Employers will have additional time in which to provide written notice to employees of the availability of health exchanges, per a “Frequently Asked Questions” issued on January 25, 2013 by the tri-agencies administering the Affordable Care Act (HHS, DOL and IRS).
Specifically, the guidance extends the initial notice deadline from March 1, 2013, to sometime after the Department of Labor issues regulations describing the notice requirements in more detail. Per the guidance this will likely be in the “late summer or fall of 2013.” Subsequent to the initial Notice deadline, which applies to all active employees, employers will be required to provide the notice to each new hire. The Notice must:
- Inform employees of the existence of the exchanges, describe the services they provide, and the manner in which the employee may contact the exchanges to request assistance;
- 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 an exchange; and
- Inform employees that, if they purchase coverage through an exchange, 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.
The new guidance states that the Department of Labor may issue a model Notice of Exchange along with the coming regulations, but in the meantime suggests that employers may want to adapt for this purpose a proposed template that summarizes employer-sponsored coverage options for purposes of determining eligibility for financial aid on the exchanges.
The template consists of pages 34 – 38 of the recently released streamlined individual application for exchange coverage, Medicaid and CHIP (CMS 10440). The data elements that it contains include the following:
- Employer name
- Employer contact information
- Hours worked per week (e.g., full-time, or not)
- Whether an offer of health coverage is made
- Date of future enrollment
- Name of lowest cost plan providing minimum value; and
- Employee contribution amount and frequency
Employers can either provide this information on each streamlined application presented to them by an employee, or can pre-populate a template themselves for this purpose. It is the pre-populated template that the FAQ guidance suggests as a temporary stand-in for the Notice of Exchange. Presumably an employer adapting the template for use as a Notice of Exchange would add to these data elements the three exchange-related disclosures described above.
The Notice of Exchange requirement is set forth in Section 18B of the Fair Labor Standards Act (FLSA), which was added by the Affordable Care Act. As such it applies to “employers” as defined under the FLSA. The FLSA defines employers in a fashion similar to that under ERISA: as “any person acting directly or indirectly in the interest of an employer in relation to an employee.” See 29 U.S.C. § 203(d); ERISA Section 3(5).
Note that employers will fall within this broad and somewhat circular definition of an “employer” – and hence will be obligated to provide the Notice of Exchange – even if they are not subject to the FLSA’s minimum wage provisions, described here.