The Department of Labor May 8 released model language and a template for the written notice that almost all employers will be required to provide to their employees about how to access health care coverage through new "exchanges" created by the 2010 health care law. The notice also lets employees know they may be eligible for tax subsidies to buy insurance through exchanges.
Notice required by Oct. 1
Employers will be required to provide the notice to current employees by Oct. 1, and at the time of hiring for employees hired on or after Oct. 1, the DOL said in IRS Technical Release 2013-02. Starting in 2014, employers meet the notice requirement if they provide written notice to employees within 14 days of the employee's start date.
The DOL’s model language is contained in a "Model Notice to Employees of Coverage Options" posted on the agency’s website. The DOL offers two versions of the template: for employers who do not offer a health plan, and for employers who offer a health plan to some or all employees.
All employers covered by the federal minimum wage law (officially, the Fair Labor Standards Act) must provide the notice to every employee, whether full time or part time.
The employee-notice requirement was supposed to take effect March 1, but the DOL earlier this year delayed it because it said neither government agencies nor employers were ready to implement the requirement.
The agency says it released the information as "temporary guidance" now because employers have been pressing for a model notice on an earlier timeframe so they can begin informing their employees about coverage options. Employers can begin using the form prior to Oct. 1, the DOL said. The temporary guidance remains in effect until the DOL issues further guidance.
Oct. 1 is also the deadline for government-run exchanges to begin enrolling individuals and small businesses in health plans for 2014. The exchanges are designed to offer "one-stop shopping" for individuals and small businesses to compare and enroll in qualified private health insurance options for 2014.
What the notice includes
The DOL's template and model language:
Provides basic information to employees about what DOL calls the "Health Insurance Marketplace" (referred to in the law as an exchange), and how to contact the exchange.
Tells employees they may be eligible for federal subsidies to buy coverage on an exchange if their employer does not offer coverage, or if the coverage their employer offers does not meet certain affordability or "minimum value" standards.
Note: To be considered affordable, a full-time employee's share of the premium for self-only coverage cannot exceed 9.5 percent of their annual household income. (Regulations allow a few alternative methods for measuring affordability; see the NRA's primer on the health care law to learn more about “affordability safe harbors.”) To provide minimum value, the employer’s plan must pay for at least an average of 60 percent of medical expenses incurred, for allowable charges.
Informs employees that if their employer offers coverage that meets the law's standards for affordability and minimum value, the employee will not be eligible for tax subsidies to buy coverage on an exchange. If an employee opts for exchange coverage rather than accepting the employer's plan in these cases, the notice warns the employee that he or she may lose their employer's contribution (if any) to employer-offered coverage. The model language notes that employer and employee contributions to employer-based coverage are tax-deductible, where the payments an employee makes for insurance purchased through an exchange are on an after-tax basis.
The version for employers who offer health plans includes a section where the employer can provide information about the employer-provided coverage, including who is eligible for the health plan, whether the plan meets the minimum-value standard and whether the coverage is intended to be affordable for a particular employee. Employers have the option of filling out additional fields detailing whether the employee in question will become eligible for a health plan within the next three months, or whether employers plan any changes for the new plan year.
Employers must provide the notice in writing, "in a manner calculated to be understood by the average employee," the DOL said. The notice may be provided electronically if the electronic notice meets certain DOL standards.
Further details are available on the DOL's website.
The DOL also yesterday offered a modified version of its "Model COBRA Election Notice." This contains model language that employers with 20 or more employees can use to offer employees and their families the opportunity to temporarily extend their health coverage (called continuation coverage) in certain instances where coverage under the plan would otherwise end. The updated version advises qualified beneficiaries that they may want to investigate health care coverage through an exchange, as an alternative to COBRA continuation coverage.