The Affordable Care Act (ACA) prohibits group health plans and group health insurance issuers from applying any waiting period that exceeds 90 days. This means that, 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. All calendar days are counted beginning on the enrollment date, including weekends and holidays.
Other eligibility conditions that are not based solely on the lapse of time are generally allowed, unless the condition is designed to avoid compliance with the 90-day waiting period limit. Also, the ACA’s waiting period limit does not require an employer to offer coverage to any particular employee or class of employees, including part-time employees. It only prevents an otherwise eligible employee (or dependent) from having to wait more than 90 days before coverage under a group health plan becomes effective.
In addition, employers may impose a requirement to successfully complete a reasonable and bona fide employment-based orientation period as a condition for eligibility for coverage under a plan. However, any permitted orientation period may not exceed one month.
Affected Plans
The ACA’s 90-day waiting period limit applies to both grandfathered and non-grandfathered group health plans and health insurance coverage. However, it does not apply to HIPAA-excepted benefits, such as limited-scope dental or vision plans and certain health flexible spending accounts (FSAs).
90-day Waiting Period Limit
A “waiting period” is the period of time that must pass before coverage for an employee or dependent who is otherwise eligible to enroll in the plan becomes effective. An employee or dependent is otherwise eligible for coverage when he or she has met the plan’s substantive eligibility conditions.
Under the ACA, a group health plan and a health insurance issuer offering group health insurance coverage may not apply a waiting period that exceeds 90 days. Thus, 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. All calendar days are counted beginning on the enrollment date, including weekends and holidays.
However, the ACA does not:
- Require a plan or issuer to have any waiting period at all; or
- Prevent a plan or issuer from having a waiting period that is shorter than 90 days.
If, under the terms of the plan, an individual can elect coverage that becomes effective on a date that does not exceed 90 days, the coverage complies with the ACA’s 90-day waiting period limit. A plan or issuer does not violate the ACA merely because employees take additional time to elect coverage.
In addition, if an individual enrolls as a late enrollee or special enrollee, any period before the individual’s late or special enrollment is not a waiting period.
Counting Days
When applying the ACA’s 90-day waiting period limit, all calendar days must be counted, beginning on the enrollment date, including weekends and holidays. For a plan with a waiting period, the enrollment date is the first day of the waiting period. A plan or issuer may choose to make coverage effective earlier than the 91st day for administrative convenience, if it:
- Imposes a 90-day waiting period, and the 91st day is a weekend or holiday; or
- Does not want to start coverage in the middle of a month (or pay period).
For example, a plan may impose a waiting period of 60 days plus a fraction of a month (or pay period) until the first day of the next month (or pay period), if the waiting period does not extend beyond 90 days. However, a plan or issuer may not make the effective date of coverage later than the 91st day. Thus, for example, a plan or issuer generally cannot wait until the first of the month after the 90-day waiting period ends to make coverage effective.
Other Permitted Eligibility Conditions
Under the ACA, eligibility conditions that are based solely on the lapse of time are allowed for no more than 90 days. However, other eligibility conditions not based solely on the lapse of time are generally allowed, unless the condition is designed to avoid compliance with the 90-day waiting period limit.
Examples of permissible eligibility conditions:
- Being in an eligible job classification; or
- Achieving job-related licensure requirements specified in the plan’s
Another example of a permissible eligibility condition is the satisfaction of a reasonable and bona fide employment-based orientation period.
Reasonable and Bona Fide Employment-based Orientation Periods
A requirement to successfully complete a reasonable and bona fide employment-based orientation period may be imposed as a condition for eligibility for coverage under a plan. During an orientation period, an employer and employee can evaluate whether the employment situation is satisfactory for each party, and standard orientation and training processes can begin.
The final rules do not specify the circumstances under which the duration of an orientation period would not be considered “reasonable or bona fide.” The Departments stated that orientation periods are commonplace, and they do not intend to call into question the reasonableness of short, bona fide orientation periods.
Maximum Length
The final rules specify one month as the maximum length of any orientation period. The one-month limit is intended to avoid abuse and facilitate compliance with the waiting period restrictions. Thus, to ensure that an orientation period is not used as a subterfuge for the passage of time or designed to avoid compliance with the 90-day limit, an orientation period is permitted only if it does not exceed one month.
