FAQs: State Exchange Model Notices

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1 FAQs: State Exchange Model Notices The Department of Labor (DOL) has posted a draft Exchange/Marketplace Notice on their website and wants your feedback on the model forms. According to Technical Release , released on May 8, 2012, all employers are required to provide a written notice that explains their rights to enroll in the Exchange/Marketplace. The Exchange/Marketplace Notice must be given to every employee no later than Oct. 1, 2013 and after that date, to new employees when they are hired. The model notice will provide information to individuals about their employer-sponsored health benefits and information on the availability of health insurance through the Exchange/Marketplace. According to Amy Turner of the Employee Benefits Security Administration (EBSA), it is a model notice and employers can use the form or create their own so long as the same information is provided. The model employee notices included one for employers that do not offer a health plan, and one for employers that offer a health plan to some or all employees. Why is it called the FLSA Notice? The Affordable Care Act amended the Fair Labor Standards Act (FLSA) to require employers to issue notices to employees regarding their health coverage options available during the Marketplace. Which employers are required to comply with Technical Release No ? All employers subject to the Fair Labor Standards Act (FLSA) must provide their employees with notice. Employers covered by the FLSA include those that have at least $500,000 in annual dollar volume of business, based on their gross receipts from sales over a 12- month period. The FLSA applies to employers that employ one or more employees and are engaged in, or produce goods for, interstate commerce. An employer engages in interstate commerce if it has any regular contact with interstate commerce, no matter how small. Only employers that engage in purely isolated local activity may claim to be uninvolved in interstate commerce. The FLSA also covers hospitals, schools, institutions of higher education and federal, state and local government agencies. Additional information on the FLSA is available on the DOL website at: When is the FLSA Notice due? The FLSA requirement was supposed to have been satisfied on or before March 1, 2013; however, given the regulatory delays in establishing the Exchange/Marketplace, the Department of Labor (DOL) extended the deadline. The guidance under the Technical Release No is temporary through the applicability date of Oct. 1, 2013, but may be relied upon until future guidance and regulations are issued. Where is This Information Necessary? At this time, 16 states and the District of Columbia will operate their own Exchange/Marketplace. In the remaining 34 states, the

2 federal government will operate the Exchange/Marketplace. The information requested in the Model Notice will be useful to individuals when they fill out an insurance application through an Exchange/Marketplace. The employee can request a calculation as to whether he or she is eligible for premium assistance (advance tax credits from the federal government) to reduce the amount the individual will need to pay for health insurance. However, employees should be aware that the premium assistance does not reduce monthly premiums paid to the insurer. Instead, if an individual is eligible for premium assistance, the federal government simply pays a portion of the monthly premiums to the insurer. Why is disclosing plan information to the employee important to the employer? Employers will want to provide information to employees to help them make good choices for health coverage. Whether an employee can get premium assistance for the purchase of health insurance through an Exchange/Marketplace depends on whether he or she is eligible for health coverage at work. If employer coverage if offered at work, whether that coverage provides minimum value and is affordable is key to whether the employee is eligible for assistance in the purchase of health insurance through the Exchange/Marketplace. Who do we give the forms to? Employers must give the Exchange/Marketplace Notice to all existing employee by Oct. 1, The model employee notices included one for employers that do not offer a health plan, and one for employers that offer a health plan to some or all employees. The employers must provide all employees a notice whether or not an employee has parttime or full-time status; and regardless of whether they have coverage from the employer or whether the employee is eligible to enroll in a group health plan. The employer must also provide a notice to all newly-hired employees hired after Oct. 1, 2013 within 14 days of the employees start of employment. The notice deadline is intended to correspond to the open enrollment period for the Exchange/Marketplace commencing Oct. 1, 2013 for coverage through the Exchange/Marketplace beginning Jan. 1, Can I send the notice electronically? Yes. The Model Notice can be sent to the employee by first class mail or electronically. If the employer opts to send the Model Notice electronically, it must meet the same requirements for electronic distribution of ERISA plan disclosures. Generally, if done in accordance with the DOL s electronic disclosure safe harbor regulations, notices can be distributed as follows: * Those employees who use a computer as part of their normal job function, or * Those employees who have consented to electronic delivery in a manner that demonstrates they can effectively receive the electronic delivery. The employer may also include the Model Notice in new hire packets, annual enrollment materials, and use other existing communications that will be delivered in the manner and timeframe required by the DOL safe harbor.

