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Patient Protection and Affordable Care Act (ACA) Guidance on 90-Day Waiting Periods and Certificates of Creditable Coverage

Recently issued Affordable Care Act guidance clarifies the prohibition on waiting periods in excess of 90 days and eliminates the requirement to issue HIPAA group health plan certificates of creditable coverage after December 31, 2014.

On March 18, 2013, the U.S. Departments of Health and Human Services, Labor and Treasury (the Departments) issued proposed regulations that implement the 90-day waiting period limitation for health plan coverage under the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (ACA).  These proposed regulations include technical amendments to existing rules regarding preexisting condition limitations and portability required by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and its implementing regulations.


The ACA added Section 2708 to the Public Health Service Act, prohibiting eligibility waiting periods in excess of 90 days for group health plan coverage starting with the first plan year beginning on or after January 1, 2014.  The 90-day rule applies to all grandfathered and non-grandfathered group health plans and group health insurance issuers, including multiemployer health plans and single-employer group health plans maintained pursuant to collective bargaining arrangements.  In August 2012, the U.S. Department of the Treasury, in connection with the U.S. Departments of Labor and Health and Human Services, released Internal Revenue Service Notice 2012-59, which provided temporary guidance on the definition of a “waiting period” and the application of waiting periods to certain types of variable hour employees.  This new guidance is generally consistent with Notice 2012-59.  Compliance with this guidance or Notice 2012-59 through the end of 2014 is permissible.

Prohibition on Waiting Periods that Exceed 90 Days

A “waiting period” is defined as the period that must pass before coverage for an employee or dependent who is otherwise eligible to enroll under the terms of a group health plan can become effective.  Under the proposed regulations, an individual is considered “otherwise eligible to enroll” if he or she has met the group health plan’s substantive eligibility conditions (e.g., being in an eligible job classification or obtaining job-related licensure requirements specified by the plan).  The proposed regulations permit other conditions for eligibility under the terms of a plan that are not based solely on the lapse of a time period (e.g., meeting certain sales goals, earning a certain level of commission or earning a cumulative number of hours of service), provided that that they are not designed to avoid compliance with the 90-day waiting period limitation.

As long as an employee is able to elect coverage that becomes effective on or before the 91st day after the start of the waiting period, the requirement is satisfied with respect to an employee who chooses to begin coverage beyond the end of the 90-day waiting period.  Furthermore, the proposed regulations clarify that if an employee or dependent enrolls as a late enrollee or a HIPAA special enrollee, any period before such late or special enrollment is not a waiting period.

Insured Plans

The proposed regulations clarify that, for fully insured group health plans, the insurance issuer can rely on the eligibility information reported to it by the plan sponsor with respect to any applicable waiting period.  The insurance issuer will not be considered in violation of the 90-day waiting period requirements if (i) the issuer requires the plan sponsor to make a representation regarding the terms of any eligibility conditions or waiting periods imposed before an individual is eligible to become covered under the plan, (ii) the plan sponsor is required to update the representation with any changes, and (iii) the issuer has no specific knowledge of the imposition of a waiting period in excess of 90 days.

Application to Variable Hour Employees

The proposed regulations also confirm previously issued guidance with respect to variable hour employees.  If eligibility for group health plan coverage is conditioned on an employee working a certain number of hours (e.g., 30 hours per week or 250 hours per quarter) or on a full-time basis, and it cannot be determined that a newly hired employee is reasonably expected to regularly work that number of hours or work full-time, an employer can use a reasonable time period to determine whether the employee is eligible for coverage under the plan terms.  This measurement period may begin on any date between the employee’s start date and the first day of the next calendar month, and may not exceed 12 months.  (This is consistent with the timeframe permitted for determining whether a variable hour employee is a full-time employee for purposes of the “pay-or-play” employer shared responsibility rules under Section 4980H of the Internal Revenue Code (Code).)  A waiting period of up to 90 days may be imposed once the employee is determined to be eligible for coverage.  However, the measurement period must not be designed to avoid compliance with the 90-day waiting period limitation.  The proposed regulations explain that, in all cases, coverage must be effective no later than 13 months from the employee’s start date, plus any time remaining until the first day of the next calendar month.  Therefore, a plan that uses a 12-month measuring period could not impose a full 90-day waiting period.

Cumulative Service Requirements

Under the proposed regulations, a group health plan may require employees to complete a certain amount of service before becoming eligible for benefits.  This type of service requirement is not considered problematic as long as the cumulative hours-of-service requirement does not exceed 1,200 hours.  This provision is intended to provide plan sponsors with flexibility since it continues to permit the utilization of a one-time probationary or trial period to determine whether a new employee will be able to handle the duties and challenges of the job, while still providing protections against excessive waiting periods for such employees.  The proposed regulations do not permit a plan sponsor or issuer to reapply the hours-of-service requirement to the same individual each year. A plan with a cumulative service requirement could impose up to a 90-day waiting period that begins once the new employee completes the probationary or trial period.

