Affordable Care Act: Important Deadline for Employee Notices of the Health Insurance Marketplace (Exchange) Due October 1, 2013
By Gretchen Harders and Michelle Capezza
On May 8, 2013, the Employee Benefits Security Administration of the Department of Labor (the “DOL”) issued Technical Release 2013-02 (the “Release”) providing important guidance under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (the “Affordable Care Act”) with regard to the requirement that employers provide notices to their employees of the existence of the Health Insurance Marketplace, generally referred to previously as the Exchange. These employee notices must be provided to existing employees no later than October 1, 2013. This deadline is intended to correspond to the open enrollment period for the Marketplace commencing October 1, 2013 for coverage through the Marketplace beginning January 1, 2014. The Release includes temporary guidance and two model employee notices of the Marketplace upon which employers may rely. The Release further provides an updated model election notice for group health plans for purposes of the continuation coverage provisions under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) to include information of the health coverage options offered to individuals through the Marketplace for comparative purposes.
Employee Notice of the Marketplace. The Affordable Care Act amended the Fair Labor Standards Act (“FLSA”) to require employers to issue employees a notice of the health coverage options available under the Marketplace. The FLSA requirement was required to have been satisfied on or before March 1, 2013; however, given the regulatory delays in establishing and approving the Marketplace, the DOL extended the deadline. The guidance under this Release is temporary through the applicability date of October 1, 2013, but may be relied upon until future guidance and regulations are issued.
Which employers are required to comply with the notice requirements?
Whether or not required to “pay or play” under the Affordable Care Act, all employers subject to the FLSA must provide the employee notice. The FLSA generally applies to employers that employ one or more employees and are engaged in or produce goods for interstate commerce. The FLSA also covers, among other things, hospitals, schools, institutions of higher education and federal, state and local government agencies. To determine whether an employer is subject to the FLSA, the DOL provides an internet assistance tool at http://www.dol.gov/elaws/esa/flsa/scope/screen24.asp.
Which employees must receive the notice?
Employers must provide the employee notice to each employee whether or not the employee has part-time or full-time status. It does not matter whether the employee is enrolled or eligible to enroll in a group health plan. A separate notice is not required to dependents or other individuals who may become eligible for coverage under the plan, but are not employees.
What information must the notice provide?
The employee notice must contain the following information:
- The existence of the Marketplace;
- The contact information and description of services offered on the Marketplace;
- A statement that the individual may be eligible for a premium tax credit if the employee purchases a qualified plan on the Marketplace; and
- A statement that if the employee purchases a qualified plan on the Marketplace, the employee may lose the employer contribution to any health benefit plan offered by the employer and all or a portion of employer contributions may be excluded from federal income.
What are the DOL model notice(s)?
The DOL has provided two model employee notices available on its website, one for employers who do not offer a health plan and one for employers who offer a health plan to some or all employees. The Release provides that employers may use the model notice(s) provided the notice(s) include the information described above.
The model employee notice for employers who do not offer health coverage includes the information described above, as well as an explanation of the impact of the availability of employer health coverage on the employee’s eligibility for subsidies on the Marketplace. The model employee notice does not require the employer to provide specific contact information for the Marketplace in the state where the employee resides, but rather refers the employee to the http://www.healthcare.gov website for contact information for the Marketplace in the employee’s area. This model employee notice requires the employer to provide contact information for the employer, including the employer’s EIN. This is the information an employee will need to include in an application for a premium subsidy on a Marketplace.
The model employee notice for employers who do offer health coverage generally includes the same information as the model employee notice for employers who do not offer health coverage. This model employee notice does, however, require the employer to provide contact information to obtain more information about the employer’s health care coverage. The disclosure requires the employer to state whether the health care coverage is offered to all employees and, if not to all employees, a description of those employees eligible for health care coverage. It also requires the employer to state whether it offers dependent coverage and which dependents are eligible. Finally, the employer is required to disclose whether the health care coverage offered meets the minimum value standard and that the cost of coverage is intended to be affordable. The Department of Treasury and Internal Revenue Service recently issued proposed guidance to assist employees in assessing whether the coverage offered provides minimum value. See our prior blog post New Proposed guidance for Determining Whether Employer-Sponsored Health Plan Provides Minimum Value.
The model employee notice includes optional information that an employer may provide to the employee based on the Marketplace Employer Coverage Tool to better understand their coverage choices, including whether the employee is eligible in the next three months for employer coverage, whether the employer offers a health plan that meets the minimum value standard, the premium for employee-only coverage under the lowest-cost plan that meets the minimum value standard if the employee received the maximum discount for any tobacco cessation program, and what changes the employer will make for the next plan year. Although this information is optional, it may be to an employer’s benefit to demonstrate, where appropriate, that its plan is providing minimum value and is affordable.
When must the employee notice be provided and what are the acceptable delivery methods?
Current employees before October 1, 2013 must be provided with the notice no later than October 1, 2013. Beginning October 1, 2013, the employer must provide each new employee the notice at the time of hire, which will be considered timely provided in 2014 if provided within 14 days of the employee’s start date.
The employee notice must be provided free of charge in writing in a manner calculated to be understood by the average employee. The employee notice may be provided by first class mail or electronically if in accordance with the DOL’s electronic disclosure safe harbor.
COBRA Model Notice. Under COBRA, an individual who was covered by a group health plan the day before a qualifying event occurred may be eligible to elect COBRA continuation coverage. These qualified beneficiaries must be provided with an election notice within 14 day after the plan administrator receives notice of a qualifying event. The COBRA election notice is required to include specific information.
The DOL updated its model COBRA election notice to provide information about the Marketplace for the purposes of informing qualified beneficiaries that they may also be eligible for a premium tax credit to pay for coverage offered through the Marketplace. It also includes clarification on the limit on pre-existing conditions exclusions beginning in 2014. Such information is not specifically required under the Affordable Care Act and should have no impact on whether an employer is subject to the employer responsibility penalties if in fact a former employee obtains coverage on the Marketplace.
The Release provides that the use of the model COBRA election notice completed appropriately will be considered good faith compliance with the COBRA election requirements. The model COBRA election notice does not provide a specific deadline or compliance date. Employers may wish to review their existing COBRA election notices for changes relating to the Affordable Care Act.
Employers have long been waiting for specific guidance from the DOL on the employee notice requirements. Now that it is here, compliance should be addressed well before the October 1, 2013 deadline.
