The 90-Day Waiting Period Limitation

The 90-Day Waiting Period Limitation
 
In addition to the hour and day counting  rules under §4980H, employers also have to be aware of the 90-day waiting period limitation of the Affordable Care Act (ACA).  Unlike §4980H, the 90-day waiting period limitation applies to all employers, not just applicable large employers.  Under the rule employers offering group health insurance (which means insured and self-insured as well as grandfathered and non-grandfathered plans) cannot have a waiting period that exceeds 90 days.  A waiting period is defined as the period that passes before coverage is available to an otherwise eligible employee or dependent under the plan terms. 
 
All days, including weekends and holidays must be considered when counting the 90 days.  Additionally, there are no exceptions to the 90-day waiting period limitation if the 90th day falls on a weekend or holiday.  Therefore, an employer’s plan terms must allow for flexibility that allows participants the opportunity to enroll in coverage before the 90th day in case it is not feasible to enroll on the 90th day.
 
An employer can condition an employee’s eligibility in the plan on factors not associated with the passage of time, such as the completion of a license or certificate as long as they are not designed to avoid the 90-day waiting period limitation.  If an employer’s plan has an eligibility condition similar to the acquisition of a license or certificate, the plan will comply with the 90-day waiting period limitation so long as the employee is eligible to participate in the plan by the 90th day after meeting the eligibility condition.
 
Unlike §4980H, the 90-day waiting period limitation gives employers flexibility with the plan terms.   As a result, it is possible for an applicable large employer to comply with the 90-day waiting period limitation, but violate §4980H.  Alternatively, an employer could violate, at least temporarily, the 90-day waiting period, but comply with §4980H.  In the worst case scenario an employer will be violating both provisions of the ACA.  The following example illustrates some of the concepts discussed above.
 
Example 1 – Employer ABC sponsors a group health plan for its employees.    The plan terms offer health coverage to all employees who are licensed CPAs.  Holly starts with ABC on January 1, 2014.  However, Holly does not become a licensed CPA until June 1, 2014.  If ABC offers Holly the opportunity to be covered by August 30, 2014 the employer will satisfy the 90-day waiting period limitation. Please note if Holly is reasonably expected to accumulate more than 30 hours of service a week on her start date and ABC is an applicable large employer, this would be an example of the employer complying with the 90-day waiting period limitation, but violating §4980H with respect to Holly.
 
The 90-day waiting period limitation allows employers to use a period of up to 12 months to measure an employee’s hours of service if the plan terms condition eligibility on an employee working a specific number of hours during a time period.  Similar to the rules for new variable hour employees under §4980H, an employer can only use this rule if the employer cannot determine at the employee’s start date whether the employee will meet the requisite hours threshold.  Contrary to §4980H, the 90-day waiting period limitation does not require an employer to offer coverage to employees who average at least 30 hours of service per week.  Therefore, an employer could comply with the 90-day waiting period limitation by having the plan terms condition eligibility on an employee averaging 35 or 45 hours a week.  This option will realistically only be available to employers who are not applicable large employers.
 
The 12 month measurement period must begin by the first day of the month following the employee’s start date.  To comply with the 90-day waiting period limitation there are two rules that depend on the employee’s start date.  If the employee’s start date is the first day of a month, the rule will give an employer 13 months from the employee’s start date to offer an employee determined to be a full-time employee the opportunity to participate in the employer’s health plan.  If the employee’s start date is any other day besides the first day of the month, the rule will give an employer 13 months plus a partial month from the employee’s start date to offer an employee determined to be a full-time employee the opportunity to participate in the employer’s health plan.
 
If the plan terms require an employee to accumulate a certain number of hours before becoming eligible to participate, the plan will comply with the 90-day waiting period limitation so long as the plan terms do not require an employee to accumulate more than 1,200 hours of service.  If an employer’s plan conditions eligibility on an employee’s cumulative hours, it can only do so one time.  So long as the employer makes coverage available to an employee who has obtained the requisite number of hours, by the 90th day after the employee obtains the requisite number of hours the employer will be in compliance with the 90-day waiting period limitation.
 
Example 2 – Employer ABC sponsors a group health plan for its employees.  The plan terms offer health coverage to all employees once an employee accumulates 1,000 hours of service.  Jake starts working at ABC on January 15, 2014 and accumulates 1,000 hours of service on July 8, 2014.  Jake’s 90-day waiting limitation begins on July 8, 2014.  Therefore, if ABC offers Jake the opportunity to participate in the group health plan by October 6, 2014, ABC will have complied with the 90-day waiting period limitation with respect to Jake.  If ABC is an applicable large employer and Jake is expected to consistently accumulate at least 30 hours of service a week beginning on his start date, ABC would be violating §4980H with respect to Jake by not offering him the opportunity to enroll in coverage by April 30, 2014.
 
The 90-day waiting period limitation provides more flexibility to employers compared to §4980H.  However, applicable large employers will not be able to use the flexibility provided by the rules associated with the 90-day waiting period limitation.  Applicable large employers must be aware of the dates coverage is required to be made available under both the 90-day waiting period limitation and §4980H and apply the earlier date so the employer complies with both provisions of the ACA.  Please contact Moulder Law to further discuss an action plan for your company.
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