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.

Counting 90 Days

Under the proposed regulations, the waiting period may not extend beyond 90 days after an individual has satisfied all other plan eligibility requirements.  All calendar days are counted, including weekends and holidays.  If the 91st day is a weekend or holiday, the plan or insurance issuer may choose to permit coverage to be effective earlier than the 91st day for administrative convenience; however, a plan or insurance issuer may not make the effective date of coverage later than the 91st day.  The proposed regulations clarify that it is not permissible under the 90-day rule to delay coverage until the first day of the month following completion of a 90-day waiting period.  Employers that wish to use a first day of the month or first day of the payroll period as their enrollment date would need to apply a shorter waiting period to ensure that coverage would become effective on or before the 91st day.  The Departments also noted that plans and insurance issuers may not use “three months” as a substitute for 90 days.  If an individual is already in a waiting period for coverage before the first day of the plan year starting on or after January 1, 2014, the waiting period applicable to the individual as of the 2014 plan year cannot exceed 90 days.  The proposed regulations provide several examples to illustrate the 90-day rule.

Application to Collectively Bargained Multiemployer Plans

The Departments acknowledge the unique operating structures and eligibility conditions that may be an integral part of multiemployer plans maintained pursuant to collective bargaining.  The proposed regulations permit different substantive eligibility conditions based on a participating employer’s industry or an employee’s occupation, such as eligibility provisions based on formulas for earnings and residuals, as long as they are not designed to avoid compliance with the 90-day rule.  The preamble to the proposed regulations specifically notes that eligibility provisions based on compensation, self-payments (or buy-ins) to satisfy hours of service requirements, and hour banks (which function as buy-in provisions) are permitted under the proposed regulations.  The Departments have invited comments on whether any additional examples or provisions are needed to address multiemployer plans.

Elimination of Requirement to Provide HIPAA Certificates of Creditable Coverage

Under current law with respect to adult participants, a group health plan may exclude coverage for preexisting conditions for up to 12 months (or up to 18 months for late enrollees).  This period of limitation is required to be reduced by one day for every day of creditable coverage that the individual has as of his or her enrollment date.  Individuals who lose health plan coverage must be provided with a certificate of creditable coverage as proof of other coverage that could offset the permitted limitation period.  Effective for plan years starting on or after January 1, 2014, preexisting condition exclusions are prohibited for all grandfathered and non-grandfathered group health plans and health insurance issuers.  (The prohibition on preexisting condition exclusions is already in effect with respect to individuals under 19 years of age.)  This prohibition on preexisting condition exclusions makes the current rules requiring plans to provide certificates of creditable coverage unnecessary.

The proposed regulations eliminate the requirement to issue a certificate of creditable coverage effective as of December 31, 2014.  HIPAA certificates of creditable coverage still must be provided through the end of 2014 so that individuals who may need to offset a preexisting condition exclusion under a non-calendar-year plan would still have access to a certificate for proof of coverage through the end of 2014.

Next Steps

Employers sponsoring group health plans should prepare for compliance with the waiting period restrictions by reviewing health plan eligibility timeframes to ensure that coverage becomes effective no later than 90 days after a new employee satisfies the plan’s eligibility requirements.  Plan eligibility rules and waiting periods should be closely examined both for the 90-day waiting period rules and for other legal requirements, including the employer shared responsibility requirements and HIPAA nondiscrimination provisions.  Employers should review and amend enrollment materials and plan documents, update summary plan descriptions and revise other employee communications as necessary to reflect any changes.  Group health plans should continue to issue HIPAA certificates of creditable coverage through 2014.

© 2019 McDermott Will & Emery


About this Author

Megan Mardy Attorney McDermott Will Emery

Megan Mardy is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm's Chicago office.  Megan focuses her practice primarily on designing, amending and administering 401(k) plans, profit sharing plans, pension plans, cafeteria plans and welfare benefit plans.  She also has experience counseling clients regarding compliance with HIPAA, the Affordable Care Act, and other federal laws affecting group health plans.  Megan has counseled privately and publicly-held corporations and tax-exempt entities regarding fiduciary issues under ERISA, employee benefits...


Jamie A. Weyeneth advises companies on a wide variety of employee benefits issues with a focus on health and welfare plans. She has extensive experience with the Affordable Care Act, privacy compliance under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and continuing health coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA).

Jamie counsels clients on their health and welfare plan design, administration and compliance issues. She has worked with clients to transition active and retired...