A special twist added by California law implementing the Affordable Care Act (ACA) has caught many employers off guard. The California law imposes a shortened waiting period for healthcare benefits. California added a provision that requires certain employers to offer health insurance benefits to employees within 60-days of employment. Under federal law, employers only need to provide benefits within 90-days. This seemingly small change will affect numerous employers because most employers impose a blanket 90-day eligibility/probationary waiting periods before new employees are entitled to benefits such as health insurance, vacation, and sick pay.
California’s 60-Day Waiting Period
In 2012, California updated its Health and Safety Code and Insurance Code to conform with certain provisions of the federal ACA. The law, AB 1083, conforms California law governing group health insurance products to ACA insurance market reforms. The provisions of AB 1083 generally mirror those of the ACA. A significant difference, however, is that AB 1083 imposes a shorter, 60-day maximum waiting period on group health insurance policies and HMO contract years. Under California law, the maximum waiting period that a health plan may wait to offer health insurance benefits to employees is 60 days after the date of hire. A waiting period is any period that must pass before coverage becomes effective for an employee or dependent who otherwise meets an employer’s eligibility requirements. The waiting period limit does not apply to self-insured plans or plans issued, renewed or delivered in other states. Instead, these plans are subject to the federal 90-day maximum waiting period. However, the waiting period does apply to other plans, regardless of the plan size.
Compliance with the 60-Day Waiting Period
Employers must read the 60-day deadline literally. Therefore, coverage must be available to the employee on their 60 day of employment – not the first month following the employee’s 60 day of employment. Further, the 60 days are calendar days, and include weekends and holidays. This can cause problems for employers because most insurers do not allow coverage to begin in the middle of the month. Therefore, many employers are forced to offer health insurance no later than 30 days after the employee’s first month. In order to comply with the 60-day limit, many employers must make employees eligible for health insurance: (1) the first month following the date of hire; (2) the first month following a 30-day waiting period; or, (3) 60 days following the date of hire (assuming the carrier can start coverage in the middle of a month).
Update Policies & Handbooks
The 60-day waiting period only applies to insurers and HMO’s, not employers. So why should employers be concerned with the eligibility change? The new changes affect employer policies regarding eligibility time periods. Even though employers cannot be penalized under the California law, employees can still bring lawsuits against employers asserting their rights to health insurance. In addition, federal law imposes a penalty of $100 per day for each day the employee is affected by lack of insurance. Therefore, ensure you contact your insurance carrier to discuss compliance with the 60-day deadline. Once you determine when you need to offer insurance (i.e., 30 days after hire), notify HR of the changes, and update your policies and employee handbook.
This new provision does not go into effect until your renewal in 2014
