For new hires, when does the initial measurement period start, on date of hire, or 1st day the following month?
Measurement periods are used by employers to determine full-time status for new-hires and existing employees regarding offering health coverage under the ACA's employer mandate (where a full–time employee, for purposes of this provision, is one who works an average of 30 hours or more per week or an average of 130 hours a month; see details below).
These periods are complex (as there isn't one "period" there are many), but can be summed up as (TIP: see the images below for a visual):
- A waiting period of 3 months max (90 days) where a newly hired full-time employee has to wait up-to 90 days for their coverage to start. If you are hired at full-time, there is no 12 month waiting period for coverage.
- An initial measurement period and administrative period for new-hires where full-time status is determined and confirmed over the first 90 days and then for the remainder of a 12 month period until they join the standard 12 month measurement period (in case someone is reasonably hired part-time but ends up working full-time). In other words, new hires who are not reasonably expected to work at least 130 hours per month have their own start date and end date (because they were hired mid-year). This is called an initial measurement period, and this includes an administrative period (a type of look-back period where part-time status can be changed to full-time and coverage can be offered). These periods combined are often just called an "initial measurement period". To be clear, this measurement period for new hires not expected to work full-time has different start and end dates (but the same duration) as the company’s standard measurement period. See: What is the initial measurement period?
- A look-back period of 3 -12 months (at the employer's discretion) used to determine full-time status of those already working (such as those employed when an employer starts offering health plans). This works the same as the initial measurement period for part-time workers, except it activates when an employer must start complying with the mandate.
- Standard and stability measurement periods used over the course of the year which speak to whether an existing employee will gain or lose full-time status. They work the same as the initial measurement period but start on a specific date every year (they don't start when an employee is hired, they apply to every employee each year).
- Measurement periods used to determine the length of time coverage has to be offered for (after an employee is full-time they must be offered coverage until the end of the calendar year, which is 12 months maximum and 6 months minimum; 3 was pushed for but rejected).
NOTE: Feel free to ask specific questions, the above is complex. But the gist is, if you aren't hired full-time then you could have to wait up to a year for coverage, even if you start working full-time during the year. Likewise, if you are hired full-time, you can't just have your benefits dropped after you are locked in.
TIP: See the graphics below. As you can see, there are a few different measurement periods to deal with here.
For both new-hires and existing employees, the initial measurement period starts on the 1st of the calendar month after the employee start date or at the start of the payroll period. Employers should make sure to take into account initial and standard stability periods and standard measurement periods as well. They all typically start on the 1st day of the month or on the start of payroll.
Initial measurement for new hires is 3-12 months, standard for ongoing employees is a 12 month calendar year. SEE: Determining full-time employees – safe harbor methods.
If the employee works more than 30 hours a week or 130 in a month, for more than 120 days in a year, they are full-time in regard to ObamaCare's Employer mandate. As another part of the mandate employers need to count all employee hours during initial and standard measuring period to determine if they are required to provide coverage or get a fine. Employers must look at both initial measuring and standard measuring periods, as one can override the other.
It makes sense to tie the Initial Measurement Period to the start of a payroll period which is allowed under the proposed regulations. Remember employees can't have longer than a 90 day wait time for health insurance to start.
Here is some more information on using payroll period start dates for look-back periods and initial measuring periods.
There are two sources that explain this very well (outside digging through the laws and federal registers). They are:
media-services.com - simplified explanation of employee measurement periods under ObamaCare
moulderlaw.com - complex but more detailed explanation of employee measurement periods under ObamaCare.
TIP: Employers must remember that once an employee is full-time, they must generally be offered coverage for the duration of the stability period as long as they remained employed (even if they switch to say 5 hours a week a day after officially becoming full-time).