The “Orientation” Period • January, 2015

Extending Your Benefits Waiting Period
There is a little-known rule under the Affordable Care Act that allows employers to extend the 90-day waiting period limitation for benefits eligibility. It can be used by employers of all sizes, but those companies subject to “Pay or Play” need to understand the nuances.

The 90-Day Waiting Period Limit
Prior to 2014, an employer could choose to offer coverage on the 1st of the month following a person’s date of hire, any number of months (such as 12 months), or any number of days (such as 180 days). The only limitations were those imposed by the medical insurance carrier.

However, as of a plan’s renewal date on or after 1/1/2014, the Affordable Care Act required employers of all sizes to comply with new waiting period rules. Group-sponsored medical coverage needed to begin by the 91st day of employment, or by the 91st day following an employee’s movement to a new benefits-eligible classification. This applied to all fully insured as well as self-funded programs.

This drastically reduced the options an employer could choose as their “new hire benefits start date” to one of the following:

  • 1st day of employment*
  • 1st of the month following date of hire
  • 1st of the month following 1 month of employment
  • 1st of the month following 30 days of employment
  • 1st of the month following 60 days of employment
  • 91st day of employment*

* Most carriers do not allow coverage to begin on any date other than the 1st of a month; therefore, coverage on the 1st day of employment or on the 91st day of employment may not be allowed.

Extension for “Orientation Period”
With plan years beginning 1/1/2015 and after, the government clarified when employers may be able to extend the date of benefits eligibility further. For example, you do not need to include prior employment days in your benefits waiting period when:

  • An employee enters a new job class that would newly allow him to be eligible for benefits;
  • A job-related license is obtained, and that license is required and specified in your plan’s eligibility terms;
  • An employee is satisfying a reasonable and bona fide employment-based orientation period.

The government specifically defines a “reasonable” orientation period as being no greater than one calendar month. For example, if a person begins work on January 6th, their orientation period must end before February 6th. For months where there is no corresponding day, you need to use the last day of that month; for example, if a person begins work on May 31st, their orientation period must end on or before June 30th.

Large Employers (50+ FTE) Beware A large employer that is subject to the “Pay or Play” mandate needs to be cautious of their orientation period + waiting period. If these combined periods run too long, a penalty could be imposed for the initial month of coverage not provided.

To avoid a penalty, yet push the coverage start date out as long as possible (through waiting periods and/or orientation periods), large employers would need to use one of these two options:

  1. If you have “1st of the month following 60 days” as your waiting period, you can add a 1 month orientation period, OR
  2. If you have a waiting period set where benefits would begin on the 91st day of employment, you cannot add an orientation period.
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This article is provided for informational purposes only. Please contact your attorney and/or accountant to determine if this information may affect your business. © 2015 GHB Insurance

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