Prohibiting Waiting Periods Longer Than 90 Days

Each year approximately 400,000 employees are subject to waiting periods of four months or longer.

Last month, Labor, Treasury, and HHS jointly issued proposed regulations addressing healthcare reform’s prohibition on excessive waiting periods.  These new standards are expected to further drive implementation of a pending PPACA provision aimed at both insured and self-insured group health plans.

The proposed regulations are substantially similar to the agencies’ initial guidance (August 2012) and contain virtually no surprises.  This requirement is absolute; it confirms that all calendar days are counted, that “90 days” is not synonymous to “three months,” and that the waiting period cannot be extended.  For example, consider a healthcare plan that seeks to establish coverage on the first day of a calendar month—or if the 90th day happens to fall on a weekend or holiday. Such a plan may choose to commence coverage prior to and NOT later than the cutoff date.

Meanwhile, the regulations do not indicate that an employee be restricted to 90 calendar days in which to sign up for coverage (as long as said employee had the opportunity to elect coverage within that 90 day window).  We interpret this language to clarify that granting employees additional time to make enrollment decisions will not be considered a compliance violation.  Likewise, other eligibility conditions/criteria (i.e. job classification or licensure requirements) will also be permissible, assuming they are not intentionally designed to circumvent the spirit and intent of the law.

While some plans require employees to wait a set amount of time before collecting healthcare benefits, others mandate reaching a set number of hours worked.  This prohibition does not bar one-time cumulative hours of service requirements, as long as the requirement does not exceed 1,200 hours.  For eligibility conditions that require a minimum number of hours of service per period (such as working full-time), a plan may use a reasonable measurement period of up to 12 months to determine whether a new employee with variable hours meets the condition.  In such an instance coverage must be made available no later than 13 months from the employee’s start date.

These waiting period rules are expected to go into effect on January 1, 2014 (i.e. Plan years beginning on or after that date). All group plans/insurers will be affected, regardless of grandfathered status.  If final regulations are more restrictive, they will not be implemented until January of 2015 at the earliest.

While compliance with the 90-day limit may seem relatively straightforward, there are some potential traps for the unwary.  Does this apply to all employers?  Are benefit accounts (FSAs/HRAs/HSAs) included?  Do any exceptions exist?  For answers to these questions and more, be sure to attend Capital Connection’s next quarterly webinar on Wednesday, April 10th.

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