Notice of Coverage Options
Smart first steps
Employers will be required to give employees a written notice of the existence of State Health Insurance Exchanges and, if the employer offers a health plan, some of the factors that might be relevant to the employee’s decision to participate in the employer’s plan or seek coverage through an Exchange.
Specifically, the written notice will have to include the following information:
- A description of services provided by the Exchange and how the employee can contact the Exchange for assistance
- If the employer plan’s share of the total allowed costs of benefits provided under the plan is less than 60%, the fact that the employee may be eligible for a premium tax credit or cost-sharing reduction if the employee purchases coverage through the Exchange
- If the employee purchases coverage through the Exchange but does not qualify to receive a Free Choice Voucher, the fact the employee might be giving up some or all of any employer contribution towards the cost of coverage and the related Federal income tax benefits
Additional content may be required by Department of Labor regulations.
The notice will have to be given to all current employees when this requirement first takes effect. After that, the notice will have to be given only to new employees when they are hired. There does not appear to be any requirement to provide the notice on a recurring basis to employees who already have received it.
The notice apparently will have to be provided to all employees, including part-time, temporary, and seasonal employees unless future Department of Labor guidance specifies otherwise.
Effective date: This notice must be provided to current employees not later than March 1, 2013, and on the date of hire for new employees hired on or after March 1, 2013.
The notice requirement applies to employers who are subject to the Fair Labor Standards Act (FLSA). There is no exemption for employers sponsoring a grandfathered health plan.
What employers are subject to FLSA?
The FLSA applies to all employees of certain “covered enterprises.” A covered enterprise is any of the following:
- A company/organization with at least 2 employees and annual dollar volume of sales or receipts of at least $500,000
- A hospital or other institution primarily engaged in the care of the sick, the aged, the mentally ill or developmentally disabled who live on the premises (it does not matter if the hospital or institution is public or private, or operated on a for-profit or not-for-profit basis)
- A pre-school, elementary, or secondary school, or an institution of higher learning, or a school for mentally or physically handicapped or gifted children (it does not matter if the school or institution is public or private, or operated on a for-profit or not-for-profit basis)
- A federal, state, or local government agency
Additionally, individuals who are not employed by FLSA covered enterprises may nonetheless be protected by FLSA. It is not clear whether the automatic enrollment mandate will apply only to FLSA covered entities, or to all employers with workers protected by FLSA.
Key implication: Administration
This requirement apparently will apply to all employers subject to the FLSA, regardless of whether they offer any health benefits to their employees.
Key implication: Communications
Employers that offer health benefits will be required, by way of this notice, to tell new employees that alternative coverage is available to them through the Exchange. Depending on the employer’s plan design, the notice might also include information that would encourage certain employees to seek coverage in an Exchange – thus potentially exposing the employer to financial penalties.
Smart first steps for employers to consider
There is little employers can do to prepare until the Department of Labor issues guidance on the form and content of this notice. However, one fact that definitely will have to be disclosed is whether the plan’s share of total costs of benefits provided under the plan is at least 60%. Employers might consider making this determination now so that they will have time before they have to begin sending this notice to determine an appropriate course of action to take if their plans fall short of this threshold.
As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.