Beginning January 1, 2014, individuals and employees of small businesses will have access to health coverage through a health insurance market (known as an "Exchange" or "Marketplace") in their state. Open enrollment for the Marketplace begins October 1, 2013. The Affordable Care Act (ACA) requires employers to provide employees with a notice of their coverage options available through the Marketplace ("Exchange" or "Marketplace" Notice).
On May 8, 2013, the U.S. Department of Labor (DOL) issued
Technical Release 2013-02 providing two model Marketplace Notices (one for employers that provide health coverage, and another for employers that do not provide health coverage) and clarifying questions about the Notice requirement, such as when and how to provide the Notice. The Technical Release also includes a revised model COBRA election notice, which now includes information about coverage through the Marketplace. For additional information on the notice requirements, click
here.
Exchange or Marketplace Notice
The Marketplace Notice must be provided by employers that are subject to the Fair Labor Standards Act (FLSA). In general, the FLSA applies to employers that employ one or more employees who are engaged in, or provide goods for, interstate commerce. For most firms, a test of not less than $500,000 in annual dollar volume of business applies. The DOL provides an
online tool to help employers determine whether they are subject to the FLSA. If an employer is subject to the FLSA, it must provide a Marketplace Notice regardless whether it is a large employer subject to the play-or-pay mandate or whether it offers grandfathered or non-grandfathered health coverage (or no coverage at all).
The Marketplace Notice must be distributed to all employees, regardless of their enrollment status or their part-time or full-time status. Spouses and dependents are not required to receive a separate Notice. The Marketplace Notice must inform the employee:
- of the existence of the Marketplace, including a description of the services provided by the Marketplace and contact information for the Marketplace;
- that the employee may be eligible for a premium tax credit if the employee purchases a qualified health plan through the Marketplace; and
- that if the employee purchases coverage through the Marketplace, the employee may lose any employer contribution to a health plan offered by the employer, and all or a portion of such contribution may be excludible from income for federal income tax purposes.
To satisfy the content requirements, two model Marketplace Notices are now available on the Department of Labor's website. There is one
model for employers who do not offer a health plan and another
model for employers who do offer coverage to some or all employees. The two model Notices are generally the same, but the model for employers that offer health coverage would also describe which of its employees are eligible for coverage, which dependents are eligible for coverage, and whether coverage provides minimum value and is intended to be affordable. It also contains an optional page where the employer can provide information corresponding with the Employer Coverage Tool attached to the "Application for Health Coverage & Help Paying Costs" (for a copy, click
here).
Employers must provide the Marketplace Notice to their current employees by
October 1, 2013. The Notice also must be provided to new-hires on and after October 1, 2013. For new-hires, the Notice will be considered timely in 2014 if it is provided
within 14 days of their start date. The Notice may be provided by first class mail, or electronically under the DOL's electronic disclosure safe harbor rules, which generally permit email or other electronic disclosure for employees who have computer access as a regular part of their job functions or consent to electronic disclosure.
Model COBRA Notice
The DOL also revised the
model COBRA election notice, noting that individuals eligible for COBRA also may want to consider and compare health coverage available through the Marketplace. The revised COBRA election notice informs qualified beneficiaries that other coverage options are available through the Marketplace, and that being eligible for COBRA does not impact an individual's eligibility for a tax credit through the Marketplace. It also removes the paragraph about preventing a gap in creditable coverage, since plans will not be permitted to impose preexisting condition limitations beginning January 1, 2014. (Plans already are prohibited from applying preexisting condition exclusions on children under age 19.) For a description of this and other changes that will be effective in 2014, click
here.
As with the earlier COBRA model notice, use of the revised model, appropriately completed, will be considered by the DOL to be good faith compliance with the election notice requirements of COBRA.
* For additional Affordable Care Act resources, visit AGC’s members’-only webpage at www.agc.org/HealthCareReform.
Editor's note: This article was written by guest authors Kelly Pointer and Joy Sellstrom. Kelly Pointer is an associate in the Employee Benefits & Executive Compensation Department of Seyfarth Shaw LLP. Her practice focuses on qualified retirement and 403(b) plans and health and welfare plans. Ms. Pointer’s qualified retirement and 403(b) plan experience includes matters related to design and implementation, maintenance and ongoing administration, ERISA and tax code compliance, reporting and disclosure requirements, and plan termination. She also assists clients with compliance issues through the IRS voluntary correction program and advises on establishing and maintaining fiduciary structures and processes. Ms. Pointer’s health and welfare plan experience includes matters related to consumer-driven health arrangements, cafeteria plan requirements, domestic partner benefits, compliance with COBRA, HIPAA privacy and portability, and health care reform. Joy Sellstrom is senior counsel in the Employee Benefits Department and has focused her practice on employee benefits and executive compensation for over 25 years, specializing in health and welfare benefits. Ms. Sellstrom has been Co-Chair of the Firm’s Welfare Benefits Practice Group for the past 10 years and is a frequent author on health care reform issues. In addition to health care reform, she advises employers on HIPAA privacy and portability, COBRA, wellness programs, consumer-driven health arrangements (including health reimbursement arrangements and health savings accounts), domestic partnership issues and funding mechanisms for both active and retiree health programs (e.g. VEBAs and 401(h) accounts). Her practice also includes reviewing and preparing vendor agreements, and counseling regarding governmental audits.
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.