Waiting Period/Eligibility Requirements

April 13, 2006

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Currently, there aren't any laws that set specific restrictions or establish guidelines for how long your employee has to wait before becoming eligible to participate in your health plan. Although you can choose any limit you want (or at least any limit your insurer offers), the most common time limits are:

no waiting period; eligibility is immediate upon hire as a full-time employee
30 days of full-time employment
three to six months of full-time employment
one year of full-time employment

Which period should you choose? There are several factors that come into play in making your decision which eligibility period to choose. They are:

Normal workforce turnover. If you have a high rate of employee turnover during the first six months, you might want to choose six months as the eligibility requirement; if you choose no waiting period, your administrative costs could be inordinately high.
Competitive pressure. If you have to compete with other companies in your area for employees, you may end up at a competitive disadvantage if you require a longer waiting period than your competitors.
Employees covered. Usually, only full-time employees are covered; if you want to cover part-time employees, you should establish an eligibility period based on a minimum number of hours per week or per year to remain enrolled.
Price. It may impact your premium cost to go with a longer waiting period rather than a shorter one. Short periods can mean additional cost.

Should you have age limits? Some employers place maximum and minimum age limits on health plan eligibility in order to keep costs down. This decision may well be driven by your health insurance company. Talk to them about whether they use maximums or minimums.

As for the minimum age, there are no laws telling you what you have to do. Many employers don't have a minimum age; many of those that do choose age 18.

Age maximums are a little trickier. Generally, an employer that places age maximums on employees runs the risk of violating the age discrimination laws. Of course, if you have fewer than 20 employees, the federal age discrimination laws do not apply to you (although state antidiscrimination laws might). As a consequence, if you have fewer than 20 employees, you may not have to offer employees who work past age 65 coverage on the same basis as other employees. Age maximums are much more common in the area of employees' dependents (for example, children are no longer eligible once they reach age 22). Many health plans do require that those employees eligible for Medicare (i.e., age 65 or over) must take advantage of it.