Health care reform
On June 20, 2014, HHS released the final rule on orientation periods and how they relate to waiting periods for plan eligibility.
Orientation period can last one month
Many employers’ health plans require new employees to work a certain period of time before their coverage becomes effective. For plan years beginning on or after January 1, 2014, PPACA prohibits group health plans from imposing a waiting period of more than 90 days. The waiting period starts the first day the employee, or dependent, meets the plan's eligibility requirements. The law applies only to full-time employees and prohibits plans from designing their eligibility conditions to avoid complying with the 90-day limitation.
According to the final rule, employers can wait until the end of a "reasonable and bona fide employment-based orientation period"1 before beginning the 90-day-maximum waiting period, as long as the orientation period is no longer than one month. The rule defines an orientation period as one during which "an employer and employee could evaluate whether the employment situation was satisfactory for each party, and standard orientation and training processes would begin."2
The final rule defines a month this way: The orientation period begins at the date of hire, and ends on the same day of the following month, minus one (e.g., February 5 through March 4). The rule applies to plan years beginning on or after January 1, 2015.
Coverage must still start by first day of fourth month
However, even with this final rule, businesses must still provide insurance no later than the first day of the fourth month of employment, which may come earlier than the orientation month plus 90 days.
Example: ABC Company hires Jenny on January 6. Her orientation period ends February 5. A 90-day waiting period would end May 6. But Jenny’s health insurance coverage must begin May 1 because that is the first day of her fourth month of employment.
Employers should align their orientation and waiting periods so that coverage does not begin later than the first day of the fourth full calendar month of employment. If an employer adds an orientation period to a waiting period, the company should make sure the arrangement is clearly explained to all new hires.
Employees need to understand that their health coverage at a new employer may not take effect until they have been employed for nearly four months.