A new federal maximum 90-Day waiting period limit applies to all group health plans, fully insured and self-funded, grandfathered and non-grandfathered, for the plan year beginning on or after Jan. 1, 2014. It is important to note that 3 months is not the same as 90 days.
Both new business and renewals will have to be sure that coverage of recently-hired employees becomes effective on or before the 91st day after the start of the waiting period. The waiting period is the period that must pass before the coverage for an employee or dependent who is “otherwise eligible” to enroll under the terms of the plan can become effective.
“Otherwise eligible” means that that the employee has met the plan’s substantive eligibility conditions (e.g. eligibility conditions that are not based solely on the basis of time. For example, the employee becomes a member of an eligible class, obtains a job-related license requirement, meets certain sales goals, or earns a cumulative number of hours of service, etc.)
States may mandate shorter waiting periods. For example, California will institute its own maximum waiting period of 60 days beginning Jan. 1, 2014.
The most common waiting period administration:
- First of month – coverage is effective on the first of the month following the event, such as date of hire, or a defined number of days or months.
Non-compliant waiting periods for new business will not be accepted, and non-compliant waiting periods for renewing clients must be modified.
Compliant waiting periods for new business and renewals include the following:
- No waiting period
- Date of Event: 1 to 90 calendar days; 1 or 2 months (unknown at this time if the carriers will be able to do this)
- First of Month: Following the event, such as date of hire, 1 or 2 months or 1 to 60 calendar days.
Existing business with a renewal or plan change with an effective date on or after Jan. 1, 2014 must adhere to the following:
- For policies with a compliant waiting period (one of the compliant choices shown above), no change is necessary.
- Policies with a compliant waiting period are not permitted to change to a non-compliant waiting period.
- Policies with a non-compliant waiting period must be revised no later than the plan’s first renewal date on or after Jan. 1, 2014.
The following waiting periods are considered non-compliant: (1) waiting period greater than 90 days; (2) waiting period greater than 60 days if first of month administration; (3) waiting period greater than 2 months.
Small business standard plans will be moved automatically to a compliant waiting period. For larger insured groups and self-funded clients, a discussion will be held upon renewal . Employers with existing policies that are non-compliant will be advised that unless a conforming change is made to a compliant waiting period, the waiting period will default to a compliant waiting period at the renewal date as follows:
- Any waiting period greater than 60 days with first of month administration will be revised to: Waiting Period = 60 days
- Any waiting period greater than 2 months will be revised to: Waiting Period = 2 months
The 90-day waiting period limitation generally does not require the plan sponsor to offer coverage to any particular employee or class of employees (including, for example, part-time employees). Instead, these proposed regulations would prohibit requiring otherwise eligible participants and beneficiaries to wait more than 90 calendar days before coverage is effective.
A group can have different waiting periods as long it does not exceed the 90-day limit. However, when creating such classifications (such as salaried vs. hourly workers), we highly recommend that the group consult with its own legal counsel to ensure there are no discrimination concerns.
Ultimately, the liability rests with the employer group.