Comply with the Affordable Care Act’s Exchange Notice Requirements
Despite some delays in implementation, a major piece of the Patient Protection and Affordable Care Act still requires all applicable employers, regardless of whether they offer health care coverage, to provide their current employees with a health insurance exchange notice no later than Oct. 1, 2013, when a health insurance exchange is to be operational in each state.
When the Affordable Care Act was enacted, it added Section 18B to the Fair Labor Standards Act (FLSA). Specifically, Section 18B states that employers subject to FLSA must provide employees with written notice regarding the exchange. The purpose of the notice is to inform employees about the new health insurance exchanges and subsidies that will be available to individuals effective Jan. 1, 2014, and to provide information about the employer’s current offerings to employees. Originally this notice was required to be given by March 1, 2013. But delays in issuing guidance on the notice resulted in delaying the obligation to give the notice until Oct. 1, 2013.
The Department of Labor (DOL) has released interim guidance on giving the notice (Technical Release 2013-02). According to the guidance, this one-time notice must be given to all current employees as of Oct. 1, 2013, and to new employees as they’re hired. For 2014, if the notice is provided within 14 days of an employee’s start date, the notice will be considered as having been provided at the time of hiring.
Employers must give a notice to all full-time and part-time employees, regardless of whether the employee is enrolled in an employer-sponsored medical plan. And employers must provide this notice even if they don’t offer any health coverage to employees. The notice doesn’t have to be provided to employees’ dependents.
In addition, the notices must be in writing and can be delivered electronically by the employer if the ERISA standards for electronic delivery are met.
What Must Be Included in Notice
DOL has provided two model notices for employers: one model for employers who don’t offer a health plan to any employees (www.dol.gov/ebsa/pdf/FLSAwithoutplans.pdf), and another model for employers who do offer a health plan to some or all of their employees (www.dol.gov/ebsa/pdf/FLSAwithplans.pdf).
Employers can use the model notices or create their own notice as long as the notice includes the following required information explaining that:
- The exchange or marketplace exists, and including a description of the services it provides and directions for employees to visit HealthCare.gov for more information.
- Employees who purchase coverage through the exchange or marketplace may be eligible for a premium subsidy if their employer doesn’t provide coverage that’s “affordable” and provides “minimum value.” Coverage is affordable if the employee-only option for the lowest-cost plan offered costs less than 9.5 percent of an employee’s W-2 wages. Coverage provides minimum value if the plan pays at least 60 percent of allowed charges for covered services.
- Employees who purchase coverage through the exchange or marketplace will pay for that coverage with after-tax dollars.
- If applicable, the employer offers its employees medical coverage, and including a description of it.
The obligation to provide notice is mandatory, but use of the DOL model is optional. The model exchange notice may be a good starting place and a cost-effective way to fulfill this requirement. Employers must complete sections of the notice before distributing it to employees, including employer contact information, and, for employers that do offer a health plan to employees, information about eligibility for coverage under the health plan as well as whether the health plan meets the “minimum value standard.”
Other information requested as part of the DOL’s model for employers that offer a health plan to employees seems to be optional but would probably need to be provided to any employees who ask for it in connection with their own completion of an application to enroll in a health insurance exchange plan.
With respect to indicating on the notice whether an employer-sponsored plan meets the “minimum value standard,” the determination can be quite tedious. The IRS has provided that the determination can be made by one of the following methods: (1) using the Minimum Value Calculator available at www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/mv-calculator-final-4-11-2013.xlsm; (2) using a plan design designated by the IRS as a safe harbor plan; or (3) obtaining a certification from an actuary. Most likely, however, for fully insured health plans, the insurers will indicate to employers whether the applicable plan design meets the minimum value standard.