Under the Affordable Care Act, employers will be allowed to require new employees to complete an orientation period before becoming eligible for group health benefits, but it cannot exceed one month, the federal agencies enforcing the health law say.

In final rules published in the Federal Register today, the U.S. Departments of Labor, Treasury, and Health and Human Services clarify: If a group health plan conditions eligibility on an employee’s having completed a reasonable and bona fide employment-based orientation period, the eligibility condition is not considered to be designed to avoid compliance with the ACA’s 90-day waiting period limitation if the orientation period does not exceed one month and the maximum 90-day waiting period begins on the first day after the orientation period.

Although this final rule was largely anticipated by the benefits industry, now that it’s finalized employers will be expected to become compliant with it and benefit advisers should be prepared to counsel clients accordingly. The final regulations apply to group health plans and group health insurance issuers for plan years beginning on or after Jan. 1, 2015.

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“Orientation periods are commonplace and the Departments do not intend to call into question the reasonableness of short, bona fide orientation periods,” the final rule reads. “The danger of abuse increases, however, as the length of the period expands.”

During an orientation period the federal agencies say they envision “that an employer and employee will evaluate whether the employment situation is satisfactory for each party, and standard orientation and training processes will begin.”

While an employer can impose eligibility criteria, such as requiring the worker to fit within an eligible job classification or to achieve job-related licensing requirements, it cannot impose conditions merely as a tactic to delay the employer’s responsibility to provide health benefits, the Obama administration says in the final rule.

The ACA forbids group health plans and insurers that cover groups from imposing waiting periods on new enrollees that exceed 90 days and this final rule clarifies how orientation periods can coincide with the waiting periods without an employer incurring a penalty. The penalty for violating the 90-day waiting period clause is $100 per employee per day of violation.

Employers that are considering adding an orientation period as an eligibility condition should also be aware compliance with the orientation period rules do not indicate compliance with the employer mandate.

 

The preface to the final rule on orientation periods “clarifies that this requirement is independent of the employer responsibility requirement, which imposes its own time limits and penalties,” says Timothy Jost, an attorney and professor of law at the Lexington, Va.-based Washington and Lee University School of Law.

Under the employer responsibility rule, an employer must cover a newly hired full-time employee by the first day of the fourth full calendar month of employment, he adds in a June 21 blog post. 

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