May 14, 2013
Under the Affordable Care Act (“ACA”), employers will be required to provide all employees with notice regarding certain rights concerning the provision of health insurance benefits by October 1, 2013. On May 8, 2013, United States Department of Labor (“DOL”) issued highly anticipated temporary guidance detailing the notice requirements, providing model notices, and revising the model COBRA Election Notice. The DOL’s guidance will remain effective until the DOL issues regulations or other guidance.
Section 18B of the Fair Labor Standards Act (“FLSA”), created by the ACA, requires employers to provide each employee, at the time of hiring, a written notice that informs the employee:
• About the existence of the Health Insurance Marketplace (the “Marketplace,” formerly referred to as the Exchange), including a description of the services provided by the Marketplace, and contact information for the Marketplace;
• The employee may be eligible for a premium tax credit for qualified health plans purchased through the Marketplace if the employer’s share of total allowed costs of benefits provided under the employer’s plan (if offered) does not meet minimum value requirements; and
• If the employee purchases a qualified health plan through the Marketplace, the employee may lose the employer contribution to any health benefits plan offered by the employer, and that all or a portion of such contribution may be excludable from income for federal income tax purposes.
The guidance additionally requires the notice to be provided to current employees by October 1, 2013. For new hires, the notice must be provided at the time of hiring. Effective January 1, 2014, the DOL will consider a notice to be provided at the time of hiring if the notice is provided within 14 days of an employee’s start date. The notice does not have to be provided to dependents.
All employers subject to the FLSA will be required to provide the notice. Employers must provide the notice to each employee, regardless of plan enrollment status (if applicable), or of part-time or full-time status.
The notice must be provided in writing. The notice may be provided electronically if the requirements of the DOL’s electronic disclosure safe harbor are met. (See 29 CFR Section 2520.104b-1(c)).
As anticipated, the DOL published model notices. There is one notice for employers that offer a health plan to some or all employees, and one notice for employers that do not offer a health plan. The model notices are available at: www.dol.gov/ebsa/compliance_assistance.html
For employers offering coverage, the notices require the following information:
• Whether the plan is offered to some or all employees, and who is eligible;
• Whether the plan is offered to dependents, and which dependents are eligible; and
• Whether the plan satisfies the minimum value requirement and whether the coverage is intended to be “affordable.”
In addition, employers have the option of providing the following information:
• The employee’s eligibility for coverage;
• Employee contributions for the lowest cost employer plan that provides minimum value; and
• Changes in the employer’s plan for the new plan year (if any).
This optional information will assist in the determination of whether offered coverage is affordable.
Beginning on January 1, 2014, the Marketplace will open for business, allowing the purchase of health insurance by individuals and small businesses. Open enrollment in the Marketplace begins October 1, 2013. The DOL published this guidance in advance of its expected timeframe (late summer/early fall) to allow employers to give early notice to employees, and to ensure that “employees receive the information at a meaningful time.”
COBRA Election Notice Revised
The DOL also announced it revised its Model COBRA Election Notice to provide more information on options created by the ACA. Most notable are the impact of the ACA’s prohibition of pre-existing condition exclusions, which takes effect for adults on January 1, 2014, and discussion of health insurance plan purchase options through the Marketplace. Employers should revise their forms accordingly. The model Election Notice is also available at: www.dol.gov/ebsa/compliance_assistance.html
Minimum Value Regulations
On May 3, 2013, the Internal Revenue Service (“IRS”) published proposed regulations detailing minimum value requirements under the ACA. As you may recall, the ACA imposes a penalty on large employers (50 full-time or equivalent employees) if the employer does not offer health insurance coverage to its full-time employees (30+ hours/week) that is both affordable and of minimum value. A plan fails to provide minimum value if the plan’s percentage share of the total allowed costs of benefits provided is less than 60 percent (60 percent equals the “bronze” plan level).
The proposed regulations offer further guidance on what plans must do to meet minimum value requirements. Available options to determine minimum value now include:
• Use of the Health and Human Service MV Calculator, now available at: cciio.cms.gov/resources/files/mv-calculator-final-2-20-2013.xlsm
• Satisfy one of three published Safe Harbors
• Provide a certification from an actuary who is a member of the American Academy of Actuaries
• Provide a small group plan bronze level plan
The safe harbors are as follows:
• A plan with $3,500 integrated medical/drug deductible, 80% cost sharing, and $5,000 maximum out-of-pocket limit;
• A plan with $4,500 integrated medical/drug deductible, 70% cost sharing, $6,400 max out-of-pocket limit, and $500 employer contribution to Health Savings Account; or
• A plan with $3,500 medical deductible, $0 drug deductible, 60% medical cost sharing, $10/$20/$50 copay tiered drug plan, and 75% coinsurance for specialty drugs
If you have questions regarding the above requirements, or other questions regarding the ACA, please contact one of the authors. AALRR will also be hosting a webinar on June 26, 2013 at 11:30 a.m. to 12:30 p.m. regarding these and other issues under the ACA.