Important Employer Deadline under the Healthcare Law Is Almost Here

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Important Employer Deadline under the Healthcare Law Is Almost Here

Unless the federal government does a dramatic about face, the public health insurance exchanges will be up and running October 1 for enrollment in 2014. Many employers are also facing an October 1 deadline that imposes a paperwork burden.

By that date under the Affordable Care Act, most employers are required to provide a notice to each employee explaining their options available under the law.

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Here is what most employers need to tell employees:

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Technically, the law does not impose any fines for failing to provide the notices. However, the Affordable Care Act is intertwined with other laws (this particular provision is embedded in the FLSA in a new section, 8A), so it is considered a good idea to comply to avoid possible legal complications.

• The exchange exists, what services the exchange provides, and how employees can contact the exchange to receive assistance.

• If your health plan covers less than 60 percent of the cost of those benefits, employees may be eligible for a premium tax credit if they buy coverage through the exchange.

• If the employee buys coverage through a public exchange, he or she may forfeit employer contribution to health benefit costs. At the same time, employer support for employees buying coverage via a public exchange may be excludable from their income for purposes of taxation.

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Who Must Receive the Notices?

Notices must be given to all employees, whether or not they work full time, and regardless of whether they are currently receiving health benefits. The October 1 deadline is to give these notices to all employees. After October 1, the notices must be given to new hires within two weeks of coming on board.

The notices must "be provided in writing in a manner calculated to be understood by the average employee," says the Department of Labor (DOL) in Technical Release 2013-02. They can also be provided via e-mail, but only to employees for whom accessing e-mail is "an "integral part of the employee's duties" and who can access the system easily.

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Which Employers Must Send the Notices?

The notice requirement must be met by employers that must comply with the Fair Labor Standards Act (FLSA). In general, the FLSA applies to employers with 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 business applies.

The FLSA also specifically covers the following: 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; as well as federal, state and local government agencies.

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Model Notices

The DOL has issued a pair of model notices you can use. One is for employers which currently offer health benefits and another for those which do not. On Part B of the forms, you will see information the employees will need if they plan to purchase coverage on the exchange, assuming they are eligible. The Part B information would allow employees who apply to their state's exchange (or the federal version, if no state-run exchange exists) to complete a required questionnaire to determine their eligibility for the program.

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The model notice for employers that do currently offer health coverage features a lot of slots for information about your health plan in Part B. Since the law doesn't actually require you to provide the information, and because some of the information may be hard to dig up, "employers may decide to disregard some or all of Part B, especially if the information is uncertain or likely to change," according to attorney Ann Caresani, a partner with Porter Wright firm.

The DOL hasn't issued much guidance on some of the details requested in Part B. Caresani therefore urges employers to be "cautious about volunteering too much information."

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Satisfying the "Bronze Standard"

One question in Part B asks whether your organization provides health benefits that meet the ACA's minimum value test -- in other words, whether your plan lives up to the bronze standard. This information is also essential for determining whether you are "playing" or will instead need to "pay" when the delayed requirement takes effect in 2015.

It also determines whether employees are eligible to get coverage through the exchange. In May, the Department of Health and Human Services issued proposed regulations (not yet finalized but best guidance available so far) on the subject. Individual states may set some standards of their own.

Here are three safe harbors:

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• A plan with a $3,500 integrated medical and drug deductible, 80 percent plan cost sharing, and a $6,000 maximum out-of-pocket limit for employee cost-sharing;

• A plan with a $4,500 integrated medical and drug deductible, 70 percent plan cost sharing, a $6,400 maximum out-of-pocket limit, and a $500 employer contribution to an HSA; and

• A plan with a $3,500 medical deductible, $0 drug deductible, 60 percent plan medical expense cost-sharing, 75 percent plan drug cost-sharing, a $6,400 maximum out-of-pocket limit, and drug co-pays of $10/$20/$50 for the first, second and third prescription drug tiers, with 75 percent coinsurance for specialty drugs.

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Possible Employee Public Relations Opportunity

If it turns out the plan your organization is already offering exceeds the bronze standard, consider turning it into an opportunity to help employees appreciate the benefit they are receiving.

Seizing this employee public relations opportunity may counter any lingering doubts or speculation by some employees. There could be some employees who believe the fact that you are informing them about the public exchange automatically means the deal you are offering them is substandard, and therefore, they are eligible for tax subsidies through the public exchange.

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