Short answer: A waiting period is the time a newly eligible employee must wait before health coverage begins. Under the ACA, a group health plan’s waiting period cannot exceed 90 days, so many employers use “first of the month following 30 days” to stay safely compliant.
A waiting period is the time that must pass before coverage becomes effective for an employee who is otherwise eligible. The ACA caps it: a group health plan’s waiting period cannot exceed 90 days. Note that 90 days means 90 calendar days, including weekends and holidays, not three months.
Because a strict 90-day count can land awkwardly mid-month, many employers use a payroll-friendly design like “first of the month following 30 days” of employment, which stays within the limit. Employers may also apply a bona fide orientation period of up to one month before the waiting period starts.
Setting the waiting period is a balance: a longer wait reduces cost and churn from short-tenure hires, while a shorter wait helps recruiting and reduces gaps in coverage. For applicable large employers, the waiting period also interacts with the ACA employer mandate’s timing rules for offering coverage to full-time employees.
Sources
ACA waiting-period rule, 29 CFR §2590.715-2708 (a group health plan waiting period may not exceed 90 days; a bona fide employment-based orientation period of up to one month may precede it): .
ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-L/part-2590/subpart-C/section-2590.715-2708HealthCare.gov (CMS) Glossary, Waiting period (job-based coverage): .
healthcare.gov/glossary/waiting-period-job-based-coverage