Employers now can get an extra 30 days on top of the 90 days by which employers must have offered health coverage to eligible workers, under new final rules on orientation periods issued by the U.S. Departments of Labor, Health and Human Services and the Treasury. The final rules, published on June 25 in the Federal Register, applies to grandfathered and nongrandfathered group health plans and group health insurers for plan years beginning on or after Jan. 1, 2015.
Under health care reform, waiting periods and eligibility conditions based solely on the lapse of a time period cannot exceed 90 days, and all calendar days, including weekends and holidays, are counted after the date of hire, under previous final rules that DOL, HHS and Treasury issued in February 2014. The 90-day waiting period limit takes effect for plan years starting on or after Jan. 1, 2015.
On the other hand, that period may be extended if newly hired workers are required to complete a reasonable and bona fide employment-based orientation period as a condition for eligibility for coverage under a plan. Under proposed rules issued in February 2014, orientation periods would delay the 90-day clock for a short amount of time, during which employer and employee could feel each other out and complete orientation. The proposal would limit the duration of orientation periods to one month. The final rule adopts that proposal without change.
The departments say the rule allows employers to continue to use probationary or trial periods to determine whether a new employee will be able to handle the duties and challenges of the job, while providing protections against excessive waiting periods.
A Short-term Buffer
Orientation periods will be determined by adding one calendar month and subtracting one calendar day from an employee’s start date to account for the orientation period. For example, if an employee’s start date is May 3, the last permitted day of the orientation period is June 2.
Keeping the orientation-period safe harbor short was important in supporting the Departments’ goal of not allowing employers to circumvent the overall goal of the 90-day period. If the safe harbor allowed longer orientation periods, abuse could result, they explained in the preamble. “[Employers] may not impose conditions that are mere subterfuges for the passage of time.”
Thirty percent of new hires are subject to waiting periods of three months or more, and 9 percent have waiting periods of four months or more, according to the Kaiser Family Foundation’s Employer Health Benefits Annual Survey for 2013. The final rule says that means about 1.5 million workers could be affected by 90-day maximum waiting-period rules.
The final 90-day maximum waiting-period rule allows other safe harbors that can extend waiting periods beyond 90 days. Examples include “measurement periods” (during which a worker’s full-time status is not yet certain), “cumulative hours of service” and “rehired employees.”
Complying with the final rules does not guarantee compliance with the Affordable Care Act’s broader employer mandate, according to the preamble. Employers subject to the mandate still may face penalties if a new hire is not covered by the beginning of the fourth full calendar month of employment, the rule stated.
For more information on the ACA’s 90-day limit on waiting periods, see Section 430 of The New Health Care Reform Law: What Employers Need to Know.