March 7, 2014

Final a nd Pro posed W aiting Perio d Re gulations Issued

On February 20, 2014, final and additional proposed rules were issued regardi ng the 90 day waiting
peri od under the Affordabl e Care Act (ACA). The rul e, as we ori ginally understood it, was effecti ve
on or after January 1, 2014, requi ring a group healt h plan and a healt h insurance issuer (the carrier)
not to apply any waiting peri od that exceeds 90 days for group health insurance coverage.
1
This
rule appli es to both grandfathered and non-grandfathered plans.

The following outlines notabl e changes from previously-issued regul ations:


Summary: The em ployer may impose an ori entation period permissible for new em ployees
who are hired into a position that is benefit eligi ble. Full time em ployees who are eli gibl e for
coverage at the time of hire may not have an orientati on imposed for purposes of del aying
the effecti ve dat e of coverage. The orient ation period is also not be permissible for new
variabl e-hour em ployees who are pl aced in an em ployers measurement peri od under ACA.

Effective Date. The final regul ations apply to plan years begi nni ng on or after January 1,
2015. For pl an years begi nning in 2014, em ployers may comply with either the previously-
issued proposed regul ations or the final regul ations.

Bona fide Employment-ba sed Orientation Period.* A waiting peri od is the period that
must pass before coverage for an empl oyee or dependent who is otherwise eligi ble to
enroll under the terms of a group health plan can becom e effecti ve. To be otherwise eligibl e
to enroll in a plan means that an indi vidual has met the plan's substanti ve eligi bility
conditions (such as being in an eli gible job classification or achieving job-related licensure
requirements specifi ed in the plan's terms). So, the maximum 90-day waiting period does
not have to begin until the fi rst day after the substanti ve eligi bility conditions are met.




1
Nothing in the Aff ordable Care Act requires a group health plan, or carrier, to have a w aiting period. In addition, state
insurance law may be more restrictive than w hat the f ederal law requires. For example, Calif ornia insurance law prohibits
w aiting periods that exceed 60 days. State insurance requirements are generally not applicable to ERISA self-insured
plans.


The fi nal regulations indicate that a reasonabl e and bona fi de em ployment-based
orientation peri od can be a substanti ve eli gibility condition and the propos ed rul e offers a
one-month ori entation period. The idea is that, during an orientation peri od, an employer
and em ployee could evaluat e whether the em ployment situation was satisfactory for each
party, and standard orientati on and trai ning processes would begi n. One m onth woul d be
determined by addi ng one calendar month and subtracting one calendar day, measured
from an em ployees start date in a position that is otherwise eligi ble for coverage.

For exam ple, if an empl oyees start date in an otherwise eligi ble position is May 3, the last
permitted day of the ori entation period is June 2. Similarly, if an em ployees start date in an
otherwise eli gible position is October 1, the last permitted day of the ori entation period is
October 31. If there is not a corresponding dat e in the next calendar month upon adding a
calendar month, the last permitted day of the orientati on period is the last day of the next
calendar month. For ex ampl e, if the empl oyees start date is January 30, the last permitted
day of the ori entation period is February 28 (or February 29 in a leap year). Similarly, if the
employees start date is August 31, the last permitted day of the orientati on period is
September 30.

Rehired Employees/Employees Changing to and from Eligible Job Classifications. *
The fi nal regulations provide that a former em ployee who is rehired may be treated as
newly eli gible for coverage upon rehire and, therefore, a plan may requi re that indi vi dual to
meet the plans eligibility criteria and to satisfy the plans waiting period anew, if reasonabl e
under the circumstances. For exampl e, the termi nation and rehi re cannot be a subterfuge
to avoi d compliance with the 90-day waiting peri od limitation. The same analysis woul d
apply to an indi vi dual who moves to a job classification that is ineligible for coverage under
the plan but then lat er moves back to an eligibl e job classification.

Multiemployer Plans. Multiempl oyer pl ans maint ained pursuant to collective bargaining
agreem ents have unique operating structures and m ay include di fferent eli gibility conditions
based on the participating empl oyers industry or the em ployees occupation.

On Septem ber 4, 2013, the Departments issued a set of frequently asked questions
(FAQs)
2
stating that if a multiemployer plan operating has an eligi bility provision that all ows
employees to becom e eligibl e for coverage by working hours of covered em ployment
across multiple contri buting empl oyers (which often aggregates hours by calendar quarter
and then permits coverage to extend for the next full calendar quarter, regardless of
whet her an em ployee has termi nated empl oyment), the Departm ents would consider that
provision designed to accomm odat e a uni que operating structure, (and, therefore, not
designed to avoi d compliance with the 90-day waiting peri od limitation).

The fi nal regulations include the foll owi ng exam ple consistent with this FAQ.


* USI Comment

Eligibility rules should caref ully be review ed f or compliance w ith the 90-day w aiting period rules as w ell as the
employer penalty provisions and nondiscrimination rules.

While it is per missible under t he 90-day w aiting period rules f or a plan t o use substant ive eligibility condit ions (e. g.,
job classif ication) to deny coverage to certain employees, have a w aiting period of an additional month during a
bona f ide employ ment-based or ientat ion period, and impose a new w aiting period f or rehir ed employees and/or
employees changing t o and f rom eligible job c lassif ications,
3
this raises issues f or large employers subject t o the
employer penalty beginning in 2015 because it not clear how it int eracts w ith the employer mandat e and Section



2
See Q&A 2 at: http://www .dol.gov/ebsa/pdf /f aq-aca16.pdf
3
These employees may be view ed as continuing employees f or purposes of the employer mandate and the imposition of
another 90 day w aiting period may result in a penalty exposure for the employer as continuing employees generally need
to be off ered coverage by the f irst of the month f ollow ing return to w ork.

4980H penalt ies f or employers w ho do not of f er minimum value, af f ordable coverage w ithin 90 days to eligible
employees. There is a chance that f or any period of time beyond 90 days that a f ull time employee is made t o w ait,
an applicable large employer may still be subject t o a shared responsibility pay ment despite this proposed rule
allow ing an orient ation period.

In addit ion, having less generous eligibility rules f or low er paid employees or protected classes can also violat e
various nondiscrimination rules.

For the regulations, visit:

Ninety-Day Waiting Period Limitation and Tec hnical Amendments to Certai n Health
Coverage Requi rem ents Under the Affordable Care Act; Final Rule

http://www.gpo.go v/ fdsys/pkg/FR-20 14 -02 -2 4/pd f/20 14 -0 380 9.pd f

Ninety-Day Waiting Period Limitation; Proposed Rul e

http://www.gpo.go v/ fdsys/pkg/FR-20 14 -02 -2 4/pd f/20 14 -0 381 1.pd f



*Note: All of this is subject to change based on government regulations.