The ACA requires that folks become eligible for medical insurance no later than 90 days after hire. Most insurance companies require that coverage begin on the 1st of a month rather than mid-month, as mid-month gets complex with pro-rating of premiums. There are typically three different waiting periods for employers to consider:
1st of the month after date of hire
1st of the month after 30 days
1st of the month after 60 days
Why would I use the 1st of the month after date of hire?
An employee will become eligible for coverage the quickest. If your new employee had coverage at their prior employer, there’s a good likelihood that their coverage at that employer ended on the last day of the month. Overall, you’re essentially eliminating the potential of a lapse in coverage by bringing them onto your program immediately. Folks should not have to worry about COBRA or finding an individual plan for a short period of time. If you do go down this path, use it to your recruiting advantage. Just 10.7% of Tzedakah House accounts have this waiting period, meaning a lot of your competition is having folks wait longer to join.
Why wouldn't I use the 1st of the month after date of hire?
An employee may not have a lot of time to consider the benefits depending on when in the month they’re hired. As an example, if someone starts on April 28th, they’re eligible on May 1st. This provides just hours for folks to learn about the benefits, compare potential other options, and then elect or waive. There’s little to no chance that they will be in the insurance company’s system or get their ID cards timely, which could delay care. You're also paying toward their coverage almost immediately, which we all know is not just a few dollars per month. If you have a lot of turnover, this could be money spent better elsewhere or just down the road.
What are some best practices if using 1st of the month after date of hire?
Make sure that your program is discussed during the hiring process. If the future employee has a strong sense as to their options, it makes the decision-making process go much quicker. You should have a Benefits Guide that you can share. If the cost of coverage, especially the medical insurance, is not in your Benefits Guide, make sure to have that calculated to be shared.
Once an offer is accepted, either coordinate an educational meeting with the broker or provide the employee with a video from the broker explaining each of the benefits. While some HR teams prefer to handle this internally, this is a service brokers like Tzedakah House provide to clients. If the employee is hired on the 28th, I'd lean toward the video. If they're hired on the 7th, there's certainly time to coordinate a meeting.
Make electing coverage as simple as possible. If an employee has the ability to make their elections electronically instead of completing a stack of forms, the timing of getting into the insurance company's system is expedited. Tzedakah House partners with Employee Navigator to offer most clients, depending on size and workforce, the opportunity for their employees to elect or waive coverage virtually.
What are the pros and cons of the 30-day and 60-day options?
One reason why employers go with a 30-day or 60-day waiting period is because they're pushing paying for coverage a little bit down the road. This can provide an employer with time to see how the new employee is performing before making an investment in their benefits. As noted above, this can put a strain on the employee if they were covered by their former employer.
Here's an example of potential timing with a 60-day waiting period:
Employee Resigns From Prior Position: April 21st
Employee Hired: April 24th
Former Coverage Ends: April 30th
Employee Becomes Eligible: July 1st
Gap in Coverage: May 1st through June 30th
What waiting periods do Tzedakah House clients use?
Below is the breakdown of clients by waiting period. Note that this encompasses companies of all different sizes and industries. If you would like a comparison of your waiting period or benefits program as a whole against companies of similar size in the same industry, please reach out to Benjamin Klein by phone or email.
1st of the month after date of hire (10.7%)
1st of the month after 30 days (31.1%)
1st of the month after 60 days (58.2%)