Employers Must Still Provide Notice of Affordable Care Act Exchanges by October 1, 2013

As widely reported in the media, the Obama Administration announced in early July that it is delaying until January 1, 2015:  (a) the employer shared responsibility payments due under the Affordable Care Act (“ACA”), and (b) certain ACA employer and insurer reporting requirements.  

Employers must still, however, comply with ACA’s other requirements, including the requirement to notify employees in writing, by October 1, 2013, regarding the availability of health care coverage through health care exchanges that will be established as part of ACA.  COBRA notices must also be updated to reflect the availability of coverage through the health care exchanges.  The U.S. Department of Labor (“DOL”) has issued Technical Release 2013-02, which provides temporary guidance for employers regarding these notice requirements.  Model documents that employers may use to comply with their notice obligations are also available on the DOL’s website.  (See Sections 2(b) and 3 below.)  

Below is important information regarding these upcoming notice requirements. 

1.   Background Information Regarding the ACA Exchanges.

A key component of ACA is the establishment of health care exchanges, which provide a “one-stop shop” for individuals to find, compare and purchase health insurance options.  (The federal government has also recently begun referring to these exchanges as the “Marketplace”.)  

Open enrollment for health coverage through the exchanges will begin on October 1, 2013, and eligible individuals will be able to access coverage through the exchanges beginning January 1, 2014.  Families with earnings on a sliding scale of up to 400% of the federal poverty level – currently $94,200 for a family of four – will be eligible for tax credits for insurance plans purchased on the exchanges. 

2.   Employers’ Notice Obligation Regarding the ACA Exchanges.

(a)   Employers That Must Provide the Notice.

ACA requires all employers covered by the federal Fair Labor Standards Act (“FLSA”) to notify employees of the availability of health coverage on the exchanges. 

The FLSA covers most employers, as it generally applies to (i) employers that employ one or more employees who are engaged in, or produce goods for, interstate commerce;[1] and (ii) specific entities, including 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 regarding FLSA coverage generally, including an Internet compliance assistance tool to assist employers in determining FLSA coverage.  

(b)   Contents, Timing and Manner of Distribution of the Notice Regarding the ACA Exchanges.

Contents.  Employers must advise employees:

(i)   about the existence of the exchanges, and include a description of the services provided by the exchanges and the manner in which the employee may contact the exchange to request assistance;

(ii)   whether the employer’s health plan’s share of the total allowed costs of benefits provided under the plan is less than 60% of such costs (in which case the employee may be eligible for a premium tax credit if he/she purchases coverage through the exchanges); and

(iii)   if they purchase coverage through the exchanges, they may lose any employer contribution to the employer’s health plan and that all or a portion of such contributions may be excludable from income for federal income tax purposes.

The DOL has published the following model notices on its website: 

(i)   Employers that offer health coverage to some or all employees may utilize the model notice available on the DOL’s website at http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf.

(ii)   Employers that do not offer health coverage to any employees may utilize the model notice available on the DOL’s website at http://www.dol.gov/ebsa/pdf/FLSAwithoutplans.pdf. 

Employers may also use a modified version of these notices provided the necessary information is included in the notices.

Timing of the Exchange Notices.  Employers must provide the notice to each employee, regardless of whether the employee is full-time or part-time, or enrolled in the employer’s health care plan.  Employers are not required to give a separate notice to dependents (or other non-employee individuals who are or may become eligible for coverage under the plan).

(i)   For current employees hired before October 1, 2013, the notice must be provided by October 1, 2013. 

(ii)   For new employees hired on or after October 1, 2013, the notice must be provided to each new employee at the time of hiring, within 14 days of an employee’s start date.

This is a one-time notice requirement; it need not be provided on an annual basis.  

Manner of Distribution.  The notice may be provided by:

(i)   first-class mail; or

(ii)   electronically, if the requirements of the DOL’s electronic safe harbor are satisfied, i.e., if the employees have access to a worksite Internet as an integral part of their work duties or if the employees have provided affirmative consent to receiving disclosures electronically.

3.   Updated Model COBRA Notices.

In light of the upcoming opportunity for individuals to obtain health care coverage through the exchanges, the DOL has also updated the contents of its model COBRA notice (i.e., the notice that must be provided to individuals regarding their right to continuation coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA)).  A copy of the DOL’s updated COBRA notice and a redline showing the changes made to the DOL’s model COBRA notice are available on the DOL’s website at http://www.dol.gov/ebsa/cobra.html.  

We recommend that, by October 1, 2013 (i.e., the deadline for providing the notice regarding the ACA exchanges, described in Section 2 above), employers (or their COBRA administrators) begin using the DOL’s updated COBRA notice, or update their own forms to incorporate the changes in the DOL’s model COBRA notice.

4.   Next Steps.

Employers should review the DOL’s model notices regarding the ACA exchanges now and determine the best way to deliver these notices:  (a) to their current employees by October 1, 2013; and (b) to new employees hired on or after October 1, 2013.  Employers should also review the DOL’s updated COBRA notice and prepare to utilize this notice (or update their own forms to reflect the changes in this notice) by October 1, 2013.  Employers that utilize third-party COBRA administrators should coordinate with these administrators regarding the updates to the COBRA notices provided to their employees.  

Please do not hesitate to contact any of our attorneys if you have any questions regarding these notices or your company’s obligations generally under ACA.