3 Do we give a notice to non-employees? How about dependents or other individuals who may become eligible for coverage under the plan, such as spouses or retirees? No. The employer does not need to send the Model Notice to former employees, retirees, COBRA beneficiaries, dependents or spouses even if they continue to be enrolled in their health plan, as in the case of COBRA beneficiaries and retirees. However, an employer s obligation to provide notice to independent contractors, leased workers, etc. may depend based on the nature of the contract. Employers should contact their legal counsel and review the FLSA employee test for additional information. Why are there two employee model notices? Two Model Notices were created by the DOL, one Model Notice is for employers that do not offer a health plan and one for employers that offer a health plan for some or all employees. The Model Notice for employers with a plan is available at The Model Notice for employers without a plan is available at Both Notices generally require the same information, and include a Part A and a Part B. Part A provides general information about the Exchange/Marketplace and the consequences of declining employer coverage. Part A of the Notice provides information required by employees seeking to enroll in the Exchange/Marketplace. Optional Information Notice Part B: The Model Notice contains an optional section that asks the employer to disclose whether the health care coverage offered meets the minimum value standard and whether the cost of coverage is intended to be affordable. In order to answer this question, you will want to advise your client/employers to become familiar with the Department of Treasury and Internal Revenue Service proposed guidance to assist employees in assessing whether the coverage offered provides minimum value. Part B of the Model Notice includes optional elements that the employer may complete to inform the employee about health coverage they offer. Part B of the Model Notice is identified as optional, but note that not all of Part B, other than the statement of minimum value, is optional. The Model Notice Part B requires that the employer to disclose specified health information regarding the employee benefit plan. This level of customization may be burdensome on employers because it calls for specialized information. If the employer decides to create its own Notice, employers may want to include some or all of the optional elements in its own Notice to limit the number of inquiries it receives from employees. The information disclosed will help the employee understand the impact their choice will make on the employee s eligibility for a premium tax credit. For example, if an employer offers an employee a health plan that provides minimum value and has an affordable premium for self-only coverage, then the employee is not eligible for a premium tax credit.

4 The optional elements are structured to correspond to the Exchange/Marketplace application. If an employee has the employer s Notice with optional elements in hand, they should be able to use the information to enroll in the Exchange/Marketplace application. Providing the information in advance will make it less likely that the employee will contact the employer, or the TPA with questions. The employer will want to include some or all of the optional elements, including: * Employer identification and contact information * A brief explanation of the classes of employees who are eligible for health coverage * The employer health plan s definition of eligible dependents * Whether the employer health plan is intended to be affordable (i.e., cost is not more than 9.5% of an employee s wages). Model Notice for Employers without Health Coverage The Model Notice for employers that do not offer health coverage, contains a disclosure section that requires the employer to provide contact information to obtain more information about the employer s health care coverage. The disclosure section requires the employer to state whether the health care coverage is offered to all employees and, if not to all employees, to provide a description of those employees eligible for health care coverage. Further, it requires the employer to state whether it offers dependent coverage and which dependents are eligible. The Model Notice for Employers that Offer Health Coverage The Model Notice for employers that offer health coverage include optional information that an employer may provide to employees based on the Exchange/Marketplace Employer Coverage Tool to help them understand their coverage choices. Mandatory information employers are asked to provide the employee are: * Whether an employee is eligible in the next three months for employer coverage * Whether the employer offers a health plan that meets the minimum value standard (whether the premium for employee-only coverage under the lowest-cost plan meets the minimum value standard if the employee received the maximum discount for any tobacco cessation program) and * What changes the employer will make for the next plan year. The Model Notice also contains an optional section that asks the employer to disclose whether the health care coverage offered meets the minimum value standard and that the

