The primary purpose of the Affordable Care Act (ACA) was to expand access to affordable health coverage. Central to achieving this purpose is the creation of new Insurance Exchanges, referred to as Health Insurance Marketplaces which are intended to provide a competitive private health insurance market where individuals and employees of small businesses can shop for affordable coverage. Every state will have a Marketplace—some will be run by the state, others by the Federal government or a combination of the two. Although the Affordable Care Act’s (ACA) “employer mandate” has been delayed until 2015, health insurance exchanges are still scheduled to start offering health coverage to individuals and employees of small businesses starting January 1, 2014. Open enrollment in these Health Insurance Marketplaces will begin on October 1, 2013. Individuals who don’t have insurance coverage after 2013 may be subject to a penalty.
Depending on their income, individuals who obtain coverage through the Marketplace may qualify for premium tax credits that immediately reduce the premiums they pay for coverage. They may also be eligible for cost-sharing reductions that reduce the amount they pay out of pocket for medical expenses. However, neither the credit nor cost-sharing reduction is available if the individual’s employer offers a health plan with minimum essential coverage that is affordable and meets the minimum value standard. The plan meets the minimum value standard if the plan’s share of the total allowed cost of benefits is no less than 60%. Coverage is affordable if the employee’s share of the self-only premium for the employer’s lowest cost plan doesn’t exceed 9.5% of the employee’s household income.
Employers Subject to the Notice Requirement
To make sure employees have the information they need to allow them access to the benefits offered through the Marketplace, starting October 1, 2013, employers must provide its employees written notice of the health coverage it offers along with an explanation of the new Health Insurance Marketplace coverage options. Employees will take this information to the Marketplace when they apply for insurance.
An employer covered by the Fair Labor Standards Act (FLSA) must provide each employee with a written notice. In general, the FLSA applies to employers that have (a) one or more employees who are engaged in commerce and (b) gross annual sales of $500,000 or more. The FLSA is enforced by the Department of Labor (DOL). DOL has issued guidance (see the link below) addressing applicability of fines or penalties for failure to provide the required notices.
Timing and Delivery of the Notice
Employers (including those who do not offer health coverage to their employees) must distribute the appropriate notice to all employees (regardless of plan enrollment status or part-time or full-time status). For all employees who are employed before October 1, 2013, the notice must be provided by October 1, 2013. For employees hired after September 30, 2013, the notice must be provided at the time of hiring; however, for 2014, a notice provided within 14 days of an employee’s start date will be considered provided at the time of hiring.
Content of the Notice
The notice must include specific information. An employer must provide each employee with a written notice:
- informing the employee of the existence of a state insurance marketplace;
- including a description of the services provided by the marketplace;
- explaining how the employee may contact the marketplace to request assistance;
- stating that if the employer plan’s share of the total allowed costs of benefits provided under the plan is less than 60% of the total allowed costs or the employee’s premiums for self-only coverage exceed 9.5% of the employee’s household income, the employee may be eligible for a premium assistance credit and a cost-sharing-reduction if the employee purchases a qualified health plan in the individual market through the marketplace; and
- stating that if the employee purchases a qualified health plan in the individual market through the marketplace, the employee may lose any employer contribution to any health benefits plan offered by the employer and that all or a portion of the contribution may be excludable from income for U.S. income tax purposes.
Department of Labor Model Notices
The DOL issued two model notices in May 2013 that may be used for current and new employees. One model is for employers who offer employer-provided health insurance coverage to some or all of their employees, and the other model is for employers who do not offer employer-provided health insurance coverage. Links to these model notices are provided below. The model notices are also available at www.dol.gov/ebsa. The model notices direct employees to the website www.healthcare.gov for more information about marketplaces so that employers do not have to explain or direct employees living in various states who are served by different marketplaces. The notice must be provided by first class mail or electronically if the DOL’s safe harbor rules for electronic disclosure are met.
The model notices must be revised by employers to include identifying and contact information. In addition, employers who offer health insurance coverage must provide information on which employees are offered coverage, eligibility requirements, and a statement as to whether the coverage meets the minimum value standard and whether the cost of the coverage to the employee is intended to be affordable based on the employee’s wages.
DOL – Frequently Asked Question – Notice of Coverage Options – Fines
DOL – Model Notice – For employers who do offer a health plan to some or all employees
DOL – Model Notice – For employers who do NOT offer a health plan
DOL – Model Notices – Spanish and MS Word format
Please contact Martini, Iosue & Akpovi by phone at (818) 789-1179 if you have questions or want more information.