The ACA prohibits waiting periods in excess of 90 days for group health plan coverage for plan years beginning on or after January 1, 2014. On March 8, 2013, the Departments issued proposed regulations effective through the end of 2014 implementing the 90-day waiting period limitation (as described in “ACA Guidance on 90-Day Waiting Periods and Certificates of Creditable Coverage”. The proposed regulations addressed a number of topics related to the limitation, including the ability to impose substantive eligibility requirements not based solely on the lapse of time if not designed to avoid compliance with the 90-day waiting period limitation. The September 4, 2013, FAQ confirms that the March 8, 2013, proposed rules can be relied upon through 2014 and states that any subsequent guidance will not be effective prior to January 1, 2015. In addition, the FAQ sets forth an example of a substantive eligibility requirement that would be permissible under the proposed rules. The example given is that a multiemployer plan operating pursuant to an arms-length collective bargaining agreement that has an eligibility provision allowing employees to become eligible for coverage by working hours of covered employment across multiple contributing employers would be considered by the Departments to be designed to accommodate a unique operating structure and not to avoid compliance with the 90-day waiting period limitation.
Impact of 90-Day Waiting Period Rule on “Pay-or-Play” Penalties
Compliance with the 90-day waiting period rule does not affect compliance with other ACA requirements. The proposed regulations warn that substantive eligibility conditions that are permitted under the 90-day waiting period rule may nonetheless result in a failure by a large employer to offer coverage to a full-time employee and could result in an assessable payment under the employer shared responsibility rules of Section 4980H of the Code. For example, although a 1,200 cumulative hour rule plus a 90-day waiting period is permitted under these proposed rules, an employer could be assessed a penalty if a new full-time employee is not offered coverage within the first three months of employment and obtains a subsidy through the Exchange. Thus, for large employers, it is very important to analyze any eligibility and waiting period rules in light of the “pay-or-play” employer shared responsibility rules under Section 4980H of the Code.