Under the Affordable Care Act, what are the proposed rules on waiting periods?
Beginning January 1, 2014, once an employee meets the plan eligibility requirements, the employee must be offered coverage no later than the ninetieth calendar day. The statute clearly states: “group health plans are prohibited from applying waiting periods for health coverage longer than 90 days after the employee or dependent is otherwise eligible for coverage.” And note that 90 days does not mean three months! Even with the delay of the Employer Shared Responsibility penalties for 2015 and the fact that the regulations are not final and are “proposed,” employers need to be mindful of how certain plan rules and possible collective bargaining agreements may together create waiting periods that are impermissible under the ACA requirements. Remember that the ACA is considered under the section of the Employee Retirement Income Security Act (ERISA), which allows plan participants to sue employers. So, if a waiting period is deemed to not meet ACA requirements and is in violation of the statute, an employee can sue the employer under ERISA. A small risk, but a risk nonetheless.
- To sum up the proposed rules on waiting periods that are permissible:
- A plan can require employees to work 1,200 cumulative hours before they are eligible for coverage and then, at that point, they can apply the 90-day wait period rule.
- A plan may continue to require that employees work a minimum number of hours during a specified period (i.e., employees who work at least 30 hours per week) and may limit coverage to specific job classifications or require licensure.
- If a plan has an hours-based eligibility requirement, and the plan cannot reasonably determine whether an employee will meet this hours requirement, the employee can be considered a variable hour employee and the plan may use specific voluntary safe harbors to determine whether the employee is eligible for coverage. These safe harbors may result in measurement periods of up to 12 months, with coverage effective no later than 13 months from the employee’s date of hire.
- The plan can apply different rules for different groups of employees (collectively bargained and nonbargained, salaried versus hourly and those employed in different states or locations).
The rules may be a bit of an issue for collectively bargained groups, especially where the bargaining parties are in the driver’s seat in terms of when health coverage begins based on when the employer will begin to contribute toward coverage. If plan waiting periods under the bargaining agreements and the in force plan documents are not consistent with the ACA rules, a number of steps must be taken to address the compliance requirements and understand how any changes may impact plan cost. And, given the notification of change period requirements (60 days prior to effective date of change), be ready to communicate via the Summary of Benefits and Coverage (SBC).