New Rules for Waiting Periods in 2014
An employer with a policy that requires a waiting period before an employee is eligible for health insurance coverage should review it to ensure they are compliant heading into 2014.
Proposed rules implementing the Patient Protection and Affordable Care Act would prohibit employers from imposing waiting periods of more than 90 days before health insurance coverage for an eligible employee becomes effective.
The proposed rules do not restrict employers from requiring employees to meet certain requirements in order to become eligible for health insurance, such as completing a number of cumulative hours of service, but they do make it clear that a waiting period based solely on a time period cannot exceed 90 days. For this purpose a waiting period is defined as the period that must pass before coverage for an employee or dependent who is otherwise eligible can become effective.
Can I Use a 90-day Waiting Period in 2014?
From a practical standpoint, an employer’s existing 90-day waiting period will not work under the proposed rules if the health insurer starts coverage effective on the 1st day of the month following the date the employee becomes eligible.
For example, where an employer requires a 90-day waiting period before the employee becomes eligible for health insurance coverage and the employee starts work on January 15th, the employee would become eligible for coverage on or around April 15th (90 days later). If the health insurer starts coverage on the 1st of the next month, the employee’s coverage would not become effective until May 1st (106 days later). The employer would be out of compliance because the employee’s coverage did not become effective within 90 days of when they became eligible for coverage.
Penalties for Non-Compliance
The proposed rules become effective January 1, 2014, and immediately apply to any employee whose waiting period has already started, even if January 1 would be their 91st day of employment. For failure to comply with the 90-day waiting period limitation, Internal Revenue Code Section 4980D imposes a penalty of $100 for each day of the failure per individual.
How to Comply
Though other factors may apply and policy updates should be reviewed by an attorney, to comply with the new rules where coverage begins the 1st day of the next month following eligibility, an employer’s time-based waiting period should be 58 days or less (taking into account the short month of February).
Author: Elliott Dale