Health Reform Exchange Notices Deadline Approaching For Employers
The Patient Protection and Affordable Care Act (PPACA) amended the Fair Labor Standards Act (FLSA) to create a new requirement that employers who are covered by the FLSA provide a written notice to their employees of coverage options available to individuals through the state or federally-facilitated health insurance marketplaces or "Exchanges." Employers are required to provide the Exchange Notice to all current employees on or before Oct. 1, 2013. As the deadline approaches, employers should be working toward compliance with this PPACA requirement. On May 8, 2013, the Department of Labor (DOL) issued Technical Release 2013-02 with temporary guidance regarding the Exchange Notice requirement, including model notice forms.
Which Employers Are Subject to the Exchange Notice Requirement?
Because the Exchange Notice requirement was enacted as part of the FLSA, employers to whom the FLSA applies will be required to provide Exchange Notices to their employees. Whether or not you are a "small employer" that is exempt from the PPACA employer "pay or play" provisions (i.e., you have fewer than 50 full-time equivalents) is not relevant for purposes of determining whether you are an employer who must provide the Exchange Notices.
In general, the FLSA applies to (and the Exchange Notice will need to be provided by) employers that employ one or more employees who are engaged in, or produce goods for, interstate commerce. For most firms, a test of not less than $500,000 in annual dollar volume of sales or business applies. However, the FLSA also specifically covers the following entities, regardless of the volume of sales: hospitals; institutions primarily engaged in the care of the sick, the aged, mentally ill or disabled who reside on the premises; schools for children who are mentally or physically disabled or gifted; preschools, elementary and secondary schools and institutions of higher education; and federal, state and local government agencies.
The DOL's Wage and Hour Division provides guidance relating to the applicability of the FLSA, including an internet compliance assistance tool to determine applicability of the FLSA.
Which Employees Must Receive an Exchange Notice?
When and How Must Exchange Notices Be Delivered?
No later than Oct. 1, 2013, an employer must provide an Exchange Notice to every current employee (including employees who are not participating in the employer's health plan or who are part-time). In addition, the Exchange Notice must be provided regardless of whether the employer even offers a health plan to its employees. In addition, beginning Oct. 1, 2013, employers are required to provide the Exchange Notice to each new employee at the time of hiring, to be distributed within 14 days after an employee's start date. However, employers are not required to provide Exchange Notices to dependents or other individuals who are not employees. Employers that use "contract" employees will want to consider whether the employer or the contracting entity will provide the Exchange Notice.
The Exchange Notice must be provided free of charge. It must be provided in writing and in a manner calculated to be understood by the average employee, either through first class mail or electronically if the requirements of the DOL's electronic disclosure safe harbor are met. Note that governmental employers are not typically subject to the DOL's electronic disclosure rules and should in particular be aware that these are more stringent than the IRS' electronic disclosure rules.
Employers may work with their third party administrators (TPAs) or health insurance issuers to provide the Exchange Notice to employees. However, because the Exchange Notice must be provided to all employees, it will be necessary to confirm that the TPA or issuer can provide the notice to all of an employer's employees and not merely those who are enrolled in the employer's health plan.
Are Model Notice Forms Available?
Yes. Employers are permitted to use the DOL's model notice forms. Those model notices may be found at the DOL's Affordable Care Act website. The DOL provided two model notice forms: one for employers that offer health coverage to some or all employees and one for employers that do not offer health coverage to employees. Although employers are not required to use the model notice forms, we strongly recommend that employers use them (although certain information on the model notice form is "optional," as discussed below).
The PPACA statutory provisions require that certain information to be provided in the Exchange Notices. That information is set forth in Part A on the first page of the model notices. In addition to the information required by statute, Part B of the model notices under Technical Release 2013-02 requires employers to provide certain information intended to facilitate the employee's enrollment in coverage under an Exchange should the employee choose to do so. Specifically, the Technical Release requires the following additional information:
• The name, address and EIN of the employer and a contact person at the employer for additional questions
• A description of which employees and which dependents are eligible – and which are not eligible – for coverage under the employer's health plan
• Whether the coverage meets "minimum value" and is intended to be "affordable" based on the employee's wages
This Part B information is not specifically mandated by the PPACA statutory provisions, and Technical Release 2013-02 states that employers can modify the model notice "provided the notice meets the content requirements" of the statute. However, Technical Release 2013-02 does not explicitly state that Part B is optional. Therefore, we believe that employers should complete the information included in Part B of the model notice. This would avoid a potential compliance issue if the employer were audited by the DOL.
The last page of the model notice form for employers who offer coverage is clearly optional (i.e., Sections 13 through 16). There is no requirement that employers provide this information.
Are Employers Required to Provide the Exchange Notice?
On Sept. 11, 2013, the DOL issued a new FAQ relating to the Exchange Notice requirement regarding fines and penalties for failing to provide the Exchange Notice. It provides as follows:
Q: Can an employer be fined for failing to provide employees with notice about the Affordable Care Act's new Health Insurance Marketplace?
A: No. If your company is covered by the Fair Labor Standards Act, it should provide a written notice to its employees about the Health Insurance Marketplace by Oct. 1, 2013, but there is no fine or penalty under the law for failing to provide the notice.
This FAQ has created some confusion about an employer's obligation to provide the Exchange Notice. However, the requirement to provide the Exchange Notice is set forth in statute, and it is not clear that the DOL has authority to make this requirement optional. Moreover, because PPACA includes many related provisions and enforcement requirements and the potential bases for private or public enforcement are yet largely unexplored, we recommend that employers comply with the statutory obligation to provide the Exchange Notice. We would expect proof of distribution of the Exchange Notice to be an item that the DOL considers in an audit. Thus, although there is no penalty, we strongly suggest that this Exchange Notice be distributed.
We will continue to monitor the evolution of health care reform and inform you of new guidance as it becomes available. In the meantime, please contact Mary Beth Braitman, Melissa Proffitt Reese, Chris Sears, Tara Schulstad Sciscoe, Sarah Funke, Shalina Schaefer or any member of Ice Miller's Employee Benefits Group for more information about PPACA employer responsibilities or other employee benefits matters.
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.