Measuring the Orientation Period
This one-month maximum is generally a period that begins on any day of a calendar month and is determined by adding one calendar month and subtracting one calendar day, measured from an employee’s start date in a position that is otherwise eligible for coverage. For example, if an employee’s start date in an otherwise eligible position is May 3, the last permitted day of the orientation period is June 2. Similarly, if an employee’s start date in an otherwise eligible position is Oct. 1, the last permitted day of the orientation period is Oct. 31.
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 Jan. 30, the last permitted day of the orientation period is Feb. 28 (or Feb. 29, in a leap year). Similarly, if the employee’s start date is Aug. 31, the last permitted day of the orientation period is Sept. 30.
If a group health plan conditions eligibility on completing a reasonable and bona fide employment-based orientation period, the eligibility condition complies with the ACA’s 90-day waiting period limit if the orientation period does not exceed one month and the maximum 90-day waiting period begins on the first day after the orientation period.
Example
The following example helps explain the rules for permitted orientation periods under the 90-day waiting period limit.
- Facts—Employee H begins working full time for Employer Z on Oct. 16. Employer Z sponsors a group health plan, under which full-time employees are eligible for coverage after they have successfully completed a one-month orientation period. Employee H completes the orientation period on Nov. 15.
- Conclusion—In this example, the orientation period is not considered a subterfuge for the passage of time and is not considered to be designed to avoid compliance with the 90-day waiting period limit. Accordingly, plan coverage for Employee H must begin no later than Feb. 14, which is the 91st day after Employee H completes the orientation period. (If the orientation period was more than one month, it would be considered to be considered a subterfuge for the passage of time and designed to avoid compliance with the 90-day waiting period limit. Accordingly, it would violate the ACA’s 90- day waiting period limit rules.)
Coordination with the ACA’s Employer Shared Responsibility Rules
Compliance with the one-month orientation period rules does not constitute compliance with the ACA’s employer shared responsibility rules (Code Section 4980H). Under the employer shared responsibility rules, an applicable large employer (ALE) may be subject to penalties if it fails to offer affordable, minimum value coverage to certain newly-hired full-time employees by the first day of the fourth full calendar month of employment.
An ALE that has a one-month orientation period may comply with the waiting period limit and avoid Section 4980H penalties by offering coverage no later than the first day of the fourth full calendar month of employment. However, an ALE plan may not be able to impose the full one-month orientation period and the full 90-day waiting period without potentially being subject to a Section 4980H penalty.
For example, if an employee is hired as a full-time employee on Jan. 6, a plan may offer coverage May 1 and comply with both rules. However, if the employer is an ALE and starts coverage May 6 (which is one month plus 90 days after the date of hire) the employer may be subject to a Section 4980H penalty.
Cumulative Hours-of-service Requirement
If a group health plan or group health insurance issuer conditions eligibility on any employee’s (part-time or full-time) having completed a number of cumulative hours of service, the eligibility condition does not violate the ACA’s 90-day waiting period limit 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. Also, this provision is designed to be a one-time eligibility requirement only. A plan or issuer is not permitted to reapply the hours-of-service requirement to the same individual each year.
Application to Variable-hour Employees
A special rule applies if a group health plan conditions eligibility on an employee regularly working a specified number of hours per pay period (or working full-time), 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).
In this type of situation, the plan may take a reasonable period of time—up to 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. This may include a measurement period of up to 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. This is consistent with the timeframe permitted for these determinations under the employer shared responsibility rules.
The time period for determining whether a variable-hour employee meets the plan’s hours of service eligibility condition will comply with the ACA’s 90-day waiting period limit if coverage is made effective no later than 13 months from the employee’s start date, except where a waiting period that exceeds 90 days is imposed in addition to the measurement period. If an employee’s start date is not the first of the month, the time period can also include the time remaining until the first day of the next calendar month.
