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Federal Health Reform Law Limits Insurance Waiting Period to 90 Days

Posted by Christopher Geehern on Mar 29, 2013 10:23:00 AM

Newly hired full-time employees will wait no more than 90 days to become eligible for their company’s group health insurance plan under new regulations issued for the federal health-care reform law due to take effect on January 1.

Health care reformThe same regulations allow employers to monitor for up to a year workers with variable schedules to determine whether those people log enough hours to join the company health plan.

The Affordable Care Act (ACA) regulations mandate that group health plans may not impose a waiting period on full-time employees that exceeds 90 days.  The regulations specify that employers must apply the following criteria when establishing a waiting period:

  • Employees who otherwise meet all eligibility requirements must not be made to wait more than 90 calendar days after their start date to begin coverage;
  • Employers may not extend the 90-day period to make coverage begin on the first of the month, the start of a payroll period, a regular business day or any other administratively convenient commencement-of-coverage date;
  • An employer may shorten the waiting period to align coverage commencement with an administratively convenient commencement date.  For example, an employer could stipulate that commencement of coverage begins on the ninety-first day of employment if that day is the first day of a month; otherwise it begins on the first day of the previous month. 

The regulations also apply the 90-day waiting period rule to employees hired before January 1, 2014 and not yet eligible for coverage due to an existing waiting period.  So an employee hired on October 1, 2013 would be immediately be eligible for coverage on January 1, 2014 even if a 120-day waiting period in effect when the employee was hired.

In order to understand waiting period for workers with variable schedules, employers must understand the concepts of “measurement” and “stability” periods.

  • A measurement period is a time period, three to 12 months in length, during which an employer tracks the hours paid for each employee; 
  • A stability period is the period of time, six to 12 months in length, following the measurement period.  Employees who average the minimum hours for benefits eligibility during the measurement period (the ACA sets the minimum at 30 hours, though employers are free to set a lower threshold) are eligible for benefits throughout the following stability period.
  • Employers are free to choose the actual length of their measurement and stability periods within the maximum and minimum lengths for each.

When a newly hired employee does not have a set schedule of hours to be worked, and the employer cannot ascertain immediately whether the employee will work the minimum hours to meet the eligibility requirements of the health plan, the employer may use an initial measurement period not to exceed 12 months.  The employer tracks hours paid month-to-month to determine the employee’s eligibility.  The initial measurement period must start either at the date of hire or no later than the start of the month following the date of hire.  Each newly hired employee would have an initial measurement period tailored to his or her start date. 

Should the employee meet the hours paid requirement, then coverage must start within 13 months of the first day of the month following the employee’s start date.  The employee will continue to be eligible for coverage during a stability period lasting at least as long as the initial measurement period.

Here’s an example.

A variable-hour employee starts on March 15, 2014.  The employer decides upon a 12- month initial measurement period that starts the first of the month following the employee’s start date.  If the employee meets the minimum hourly requirement during the initial measurement period, then the employee is eligible to commence coverage no later than May 1, 2015 (13 months after the first of the month following the start date).

The employee remains eligible through April 30, 2016, the end of the corresponding stability period.  After completion of the stability period, the employee’s eligibility would be determined by the regular measurement periods used by the company.

Employers should keep in mind that there is no requirement under ACA to offer benefits to part-time employees. 

Topics: Health Care Reform, Issues

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