What is the limit on waiting periods?

For plan years beginning on or after January 1, 2015, any waiting period cannot exceed 90 days. All calendar days are counted, including weekends and holidays.

Can an employer have an orientation period before the waiting period begins?

Yes, however, one month is the maximum allowed length for an employment-based orientation period. One month would be determined by adding one calendar month and subtracting one calendar day from an employee’s start date in a position that is eligible for coverage. For example, if an employee’s start date is May 3, the last permitted day of the orientation period is June 2.

How do the waiting period rules apply to rehires?

An employee whose employment has terminated and who then is rehired may be treated as newly eligible upon rehire and, therefore, required to meet the waiting period anew, if reasonable under the circumstances. The same would apply to an employee who moves to a job classification that is ineligible for coverage but then later moves back to an eligible job classification.

Please note that there are rehire rules under the Large Employer Mandate that may require Applicable Large Employers to provide coverage sooner than the end of the 90-day waiting period.

How are carriers administering the waiting period limitation?

Under the waiting period rules, carriers can rely on the eligibility information reported to it by the employer (or other plan sponsor) if: (1) The carrier requires the employer to make a representation regarding the terms of any eligibility conditions or waiting periods imposed by the employer (and requires the employer to update this representation with any changes), and (2) The carrier has no specific knowledge of the imposition of a waiting period that would exceed the permitted 90-day period.

Covered California for Small Business (CCSB) has taken this approach. CCSB leaves it up to the employer to establish eligibility. CCSB simply asks employers to attest that they are adhering to the waiting period rules. However, the way most other carriers administer the waiting period rules is they track the length of any orientation period and waiting period from the date of hire.

Can an employer have different contribution levels or waiting periods for managers and supervisors?

Group health plans cannot discriminate in favor of highly compensated individuals as to eligibility to participate in, and the benefits provided under the plan. Highly compensated individuals are defined as: (1) one of the 5 highest paid officers; (2) a shareholder who owns more than 10% in value of the stock of the employer; or (3) among the highest paid 25% of all employees (except for employees that may excluded – employees who have not completed 3 years of service; employees who have not attained age 25; part-time or seasonal employees; employees covered by a collective bargaining agreement; employees who are non-resident aliens and who receive no earned income from the employer).

The IRS has not determined what eligibility to participate in, and benefits provided under the plan means or includes. Hence, it has not been determined whether differing employer contributions and/or waiting periods will be treated as a “benefit” that must be provided on a nondiscriminatory basis.

However, employers should be cautious that contribution levels and waiting periods could be considered a benefit provided under the plan since employer contributions is typically a benefit employers provide employees, and waiting periods dictate when an employee’s benefits become effective.  It can also be claimed that employees with shorter waiting periods are favored more with regards to eligibility to participate in the plan. These employees also have more of a benefit than employees with longer waiting periods, because their coverage becomes effective sooner, therefore they can take advantage of the plan benefits sooner.