Beginning in 2014, employers offering group health plans may not wait longer than 90 days to begin covering all employees eligible for benefits, if they wish to avoid penalties. New Department of Labor (DOL) temporary guidance provides, in essence, that the countdown to 90 days begins as soon as the employee is otherwise eligible for coverage.

Background on the 90-day waiting period

Under Public Health Service Act section 2708, group health insurance plans beginning on or after January 1, 2014 may not impose waiting periods longer than 90 days. This provision engendered some confusion about when the 90-day period must begin and at what point employers would be liable for a penalty under “shared responsibility” provisions of the Patient Protection and Affordable Care Act (PPACA). In August 2012, the Department of Labor, in conjunction with the Health and Human Services and Treasury departments, provided temporary guidance on the subject in IRS 2012-59 and DOL Technical Release 2012-02.¹ This guidance should also be considered in the context of rules for determining when an employee qualifies as a full-time employee, discussed here

The DOL provided guidance on three major points:

• Waiting periods based solely on elapsed time cannot exceed 90 days. That is, if an employer puts no other conditions on benefit eligibility, benefits must be provided no later than 90 days after an employee starts work.
  • Illustration: Matt begins working at Company A on June 1, 2014. His employer offers him group health coverage, with no other eligibility requirements. Matt’s coverage must begin no later than August 30.
    
    
• In certain circumstances, health coverage can begin after more than 90 days without penalty to the employer. For example, an employer can choose to offer group health insurance only after employees enter certain job classifications, acquire certain licenses, or work a minimum number of hours, up to a maximum of 1,200. In these cases, the 90-day waiting period can begin once these requirements are met. (See our article) for guidance on determining whether certain employees with variable hours are counted as full-time employees for the purposes of PPACA.)
  
  
  • Illustration: Tess begins working part-time for Company B on June 1, 2014. She must acquire a license necessary for performing her duties, at which point she becomes eligible for employer-sponsored health benefits. She submits proof of licensure to the company on July 1. Tess’s health coverage must begin no later than September 29.
    
    
• If an employee is eligible for an insurance-premium tax credit or a premium-sharing reduction during the waiting period, the employer is not subject to a shared-responsibility penalty during that period. (These benefits and requirements begin in 2014).
  
  
  • Illustration: From June 1 to September 29, 2014, Tess receives a tax credit to help her purchase an individual health insurance plan. Company B is not required to pay a penalty during this period because she is a part-time employee.

What you need to know now

These guidelines will be in effect at least through the end of 2014.

• Impact on employers — Employers will need to look at their medical plans to determine whether they are in compliance with the 90-day requirement.
  
  
• Impact on employees — Employees will have access to their medical coverage within a maximum of 90 days of becoming eligible.
  
  
• Impact on brokers — As always, brokers need to educate themselves on these requirements to continue to serve as trusted advisors on key employer questions.