By Katherine O’Neill, Dinse, Knapp & McAndrew
The Affordable Care Act (ACA) is designed to expand access to affordable healthcare coverage. With the individual mandate scheduled to go online in 2014, employers face new ACA compliance requirements. In May 2013, the U.S. Department of Labor (DOL) published new guidance on one aspect of the compliance requirements. Beginning on October 1, 2013, most employers must provide current and new employees with a notice informing them about the new health insurance marketplace and its coverage options.
Health insurance marketplace
The ACA, which was designed to expand access to affordable healthcare coverage, includes new healthcare coverage options for employees and individuals. As of January 1, 2014, individuals and employees of small businesses may purchase health insurance coverage through a new competitive health insurance marketplace that will offer private health insurance policies from multiple carriers. The marketplace offers “one-stop shopping” for consumers to find and compare private health insurance options. Some individuals will be eligible to receive premium tax credits to assist them in purchasing coverage through the marketplace. Open enrollment for healthcare coverage through the marketplace begins on October 1, 2013, for plans effective on January 1, 2014.
Marketplaces will vary from state to state and will either be administered by the state itself or by the U.S. Department of Health and Human Services (HHS).
Notice requirement and DOL guidance
The ACA adds Section 18B to the Fair Labor Standards Act (FLSA), requiring all employers covered by the FLSA to provide a notice to their employees about the marketplace and its coverage options on or before October 1, 2013. In general, the FLSA applies to employers that employ one or more employees who are engaged in, or produce goods for, interstate commerce. In addition, employers with two or more employees are covered by the FLSA if their enterprise has gross income or sales of $500,000 or more, or if their enterprise is a hospital, a business providing medical or nursing care for residents, a school, a preschool, or a government agency.
In May 2013, the DOL published Technical Release 2013-02, which provides additional guidance and detailed information about the marketplace notice. Under the statute and the new guidance, the marketplace notice must:
- Inform employees about the existence of the marketplace and describe the services available for purchase through the marketplace.
- Tell employees how to contact the marketplace for assistance.
- Apprise employees of their potential eligibility for a tax credit to subsidize a portion of the cost of the premium for insurance purchased through the marketplace. Employees may be eligible for the tax credit if the cost of their employer-sponsored plan exceeds 9.5 percent of their annual household income or if the employer-provided coverage doesn’t meet the “minimum value standard.” (Plans with actuarial values of at least 60 percent meet the minimum value standard.)
- Notify employees that they may lose amounts contributed by their employer toward insurance premiums for employer-sponsored plans if they purchase insurance through the marketplace and that such contributions may be excludable from income for federal income tax purposes.
The marketplace notice must be provided to all employees regardless of their part-time or full-time status. It must be provided free of charge and in a form designed to be understood by the average employee. Employers don’t have to provide separate notices for spouses, dependents, or other individuals who are eligible for coverage but who aren’t employees. The marketplace notice may be delivered by first-class mail or electronically if it meets the DOL’s electronic distribution safe harbor. New employees must be provided with a marketplace notice within 14 days of being hired.
Note: Employers may provide the marketplace notice to employees electronically only if the delivery meets the DOL’s applicable safe harbor. The marketplace notice may be distributed in electronic form if:
- The employee performs his duties at a place where the electronic form is furnished (i.e., if the employee works at a computer workstation connected to the Internet or an intranet and the form is distributed via e-mail) and accessing of the electronic information system is an integral part of his duties.
- The employee consents to receiving such documents in electronic form. The employer must provide a written notice that clearly and conspicuously states:
- The types of documents to which the consent applies;
- That consent can be withdrawn at any time without charge;
- The procedures for withdrawing consent and for updating the employee’s address for receipt of electronically furnished documents or other information;
- The right to request and obtain a paper version of the electronic documents and whether a charge applies in connection with such a request; and
- Any hardware or software requirements for accessing the documents electronically.
Model marketplace notices. The guidance released by the DOL in May includes two model marketplace notices: one for employers that offer employer-sponsored health plans and one for employers that don’t. The model notices contain space for employers to include certain optional information, such as whether the employee is currently eligible for coverage offered by the employer (or whether he will be eligible within three months), whether the coverage offered by the employer meets the minimum value standard, the cost of the employer’s sponsored plan, and whether the employer intends to make changes to coverage options for the 2014 plan year. Responses to those questions are optional, but the information could be useful for employees deciding whether to decline employer-sponsored coverage. The model notices are available at www.dol.gov/ebsa/healthreform/.
Revised COBRA election notice. The technical release also includes information about updated election notice requirements under COBRA and contains a model notice for group health plans to make individuals who no longer qualify for group health coverage aware of coverage options available in the marketplace. The election notice must be provided to an employee within 14 days after the plan administrator receives notice of a qualifying event causing the employee to no longer be eligible under the employer-sponsored plan. The model notice is available at www.dol.gov/ebsa/cobra.html.
Help for employees and small employers. The ACA requires state marketplaces to establish a “navigator” program to help people who are eligible to purchase coverage through the marketplace learn about their new coverage options and enroll in a plan. That includes being available to assist smaller employers in understanding the new marketplace notice requirements.
Practice pointers for employers
Here’s a checklist to ensure you’re ready to comply with the notice requirements:
- Let your employees know about the notice in an appropriate manner. You should determine the best permissible method of notice distribution for your business. If your employees primarily work at workstations connected to the Internet, electronic notification may be appropriate. If your employees are out in the field or on a jobsite, you may be better off using paper notification, unless your employees consent to electronic notification.
- Meet the October 1 deadline. Be aware that the October 1 deadline for compliance applies regardless of your plan year. Both plans that run on the calendar year (with a new plan year beginning on January 1) and noncalendar year plans must adhere to the October deadline.
- Decide whether you want to include optional information. As we noted above, some elements of the model notice are optional. Although the optional provisions may be informative for employees, completing the model notice may take longer when you include the optional provisions. It’s optional to provide the following information:
- Whether the employee is currently eligible for coverage offered by the company or will be eligible in the next three months;
- Whether the company offers a health plan that meets the minimum value standard;
- The cost of the company-provided plan; and
- The changes you intend to make to company-provided coverage options for the new plan year.
- Incorporate the guidance into your plan materials. If October 1 corresponds with the start of your open enrollment period, add the marketplace notice to your open enrollment materials.
The ACA imposes new obligations on employers. It’s important to assess those requirements and approach them strategically. Getting ahead of the new marketplace notice requirements will help you, your administrators, and your HR team effectively inform your employees of the changes to their healthcare options. Providing your employees with the help and support they need to navigate the new health insurance environment will improve employee satisfaction and could help with performance and retention.
Excerpted from Vermont Employment Law Letter. Katherine O’Neill is an associate attorney specializing in employment and corporate transactions for businesses and institutions of higher education at Dinse, Knapp & McAndrew in Burlington.