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Employers May Delay New Hires' Health Coverage for Up to 4 Months Under Rule

By John Reichard, CQ HealthBeat Editor

June 24, 2014 -- Employers in some circumstances will have up to four months to delay the start of health benefits for new hires, according to a new rule jointly issued by three federal agencies.

The rule, set to take effect August 25, addresses the effects of "orientation periods" for new employees in determining how long they must wait for health coverage to begin. It applies to coverage beginning in "plan year" 2015. Employers and insurers differ in what they interpret as the start of a plan year.

A provision of the health care law (PL 111-148, PL 111-152) states that insurers or employers offering group coverage can't apply a waiting period that exceeds 90 days. The requirement applies to all group health coverage, including that offered by "grandfathered" plans otherwise exempt from some of the law's requirements.

The rule states the start of the 90-day waiting period can be delayed during orientation periods that give both the employer and the employee a chance to determine whether they want to proceed with employment. However, the orientation period can't last more than a month, according to the rule issued by the Treasury, Labor and Health and Human Services departments.

"Orientation periods are commonplace and the departments do not intend to call into question the reasonableness of short, bona fide orientation periods," the rule states. "The danger of abuse increases, however, as the length of the period expands."

The rule explained that if the orientation period lasts no more than a month it wouldn't be viewed as an attempt to dodge compliance with the 90-day maximum waiting period.

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