From the Hotline: Insurance Waiting Periods Based on PPACA Guidelines for 1/1/14
Question: When PPACA’s guidelines on excessive waiting period limits go into effect for plan years on or after Jan 1, 2014, does this mean that small groups can no longer have a waiting period that is “the first of the month following 90 days”?
Answer: The current thinking (absent explicit guidance from the IRS/DOL on the 90-day limitation on waiting periods) is that employers who have first of the month following 90 days of employment rules will need to amend them for plan years beginning on and after January 1, 2014. The language in the PPACA regulations prohibits eligibility waiting periods that exceed 90 days except in very specific circumstances. The FAQs clarify the agencies’ current views on the following aspects of this rule: First, plans will not have to cover all employees after 90 days – i.e., exclusions by job category or classification, including part-time status, will still be permitted. Second (and the part that meets your question), the 90-day waiting period begins when the employee is otherwise eligible for coverage under the terms of the Plan. Thus, an otherwise eligible employee cannot be made to wait more than 90 days before coverage is effective. Third, plans may condition eligibility on an employee’s working a specified number of hours within a given period – such as under an hour bank provision – so long as the required hours do not exceed a certain number (to be specified in upcoming guidance).
The FAQs provide the following helpful example [http://www.dol.gov/ebsa/newsroom/tr12-01.html] underlined for your quick reading:
“How do the Departments intend to address the application of the 90-day waiting period limitation in PHS Act section 2708 to an offer of coverage by an employer?
“A7. Having reviewed the comments in response to IRS Notice 2011-36, the Departments intend to retain, for purposes of PHS Act section 2708, the definition in existing regulations that the 90-day waiting period begins when an employee is otherwise eligible for coverage under the terms of the group health plan. This is the definition of waiting period used for purposes of Title XXVII of the PHS Act, Part 7 of ERISA, and chapter 100 of the Code. Under this approach, if a plan were to provide that full-time employees are eligible for coverage without satisfying any other condition, and an employee were hired as a full-time employee, the waiting period (if the employer were to choose to impose one) for that employee would begin on the date of hire and could not exceed 90 days. Consistent with PHS Act section 2708, eligibility conditions that are based solely on the lapse of a time period would be permissible for no more than 90 days.”
We hope that the regulators issue more explicit instructions in the next set of clarification FAQs. The current thinking among benefits practitioners, however, is that plans should begin amending waiting periods based on timing alone (like the first of the month following 90 days) to reflect that the total waiting period will be no more than 90 days in total.