Update: No Penalty for Failure to Provide Employees With Insurance Exchange Notice
The new ObamaCare law is changing the relationship between employers and employees, even if you don't offer health coverage or don't plan to in the future..
One of the many new responsibilities imposed on employers by the Patient Protection and Affordable Care Act (ACA) is providing employees with written notice regarding the coverage available through health insurance exchanges for 2014. The Department of Labor (DOL) has issued guidance for complying with the notice requirement, which is in effect as of October 1, 2013.
The DOL also made changes to the required COBRA election notice for continuation coverage to reflect the new health benefit exchange options under the ACA.
Employers should note that the guidance issued by the DOL is temporary. Therefore, while you can rely on this guidance prior to the general applicability date of October 1, 2013, be sure to stay tuned for rules and regulations that may be issued in the interim.
Employers Covered by the FLSA Are Subject to the Notice Requirement
As part of health care reform, beginning January 1, 2014, health care coverage is available for individuals and employees of small businesses through state health insurance exchanges (also known as the Health Insurance Marketplace). Open enrollment for health insurance coverage through the exchanges begins October 1, 2013.
The ACA amended the federal Fair Labor Standards Act (FLSA) to require covered employers to provide current employees and new hires with written notice of the existence of the exchanges and various other information pertaining to health care coverage through this option.
Update: On September 11, 2013, the Department of Labor issued guidance that there is no penalty or fine imposed under the law for failing to provide the notice to employees by October 1, 2013.
Generally, employers with one or more employees involved in interstate commerce and with $500,000 or more in annual sales are subject to the FLSA.
Content and Delivery Requirements for the Notice
Employers required to provide insurance exchange notices to employees must do so for both full- and part-time employees. And if you offer a group health plan, notice is not limited to employees enrolled in the plan or eligible to enroll—the notice is required for employees not enrolled in the group health plan or ineligible to enroll as well.
Employers are also required to provide the notice to each new employee at the time of hiring, within 14 days of an employee’s start date.
Who doesn’t get the notice? You aren’t required to provide a notice to dependents or other individuals who are eligible (or who may become eligible) for coverage under your group plan, but who are not employees.
Notice is required even if you don’t offer health care coverage. All covered employers must provide employees with notice of their health care insurance options, regardless of whether health insurance is an employee benefit offered by your business.
Properly delivering notices. You can use first-class mail to deliver the notice to employees or deliver it electronically (as long as the DOL’s electronic disclosure safe harbor requirements are met).
Whatever method of delivery you choose, the notice must be provided free of charge.
When does this requirement take effect? Employers must provide individuals employed as of September 30, 2013, with the notice by October 1, 2013. Beginning October 1, 2013, employers are required to provide the notice to new hires.
Note that while the notice is required for current employees and new hires effective October 1, 2013, employers may begin providing the notice to current employees and new hires immediately.
Notice must include certain information. To satisfy the notice requirement, the following must be provided in a written format, in language that an average employee can understand:
- Information making the employee aware of the exchange option, with a description of the services provided by the exchange and contact information;
- Information that the employee may be eligible for a premium tax credit if the employee purchases health care coverage through the exchange and the employer plan’s share of the cost of benefits provided under the plan is less than 60 percent of the costs; and
- Informing the employee of the potential loss of the employer contribution to a health benefits plan offered by the employer (which may be excludable from federal income tax), if an employee purchases health care coverage through the exchange.
Model notices available. To be certain that you meet the notice format and content requirements, you can use a model notice provided by the DOL for employers. Two model notices are provided—one version for employers who offer a health care plan to some or all employees and one for employers not offering a health care plan.
You can modify the model notices to meet your business’s needs as long as the required content is included.
Don’t wait until the last minute to deal with this mandate. Now is the time to determine if you need assistance and reach out to your insurer, plan administrator, accountant or legal advisor. Even if you choose not to begin providing the notice until the legally required date, spend some time sooner rather than later creating the documents you need to be in compliance.
COBRA Election Notice Revised to Include Exchange Information
Under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), an individual covered by a group health plan may be eligible for continuation of coverage upon the occurrence of a qualifying event (for example, upon termination of employment). An election notice explaining the right to continuation of coverage must be provided by a group health plan to qualified individuals within 14 days after the plan administrator receives notice of a qualifying event.
The DOL has provided a model COBRA election which is revised to include the health care exchange coverage options.
The DOL guidance doesn’t state that the exchange information is required for a COBRA election notice. However, the guidance does state that use of the revised model notice will be considered to be good faith compliance with the election notice requirements under COBRA. As this statement may be an indication that such information will be required for the notice in the near future, consider contacting your insurer or plan administrator to discuss whether revision of the COBRA election notice is warranted.