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Regulators Interpret the 90-Day Waiting Period Limit

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Federal regulators have come out with another of the many batches of guidance that employers and their advisors will need to implement the “health coverage access” provisions of the Patient Protection and Affordable Care Act of 2010 (PPACA).

The PPACA pay-or-play provisions, which are officially known as the “employer shared responsibility provisions,” will require large and midsize employers to choose between providing health coverage for full-time employees or paying a penalty.

Employers will not have to offer coverage to any employees, but a coverage access section that’s separate from the play-or-play provision will require employers that do offer major medical coverage to limit any waiting periods that occur before coverage begins to 90 or fewer days.

Benefits specialists have been asking regulators many questions about how federal agencies will interpret the 90-day waiting period limit, especially when employers are looking at new employees who may end up working more hours than expected.

Three agencies — the Internal Revenue Service (IRS), the Employee Benefits Security Administration (EBSA), and the U.S. Department of Health and Human Services (HHS) — now have addressed some questions about the 90-day waiting period limit in a batch of guidance posted on the IRS website as IRS Notice 2012-59.

In the guidance, regulators have defined the term “waiting period” to be “the period of time 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 eligible for coverage” will mean “having met the plan’s substantive eligibility conditions (such as being in an eligible job classification or achieving job-related licensure requirements specified in the plan’s terms),” officials say.

Federal agencies will not consider an employer health plan or insurance issuer to have violated the waiting period limit if a worker is slow to decide whether to take up coverage, officials say.

If an employer provides benefits only for workers who work a specified number of hours, and the employer cannot reasonably expect a new worker to work enough hours to qualify for coverage, then “the plan may take a reasonable period of time to determine whether the employee meets the plan’s eligibility condition,” officials say.

The employer may have almost 14 months from a variable-hour worker’s start date to make coverage effective, officials say.

To get that amount of flexibility, the employer must have the coverage for an variable-hour worker who is eligible for health benefits take effect within a period equal to 13 months plus the “time remaining until the first day of the next calendar month” if the worker’s start date is not the first day of a calendar month.

Low-income and moderate-income workers who were not eligible for affordable employer-sponsored benefits could get tax subsidies through the new health insurance exchanges, or Web-based health insurance supermarkets, that PPACA is supposed to create.

Officials give 4 examples of how the variable-hour worker guidance might apply to specific workers.

Comments on the guidance are due Sept. 30.

Employers, plans and issuers should be able to rely on the compliance guidance in the notice at least through the end of 2014, officials say.

IRS officials said they were working on the 90-day waiting period limit guidance in February, in IRS Notice 2012-17.

In the same guidance, officials said they also were working on a number of other PPACA implementation rules aimed at employers.


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