Guidance on 90 Day Waiting Period and Orientation

Posted by BAS - 26 June, 2014

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The government released final guidance on the maximum permissible length of an orientation period consistent with the 90 day waiting period under health care reform.  The final rules apply for plan years beginning on or after January 1, 2015. 

Health care reform provides that a group health plan or health insurance issuer cannot apply a waiting period of more than 90 days.  A waiting period is defined as the period that must pass before coverage for an employee or dependent who is otherwise eligible to enroll under the terms of the plan can become effective.  Being otherwise eligible to enroll in a plan means having met the plan’s substantive eligibility conditions (such as being in a class of employees eligible for coverage, achieving job-related licensure requirements specified in the plan, or satisfying a reasonable and bona fide employment-based orientation period).

An employer is permitted to impose a reasonable and bona fide employment-based orientation period as a condition of eligibility.  If the orientation period must be successfully completed before the employee becomes eligible for health coverage, the orientation period may last no longer than one month.  

The regulations provide that the calculation of “one month” is determined by starting with an employee’s start date in a position eligible for coverage, adding one calendar month, and subtracting one calendar day.  For example, if an employee starts employment in an eligible position on May 3, the last permitted day of an orientation period is June 2.  For an October 1 start date, the last permitted day of orientation is October 31. 

If there is no corresponding date in the next calendar month, the last day of the orientation period is the last day of the next calendar month.  So, if an employee’s start date is January 30, the last permitted day of the orientation period is February 28 (February 29 on a leap year).  If the employee’s start date is August 31, the last permitted day of the orientation period is September 30. 

The guidance also addresses how the waiting period rules interact with the employer mandate under health care reform.  Under the employer mandate, an applicable large employer could be subject to a tax penalty if it fails to offer minimum value coverage to newly hired full-time employees by the first day of the fourth full calendar month of employment.  So, if an employee is hired on January 6 and coverage begins May 6, the employer may satisfy the waiting period/orientation rules but not the employer mandate rules.  Both rules would be satisfied if coverage for the January 6 new hire became effective May 1. 

This new guidance with examples is helpful for employers to determine if their practices satisfy health care reform.


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