Document Archive > The 90 Day Waiting Period & Other Matters

HCR Proposed Regulations: The 90 Day Waiting Period and Other Matters

In late March, the Agencies (Internal Revenue Service, Department of Labor, and Health and Human Services) released additional proposed regulations regarding the 90 day waiting period limitation. The proposed regulations follow earlier guidance while also providing some clarity to the rules, as a result of comments it received regarding the earlier guidance. The Agencies have asked for comment on this new release, as well.

Discussion

  1. Calculating the 90 Days. The proposed rules address a number of approaches for calculating the 90 days for employees who are generally expected to work full time (i.e. 30 hours/week):
    • Lapse of Time Rule. Under this approach, the plan must use 90 calendar days including weekends and holidays to determine the maximum waiting period for plan eligibility. Under this scenario, there is no actively at work requirement.
    • Cumulative Service Rule. The plan which uses an accumulation of service as its basis for eligibility must set the hours of service to be no greater than 1,200 hours. Here, obviously, the employee must be actively at work. The plan may impose the 90 day waiting period at that time.
    • Other Eligibility Criteria. The proposed rules permit plan sponsors to set conditions for eligibility that are not time related. For example, an employee may become eligible to participate in the health plan upon reaching certain sales goals or commission levels or other performance-related criteria. Once achieved, the plan sponsor cannot require a waiting period greater than 90 days. Also, the substantive eligibility criteria cannot be designed to avoid waiting period limitations.
    • Measurement Periods. It is also worth noting that Health Care Reform regulations permit an employer to use an initial measurement period for the 2014 implementation date, but the regulations do not require it.
  2. Counting the Days:
    • 90 calendar days is the absolute maximum, regardless of weekends and holidays.
    • If the 90th day falls on a weekend, the employee must be deemed eligible as of the Friday before the weekend or even earlier. It cannot be effective the following Monday! Same rules apply where 90th day falls on a holiday (state, federal, or whatever).
    • There is no violation of the limitation if the employee takes a few days to submit the paperwork as long as coverage is effective on the 91st day or sooner.
  3. Variable Hour Employees. The group health plan can set a specific number of hours (e.g. 30 hours per week; 250 hours per quarter) as a plan condition for eligibility. As we all know, the plan can take a reasonable period of time to determine if a newly-hired employee is reasonably expected to work that number of hours on a regular basis. It is clear that the plan can use a measurement period not to exceed twelve months. What’s new is the start date, for purposes of the measurement period, can be date of hire, or on any date in the first calendar month following date of hire. It is also clear that a shorter period is equally acceptable. However, the plan will violate the IRC § 4980H rules if it then imposes a waiting period following the measurement period.

    The proposed rule also makes it clear the plan has not violated the rules if coverage is made effective no later than 13 months from the employee’s actual start date plus the period between the employee’s start date and the first day of the month following calendar month. In other words, if the plan uses a 12 month measurement period, the employer must complete the enrollment process no later than one month following the end of the measurement period plus the gap between hire date and the start of the measurement period.
  4. Hour Banks. Some collectively bargained plans allow workers to bank excess hours during a period (e.g. three months or whatever), and to draw down on them at a later time to maintain full time status. The Agencies are flexible with the concept since it does not appear to be an abuse of the 90 day rule.
  5. Voluntary Buy-Ins. In response to questions raised during the comment period on earlier proposed rules, the Agencies agree that, if an employer wants to permit employees to join the plan, even though they do not have a sufficient number of hours (e.g. 1,200 hours) by making self-payment (or buy-in) equal to the amount (unclear what the Agencies meant here) which would allow them to have a sufficient number of hours.
  6. Enrollment Data. Health insurance issuers can rely on the enrollment data it receives from the plan sponsor, even if it is inaccurate, for purposes of insurance company compliance with these rules, as long as it is in the absence of the issuer’s knowing the data to be inaccurate.

Other Laws

The changes brought about by Health Care Reform also effect earlier legislation. The proposed 90 days regulations contained information involving these changes which have very little to do with the 90 day regulations, themselves.

  1. Pre-existing Condition Limitations. In preparation for 2014 and the elimination of pre-existing limitations, the proposed rules indicate that insurers must still provide certificates of creditable coverage in 2014. Although the 30 hour/90 day rules are effective on January 1, 2014, the demise of the pre-existing condition exclusion will occur on the first day of the plan year beginning in 2014. Fiscal year plans may contain pre-existing condition requirements for the remainder of its 2013 plan year.
  2. HMO Affiliation Periods. For plan years beginning in 2014, with the removal of pre-existing condition limitations, HMOs may no longer require Affiliation Periods.
  3. Late Entrants and Special Open Enrollments. In general, under HIPAA, individuals who lose other medical coverage may join a spouse’s plan as long as they do so within 30 days of the loss of other coverage, without being subject to a 90 day waiting period. Similarly, if individuals first eligible to obtain coverage decline coverage, they will be eligible at the next open enrollment without being subject to a new 90 day waiting period.

Applicability of These Regulations

The 90 day rules and their regulations apply to plan years beginning on or after January 1, 2014 and apply to both grandfathered and non-grandfathered plans as well as health plan issuers.