Employees that are Rehired or Change Job Classifications
A former employee who is rehired may be treated as newly eligible for coverage upon rehire. A plan or issuer may require that individual to meet the plan’s eligibility criteria and to satisfy the plan’s waiting period again, if reasonable under the circumstances. The requirement would not be reasonable if the termination and rehire is a subterfuge to avoid compliance with the 90-day waiting period limit. 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.
Relation to Employer Shared Responsibility Penalty
Under ACA’s employer shared responsibility rules, ALEs that do not offer affordable, minimum value health coverage to their full-time employees may be subject to a penalty. Under these rules, there are times when an employer will not be subject to a penalty with respect to an employee, even if the ALE does not offer coverage to that employee during that time. However, the fact that an ALE will not owe a penalty under the employer shared responsibility rules for failing to offer coverage during certain periods of time does not, by itself, constitute compliance with the 90-day waiting period limit during that same period.
The employer shared responsibility rules provide that an ALE will not be subject to a penalty with respect to an employee for not offering coverage to the employee during a period of three full calendar months, beginning with the first day of the first full calendar month of employment (if, for the calendar month, the employee is otherwise eligible for coverage under the ALE’s group health plan). For this rule to apply, the employee must be offered coverage no later than the first day of the fourth full calendar month of employment (if the employee is still employed on that day) and the coverage must provide minimum value.
However, if an ALE denies coverage to a full-time employee based on a substantive eligibility condition, such as being in an eligible job classification, the ALE may be subject to a penalty under the ACA. Also, although a cumulative hours-of-service requirement up to 1,200 hours may be permissible under the ACA’s 90-day waiting period limit, denying coverage to full-time employees while they accumulate the necessary number of hours of service may trigger an employer shared responsibility penalty for ALEs.
Examples
The following examples help explain the rules related to the ACA’s 90-day waiting period limit.
Example 1 – General Rules
Facts: A group health plan provides that full-time employees are eligible for coverage under the plan. Employee A begins employment as a full-time employee on Jan. 19.
Conclusion: Any waiting period for A would begin on Jan. 19 and may not exceed 90 days. Coverage under the plan must become effective no later than April 19 (assuming February lasts 28 days).
Example 2 – Eligibility Condition Related to Job Classification
Facts: A group health plan provides that only employees with job title M are eligible for coverage under the plan. Employee B begins employment in job title L on Jan. 30.
Conclusion: B is not eligible for coverage under the plan, and the period while B is working with job title L (and therefore not in an eligible class of employees) is not part of a waiting period under the ACA’s 90-day waiting period limit.
Example 3 – Change in Job Classification to Become Eligible
Facts: Same facts as Example 2, except that B transfers to a new position with job title M on April 11.
Conclusion: B becomes eligible for coverage on April 11, but for the waiting period. Any waiting period for B begins on April 11 and may not exceed 90 days; therefore, coverage under the plan must become effective no later than July 10.
Example 4 – Eligibility Condition Related to Achieving Job-related Licensure Requirements
Facts: A group health plan provides that only employees who have completed specified training and achieved specified certifications are eligible for coverage under the plan. Employee C is hired on May 3 and meets the plan’s eligibility criteria on Sept. 22.
Conclusion: C becomes eligible for coverage on Sept. 22, but for the waiting period. Any waiting period for C would begin on Sept. 22, and may not exceed 90 days; therefore, coverage under the plan must become effective no later than Dec. 21.
Example 5 – Eligibility Condition Based Solely on the Lapse of Time
Facts: A group health plan provides that employees are eligible for coverage after one year of service.
Conclusion: The plan’s eligibility condition is based solely on the lapse of time and, therefore, is impermissible under the ACA’s 90-day waiting period limit because it exceeds 90 days.
Example 6 – Employee Taking Additional Time to Elect Coverage
Facts: Employer V ‘s group health plan provides for coverage to begin on the first day of the first payroll period on or after the date an employee is hired and completes the applicable enrollment forms. Enrollment forms are distributed on an employee’s start date and may be completed within 90 days. Employee D is hired and starts on Oct. 31, which is the first day of a pay period. D completes the enrollment forms and submits them on the 90th day after D’s start date, which is Jan. 28. Coverage is made effective 7 days later, Feb. 4, which is the first day of the next pay period.
