Benefits & Compensation News

Surprise in Obamacare’s waiting period rules could be used to your advantage

Lost in the wake of all the hullabaloo about further delays of the Affordable Care Act’s (ACA) employer mandate was another important rule clarification.

The feds just issued the final rule on employee waiting periods for healthcare coverage under the ACA, and they added a proposal that may very well allow health plans to extend the total waiting period beyond the 90-day maximum.

The bulk of the final rule is consistent with the proposed regs the feds had issued previously, and simply clarifies some of the finer points of the law.

According to the feds, employers can’t make new employees – or otherwise eligible employees – wait more than 90 days for the their healthcare coverage to take effect.

As for how employers must count the 90 days, the feds were very clear: The waiting period must be calculated using all calendar days, not just business days. That means employers must factor weekends and holidays into their waiting-period calculations.

The rule also says that while employers can’t make eligible employees wait longer than 90 days to be eligible for healthcare coverage, employees can enroll in their company’s plan before or after that waiting period without it negatively impacting the company.

In other words, if the plan terms allow participants to be eligible for coverage earlier than 90 days or immediately after the 90 days is over, the plan will not violate the waiting period rules.

The waiting period rules will apply to all plan years beginning on or after Jan. 1, 2015, so you’ve got some time to make sure you’re in compliance.

But like many rules issued by the feds, there’s an exception to this.

‘Bona Fide Employment-Based Orientation Period’

Here’s the part of the final rule that’s most likely to interest employers:

In addition to the final rule on the 90-day waiting period, the feds also issued a proposed rule on the maximum length of a new-employment orientation period.

The proposed rule would limit what the feds call a “reasonable and bona fide employment-based orientation period” to one month. That means, as long as a company’s new-employee orientation isn’t specifically designed to skirt the health reform law’s waiting period, a plan’s 90-day calculation wouldn’t begin until the first day after the employee’s orientation was completed.

The feds even offered some specific guidelines on how firms should go about calculating the orientation period.

Example: “One month would be determined by adding one calendar month and subtracting one calendar day, measured from an employee’s start date in a position that is otherwise eligible for coverage. For example, if an employee’s start date in an otherwise eligible position, is May 3, the last permitted day of the orientation period is June 2.”

Including the orientation period, employers technically have 120 days before they have to start offering healthcare coverage to their new employees. So it’s entirely possible for some employers to add an orientation period to their employment conditions and buy themselves an extra 30 days of not having to pay for healthcare coverage for new hires — as long as the feds don’t see it as trying to skirt the law’s requirements.

One thing that’s noticeably absent from the feds’ proposed rule: What it takes for an employer’s orientation period to be considered “reasonable and bona-fide.”

However, the proposed rule is open for public comment until March 25, 2015, and it’s likely the feds will offer more guidance on this after weighing the public comments.

We’ll keep you posted.

Additional eligibility conditions

The final rule also touched on a number of other health plan eligibility conditions that are generally OK under the rule.

These include requiring plan participants to meet certain sales goals, earn a certain commission level or complete an employee orientation period.

The feds also said it’s generally OK to require workers to complete a certain number of hours as part of a plan’s eligibility requirements, but added that the hours-worked limit must be capped at 1200 hours.

Subscribe Today

Get the latest and greatest benefits and HR news and insights delivered to your inbox.