As the October 1, 2013, deadline for compliance with certain notification requirements mandated by the Patient Protection and Affordable Care Act (PPACA) approaches, employers are grappling with questions about their obligations and compliance needs.
The PPACA requires certain employers to provide written notice by October 1 to all employees concerning coverage options available through the Health Insurance Marketplace (Marketplace) created by the PPACA. In conjunction with the impending open enrollment period for the Marketplace, the U.S. Department of Labor (DOL) has also issued a new model COBRA notice to inform individuals of coverage options that will be available through the Marketplace. McCarter & English issued a previous Client Alert discussing these issues in further detail, which may viewed here.
The following addresses some of the most frequently asked questions about the Marketplace and COBRA notice requirements.
Frequently Asked Questions Concerning the Marketplace Notice
- Which employers must issue the notice?
The notice requirement applies to all employers subject to the Fair Labor Standards Act (FLSA).
The employer’s obligation to send the notice may be satisfied by other entities, including third-party administrators, multiemployer plans or an insurer, if that party provides a timely and complete notice. Employers should note that it may need to take steps to ensure that the notice is provided to all employees in the event third parties provide the notice only to a subset of employees, such as plan participants.
- Which employees must receive the notice?
All current employees must receive the notice, regardless of their status in the employer’s health plan (i.e., participants or non-participants), employment status (full-time or part-time) or eligibility for participation in the health plan.
- When must the notice be issued?
Current employees must receive the notice no later than October 1, 2013. Starting on October 1, 2013, employers are required to issue the notice to new employees at the time of hire. In 2014, employers must provide new employees with the notice within 14 days of the employee’s start date.
- How must the notice be issued?
The notice must be provided free of charge and written in a manner calculated to be understood by the average employee. The notice must be sent either by first-class mail or electronically, if DOL guidelines concerning the electronic delivery of documents are satisfied.
- What information must be included?
FLSA Section 18B states that employers must provide their employees with a written notice providing the following:
- Basic information regarding the Marketplace, the services provided, and how to contact the Marketplace to request assistance;
- If the employer’s plan does not meet the "minimum value" requirements, a statement informing employees that they may be eligible for a premium tax credit under Internal Revenue Code Section 36B if they purchase coverage through the Marketplace. In order to meet the minimum value requirements, the employer plan’s share of coverage costs must be at least 60% and the employee’s share must not exceed 9.5% of his or her annual household income; and
- A statement informing employees that if they purchase coverage in the Marketplace, they may lose any employer contributions made toward coverage offered under the employer’s health plan, and that all or a portion of this contribution may be excludable for federal income tax purposes.
- What are the DOL Model Notices, and are employers required to use them?
The DOL has issued model notices for employers who offer a health plan to some or all employees (http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf) and for employers who do not offer a health plan (http://www.dol.gov/ebsa/pdf/FLSAwithoutplans.pdf).
Employers are not required to use the model notices so long as their notice contains all required information.
Employers should note that the model notice for employers who offer a health plan to some or all employees requests more information than is required by the FLSA. Specifically, page 3 of the notice (Questions 13 through 16), which is optional, requests an assessment of each individual employee’s eligibility and premium cost for the employer-sponsored health plan. Depending on the size of the employer’s organization, there may be a significant burden associated with completing Questions 13 through 16 for each employee. Employers may opt not to complete those questions and to provide that information separately if requested by an individual employee.
- Are there fines or penalties for employers who do not provide the notice?
The DOL has stated that employers covered by the FLSA should provide a written notice to its employees about the Health Insurance Marketplace by October 1, 2013, but that there is no fine or penalty under the law for failing to provide the notice.
Employers who disregard the mandatory notice requirement, however, may be exposed to some level of risk for non-compliance, which is difficult to anticipate at this time given that implementation of the PPACA continues to evolve. Moreover, employers who fail to issue notices could be subject to claims or litigation brought, for example, by employees who have not received the required notice.
Frequently Asked Questions Concerning the Updated COBRA Election Notice
- What is the updated COBRA Election Notice?
The Employee Benefits Security Administration has issued new notice requirements for continuation coverage as well as a new model COBRA notice. Generally, ERISA Section 606 requires plan administrators to notify beneficiaries of their rights to continuation of health care coverage no later than 14 days following notice of a qualifying event (44 days if the employer serves as plan administrator). Under the new notice requirements, employers must also inform beneficiaries of the availability of coverage through the Marketplace.
- What is the Department of Labor (DOL) Model COBRA Election Notice, and are employers required to use them?
The model notices can be found on the US Department of Labor website:
COBRA Model Election Notice: http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf
Redline Version: http://www.dol.gov/ebsa/modelelectionnoticeredline.doc
Employers are not required to use the model notices so long as their own notices include all required information. However, employers will be found in good faith compliance with these requirements so long as they properly fill out and distribute the model notices.
- When should employers begin to use the updated COBRA election notice?
The DOL did not specify a date by which employers must begin using the updated COBRA election notice. However, in order to comply with the obligation to provide notice of coverage options, we recommended that employers begin to implement the notice if they have not done so already. Open enrollment for the Marketplace coverage begins on October 1, 2013, and coverage is effective January 1, 2014, so qualifying beneficiaries may wish to consider and compare that Marketplace coverage to COBRA. Given that Marketplace coverage is not effective until January 1, 2014, qualified beneficiaries experiencing a qualifying event prior to that date may be required to enroll in COBRA initially to maintain continuous coverage.
- How should employers distribute the updated COBRA election notice?
Employers need not distribute the updated COBRA election notice to all employees. Employers should continue to use their existing COBRA-compliant process to distribute this notice to qualifying beneficiaries upon notice of a qualifying event. The only change to the process is the content of the notice itself.