Summary of the 90-day Waiting Period Limitation

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On February 20, the Departments of Labor, Treasury, and Health and Human Services announced the release of both final and proposed regulations implementing a 90-day limit on waiting periods for health coverage.  Provided by Larry Grudzien, Attorney at Law.

The following is a summary of these regulations:

Summary of the 90-day Waiting Period Limitation

Under Section 2708 of the Public Health Service Act (PHSA), group health plans and insurers offering group health coverage must not apply any waiting period that exceeds 90 days. The term ”waiting period” for this purpose is defined as “the period that must pass . . . before the individual is eligible to be covered for benefits under the terms of the plan,” as provided under PHSA Section 2704(b), Code Section 9801(b)(4) and ERISA Section 701(b)(4).

These provisions are effective for plan years beginning on or after January 1, 2014. The waiting period requirements apply to grandfathered plans. Regulations proposed to implement the law generally would apply for plan years beginning after 2013. Compliance with the proposed guidance generally will be considered compliance under PHSA Section 2708 at least through 2014. Final regulations or other guidance will not be effective before January 1, 2015, to the extent that it is more restrictive.

Final Regulations

  1. Definition of Waiting Period: The term “waiting period” is still defined as the period that must pass before coverage for an individual who is otherwise eligible to enroll under the terms of a group health plan can become effective. It is clarified that, if an individual enrolls as a late enrollee or special enrollee, any period before the late or special enrollment is not a waiting period.
  2. Eligibility Conditions Allowed before Waiting Period Is Imposed: Being otherwise eligible to enroll in a plan means having met the plan’s substantive eligibility conditions (such as, for example, being in an eligible job classification, achieving job related licensure requirements specified in the plan’s terms, or satisfying a reasonable and bona fide employment-based orientation period). The 90-day waiting period limitation generally does not require the plan sponsor to offer coverage to any particular individual or class of individuals (including, for example, part-time employees).
  3. Eligibility conditions based solely on the lapse of a time period are permissible for no more than 90 days. Other conditions for eligibility under the terms of a group health plan (that is, those that are not based solely on the lapse of a time period) are generally permissible under PHSA Section 2708 and these final regulations, unless the condition is designed to avoid compliance with the 90-day waiting period limitation.
  4. Application on Variable Hour and Seasonal Employees: If a group health plan conditions eligibility on an employee regularly having a specified number of hours of service per period (or working fulltime), and it cannot be determined that a newly-hired employee is reasonably expected to regularly work that number of hours per period (or work full-time), the plan may take a reasonable period of time, not to exceed 12 months and beginning on any date between the employee’s start date and the first day of the first calendar month following the employee’s start date, to determine whether the employee meets the plan’s eligibility condition, which may include a measurement period of no more than 12 months that begins on any date between the employee’s start date and the first day of the first calendar month following the employee’s start date. The time period for determining whether a variable-hour employee meets the plan’s hours of service per period eligibility condition will not be considered to be designed to avoid compliance with the 90-day waiting period limitation if coverage is made effective no later than 13 months from the employee’s start date, plus if the employee’s start date is not the first day of a calendar month, the time remaining until the first day of the next calendar month.
  5. Cumulative Hour of Service Requirement: If a group health plan or insurer conditions eligibility on the completion by an employee (part-time or full-time) of a number of cumulative hours of service, the eligibility condition is not considered to be designed to avoid compliance with the 90-day waiting period limitation if the cumulative hours-of-service requirement does not exceed 1,200 hours. The plan’s waiting period must begin on the first day after the employee satisfies the plan’s cumulative hours-of-service requirement and may not exceed 90 days. Furthermore, this provision continues to be designed to be a one-time eligibility requirement only. It is not permitted reapply this requirement to the same individual each year.
  6. Days Counted in the Waiting Period: After an individual is determined to be otherwise eligible for coverage under the terms of the plan, any waiting period may not extend beyond 90 days, and all calendar days are counted beginning on the enrollment date, including weekends and holidays. A plan or insurer that imposes a 90-day waiting period may, for administrative convenience, choose to permit coverage to become effective earlier than the 91st day if the 91st day is a weekend or holiday.
  7. Orientation Period: An employer may impose a requirement on an employee to successfully complete a reasonable and bona fide employment-based orientation period as a condition for eligibility for coverage under a plan. Specifically, the final regulations add an example of permissible substantive eligibility conditions under a group health plan. The final regulations add a third example regarding the satisfaction of a reasonable and bona fide employment-based orientation period. The circumstances under which the duration of an orientation period would not be considered “reasonable or bona fide” are not specified.
  8.  Rehired Employee: A former employee who is rehired may be treated as newly eligible for coverage upon rehire and, therefore, a plan or insurer may require that individual to meet the plan’s eligibility criteria and to satisfy the plan’s waiting period anew, if reasonable under the circumstances (for example, the termination and rehire cannot be a subterfuge to avoid compliance with the 90-day waiting period limitation). The same analysis would apply to an individual who moves to a job classification that is ineligible for coverage under the plan but then later moves back to an eligible job classification.
  9. Multiemployer Plans: If a multiemployer plan operating pursuant to an arms-length collective bargaining agreement has an eligibility provision that allows employees to become eligible for coverage by working hours of covered employment across multiple contributing employers (which often aggregates hours by calendar quarter and then permits coverage to extend for the next full calendar quarter, regardless of whether an employee has terminated employment), such provisions will treated as designed to accommodate a unique operating structure, (and, therefore, not designed to avoid compliance with the 90-day waiting period limitation).”

Proposed Regulations: 

  1. Orientation Period Defined: The maximum length of any orientation period is one month. This means generally a period that begins on any day of a calendar month and is determined by adding one calendar month and then subtracting one calendar day.
  2. Last Day of the Orientation Period: If there is not a corresponding date in the next calendar month upon adding a calendar month, the last permitted day of the orientation period is the last day of the next calendar month. For example, if the employee’s start date is January 30, the last permitted day of the orientation period is February 28 (or February 29 in a leap year). Similarly, if the employee’s start date is August 31, the last permitted day of the orientation period is September 30.

To obtain a copy of the final and proposed regulations,  please click on the links below: