Earlier this year, the agencies implementing the Affordable Care Act published a final rule that prohibits health plans and health insurance issuers from applying any waiting period that exceeds 90 days (i.e., the waiting period that must pass before an individual is eligible to receive benefits under a health plan).
Even though, under the ACA, the 90-day waiting period rule took effect for plan years beginning on or after Jan. 1, 2014, many plan sponsors have yet to update their work policies (for example, employee handbooks and collective bargaining agreements) in order to coordinate their provisions with the rule and/or with plan document language that incorporates the rule.
For example, while a health plan may have changed its waiting period from 120 to 90 days in order to comply with the rule, the employer and/or labor union may not have reflected this change in the relevant employee handbook and/or collective bargaining agreement. This may result in confused employees, unsure about how long their waiting period is. It also could lead to actual disputes (and lawsuits) between these different entities.
Fortunately, there are exceptions to the 90-day rule that allow additional time to be tacked on to the 90-day waiting period. As explained in the regulation published earlier this year, they are as follows:
- Orientation periods: The regulation permits a group health plan or health insurance issuer to have certain substantive eligibility conditions which include, among other things, “satisfying a reasonable and bona fide employment-based orientation period.” The regulation permits this orientation period eligibility requirement to tack on to the 90-day waiting period. The maximum time period for this orientation period is one month.
- Cumulative hours of service requirements: In addition, the regulation permits group health plans and health insurance issuers to condition health coverage eligibility on an employee’s completion of a cumulative hours of service requirement (not to exceed 1,200 hours) without such requirement being considered “designed to avoid compliance with the 90-day waiting period limitation.”
- Exception for multiemployer plans: The regulation permits multiemployer plans to use eligibility criteria to tack on to the 90-day requirement if such criteria are based on the participating employers’ unique operating structure (for example, the regulation permits a multiemployer plan’s eligibility provision that would allow employees to become eligible for coverage by working a specified number of hours of covered employment for multiple contributing employers where the plan aggregates hours in a calendar quarter, and then, if enough hours are earned, coverage begins on the first day of the next calendar quarter).
For plan sponsors that have not yet implemented the 90-day waiting period rule, as a starting point, they should review all eligibility requirements in all work policies in order to ensure that no waiting period that is based solely on a period of time exceeds 90 days (three-month or quarter language will not work), and where employees are offered health insurance coverage only after working a certain number of hours, ensure that the hours requirement does not exceed 1,200 hours.
Daniel Kuperstein is an associate with Fox Rothshild focusing on labor, employment and employee benefit issues; he can be reached at email@example.com or (973) 994-7579.
The information in this legal alert is for educational purposes only and should not be taken as specific legal advice.
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