Conclusion: Under the terms of V’s plan, coverage may become effective as early as Oct. 31, depending on when D completes the applicable enrollment forms. Under the terms of the plan, when coverage becomes effective depends solely on the length of time taken by D to complete the enrollment materials. Therefore, under the terms of the plan, D may elect coverage that would begin on a date that does not exceed the 90-day waiting period limit, and the plan complies with the ACA’s 90-day waiting period limit.
Example 7 – Variable-hour Employees
Facts: Under Employer W’s group health plan, only employees who are full-time (defined under the plan as regularly averaging 30 hours of service per week) are eligible for coverage. Employee E begins employment for Employer W on Nov. 26 of Year 1. E’s hours are reasonably expected to vary, with an opportunity to work between 20 and 45 hours per week, depending on shift availability and E’s availability. Therefore, it cannot be determined at E’s start date that E is reasonably expected to work full- time.
Under the terms of the plan, variable-hour employees (such as E) are eligible to enroll in the plan if they are determined to be a full-time employee after a measurement period of 12 months that begins on the employee’s start date. Coverage is made effective no later than the first day of the first calendar month after the applicable enrollment forms are received. E’s 12-month measurement period ends Nov. 25 of Year 2. E is determined to be a full-time employee and is notified of E’s plan eligibility. If E then elects coverage, E’s first day of coverage will be Jan. 1 of Year 3.
Conclusion: The measurement period is permissible because it is not considered to be designed to avoid compliance with the 90-day waiting period limit. The plan may use a reasonable period of time to determine whether a variable-hour employee is full-time, provided that:
- The period of time is no longer than 12 months;
- The period of time begins on a date between the employee’s start date and the first day of the next calendar month (inclusive);
- 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; and
- In addition to the measurement period, no more than 90 days elapse prior to the employee’s eligibility for coverage.
Example 8 – Cumulative Hours-of-service Requirement
Facts: Employee F begins working 25 hours per week for Employer X on Jan. 6 and is considered a part-time employee for purposes of X’s group health plan. X sponsors a group health plan that provides coverage to part-time employees after they have completed a cumulative 1,200 hours of service. F satisfies the plan’s cumulative hours of service condition on Dec. 15.
Conclusion: The cumulative hours of service condition with respect to part-time employees is not considered to be designed to avoid compliance with the 90-day waiting period limit. Accordingly, coverage for F under the plan must begin no later than the 91st day after F completes 1,200 hours. (If the plan’s cumulative hours-of-service requirement was more than 1,200 hours, the requirement would be considered to be designed to avoid compliance with the 90-day waiting period limit.)
Example 9 – Rehired Employee
Facts: Employee G retires at age 55 after 30 years of employment with Employer Y with no expectation of providing further services to Y. Three months later, Y recruits G to return as an employee providing advice and transition assistance for G’s replacement under a one-year employment contract. Y’s plan imposes a 90-day waiting period from an employee’s start date before coverage becomes effective.
Conclusion: Y’s plan may treat G as newly eligible for coverage under the plan upon rehire and, thus, may impose the 90-day waiting period for coverage offered in connection with G’s rehire.
Example 10 – Reasonable and Bona Fide Employment-based Orientation Period
Facts: Employee H begins working full time for Employer Z on Oct. 16. Z sponsors a group health plan under which full time employees are eligible for coverage after they have successfully completed a one-month orientation period. H completes the orientation period on Nov. 15.
Conclusion: The orientation period is not considered a subterfuge for the passage of time and is not considered to be designed to avoid compliance with the 90-day waiting period limit. Thus, plan coverage for H must begin no later than Feb. 14 (the 91st day after H completes the orientation period). If the orientation period was more than one month, it would be considered to be a subterfuge for the passage of time and designed to avoid compliance with the 90-day waiting period limit.
Links and Resources
- On Feb. 24, 2014, the Departments of Labor, Health and Human Services and the Treasury (Departments) published final rules on the 90-day waiting period limit.
- On June 25, 2014, the Departments published separate final rules allowing employers to implement a one- month orientation period as a permissible eligibility condition.
This Compliance Overview is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. ©2020, 2023, 2024 Zywave, Inc. All rights reserved.