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Employment-Based Orientation Periods Cannot Exceed One Month for Purposes of 90-Day Waiting Period Limit

Proposed Rules Clarify What Constitutes a ‘Reasonable and Bona Fide’ Orientation Period

The Affordable Care Act prohibits group health plans from applying any waiting period that exceeds 90 days in plan years beginning on or after January 1, 2014. A waiting period is the period of time 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. For this purpose, being eligible for coverage means having met the plan’s substantive eligibility conditions.

Background Previously issued final rules addressed the relationship between a plan’s eligibility criteria and the 90-day waiting period limitation. Under those rules, a requirement to successfully complete a reasonable and bona fide employment-based orientation period is permissible as a condition for eligibility for coverage under a plan (among other conditions that are not based solely on the lapse of a time period). However, the facts and circumstances under which an employment-based orientation period would not be considered “reasonable and bona fide” were not specified.

Proposed Rules Proposed rules clarify that one month is the maximum allowed length of any reasonable and bona fide employment-based orientation period, and the 90-day waiting period must begin on the first day after such orientation period. During an orientation period, an employer and employee could evaluate whether the employment situation was satisfactory for each party, and standard orientation and training processes would begin.

One month would be determined by adding one calendar month and subtracting one calendar day, measured from an employee’s start date in a position that is otherwise eligible for coverage or, if there is not a corresponding date in the next calendar month, the last day of the next calendar month. (For example, if an employee’s start date is May 3, the last permitted day of the orientation period is June 2; if the employee’s start date is August 31, the last permitted day of the orientation period is September 30.)

Compliance with the proposed rules will constitute compliance with the 90-day waiting period limitation requirement at least through the end of 2014. To the extent final regulations or other guidance are more restrictive than the proposed rules, they will not be effective prior to January 1, 2015, and plans and issuers will be provided with sufficient time to comply.

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