QUESTION: We sponsor a self-insured health plan that imposes a three-month eligibility waiting period. Does this comply with the prohibition on excessive waiting periods?
ANSWER: A three-month waiting period does not satisfy the Affordable Care Act’s requirement to limit eligibility waiting periods to a maximum of 90 days.
A waiting period is defined as the period that must pass before coverage becomes effective for an employee or dependent who is “otherwise eligible to enroll” under the terms of a group health plan. (Individuals are “otherwise eligible” if they have satisfied the plan’s “substantive eligibility conditions,” such as being in an eligible job classification or obtaining a job-related license.) To comply with the waiting period requirement, your plan cannot require an otherwise eligible employee or dependent to wait more than 90 days before coverage becomes effective. For this purpose, three months is not equivalent to 90 days, and all calendar days (including weekends and holidays) are counted toward the 90 days, beginning on the enrollment date. Because three months can be longer than 90 days and there is no de minimis exception for the difference between 90 days and three months, a three-month waiting period does not comply with the 90-day limit.
A reasonable and bona fide employment-based orientation period is a permissible substantive eligibility condition that may delay commencement of the 90-day waiting period. This orientation period is described as a period in which the employer and employee evaluate whether the employment situation is satisfactory, and standard orientation and training processes begin. The maximum length of such an orientation period is one month, and the plan’s waiting period may begin on the first day after the orientation period. Thus, in practice, an employer may adopt an orientation period and comply with the waiting period limit by offering coverage on the first day of the month after 90 days of employment. We recommend you consult with your benefits counsel about amending your plan to comply with the maximum 90-day waiting period. Adding an orientation period may ease administration by allowing you to start coverage for all employees on the first day of a calendar month.
Finally, if you are an applicable large employer (ALE), you should review the rules regarding employer shared responsibility penalties and the conditions under which ALEs avoid potential penalties by offering coverage to new full-time employees by specified dates. These rules are similar, but not identical, to the rules for waiting periods, and ALEs should familiarize themselves with both sets of rules.
For more information, see EBIA’s Health Care Reform manual at Sections X.C (“Prohibition on Excessive Waiting Periods”) and XXVIII.C (“Penalty Tax Hinges on Whether Employer Offers Coverage to Full-Time Employees”); see also EBIA’s Self-Insured Health Plans manual at Section XIV.C (“Eligibility: Which Employees and Other Workers Will Be Allowed to Participate?”).
Contributing Editors: EBIA Staff.