On February 20, 2014, the DOL, HHS and Treasury issued Final Regulations on the 90-day waiting period requirement in the Affordable Care Act (ACA). A few changes will be welcome news to employers.
For the most part, these regulations adopt the rules in the Proposed Regulations, issued on March 21, 2013. The Proposed Regulations remain in effect for plan years starting in 2014. The Final Regulations take effect for plan years starting in 2015, but employers can rely on the new guidance now.
These are some of the rules that remain the same from the Proposed Regulations:
- Variable-hour employees. Employers may use a 12-month measurement period to determine if variable-hour employees meet eligibility requirements. Coverage must become effective no later than 13 months from the hire date or the first of the next month if the hire date was not on the first of the month.
- Hours banks. Employers may implement an hours bank as an eligibility condition if the hours do not exceed 1,200 hours before the waiting period would start.
- Holiday/weekend rules. They count toward the 90-day maximum. If day 91 falls on a holiday or weekend, the start date must occur before then, not after.
The Final Regulations add a few new wrinkles:
- Orientation period. Employers can require employees to complete a “reasonable and bona fide employment-based orientation period” before the waiting period starts. The agencies requested comments on the maximum length of the orientation period, suggesting that one month would be reasonable.
- Rehires. Employers can treat rehired employees as newly eligible for the plan and thus subject to a new waiting period. They can do the same for employees who transfer from a benefits-eligible job to a non-eligible job and back to a benefits-eligible job. The employer’s rules must be “reasonable under the circumstances.” In other words, the termination and rehire cannot be a subterfuge for adding a second waiting period.
- Retirement to rehire. The agencies clarified that an employee who retires with no expectation of providing further services but is later rehired (in the example, the gap was three months) can be subject to a new waiting period.
- Multiemployer plans. A previous FAQ indicated that these plans, subject to a collective bargaining agreement (CBA), may impose eligibility requirements based on working hours for multiple employers. This is because of the unique operating structure of many CBAs. Specifically, the agencies blessed this plan design:
- Employees become eligible for coverage by working a specified number of hours for multiple employers
- The plan aggregates hours in a calendar quarter
- If enough hours are earned, coverage begins the first day of the next calendar quarter
- Coverage may extend for the next full calendar quarter, regardless of whether an employee’s employment has terminated
“This is a common sense measure that helps workers access employer-sponsored health insurance while providing employers flexibility,” said Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi in a statement. The regulations estimated that about 5.1 million Americans receive health insurance as new employees every year. A Kaiser Family Foundation survey estimated that only nine percent of covered workers were subject to waiting periods of four months or more. This means that the regulations only affect about 459,000 new employees.