritain would then enroll the member based on the plan sponsor’s documented benefit waiting period.
Please note that plans that are subject to the employer mandate should keep those requirements in mind when making any decisions regarding eligibility conditions, including the length of an orientation period and the waiting period.
Waiting Periods and Variable Hour Employees
A waiting period that exceeds 90 days cannot be imposed in addition to a measurement period. The time period for determining whether a variable-hour employee meets the plan’s hours of service per period eligibility condition will not be considered to be designed to avoid compliance with the 90-day waiting period limitation if coverage is made effective no later than 13 months from the employee’s start date.
Benefit-Specific Waiting Periods
The waiting period rules do not specifically address benefit-specific waiting periods. However, the rule does include an anti-abuse rule that prohibits plans from imposing eligibility conditions that are designed to avoid compliance with the 90 day waiting period rule. A plan that imposes benefit-specific waiting periods that exceed 90 days has the potential risk of violating this anti-abuse rule and also HIPAA's non-discrimination rules.
Plans that fail to comply with the 90 day waiting period rules will be subject to an excise tax of $100 per day per affected individual.
This content is being provided as an informational tool. It is believed to be accurate at the time of posting and is subject to change. It is recommended that plans consult with their own experts or counsel to review all applicable federal and state legal requirements that may apply to their group health plan. By providing this information, Meritain Health is not exercising discretionary authority or assuming a plan fiduciary role, nor is Meritain Health providing legal advice.