H&W: Orientation and Waiting Periods Under the ACA

Under the final rule of the 90 day waiting period limitation, the agencies clarified how the waiting period will coincide with any employment based orientation period.

Ninety Day Waiting Period

For plan years beginning on or after January 1, 2014, a group health plan may not apply any waiting period that exceeds 90 days. A waiting period is defined as the period that must pass before an individual is eligible to be covered for benefits under the terms of the plan. For this purpose, all calendar days are counted beginning on the enrollment date, including weekends and holidays.

Orientation Period

If a group health plan conditions eligibility on an employee’s having completed a reasonable and bona fide employment-based orientation period, it will not violate the waiting period limit as long as the eligibility condition does not exceed one month and the maximum 90-day waiting period begins on the first day after the orientation period. Under the final regulations, one month would be determined by adding one calendar month and subtracting one calendar day, measured from an employee’s start date in a position that is eligible for coverage.

For example, if an employee’s start date is May 3, the last permitted day of the orientation period is June 2. If there is not a corresponding date in the next calendar month upon adding a calendar month, the last permitted day of the orientation period is the last day of the next calendar month. For example, if the employee’s start date is January 30, the last permitted day of the orientation period is February 28 (or February 29 in a leap year).

Play or Pay Penalty

Compliance with these final regulations does not guarantee compliance with the ACA’s play or pay  (Code section 4980H) provisions, under which an applicable large employer may be subject to a penalty if it fails to offer affordable minimum value coverage to certain newly-hired full-time employees by the first day of the fourth full calendar month of employment.

For example, if an employee is hired as a full-time employee on January 6, a plan may offer coverage May 1 and comply with the orientation and play or pay provisions. However, if the employer is an applicable large employer and starts coverage May 6, which is one month plus 90 days after the date of hire, the employer may be subject to an assessable payment under Code section 4980H.

Effective Date

These final regulations are effective for plan years beginning on or after January 1, 2015. The proposed regulations are substantially the same and may be relied on until then.