One of the most common questions we hear from clients when setting up a health plan is about the waiting period — how long new employees must wait before their coverage becomes effective. While the specifics can vary depending on the business’s structure and objectives, understanding the legal limits and typical practices is key. In this article, we’ll provide clarity on waiting periods under the ACA, walk through what’s allowed, and offer insight into how to set a fair and compliant enrollment policy.
What is a Waiting Period?
A waiting period is the length of time an employee must wait after becoming eligible for benefits before their coverage becomes effective.
Example:
– An employee hired on June 1 with a 30-day waiting period would have coverage effective July 1.
– If the employer uses a first-of-the-month rule, coverage would start on the first day of the month after the waiting period ends.
Typical Waiting Periods
Most employers use waiting periods of:
– First of the month following 30 days of employment (most common)
– First of the month following 60 days of employment
– Exact 30-, 60-, or 90-day waits (coverage begins on the exact date)
Some employers offer immediate coverage, particularly in competitive industries where benefits are a recruiting tool.
Maximum Waiting Period Allowed by Law
The Affordable Care Act (ACA) limits waiting periods for group health plans:
– Maximum waiting period = 90 calendar days (not three months).
– Employers cannot impose additional eligibility criteria that delay coverage beyond 90 days.
Example: A 90-day waiting period for a June 1 hire must end by August 30 — coverage must be effective no later than August 31 (or September 1 if using first-of-month rules).
Questions About Your Current Waiting Period?
Not sure if your group health plan waiting period is ACA-compliant? Want to optimize your policy to attract top talent without increasing costs? Reach out to our team—we’ll review your current plan and recommend improvements that work for your business.
Competitiveness & Employee Experience
Shorter waiting periods can:
– Improve recruitment by offering immediate access to benefits
– Increase employee satisfaction and retention
– Reduce gaps in coverage for employees leaving another employer’s plan
Longer waiting periods:
– Lower short-term employer costs by reducing coverage for high-turnover hires
– May lead to lower participation if employees find coverage elsewhere
Coordinating Waiting Periods with Other Benefits
Employers should align health plan waiting periods with:
– Ancillary benefits (dental, vision, life, disability)
– Probationary periods (while remaining ACA compliant)
– Open enrollment rules to avoid coverage gaps
Compliance Considerations
– ACA Compliance: Coverage must be offered by day 91 of employment for applicable large employers (50+ FTEs)
– ERISA Documentation: Waiting period rules must be clearly stated in the Summary Plan Description (SPD)
– State Rules: Some states may impose stricter limits for fully insured plans
– Union Plans: Collective bargaining agreements may define different waiting period terms
Waiting Period Comparison Table
Below is a comparison of common waiting periods, their typical uses, and advantages/disadvantages:
| Waiting Period | Common Use | Advantages | Disadvantages |
| Immediate (Date of Hire) | Competitive industries, recruiting tool | • No coverage gap for employees • High employee satisfaction | • Highest cost for employer • Covers short-term/turnover hires immediately |
| First of Month After 30 Days | Most common setting for mid-size employers | • Balances cost control and competitiveness • Easy to administer | • Small gap in coverage for new hires |
| First of Month After 60 Days | Used for cost-sensitive groups | • Reduces short-term coverage costs • Allows probationary review | • Longer gap may impact recruitment • Risk of employees seeking coverage elsewhere |
| 90 Days (Maximum Allowed) | Groups with high turnover or seasonal staff | • Lowest short-term employer cost • Screens out very short-term hires | • Longest coverage gap legally allowed • Potential ACA penalty risk if mishandled |
Get Expert Guidance on Your Waiting Period Policy
Setting the right waiting period requires balancing compliance, budget, and employee expectations. Our team specializes in designing group health plans that check all three boxes. Schedule a consultation to discuss your specific needs.
