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Agencies Issue Rules Related to 90-day Limitations Period under ACA

The federal agencies charged with implementing provisions of the Affordable Care Act (ACA) have issued a final rule that implements the 90-day limit on waiting periods for obtaining health coverage. The ACA prohibits group health plans and group health insurance issuers from imposing a waiting period that exceeds 90 days after an employee is otherwise eligible for health coverage.  A “waiting period” is defined as the period that must pass before coverage for an individual who is otherwise eligible to enroll under the terms of a group health plan can become effective. The final rule establishes the guidelines governing the relationship between a plan’s eligibility criteria and the 90-day waiting period limitation.

Generally, an individual “eligible” to enroll in a health plan is one who has met the plan's substantive eligibility conditions, such as being in an eligible job classification, achieving job-related licensure requirements specified in the plan's terms, meeting certain sales goals, earning a certain level of commission or satisfying a reasonable and bona fide employment-based orientation period. A requirement that an employee complete a set number of hours before becoming eligible for coverage is generally permitted, but cannot exceed 1,200 hours.  Once an individual is determined to be otherwise eligible for coverage under the terms of the plan, any waiting period cannot exceed 90 days, including the enrollment date, weekends and holidays. 

The rule does not require plan sponsors to offer coverage to any particular individual or class of individuals, such as part-time employees.

In response to comments, the agencies explain that the final rule:

provides that a former employee who is rehired may be treated as newly eligible for coverage upon rehire and, therefore, a plan or issuer may require that individual to meet the plan’s eligibility criteria and to satisfy the plan’s waiting period anew, if reasonable under the circumstances (for example, the termination and rehire cannot be a subterfuge to avoid compliance with the 90-day waiting period limitation). The same analysis would apply to an individual who moves to a job classification that is ineligible for coverage under the plan but then later moves back to an eligible job classification.

With respect to the “unique operating structure of multiemployer plans,” the final rule incorporates an agency FAQ issued in September 2013 that stated:

to the extent plans and issuers impose substantive eligibility requirements not based solely on the lapse of time, these eligibility provisions are permitted if they are not designed to avoid compliance with the 90-day waiting period limitation. . . if a multiemployer plan operating pursuant to an arms-length collective bargaining agreement has an eligibility provision that allows employees to become eligible for coverage by working hours of covered employment across multiple contributing employers (which often aggregates hours by calendar quarter and then permits coverage to extend for the next full calendar quarter, regardless of whether an employee has terminated employment), the Departments would consider that provision designed to accommodate a unique operating structure, (and, therefore, not designed to avoid compliance with the 90-day waiting period limitation).

The 90-day waiting period limitation provisions of this rule will apply to group health plans and group health insurance issuers for plan years beginning on or after January 1, 2015. For plan years beginning in 2014, the Departments will consider compliance with either the proposed regulations or the final regulations to constitute compliance with ACA’s waiting period limitation.

Notably, the final rule does not specify the facts and circumstances under which an employment-based orientation period would not be considered “reasonable and bona fide.”  Therefore, the agencies have issued an accompanying proposed rule that sets one month as the maximum allowed length of such an orientation period.  Specifically, “one month” would be calculated by adding one calendar month and subtracting one calendar day, measured from an employee’s start date in a position that is otherwise eligible for coverage. The agencies are soliciting comments on this proposal.

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