March 14, 2014
On June 25, 2014, the Departments of Labor, Health and Human Services and Treasury published a final rule on orientation periods. The final rule adopts, without any substantive changes, the language in the proposed rule discussed in this Capital Checkup. The maximum length of any orientation period is one month.
The Departments of Labor, Treasury and Health and Human Services (collectively, the "Departments"), which are responsible for implementing the Affordable Care Act,1 have issued a final regulation implementing the law's ban on waiting periods exceeding 90 days.2 The final rule is applicable for plan years beginning on or after January 1, 2015, and is very similar to the proposed rule published last year.3
The Departments also issued a proposed rule that coordinates with the final rule to address "orientation periods," which can be used in addition to the 90-day waiting period.4 The Departments have requested comments on the proposed rule by April 25, 2014.
This Capital Checkup summarizes both the final rule and the proposed rule, which provide practical guidance for sponsors of group health plans. It concludes with a list of steps plan sponsors should take to implement the Affordable Care Act's 90-day waiting period rule.
A summary of the key interpretations in the final rule, which follow the guidance in last year's proposed rule, follows:
An example in the final rule addresses multiemployer plans. The example refers to a multiemployer plan that aggregates hours in a calendar quarter. If enough hours are earned in that quarter, the plan provides coverage on the first day of the next calendar quarter. The final rule notes that such a plan has an eligibility provision that is designed to accommodate a unique operating structure and, therefore, is not considered to be designed to avoid compliance with the 90-day waiting period limitation. This example is consistent with the Departments' answer to a frequently asked question (FAQ) published last year.5
The new proposed rule would provide that if a group health plan conditions eligibility on an employee's having completed a "reasonable and bona fide employment-based orientation period," the maximum 90-day waiting period would begin on the first day after the orientation period. Under this proposed rule, an orientation period would be considered reasonable and bona fide if it is no longer than one month. The one-month period would be determined by adding one calendar month and subtracting one calendar day, measured from an employee's start date.
For example, if an employee's start date is October 16, the orientation period could last until November 15. The 90-day waiting period would begin on the first day after the orientation period. The employee would have to be offered coverage beginning no later than February 14 (the 91st day after the employee completes the orientation period).
The proposed rule is apparently intended to address concerns related to the inflexibility of the 90-day measurement period — particularly in light of the fact that coverage often starts at the beginning of the third or fourth month after employment begins. As noted at the beginning of this Capital Checkup, the Departments have requested comments on the proposed rule, which must be received by April 25, 2014.
Because the Affordable Care Act's 90-day waiting period rule took effect for plan years beginning on or after January 1, 2014, many plan sponsors have already implemented it. Those that have not yet done so should:
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As with all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their legal counsel for authoritative advice on the interpretation and application of the Affordable Care Act and related guidance, including the guidance summarized in this Capital Checkup. Segal Consulting can be retained to work with plan sponsors and their attorneys on compliance issues.
1 The Affordable Care Act is the shorthand name for the Patient Protection and Affordable Care Act (PPACA), Public Law No. 111-48, as modified by the subsequently enacted Health Care and Education Reconciliation Act (HCERA), Public Law No. 111-152. The Affordable Care Act added Section 2708 to the Public Health Service Act, which provides that, effective for plan years beginning on or after January 1, 2014, a group health plan or health insurer offering group health insurance coverage shall not apply any waiting period that exceeds 90 days. (Return to the Capital Checkup.)
3 The proposed rule was discussed in Segal's April 23, 2013 Capital Checkup, "Proposed Rule on the Affordable Care Act's 90-Day Waiting Period Provides Flexibility for Multiemployer Plans." (Return to the Capital Checkup.)
5 The answer to this FAQ was discussed in Segal's September 9, 2013 Capital Checkup, "New Guidance Addresses Multiemployer Plan Sponsors' Concerns about the Affordable Care Act's Exchange Notice and 90-Day Rule." (Return to the Capital Checkup.)
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