Does the ACA 90-day limitation on waiting periods effectively require employers to offer coverage to employees after they have been employed for 90 days?
No. Consistent with prior guidance (e.g., IRS Notice 2012-59), the Proposed Regulations state that the waiting period limitation does not require employers to offer coverage to any particular employee or class of employees, including for example part-time employees. Instead, the limitation prohibits a group health plan from requiring “otherwise eligible” employees to wait more than 90 days before coverage becomes effective. It notes, however, that a failure by an “applicable large employer” (i.e., one with 50 or more full-time equivalent employees) to offer coverage to full-time employees may nevertheless result in penalties under the employer mandate rules in Code section 4980H.
What types of eligibility conditions are permissible/impermissible?
In general, the Proposed Regulations provide that it is permissible for a group health plan to impose substantive conditions for eligibility for coverage, so long as the conditions are not designed to avoid compliance with the 90-day limit on waiting periods. It provides as examples of permissible eligibility conditions employees in an eligible job classification or achieving job-related licensure requirements.The Proposed Regulations generally prohibit eligibility conditions that are designed to avoid compliance with the 90-day waiting period limitation. Moreover, eligibility conditions that are based solely on the lapse of a time period are permissible for no more than 90 days. This means that group health plans that base eligibility for a part-time employee on the employee working, for example, a year or more will have to consider other design options.The Proposed Regulations do, however, permit group health plans that condition eligibility on an employee regularly having a specified number of hours of service per pay period (or working on a full-time basis as defined under the employer mandate rules) to take a “reasonable period of time” to determine whether the employee meets the eligibility condition. To be considered a reasonable period of time, the determination period must not exceed 12 months and must begin on the date between the employee’s start date and the first day of the calendar month following the employee’s start date. Under this rule, coverage generally must be made effective no later than 13 months from the employee’s start date (plus a fraction of a month if the employee’s start date is not the first day of a calendar month).
The Proposed Regulations also permit eligibility conditions that are based on a cumulative hours of service requirement as long as the requirement does not exceed 1,200 hours.
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Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C. She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare. She represents employers designing health plans as well as insurers designing new products. Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.
Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm's Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.
PLEASE NOTE: This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.