Guidance on the 90-Day Waiting Period under PPACA

September 7, 2012

Authored by: benefitsbclp

On August 31, 2012, the Departments of Labor, Treasury and Health and Human Services jointly issued temporary guidance regarding the 90-day waiting period limitation under Public Health Service Act § 2708 that is part of PPACA.  The guidance can be found at DOL Technical Release 2012-02 and at IRS Notice 2012-59, which are identical.  In general, the limitation is meant to prohibit a group health plan or health insurance issuer from imposing a waiting period for coverage beyond 90 days.  The statute prevents an otherwise eligible employee or dependent from having to wait more than 90 days for coverage to become effective.

The guidance states that a “waiting period is 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 means the employee or dependent has met all of the plan’s substantive eligibility conditions, such as being in an eligible job classification.

Eligibility based solely on the lapse of time is permissible so long as the time period does not exceed 90 days.  Other conditions are permissible unless they have the effect of undermining the 90-day rule.  A plan may be compliant where, under the plan’s terms, an employee may elect coverage that would begin on a date that does not exceed a 90-day waiting period even where employees take additional time to elect coverage.

However, one of the examples in the guidance states that where cumulative hours of service are required for eligibility for part-time employees, up to 1,200 hours may be required before a part-time employee becomes eligible.  If more than 1,200 hours were required, the agencies would be consider that condition to be designed to avoid compliance with the 90-day waiting period limitation and therefore not compliant.  Under the example, a part-time employee can still be subject to an additional 90-day waiting period after meeting the 1,200 hours of service requirement. The guidance does not give any clarity on how hours of service are counted, or whether a plan may use equivalencies like in the retirement plan area.

The guidance also addresses the circumstance where a plan conditions eligibility on working a specified number of hours per week (or working full-time), and it cannot be determined at an employee’s date of hire whether or not an employee will work sufficient hours to be covered.  For this purpose, the guidance conforms to the applicable large employer rules under the “play or pay” penalty Internal Revenue Code § 4980H (and the guidance contemporaneously issued by the Treasury Department at Notice 2012-58).  We will address that guidance more fully in a later post, but generally the § 4980H guidance allows the plan a reasonable period of time up to 12 months, a “measurement period,” to determine it the employee meets the hours eligibility requirement.  The time period for determining whether the employee meets the hours condition will not be considered to violate the 90-day rule if coverage is made effective no later than 13 months from the employee’s start date plus, if the start date is mid-month, the time remaining to the first day of the next month.  The guidance provides that any employer may use this rule even if it is not subject to § 4980H.  The guidance provides a number of helpful examples.

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