Notice of Health Insurance Exchanges

As you may know, the health care law – the Patient Protection and Affordable Care Act (PPACA) – requires most individuals (including children and other dependents) to carry health insurance beginning January 1, 2014. The law also requires the establishment of a health insurance exchange in all states by October 1, 2013. The goal is that exchanges, working with private insurers, will act as a marketplace and provide “one-stop shopping” for individuals and families who may need health insurance or who seek less expensive coverage. A companion program – the Small Business Health Options Program or SHOP Exchange – will assist small businesses that want to offer insurance to their employees.

PPACA amended the Fair Labor Standards Act (FLSA) to require that employers provide each employee with notice about the exchanges. The notice requirement applies to employers that employ one or more employees who are engaged in, or produce goods for, interstate commerce. An employer must have at least $500,000 in business annually. The notice requirement also applies to hospitals, schools, and government agencies.

Employers must provide notice to their existing employees by October 1, 2013, and must provide notice to new employees hired on or after October 1, 2013. Each employee must receive notice, regardless of the employee’s health plan enrollment status and part- or full-time employment status. Notice may be provided in writing or electronically under the Department of Labor’s electronic disclosure rules.

The notice must inform the employee:

1. Of the existence of the exchange, the services provided by the exchange, and contact information for the exchange.
2. That he or she may be eligible for a premium tax credit under the Internal Revenue Code if (a) the employer pays less than 60 percent of the cost of health insurance offered by the employee; and (b) the employee purchases health insurance through the exchange.
3. That an employee who purchases health insurance through an exchange may lose the employer’s (tax-free) contribution to the cost of health insurance offered by the employer.

To satisfy this notice requirement, the Department of Labor has provided model notices on its website, at http://www.dol.gov/ebsa/healthreform/. The website provides one model for employers who offer a health plan to some or all of their employees, and another model for employers who do not offer a health plan. Employers may modify the notice, as long as it meets the content requirements described above.

In a recent frequently asked question (FAQ), the Department of Labor (DOL) has clarified and confirmed that employers will not be subject to any fine or penalty for failing to provide a “Notice of Coverage Options” to employees as described above. This clarification from the DOL should relieve employer concerns that they could incur government fines or penalties for failing to provide the notices as prescribed.

If you have questions about this requirement or want help to comply with the requirement, please contact our office.