Tuesday, January 5, 2010

Waiting Periods Limits

Among the provisions included in the Senate’s recently passed health reform bill is a limit on waiting periods for new employees to be able to enroll in a their employer’s health benefits coverage. The Senate provision, which is not included in the House bill, would prohibit group health plans from applying any waiting periods exceeding 90 days. It also would require employers with more than 50 employees to pay a $600 tax assessment for each full-time employee who must meet a waiting period of more than 60 days. Employers would have some time to comply with the waiting period limits provision, if it survives the Senate/House reconciliation process—the provision only would be effective for group health plans effective on or after Jan. 1, 2014.

Many employers currently apply waiting periods to minimize the expense involved in providing health insurance to short-term employees. According to the Kaiser Family Foundation’s Annual Employer Health Benefits 2009, waiting periods range from 30 days to six months, but the most common waiting period is 90 days and the average is just over two months.

However, 29% of workers face a waiting period of three months or more, Kaiser found. Some three-quarters of new workers face a waiting period, but new workers at small firms (those with fewer than 200 workers) are more likely than workers at larger firms to face a waiting period (80% versus 70%). Also more likely to face waiting periods are workers in the retail (93%), wholesale (88%), and, ironically, the health care industry (87%).

The longest “average” waiting periods (nearly three months) are found among workers in the agriculture/mining/construction, and the retail industries, while workers for state and local governments have the shortest average waiting period (less than two months). Workers at small firms are much more likely than workers at large firms to have a waiting period of three months (37% versus 12%), but 6% of workers at all firms have waiting periods of four or more months. But among workers at large firms, the largest proportion have either no waiting period (30% of firms) and 36% have one month.

After examining these statistics, it appears that the waiting period limits and penalties would have a greater effect on small employers that offer health insurance, an already small group, than on large employers. Small employers also are much more likely than large employers to buy health insurance, rather than to be self-insured—15% of workers iat small employers are covered under a self-funded plan, compared with 77% of workers at larger employers.

Whether or not the Senate’s waiting period provision survives in health reform, will it make much difference in extending coverage?


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