5 cost of coverage is intended to be affordable. The employer will want to include some or all of the optional elements, including: * Employer identification and contact information * A brief explanation of the classes of employees who are eligible for health coverage * The employer health plan s definition of eligible dependents * Whether the employer health plan is intended to be affordable (i.e., cost is not more than 9.5% of an employee s wages). Employers will want to become familiar with the Department of Treasury and Internal Revenue Service proposed guidance to assist employees in assessing whether the coverage offered provides minimum value. Do I have to use the Model Notice Form? No. The Model Notice is just that, a model. If they wish, the employer can design their own form. However, if they create their own version, it must include the mandatory items listed in the form. You may want to inform your clients that the Model Notice provides general information about the Exchange/Marketplace and refers employees to a website with contact information for the Marketplace in their particular state. Utilizing the general information may minimize employee questions and is simpler than creating different notices with information specific to the Exchange/Marketplace in each state where the employer has employees. Only the employer will know whether it is better to include additional information on the Model Notice to take into account the employer s particular workforce, and what information is appropriate to provide to help employees understand their coverage options. At minimum, the employer must provide certain information to their employees, mandatory information required on the employer-created notices includes the following: * Information on the existence of the Exchange/Marketplace, an explanation and description of the services available in the Exchange/Marketplace * Contact information regarding services offered on the Exchange/Marketplace * A statement informing the individual that they may be eligible for a premium tax credit (assistance toward the purchase of health insurance) if the employee purchases a qualified plan on the Exchange/Marketplace. The statement must clearly state that the premium tax credit will be available if the employer s plan does not provide minimum value. * A statement that if the employee purchases coverage through a qualified plan on the Exchange/Marketplace, the employee may: (1) Lose the benefit of the employer s contribution toward the cost of coverage; and

6 (2) Have to pay premiums on all or a portion of employer contributions on an after-tax basis (as compared to pre-tax employee contributions for the employer s plan that may be excluded from federal income). (Note that Part A of the Model Notice includes these elements.) Does the Model Notice have to be personalized to list all the information called for in the form? These boxes on the Model Notice provide additional information to the employee. It is optional for the employer to fill out. The employer must, however, provide information in boxes 1 to 12 so that the employee has knowledge about the health benefits available through their employer. The model employee notice does not require employers to provide specific contact information for the Exchange/Marketplace in the state, but rather refer the employee to the healthcare.gov website. What will the Exchange/Marketplace do with this information? The Exchange/Marketplace will utilize information to conduct eligibility determinations and/or redeterminations for coverage under the Exchange. HHS has posted draft Exchange/Marketplace forms that employees will be required to fill out to receive coverage through the Healthcare Exchanges. The Exchange/Marketplace application forms are designed to be used during the initial open enrollment period, Oct. 1, 2013 through March 21, The Exchange/Marketplace will require information from the employer as well. The model employee notice requires the employer provide contact information for the employer, including the employer s Employer Identification Number (EIN). This information will be needed to include in an application for a premium subsidy on a Exchange/Marketplace. Individuals seeking health insurance through the Exchange will fill out one form which will provide information to the agencies, they will then verify coverage, income, etc. to determine the employee s eligibility for the programs available through the Exchange or other agencies, i.e. Medicaid, Children s Health Insurance Program (CHIP). The information it receives will determine whether an individual may be enrolled in a QHP based on information provided from other sources, such as the employer, through select verification methods. What if the state in which I live does not have an Exchange/Marketplace? If the employer decides to use the Model Notice, it does not require the employer to provide specific contact information for the Exchange/Marketplace in the state where the employee resides. Rather, the form refers the employee to the healthcare.gov website for additional information on their particular state Exchange/Marketplace. The Model Notice requires that the employer provide contact information for the employer, including the employer s Employer Identification Number (EIN). This information will be needed to include in an application for a premium subsidy on the Exchange/Marketplace. Why is there a COBRA Model Notice as well? The DOL updated its model COBRA election notice to provide information about the Exchange/Marketplace for the purpose of informing qualified beneficiaries that they may also be eligible for a premium tax credit

7 to pay for coverage offered through the Exchange/Marketplace. It also includes a clarification on the limit on pre-existing condition exclusions beginning in The COBRA election notice will be considered good faith compliance with the COBRA election requirements if completed appropriately. Is there a penalty for not providing the Model Notice to all employees? The DOL indicated in Technical Release that they will provide future regulations and guidance. Presumably they will clarify the consequences for noncompliance with the Model Notice and notice of coverage options requirements. ERISA generally requires that all welfare benefit plans comply with all Federal laws. Meeting the requirements of the Affordable Care Act are included in the requirements. Is there any other information that the employer will need to update? Part A of the Model Notice has information that suggests that employees check their summary plan descriptions (SPDs) for more information. You will want to remind your clients to ensure that the SPD is up-to-date or that all summaries of material modifications are available in advance of sending the Model Notice. Under ERISA, a plan sponsor can be penalized if they do not provide requested documents within 30 days of the request for information. Note that DOL posted the Exchange/Marketplace Forms at