Benefits Q&A: When Do We Offer Coverage After a Break in Service?

Question:

We recently rehired an employee who previously worked for us. When should we offer her health coverage? Our waiting period is 60 days, but she has asked to enroll sooner if possible. We would rather not allow that. Is it okay to apply a new waiting period in this situation? 

Answer:

The answer to these questions depends on: 1) the employer’s size; and 2) whether they have established a “lookback process” to identify employees who are eligible to retain coverage.

The following discussion applies only to employers subject to the Affordable Care Act’s employer mandate (those that averaged 50 or more full-time employees during the previous calendar year). Smaller employers aren’t subject to the ACA’s employer mandate and therefore have no need for a lookback process. Nothing prevents them from applying a new waiting period in the scenario you described.

Overview of lookback process

Under the ACA regulations, employers may use a “lookback process” to determine whether employees average 30 or more “hours of service” per week, making them eligible for health insurance. Hours of service include all hours worked and most types of paid leave.

Employers can choose a measurement period of up to 12 months. They calculate employees’ average hours of service at the end of the measurement period and must offer coverage to employees who averaged 30 or more hours per week. For employees who qualify and elect coverage, they can stay on the plan during a “stability period” (usually 12 months) even if they drop below 30 hours per week.

Effect of break in service

A break in service is defined as a period during which an employee has no hours of service with the employer. You may treat someone as a new employee after a break in service if it:

• Lasts at least 13 weeks; or
• Lasts at least four but less than 13 weeks and exceeds the period of employment that occurred immediately prior to the break.

In both of these situations, employers may choose to: a) apply a new waiting period (for employees being hired as full-time); or b) start a new measurement period (for those being hired as variable hour).

For employees whose breaks in service don’t meet one of the above criteria, the employer must allow them to restart health coverage by the first of the month following the date they were rehired.

Example

Alex works for Major Staffing Agency, who finds him short-term assignments with architectural firms. The Agency offers group health coverage to its workers. Alex worked at ABC Architects for eight weeks, had a break in service of 10 weeks, then started working for a different firm. Because his break in service was longer than his immediately preceding period of employment with the Agency, it can apply a new initial measurement period to him the same as for other new variable hour employees. If his break in service had been less than eight weeks, the Agency would have reinstated his health benefits (if he had them) or continued his previous measurement period.