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 Employers must provide health insurance marketplace notice by October 1, 2013 

The following update from MedCost details the recent changes to the Affordable Care Act (ACA), which requires employers subject to the Fair Labor Standards Act (FLSA) to provide a written notice to new hires and current employees informing them about the Health Insurance Marketplaces (or Exchanges) and some of the consequences of purchasing coverage through the Marketplaces instead of enrolling in employer-sponsored health coverage. In early May, the Department of Labor (DOL) issued temporary guidance (Technical Release No. 2013-02) and model notices that employers may use to notify employees of available health coverage options (see their May 16, 2013 alert here).

The notices must be provided by October 1, 2013, to current employees, regardless of full-time or part-time status and regardless of whether they are enrolled in the employer-sponsored plan. For new employees hired after October 1, 2013, the notice must be provided within 14 days of their start date. Separate notices for dependents are not required.

The DOL has issued two model notices - one for employers who offer a health plan and one for employers who do not. The notices are designed to be completed by the employer. The notice for employers who offer a health plan can be accessed at http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf and the Technical Release can be accessed at http://www.dol.gov/ebsa/newsroom/tr13-02.html.

Employers should give particular attention to the following provisions:

  • Part A, appearing on the first page of the Notice for Employers With Health Plans, contains general information. It includes the following language, explaining the tax implications for employees purchasing coverage on the Marketplaces:

Note: If you purchase a health plan through the Marketplace instead of accepting health coverage offered by your employer, then you may lose the employer contribution (if any) to the employer-sponsored coverage. Also, this employer contribution - as well as your employee contribution to employer-offered coverage - is often excluded from income for Federal and State income tax purposes. Your payments for coverage through the Marketplace are made on an after-tax basis.

The model notice also makes employees aware that if they intend to purchase coverage through the Marketplaces, they should be sure they have that coverage secured prior to dropping their employer-offered coverage (i.e., during open enrollment). Otherwise, there will not be a qualifying event that will permit them to return to the employer-offered plan.

  • Part B, the second page, contains information about the health coverage offered to employees. Employers will be required to complete this section by providing the name, address and contact information, and eligibility information about the employer's health plan. This section asks employers to indicate whether the coverage already meets the minimum value and affordability requirements of the employer mandate. Employers who have already determined that their existing health plans will satisfy those requirements (which, for employers, do not come into play until 2015), should check this box indicating those qualifications have  been met.
  • The third page of the notice requests detailed information about the health plan that may be employee specific; this section is optional for employers.

The notice must be provided in writing in a manner calculated to be understood by the average employee. It may be provided by first-class mail. Alternatively, it may be provided electronically, but only if the requirements of the DOL's electronic disclosure safe harbor are met.*

COBRA Qualified Beneficiaries

The notice must also be provided by October 1, 2013, to former employees who are either enrolled in COBRA or are in their COBRA election period. If MedCost Benefit Services performs COBRA administration services for you, upon request we will provide a report with the names and addresses of COBRA participants and those in their election period. Contact your Account Manager to request this report.

The DOL has also released a revised COBRA Model Election Notice that includes information about the Marketplace coverage options. If you perform your own COBRA administration, please be sure to download the new election notice for use when sending future COBRA election notices. It can be accessed at http://www.dol.gov/ebsa/healthreform.

*Electronic distribution is acceptable so long as employees have the ability to effectively access the documents in electronic format from any location where the employee is reasonably expected to perform duties as an employee, and where access to the plan sponsor's electronic information system is an integral part of those duties. If you have employees, potential new hires, or COBRA participants who are not able to access the information in this manner, as long as you have prior approval from them (email confirmation is acceptable) that they agree to receive the notice electronically (by personal email, for example), the information may be provided to them in this manner. Otherwise, the notice should be provided in paper format.