By Sherry P. Porter
Overview of the New Notice Requirement
Most employers will have a new notification requirement beginning October 1, 2013. Under the Patient Protection and Affordable Care Act (ACA), new health insurance options will be available under the health care exchanges or marketplaces as of January 1, 2014. Employers are required to provide notices to their employees about these new health insurance options by October 1, 2013 which corresponds with the date open enrollment begins on the marketplaces for health insurance coverage beginning January 1, 2014.
The ACA added a new provision under the Fair Labor Standards Act (FLSA) that requires an employer to notify all of its employees about the new health insurance options available through the marketplace. This requirement applies to all employers who are subject to the FLSA. This generally applies to employers that employ one or more employees who are engaged in, or produce goods for, interstate commerce with at least $500,000 in annual dollar volume of business or if the employer is one of a list of certain employers such as hospitals, schools, government agencies and others. To see if you are subject to the FLSA, you can visit their internet compliance tool: http://www.dol.gov/elaws/esa/flsa/scope/screen24.asp
Assuming you are subject to the FLSA, you will need to comply with the notification requirement by October 1, 2013. All full time and part time employees must receive the notice. Employers must provide the notice even if they do not provide health insurance for their employees. Employers do not have to provide the notice to dependents, former employees or other individuals who may be covered under their health plan, such as retirees. The marketplaces open on October 1, 2013 which is driving this deadline. Under the ACA, nearly all Americans will be required to have health insurance coverage by January 1, 2014 or risk a penalty assessment.
The notices must contain certain information about the marketplace. The notice must (1) inform the employee of the existence of the marketplace and include a description of the services provided and contact information, (2) inform the employee that if the employer plan does not provide a minimum value, then the employee may be eligible for premium tax credits under the ACA if s/he purchases insurance through the marketplace, and (3) inform the employee that if s/he purchases insurance through the marketplace, s/he may lose any employer contribution toward such coverage and that all or a part of the employer’s contribution may be excluded from their income.
The Department of Labor recently issued two model notices that an employer may use to meet this notification requirement – one for employers that offer a health plan for its employees and one for employers that do not offer a health plan for its employees. However, these model notices are not the type that an employer can just print out and send to its employees. The forms will require the employer to have a real handle on its health insurance plan and how it meshes with the requirements under the ACA in order to fulfill the notification requirement. Employers may use the model notices or create their own notices so long as they contain the required information.
If an employer does not sponsor a health plan for its employees, there is a sample form that may be used. Generally, if the employer is not a “large” employer (it has less than 50 full time equivalent employees), then it is not subject to potential ACA penalties for not offering health insurance coverage to its full time employees. Many small employers do not offer health insurance for a myriad of reasons. The employer that does not provide health insurance to its employees will need to provide the required information along with its contact information and distribute it to all employees by October 1. This information will be needed by employees who seek to obtain insurance through the marketplace.
For employers that sponsor health plans for employees, the form is a little more complicated. The basic information is the same but the employer must add information about the health plan it sponsors. Employers will have to provide information about its health plan and whether or not the coverage meets the affordability and minimum value standards mandated by the ACA. Employers must be analyzing this now to be able to complete the required notification. If an employer has not determined the status of its plan under the ACA and how it will comply or not comply, then it cannot properly complete the form.
The model notices direct employees to a website (www.healthcare.gov) for more information about the marketplace. While this should relieve the employer from explaining the notice to employees, employers are still going to be inundated with questions as the individual insurance mandate and marketplaces go into effect. You will need to be ready to handle these questions. Many employers will take advantage of this opportunity to educate their employees about the upcoming mandates under the ACA, the impact on employer provided health insurance and understanding the how the ACA impacts the employer as well as the employee.
For existing employees, the notice must be provided by October 1, 2013. Beginning October 1, 2013, the notice must be given to each new hire. For 2014, new hires must receive the notice within 14 days of their start date. The notice must be provided free of charge, can be sent by first class mail and must be provided in writing that can be understood by the average employee. An employer may also send the notice electronically so long as all of the Department of Labor’s electronic disclosure rules are met.
Revised COBRA Notice
For many years, employers have been providing COBRA notices to employees and dependents who experience a qualifying event under COBRA to allow them to continue health care coverage at their own expense. Now, all COBRA notices will need to be revised to include information about the marketplace. The DOL has updated its existing COBRA notice on its website. From October 1, 2013, all COBRA notices must contain the new information about the marketplace. The new language may be confusing to employees so employers are going to have to be ready for questions.
What Should Employers Do Now?
All employers should be developing their own communication plan about the new health insurance requirements to avoid confusion by employees and to keep employees informed. The notices provided by the DOL contain terms that are going to be confusing to employees and will likely prompt even more questions. Many employers are taking this opportunity to educate their employees about the ACA and the impact it has on employer provided health insurance. Employers will need to look at their own work force to determine what is best for all involved. Employers may wish to modify the DOL’s forms to best suit their work force and may very well end up with different forms for different groups of employees. An employer can only comply with the notice requirements if it has a good understanding of its health plan’s compliance under the ACA – so don’t delay!