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ACA Basics: Health Coverage Compliance for Boomerang Employees

With employees leaving jobs in record numbers over the past year, there has also been an increase in workers returning to their former employers. Because former employees are a known commodity and may have added new skills since leaving, rehiring these “boomerang employees” can make sense for both sides.

But if you’re an applicable large employer (ALE) bound by health coverage mandates under the Affordable Care Act (ACA), what does a boomerang employee mean in terms of compliance?

To stay in compliance with ACA mandates, work with your legal counsel and:

  • Know your measurement and stability periods
  • Understand the rules relating to employment gaps

Know your measurement and stability periods

The ACA requires ALEs to offer health coverage to full-time employees who work 30 hours or more a week. To ease the administrative burden of tracking time, especially in cases where employees don’t work the same number of hours each week, employers are allowed to average hours over a certain period of time. This time is known as the measurement period. Measurement periods are typically 12 months, though they can be as short as three months.

You must consistently apply the same measurement periods to the same categories of employees, with a few exceptions:

  • Union vs. nonunion employees
  • Salaried vs. hourly employees
  • Employees covered by collective bargaining agreements
  • Employees based in different states

If an employee averages 30 hours or more a week during the measurement period, they must be treated as a full-time employee and offered health coverage for an ensuing time frame known as the stability period. The stability period must be either:

  • The same as the measurement period
  • At least six months, if the measurement period was less than six months

Understand the rules relating to employment gaps

Whenever an employee leaves and then returns, you will need to determine whether to treat them as a continuing employee or a new hire to ensure that you remain in compliance with your offer of health coverage.

Under the ACA, there are two methods for determining employee status following a break in employment. It’s important to get this right because continuing employees will have their full-time or part-time status continue upon their return, whereas a new hire can have a different designation. This can affect whether you need to provide health coverage on day one or can use your plan-designated waiting period.

The method you choose depends on the length of time your employee was gone:

  • Less than 13 weeks
  • 13 weeks or more

Less than 13 weeks

If you rehire an employee less than 13 weeks after the end of their last period of employment with you, the ACA requires you to consider them a continuing employee.

If they elected to receive coverage under your health plan before they left, then they are immediately eligible for coverage upon the date of their rehire. But if they opted out of coverage when they were last employed by you, the ACA coverage mandate does not automatically apply upon their return.

There is one exception to the above rule:

The ACA includes a Rule of Parity exemption in which you do not need to offer health coverage to a returning employee if their break in employment was at least four weeks and lasted longer than the time they worked for you. For example, if they were employed for five weeks, left your organization and then returned seven weeks later, you would not be required to offer immediate health coverage even though they are returning less than 13 weeks after they left.

13 weeks or more

If your employee returns 13 weeks or more after they left, they can be considered a new employee. This means you can apply the rules of your health plan that apply to all new hires, including any waiting period (not to exceed the 90-day limit mandated by the ACA).

If you want to forgo a waiting period for returning employees, you will need to amend your plan and follow this policy for all employees of the same category.

In all cases, you are not mandated to provide retroactive health care coverage during the time your returning employee was not with your organization.

For more information

There can be many good reasons to welcome an employee back into the fold. But it’s important to work with your legal counsel to make sure your health coverage for boomerang employees complies with ACA mandates, as the rules can be complex.

Your benefits adviser can also provide ACA resources and insights to help you better understand health care requirements — and how to use health benefits to your advantage.