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Health Care Law Reform Update - Exchange Notice Requirement is Approaching

One of the many health care reform changes directed under the Patient Protection and Affordable Care Act (“PPACA”) is the requirement for employers to provide their employees a notice of the availability of coverage through the federal and state health insurance exchanges, also known as the Health Insurance Marketplace (“Marketplace”). Briefly, the Marketplace is an online marketplace where individuals and certain employers may shop for health care coverage offered by various insurance carriers; eligible individuals may receive premium assistance in the form of a subsidy. Section 1512 of the PPACA amended the Fair Labor Standards Act (“FLSA”) requiring employers to provide a written notice (“Notice”) describing certain elements of the Marketplace and subsidy eligibility to all current and newly hired employees. The deadline for all employers to provide the Notice to employees is October 1, 2013. Content of the Notice The Notice must inform the employee:
  1. Of the existence of the Marketplace, the services provided by the Marketplace, and the contact information for assistance at the Marketplace;
  2. That an employee purchasing a qualified health plan through the Marketplace may be eligible for a premium tax credit if the employer plan’s share of the total allowed cost of benefits provided under the employer’s plan is less than 60% of such costs;
  3. That an employee purchasing a qualified health plan through the Marketplace may lose the employer contribution, if any, to any employer health plan and that all or a portion of such employer contribution may be excludable from income for federal tax purposes.
The Notice also requires the employer to indicate whether coverage is offered to all employees, or some employees, and if only offered to some employees, the employer must complete a section stating who eligible employees are (e.g., employees classified as “full-time” under the employer’s policies). The employer must provide the same information as to whether dependent coverage is offered, and if so, who the eligible dependents are. Model Notices The Department of Labor (“DOL”) has issued two separate model Notices that employers may use. One Notice is to be used by employers who offer a health plan to some or all employees and a separate Notice is to be used by employers whodo not offer a health plan. The Notice for employers who offer a health plan to some or all employers may be found here. The Notice for employers who do not offer a health plan may be found here. Importantly, the Notice for employers who offer a health plan to some or all employees requires the employer to check a box if the health plan meets the “minimum value standard” and is “affordable” as those terms are defined under PPACA. To be sure, the “minimum value standard” and the “affordability” requirement are central pieces to the Shared Responsibility for Employers (i.e., employer mandate) component of PPACA.
  • Minimum value standard – to meet this standard, the employer plan’s share of the total allowed benefit costs covered must be at least 60%.
  • Affordability requirement – the employee’s share of the premium may not exceed 9.5% of annual household income.
Timing and Delivery of Notice The Notice must be provided to all current employees by October 1, 2013. It is important to note that the requirement applies to both full-time and part-time employees and employees who may not be eligible for coverage under the health plan or may have declined coverage. For new employees hired after October 1, 2013, the Notice must be provided within fourteen (14) days of hire. The Notice may be provided by first class mail or, alternatively, it may be delivered electronically if the employer qualifies for the electronic distribution safe harbor under DOL rules. (In a nutshell, under the safe harbor, employees must use computers as an integral part of their daily jobs, or they must consent to receipt of plan information via an email address.) Optional Information The Notices also include separate section for “optional” information that may be completed by the employer. Given the “stops and starts” and the ever-changing aspects of health care reform, our recommended approach is to not complete the “optional” language (pending further guidance from the Federal government). Penalty for failure to provide Notice At this time, there is no expressly stated penalty for failing to provide the required Notice. However, since the Notice requirements are established under federal labor laws, recovery opportunities for employees who have suffered damages as a result of the failure to receive the Notice may well exist (and be pursued by plaintiffs’ attorneys) under FLSA or ERISA. Certainly, not complying with the Notice requirement is ill-advised.