Update: On September 4, 2013, the DOL, HHS and IRS issued a Frequently Asked Question (Part XVI) stating that it is permissible for an entity other than the employer – such as a carrier, third party administrator (TPA), or multi-employer plan – to distribute the Notice of Exchange. The FAQ cautions that, if the employer delegates Notice distribution duties, the employer must “take proper steps” to ensure that a Notice is provided to all employees regardless of plan enrollment. Therefore if the third party provides the Notice only to a subset of employees (for instance, an insurance carrier providing the Notice only to employees enrolled in the group health plan), this must be disclosed to the employer so that the employer can timely provide the Notice to employees who are not covered under the plan.
The U.S. Department of Labor released, on May 9, 2013 Technical Release 2013-02 on the “Notice of Exchange” employer disclosure responsibility under the Affordable Care Act, together with an updated initial notice of COBRA coverage that includes information on health coverage alternatives offered through the exchanges, now formally referred to as the “Health Insurance Marketplace.” Together with the guidance, the DOL also published two model notices of coverage on the “Marketplace,” one for employers that offer group health coverage, and one for employers that do not.
Publication of the model notices in early May comes a good bit earlier than the “late summer or fall of 2013,” which the DOL announced in January when it postponed the original March 1, 2013 employer disclosure deadline. This is the result of numerous employer requests that that the Notice be made available earlier in the year, to provide more time for them to inform employees of upcoming coverage options through the Marketplace. Therefore employers may use the model Notices and rely on the Technical Guidance earlier than the proposed distribution date of October 1, 2013, although only employers with self-funded group health plans will be likely to do so, given that 2014 premium rates for insured plans are not yet known. The Guidance will remain in effect until regulations on the Notice requirements are published.
Technically, the notice requirement, which is set forth in Section 18B of the Fair Labor Standards Act (FLSA), applies only to employers subject to the FLSA. However that is a very broad category, including employers involved in interstate commerce with an annual dollar volume of business of at least $500,000. Other categories of employer, including schools, hospitals, institutions of higher learning, nursing homes, and federal, state, and local government agencies, are automatically covered under the FLSA. The guidance provides a link to an internet compliance tool that employers can use to determine whether or not they are subject to the FLSA, and hence the disclosure requirement.
Employers must provide the Notice of Marketplace Coverage to current full-time and part-time employees – regardless of their enrollment status under existing group plans – no later than October 1, 2013, which is also the date on which open enrollment in the Health Insurance Marketplace will begin. Thereafter employers must provide the Notice to each new employee upon hire, which the Guidance defines as within 14 days of an employee’s start date. Employers wanting to provide the Notice to current employees and new hires in advance of the October 1, 2013 deadline may use the Model Notices and rely on the terms of the Technical Release in doing so.
There is no requirement to provide a Notice to dependents or other individuals or are or may become eligible for coverage under the plan but who are not employees.
As outlined in my earlier post, the Notice must do all of the following:
- Inform employees of the existence of the Marketplace, describe the services they provide, and the manner in which the employee may contact the Marketplace to request assistance (i.e., at http://www.HealthCare.gov);
- Inform employees that they may be eligible for a premium tax credit or for cost-sharing reductions if the employer’s plan provides less than 60% actuarial value and they purchase coverage through the Marketplace; and
- Inform employees that, if they purchase coverage through the Marketplace, they may lose the employer contribution (if any) to any health plan sponsored by the employer, and that unlike exchange coverage, which is purchased with after-tax dollars, all or a portion of the employer contribution towards coverage under its own plan, if received, would be excludable from the employee’s income for Federal income tax purposes.
All of these disclosures are set forth in “Part A” of the Model Notices. The Model Notice for employers with group health coverage also requires that the employer add a name and contact information for someone with more information about employer-sponsored coverage, which may include a human resources personnel or even a broker or third party administrator contact.
“Part B” of the Model Notices contains information on the employer and on employer-sponsored coverage, if any, in sections that are numbered to correspond to line items the employees must complete when enrolling for coverage and/or financial aid on the Marketplace. Employers are not required to complete this section of the Model Notice unless and until an employee requests the information from them as needed to enroll on the Marketplace. Supplying the information up front in the standardized format is a good idea, however, as it will allow employees to enroll in the Marketplace without seeking individualized assistance from the employer. The additional information sought from employers that do not provide group health coverage is as follows:
- Employer name
- Employer Identification Number (EIN)
- Employer address
- Employer phone number
- Zip code
- Contact information for employer representative
- Phone number of contact person, if different from employer general number
- Email address for contact person.
The additional information sought from employers that do provide group health coverage is identical except they must identify a contact person with information about employer sponsored coverage. There are also entries for the employer to describe plan eligibility rules, whether or not dependent coverage is offered, and whether the plan meets minimum value (60% actuarial value) and affordability standards. It notifies employees that, even if the employer plan provides minimum value and is affordable, they may qualify for financial aid on the Marketplace based on their household income. (Note that this likely would happen only if certain deductions such as alimony or payment of student loan interest reduced someone’s household income to a point lower than the income the individual received from employment. In such an instance the employer would not be subject to an IRC Section 4980H penalty tax so long as their plan met “affordability” for that individual, based on the safe harbor definition of compensation they selected and use.)
The Model Notice for employers that do provide coverage also contains a section corresponding to the “Marketplace Employer Coverage Tool” that employers voluntarily may complete and provide to employees. The questions it covers are as follows:
- Whether the employee currently is eligible for employer-sponsored coverage or will be eligible in the next 3 months
- Whether the employer offers a health plan that meets the minimum value standard
- Premium amounts (on a weekly, bi-weekly, semi-monthly, monthly, quarterly, or annual basis) for the lowest-cost plan offered by the employer that meets minimum value standards, factoring in any discount offered for tobacco cessation programs (but not any other wellness incentives). (This is consistent with the proposed regulations on Minimum Value and other premium tax credit eligibility issues that were published on May 3, 2013).
- For employers whose plan year will end soon (at the time they prepare the Notice) and who know that the health plans they offer will change, a description of the changes to be made, including that the employer will not offer coverage, or will begin offering affordable, minimum value coverage, in which case premiums (on a weekly, bi-weekly, semi-monthly, monthly, quarterly, or yearly basis) must be estimated, along with the date on which the changes will occur.
Employers are free to prepare their own versions of the Notice of Marketplace Coverage provided that it covers all the required disclosures and provides the information that employees will need to enroll for coverage, and financial aid, on the Marketplace. In addition, the Guidance states that the Notice must be provided in writing in “a manner calculated to be understood by the average employee,” a standard which presumably is met by the Model Notices. Employers may deliver it by first-class mail, in person at the workplace, or electronically if DOL safe harbor requirements – set forth at 29 CFR § 2520.104b-1(c) – are met.