Labor & Employment Law Blog

On August 15, 2014, California Governor Jerry Brown signed Senate Bill 1034 (“SB 1034”), which, effective January 1, 2015, repeals the 60-day waiting period limit imposed on certain health insurance plans in California.  2012 legislation, Assembly Bill 1083 (“AB 1083”), imposed a 60-day waiting period limit effective in 2014, which conflicted with the federal Affordable Care Act’s (“ACA”) 90-day waiting period limit.  With the repeal, California employers may operate consistent with federal ACA regulations concerning waiting periods in 2015.

Background

Under the ACA, effective January 1, 2014, health insurance plans may not impose a more than 90-day waiting period. Public Health Service Act Section 2708.  In California, AB 1083 and Senate Bill X 1-2 (2013) imposed a maximum 60-day waiting period, effective January 1, 2014.  Thus, in 2014, many California employers who provide health insurance to their employees have scrambled to adjust their practices to comply with the more stringent California requirement.

SB 1034 repeals AB 1083, allowing California employers to follow and implement the federal ACA regulations regarding waiting period limitations.  However, relief is not immediate.  Because SB 1034 was not enacted as an “urgency bill,” it is not effective until January 1, 2015.

Federal Regulations

In June 2014, the IRS finalized regulations that would allow an up to one (1) month “orientation” period to precede the 90-day waiting period.  29 CFR Section 2590.715-2708(c)(3)(iii). The orientation period allows employers some additional flexibility and options in order to comply with the 90-day waiting period limitation. In addition, the orientation period will allow large employers (generally 50 or more full-time employees or equivalent) with additional flexibility to comply with the separate requirement under the large employer mandate, which requires the large employer to offer full-time employees health insurance coverage on the first of the month following three full calendar months of employment.  See 26 CFR Section 54.4980H-1(a)(26).

What This Means For Employers 

California employers should review their policies and eligibility language to determine where they stand in relation to the most recent rule changes.  Employers should also check with their insurance carrier as to what options the carrier is offering for its clients.  Employers should keep in mind that 90-days is the maximum and that employers may voluntarily implement shorter waiting periods.  Finally, employers may consider whether using the orientation period would be to their advantage in 2015, once the 60-day waiting period is repealed in California.