HR Glossary for HR Professionals
Glossary of the most common HR terms and acronyms to assist professionals navigating the ever-growing and ever-changing world of HR terminology.
What Does the Effective Date Mean?
The effective date is the date in which a person’s coverage under an insurance policy begins for that year or period—in other words, when coverage starts. It typically applies when a person begins a new job, makes changes to their benefits during open enrollment, or experiences a qualifying event.
Why is the Effective Date Important?
The effective date for a policy is important because it indicates when an individual is covered by their plan, which can save them hundreds if not thousands of dollars, depending on the service that they need.
For example, if a person has just been hired by an organization and elects to participate in the employer-sponsored benefits, including a healthcare plan, they need to be aware of the effective date for their insurance coverage policy. If the coverage doesn’t begin immediately—and starts either on the first of the month after 30 or 60 days of employment—they would need to utilize alternative forms of temporary insurance until the coverage kicks in, if they need to utilize healthcare services.
Who Sets the Effective Date?
The effective date is determined by employers and is typically set either 30 or 60 days after an employee elects coverage, if not immediately.
Regardless, the Affordable Care Act (ACA) specifies that employer-provided healthcare coverage from insurance companies cannot exceed a 90-day waiting period.
Related Terms: Employee Benefits, Preferred Provider Organization (PPO)