Department of Labor Issues Guidance for Notifying Employees of Health Insurance Exchange Coverage Options
On May 8, 2013, the U.S. Department of Labor (DOL) issued temporary guidance for employers to help them meet their obligations to notify employees of their health insurance exchange coverage options. State health insurance exchanges, also known as the Health Insurance Marketplace, are required by the Affordable Care Act (ACA) to allow individuals to consider and purchase coverage from a variety of available insurance plans.
Section 18B of the Fair Labor Standards Act (FLSA), which was added by section 1512 of the ACA, generally provides that an employer subject to the FLSA must provide each employee hired on or after October 1, 2013, notice about the Health Insurance Marketplace. This notice must be provided at the time of hiring. Employers must also provide the notice to existing employees by October 1, 2013.
Employers Required to Give the Notice
The vast majority of employers are subject to the Fair Labor Standards Act (FLSA), and those who are are subject to the ACA's insurance marketplace notice obligations. Specifically, the FLSA applies to employers who have at least one employee and who are engaged in, or produce goods for, interstate commerce and have at least $500,000 in annual business volume. The law also generally applies to hospitals, long-term care facilities, governmental entities (federal, state and local) and educational institutions. Other entities also may be subject to the FLSA.
Employees Who Must Receive the Notice
Generally, all employees — both full- and part-time — must be provided notice. (That said, although part-time employees must receive notice, the ACA's employer insurance coverage obligations and penalties do not extend to part-time employees). Employees must be given notice regardless of whether they are enrolled in the employer’s insurance plan. Spouses and dependents do not need to be provided notice.
Contents of the Notice
The notice must inform employees of the following:
- information regarding the existence of the Health Insurance Marketplace
- contact information for the Health Insurance Marketplace
- a description of the services provided by a Marketplace
- a statement that the employee may be eligible for a premium tax credit under section 36B of the Internal Revenue Code if the employee purchases a qualified health plan through the Marketplace
- a statement that if the employee purchases a qualified health plan through the Marketplace, the employee may lose the employer contribution (if any) to any health benefits plan offered by the employer and that all or a portion of the employer’s contribution may be excludable from income for federal income tax purposes
- the notice must be provided in writing in a manner calculated to be understood by the average employee
The Department of Labor has developed model notices for employers to use to meet the requirements of section 18B of the FLSA. Separate notices are provided for employers who do not offer a health plan and for employers who offer health insurance coverage to some or all of their employees. These notices can be found on the DOL's website at http://www.dol.gov/ebsa/healthreform/.
When Employers Must Give the Notice
Beginning October 1, 2013, employers are required to provide the notice to each new employee at the time of hiring. For 2014, the Department 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. Employees who were employed prior to October 1, 2013, must be provided the notice not later than October 1, 2013. The notice may be provided by first-class mail. It can also be provided electronically if the requirements of the Department of Labor’s electronic disclosure safe harbor are met. The safe harbor regulations are located at 29 C.F.R. §2520.104b-1(c).
COBRA Notice Revisions
Under COBRA, an individual who was covered by a group health plan on the day before a qualifying event occurred may be able to elect COBRA continuation coverage upon a qualifying event. Individuals with such a right are called qualified beneficiaries. A group health plan must provide qualified beneficiaries with an election notice, which describes their rights to continuation coverage and how to make an election. The election notice must be provided to the qualified beneficiaries within 14 days after the plan administrator receives the notice of a qualifying event. Notice to the plan administrator usually must be provided within 30 days of the qualifying event.
Some qualified beneficiaries may want to consider and compare health coverage alternatives to COBRA continuation coverage that are available through the Marketplace. Qualified beneficiaries may also be eligible for a premium tax credit (a tax credit to help pay for some or all of the cost of coverage in plans offered through the Marketplace). The Department of Labor has revised its model COBRA notice to account for the Health Insurance Marketplace; it can be found at http://www.dol.gov/ebsa/healthreform. Although the model notice is not mandatory, it does reflect the substance of what the DOL expects to be included in COBRA notices as of October 1, 2013.