Notice of Coverage Options
Beginning on January 1, 2014, individuals and employees of small businesses will have access to health coverage through state or federally administered insurance exchanges that are now being called health insurance marketplaces (Marketplaces). Enrollment in these Marketplaces is set to begin on October 1, 2013. The Affordable Care Act (ACA), through an amendment to the Fair Labor Standards Act (FLSA), mandates that employers provide a notice to their employees of the coverage options available on the Marketplaces (Notice of Coverage Options).
Employers subject to the FLSA are required to provide the Notice of Coverage Options. Generally, the FLSA applies to employers (i) with one or more employees, and (ii) that have at least $500,000 in annual business.
The Notices of Coverage Options were to have been provided by March 1, 2013, and were to include the following:
- Information to employees about the existence of the Marketplaces, including description of the services they provide and contact information for requesting assistance from the Marketplaces;
- A statement that if the employer plan’s share of the total allowed costs of benefits is less than 60% of such costs, the employee may be eligible for a premium tax credit if he or she purchases a qualified health plan through the Marketplace; and
- If the employee purchases a qualified health plan through the Marketplace, he or she may lose the employer contribution (if any) to any group health 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 date for requiring distribution of the Notice of Coverage Options was delayed, however, to allow for coordination with the DHHS’s educational efforts and the IRS’s guidance on minimum value (see, Honigman Health Care Reform Alert, May 14, 2013). Though the Department of Labor (DOL) has not yet issued final guidance, it issued temporary guidance in the form of Technical Release 2013-03 on May 8, 2013, to give employers enough time to prepare. This guidance included a model notice that can be found at www.dol.gov/ebsa/healthreform.
According to this latest guidance, the Notice of Coverage Options must be provided to each employee, regardless of plan enrollment status or part-time or full-time status. Employers are not required to provide a separate Notice to dependents.
The Notice must be provided to each new employee hired on or after October 1, 2013, and the DOL will consider the Notice to have been provided at the time of hiring, if it is provided within 14 days of an employee’s start date. With respect to current employees hired before October 1, 2013, the Notice is to be provided no later than that date. For both new hires and current employees, the Notice is to be provided free of charge, and must be written in a manner calculated to be understood by the average employee. It may be provided by first-class mail, or electronically, if the DOL’s requirements for electronic distribution of plan notices are met. The information to be included in the Notice has not changed, and is the same as described above.
In addition, the DOL guidance recognizes that the availability of health insurance coverage through a state or federal Marketplace may well affect an employee’s COBRA election decision, and thus, language about the availability of Marketplace coverage must be included in the COBRA election notice. A new model COBRA election notice incorporating this relevant language is also included at dol.gov/ebsa/cobra.html.
Summary of Benefits and Coverage (SBC): Second Year Updates
On April 23, 2013, the DOL, the Department of Health and Human Services (DHHS), and the Department of the Treasury/IRS issued a new set of frequently asked questions (FAQs) addressing the presentation of information in the Summary of Benefits and Coverage (SBC) to be provided in the second plan year, i.e., plan years beginning after January 1, 2014 and prior to January 1, 2015. These FAQs are at www.dol.gov/ebsa/faqs/faq-aca14.html.
The changes to the SBCs are not extensive, and are limited to two items – (i) the addition of statements addressing whether the plan or coverage provides minimum essential coverage (MEC), as defined in Internal Revenue Code §5000A(f), and (ii) whether the plan or coverage meets the minimum value (MV) requirements under the ACA. The guidance also provides a revised model SBC template at www.dol.gov/ebsa/pdf/correctedsbctemplate2.pdf. A sample of a completed SBC template is at www.dol.gov/ebsa/pdf/CorrectedSampleCompletedSBC2.pdf.
For plans or insurers that are already in the midst of preparing SBCs to be issued for the second year of applicability and for whom it would be an administrative burden to revise those documents, the guidance offers enforcement relief by allowing the SBC to be provided unchanged, but with a cover letter that provides disclosure regarding the plan or policy’s MEC and MV status.
The updated SBC template and completed SBC sample do not contain changes reflecting the ACA’s elimination of annual limits on essential health benefits (EHB), but the FAQs indicate that no enforcement action will be taken against a plan or insurer that modifies the second-year SBC to eliminate the entire row in the “Important Questions” chart that contains the question “Is there an overall annual limit on what the plan pays?”
If you have any questions about the revised SBC, the Notice of Coverage Options, any other ACA required notice obligation, any other aspect of ACA compliance, or any other employee benefits matter, please contact any of the Honigman attorneys listed here.