Thursday, October 23, 2014

Calculating Measurement and Stability Periods Under the ACA

Not surprisingly, there is quite a bit of confusion over the calculation of measurement and stability periods under the Patient Protection and Affordable Care Act (“the ACA”).  With 2015 on the doorstep, it is useful to clarify (or at least attempt to clarify) some rules that may have been misunderstood.

First, measurement and stability periods should not be used for ongoing employees whom the employer expects to work full-time.  Rather, they should be used only for variable hour, part-time and seasonal employees whose full-time status is genuinely in doubt – i.e., for employees who may or may not work an average of 130 hours per month over the applicable measurement period.

Second, there are different measurement and stability rules for ongoing and newly-hired employees.  For ongoing employees, there is a standard measurement period of 3 to 12 months followed by a stability period that is the longer of six months or the length of the standard measurement period.  For new employees (that is, employees who have not worked at least one entire standard measurement period), the rules are more complex.

Rather than using the standard measurement period for new employees, each new employee must be given his or her own individual measurement period and an accompanying stability period.  The individual measurement period begins no later than the first day of the month following the employee’s hiring date.  This initial measurement period, together with any associated administrative period, must not extend beyond the last day of the first calendar month beginning on or after the one-year anniversary of the employee’s date of hire.

For employees found to be full-time (by having worked an average of 130 hours per month or more over the course of the measurement period) during the measurement period, health insurance coverage must start the first day of the month beginning on or after the anniversary date of the employee’s date of hire.  Such employees are then eligible for insurance coverage for the duration of the associated stability period.

Employees not found to be full-time during the measurement period lawfully may be declared ineligible for health insurance coverage during the associated stability period.  But the associated stability period cannot last longer than one month beyond the initial measurement period and must not exceed the remainder of the overlapping standard measurement period.  So, for example, and employee hired on July 1, 2014 may be given an individual measurement period through June 30, 2015.  If the standard measurement period for the employee group is the calendar year, then the individual measurement period overlaps the standard measurement period; therefore, the associated stability period runs from July 1 through December 31, 2015.  At that point, the employee becomes an ongoing employee subject to the employer’s standard measurement period.

Third, for ongoing employees, the administrative period cannot be used to reduce or lengthen the measurement period or the stability period.  While an administrative period following a standard measurement period may last up to 90 days, it overlaps with the associated stability period so as to prevent any gaps in coverage.

Finally, as a practical matter, most employers are going to want to set standard measurement periods so as to coincide with open enrollment periods for employee health insurance coverage.  So if, for example, the employer’s insurance year is the calendar year, the employer probably is going to want to set a standard measurement period so that employees are determined to be eligible or ineligible for insurance coverage in sufficient time to enable eligible employees to enroll during open enrollment.  And, employers are going to want to check with their insurers or insurance administrators to make sure that there are no enrollment rules that would prevent new employees found eligible for coverage at the end of individual measurement periods from enrolling no later than the first day of the month following the end of the measurement period.