Employers: Do you need a health insurance waiting period?

Want to offer health insurance coverage to employees on their first day at work but are unsure of whether or not you need to institute a waiting period of sorts? 

Believe it or not, it is possible to offer your employees coverage without any such period. In fact, it is entirely optional. But, if you do decide to institute a waiting period, employers should be careful as to how they institute this policy. Read on to learn about this window, why it can be beneficial, and what you need to keep in mind if you choose to waive it.

What is the waiting period

Waiting periods are optional policies that some employers require before offering health benefits to their employees. The Affordable Care Act (ACA) places restrictions on waiting periods by requiring that they can be no longer than 90 days.

Let’s show this in an example. Say Tammy is offered a full-time role at an accounting firm. The firm offers healthcare to employees but institutes a waiting period. By law, the firm’s waiting period to offer health insurance can be no longer than 90 days. As per company policy, after 90 days in the office, Tammy can enroll in her firm’s employer-sponsored healthcare. 

Under the employer's policy, after the 90-day waiting period, the employer offers health benefits to their employees.

And, to clarify, those 90 days include weekends and holidays. 

Benefits of waiving a waiting period

To clarify, employers do not need to wait 90 days to offer their employees health insurance through the employer-sponsored plan. They can offer benefits on day one on the job, or day 14. A waiting period is optional, so as long as you waive the waiting period consistently (more on that below), there’s no penalty for getting rid of it altogether. 

There’s a benefit to both employees and employers to waive the waiting period. 

For employers

• Competitive. In a fast-paced job market, it’s a compelling benefit to offer employee healthcare coverage from day one. It’s one less thing a new employee has to worry about when starting a new job.

• Easier onboarding. So much of the employee onboarding process involved legal documentation and one-time processes. Adding healthcare enrollment to the list could be a complementary part of the process. Then, employees can focus on learning a new role. 

For employees

• Coverage. For employees, being eligible for employer-sponsored healthcare the day they start work makes the process easier. They don’t have to search for coverage on the marketplace for the waiting period, or opt into COBRA benefits from a previous employer. 

Drawbacks of waiving a waiting period

Employers put waiting periods in place for a reason, right? While making employees eligible for employer-sponsored healthcare on their first day is compelling, there are a few drawbacks. 

For employers

• Must remain consistent. Waiting periods aren’t decided each time you bring on a new employee. Instead, the employer must choose to have waiting periods as a matter of the employer's benefits policy.

• Eliminates “probationary period.” Some workplaces utilize the idea of probationary periods for new hires. That can mean they must wait a window, typically between 30 to 90 days, before they’re eligible for employee benefits. That could be everything from insurance coverage to accumulating time off. Probationary periods can be a helpful time for both parties, as the employee can decide if they’re a right fit for their team, and HR can continue to monitor the employee’s progress. Waiving the waiting period all but eliminates the concept of a trial period between the employee and employer.   

For employees

• Things may begin to feel overwhelming. Offering eligibility to employees on their first day of work could feel overwhelming. With so much new information flying at them, it might be harder for them to make an informed decision at the moment. Offering health insurance after a waiting period could give employees more time to think about the plan that fits them best. 

Best practices

Whether the waiting period for health insurance is one day or 90, there are some important practices to keep in mind during the enrollment process. 

• Compliance. Whether your company has a waiting period or not, other healthcare and benefits statutes may apply. It’s important to be aware of the ACA rules to ensure your company’s policy is compliant with state and federal laws. If you’re working with an employee benefits broker, they can assist with ensuring compliance.

• Communication. No matter the policy, make sure you are crystal clear with employees as to what the policy is. Include information in the employee handbook, during onboarding, and more to ensure they’re making the right coverage decisions for themselves. 

An exception to the rule: Large and small companies

While it’s true that employers must offer the same waiting period to all employees (or no waiting period at all) consistently, there are instances where employers can have different waiting periods. 

Generally, you’ll find the exception to this rule in large organizations with 100 or more employees. If there are different “levels” or “types” of employment at the company, the more likely it is that they can offer different wait periods to different groups. 

For example, if a company has full-time employees in addition to hourly or contract workers, they might be able to offer different wait periods to each group. However, similar to the process outlined above, these waiting periods (or no waiting periods) must remain consistent within the classes. 

Consider coverage differently with ICHRAs

Exploring new options for employer-sponsored healthcare? ICHRA offers employees flexibility and transparent pricing to select their own coverage, with the benefit of a pre-tax employer allowance. 

Let Thatch be your partner in all things ICHRA, offering a new, more seamless, cost-effective way to insure your team.