The 2010 enactment of the Affordable Care Act (“ACA”) added provisions to the Public Health Service Act (“PHS”), the Internal Revenue Code (“the Code”) and ERISA. Chief among these changes was the prohibition against waiting periods of more than 90 days for extending health coverage to eligible employees. In February of 2014, the IRS, EBSA, and Department of Health and Human Services published final regulations on the 90 day wait period limitation, and applied it to all group health plans with plan years beginning on or after January 1, 2014. This meant that employers could no longer impose waiting periods in excess of 90 days on otherwise eligible employees’ participation in employer-sponsored health insurance.
In February, the departments also published proposed regulations concerning reasonable, bona fide, employment-based orientation periods and how these would be handled in relation to the waiting period. On June 25, 2014, the departments released the final regulations concerning such orientation periods.
The final regulations explain that permissible orientation periods will not count toward the 90 day limitation. The final rule explains that this is due to the fact that most orientation programs are necessary, and are not put in place solely to subvert the 90 day waiting period limitation. However, not all orientation periods will prevent the 90 day clock from running, as the final rules limit both the type of orientation periods which will be deemed “permissible” and the time such orientation periods can last.
The final regulations limit permissible orientation periods to those which are reasonable, bona fide and employment-based. The final regulations state that the departments do not wish to question the reasonableness of short, bona fide orientation periods. Due to this, the final regulations provide a concrete maximum amount of time of one month for such orientation periods. This was done to prevent employers from abusing the 90 day limitation by having extended orientation periods. The final regulations explain that “one month,” for the purpose of the rule, is determined by adding one calendar month to employee’s start date, and subtracting one calendar day; under the final regulations, the 90 day wait period limitation begins running no later than this date. For example, if an employee begins working with an organization on May 3, any orientation period must end by June 2, and the 90 day wait limit begins to accrue on that date.
It is important to note that, while this rule applies to large employers, it does not relieve them from the responsibilities of the shared responsibility provisions. Therefore, it is possible for a large employer to be in compliance with this rule but still be subject to the shared responsibility penalty.
Employers interested in learning more about the final regulations can find them here. In response to the final regulations, employer should review their group health plans and ensure that their orientation period, if one exists, is both bona fide and no longer than one month. Additionally, employers need to review their policies to insure that their plan is not in violation of the 90 day maximum limitation, in light of the final rule on orientation periods.