Beginning January 1, 2014, individuals and small businesses will have the opportunity to purchase health insurance coverage through the Health Insurance Marketplace (“Marketplace”) established pursuant to the Patient Protection and Affordable Care Act (“ACA”). Open enrollment is expected to begin in October 2013.
Pursuant to § 1512 of the ACA, employers are required to provide employees with written notice of the health care coverage options available through the Marketplace. Specifically, the ACA requires employers to provide their employees with a written notice informing the employee of the existence of [the Marketplace], including a description of the services provided by such [Marketplace], and the manner in which the employee may contact the [Marketplace] to request assistance.
If the employer plan’s share of the total allowed costs of benefits (provided under the plan) is less than 60 percent of such costs, then the employee may be eligible for a premium tax credit under section 36B of the Internal Revenue Code (1986) and a cost sharing reduction under Section 1402 of the [ACA] if the employee purchases a qualified health plan through the [Marketplace]. If the employee purchases a qualified health plan through the [Marketplace], the employee will lose the employer contribution (if any) to any health benefits plan offered by the employer and that all or a portion of such contribution may be excluded from income for federal income tax purposes.
On May 8, 2012, the U.S. Department of Labor Employee Benefits Security Administration (“DOL”) issued Technical Release 2013-02 (“Technical Release”) to provide guidance and model notices to assist employers in meeting this ACA notice requirement. Further, the Technical Release includes an updated model election notice to be used by group health plans for purposes of continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”). The ACA Marketplace notice requirements apply to all employers that are subject to the Fair Labor Standards Act, which includes nearly all private employers and certain public sector employers.
The Technical Release includes two model notices for use by employers in satisfying the ACA notice requirement, including: (1) a model notice for employers who do not offer a health plan; and (2) a model notice for employers who offer a health plan to some or all employees. You can find the model notices at the address below: http://www.dol.gov/ebsa/healthreform/index.html.
Part B of the notices must be completed by the employer. For employers that offer health plans to some or all of their employees, the employer will need to determine whether its plan covers 60% of the actuarial cost of coverage (i.e. provides minimum value) and whether the cost of coverage to each employee exceeds 9.5% of the employee’s wages (i.e. provides affordable coverage) in order to complete Part B of its notices.
The Technical Release provides that notice regarding Marketplace coverage options must be given to each employee, regardless of whether the employee is full-time or part-time and regardless of whether the employee is enrolled in a group health plan. Employers, however, are not required to provide a separate notice to dependents.
The Technical Release requires employers to provide the notice to each new employee at the time of hiring beginning October 1, 2013. In 2014, if the notice is provided within fourteen (14) days of an employee’s start date, the DOL will consider the notice to be provided timely. Further, current employees must be provided the notice no later than October 1, 2013. The DOL guidance states that notices may be given by first-class mail and/or electronically, if the DOL’s rules regarding electronic disclosure (set forth in 29 C.F.R. 2520.104b-1(c)) are satisfied.
In addition, the DOL has issued a new model COBRA notice to help employees who may want to consider health care coverage from the Marketplace rather than COBRA coverage. The new model COBRA notice is found at http://www.dol.gov/ebsa/healthreform. While employers are not required to use the updated model COBRA notice, any employer who uses the new model notice will be considered by the DOL to be in “good faith” compliance with the election notice requirements under COBRA. Thus, most employers may wish to consider using the updated model COBRA notice beginning in 2014.
Employers should review the model notices as soon as possible and consider when to provide these notices. Employers should consider whether other health care information may be provided as additional background to assist employees in making the decisions that will be required by the end of this calendar year. Further, employers should be considering other ACA compliance issues to ensure that they understand their obligations under the ACA and potential penalties that can arise when employers fail to satisfy their obligations.