New Guidance on Employment-Based Orientation Periods

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As employers who sponsor group health plans well know, health care reform prevents plans from imposing waiting periods in excess of 90 days for employees who are otherwise eligible to enroll in a plan.  The latest guidance relating to the waiting-period rules addresses the boundaries of “reasonable and bona fide employment-based orientation periods,” which, as introduced in proposed rules earlier this year, may be used as a condition of plan eligibility.

Under the 90-day waiting-period rules, being otherwise eligible to enroll in the plan means having met the plan’s substantive eligibility criteria—which could include being in an eligible job classification, achieving job-related licensure requirements, or satisfying a reasonable and bona fide employment-based orientation period.

Final regulations released in June confirm that if a group health plan conditions eligibility on an employee completing such an orientation period, that eligibility condition is not designed to avoid compliance with the 90-day waiting-period rules if (1) the orientation period does not exceed one month and (2) the maximum 90-day waiting period begins on the first day after the orientation period.  The agencies envision that during the orientation period, the employer and employee can evaluate whether the employment situation is satisfactory for each party and begin standard orientation and training processes.

In terms of measuring, the one-month period is determined by adding one calendar month and subtracting one calendar day from the employee’s start date in a position that is otherwise eligible for coverage.  For example, if an employee’s start date is July 15, the last permitted day of the orientation period is August 14.  The 90-day waiting period then must begin on the first day after the orientation period.  For the employee with the July 15 start date, the 90-day waiting period must begin on August 15.  Special rules apply if there is not a corresponding date in the next calendar month.

It is vital to remember that compliance with the orientation-period rules described above does not necessarily ensure compliance with the employer pay-or-play mandate.  Under the mandate, coverage must be offered to certain employees by the first day of the fourth full calendar month of employment.  For the example employee hired on July 15, this means coverage must start by November 1 to avoid penalties under the pay-or-play mandate.  This is sooner than the date that results from adding a one-month orientation period plus a 90-day waiting period from the employee’s start date.

 

Topics:  Employer Group Health Plans, Employer Liability Issues, Hiring & Firing, Pay or Play, Waiting Periods

Published In: Health Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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