June 26, 2014
Authored by: Serena Yee and Lisa Van Fleet
Late Friday afternoon, the Departments of Treasury, Labor and Health and Human Services (the “Departments”) issued final regulations (the “Final Rule”) clarifying the interaction between a reasonable and bona fide employment-based orientation period and the 90-day waiting period limitation under the Affordable Care Act (“ACA”).
For plan years beginning on or after January 1, 2014, ACA prohibits a group health plan from applying a waiting period of more than 90 days. Contemporaneous with the February 24, 2014 issuance of final regulations on the 90-day limitation, the Departments issued proposed regulations addressing employee orientation periods. Such proposed regulations provide that conditioning plan eligibility on an employee’s completion of a reasonable and bona fide employment-based orientation period would be permissible if the orientation period does not exceed one month and the maximum 90-day waiting period begins on the first day after the orientation period.
The Final Rule adopts the proposed orientation period rule and offers some additional clarification. Although a plan may impose substantive eligibility criteria (i.e., being in an eligible job classification, achieving job-related licensure requirements specified in the plan, or satisfying a reasonable and bona fide employment-based orientation period) , it may not impose conditions that are mere subterfuges for the passage of time.
Under the Final Rule, the conditioning of plan eligibility on an employee’s completion of a reasonable and bona fide employment