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DOL Releases Model Marketplace (Exchange) and Revised COBRA Notices

Posted on May 30, 2013

Jill Bergman

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If you are an employer subject to the Fair Labor Standards Act (FLSA), (as most employers are) the ACA requires you give every employee on their date of hire a notice about the ACA healthcare Marketplaces (the new term being used for exchanges) that become effective January 1, 2014.  The notice was supposed to be issued beginning March 1, 2013 (including to your current workforce) however; the Department of Labor (DOL) delayed this until late summer or early fall when they indicated that guidance would be provided.  Based on employer feedback, the DOL has issued Technical Release 2013-02 earlier than originally anticipated – so we now have temporary guidance and draft model marketplace notices (as well as an updated COBRA election notice) to use.  Employers must start issuing the notice to current and new employees no later than October 1, 2013 which coincides with the beginning of the open enrollment period for the healthcare Marketplaces.  If the notice is provided to new employees within 14 days of hire (for 2014 only) you will comply with your notice obligation.

Notice To Inform Employees of Coverage Options

The free notice must be given to all your employees on their start date (you don’t have to provide a separate notice to dependents), written in a manner that your employees will understand, and include the following;

  • General healthcare Marketplace information with a description of services offered by the Marketplace.
  • How to contact the Marketplace.
  • If the plan you offer to employees is not a “minimum value plan” (total allowed costs under the plan are less than 60%) the employee may qualify for help paying for coverage from the Marketplace. It’s interesting to note that the law doesn’t specifically mention the “affordability criteria” that could also allow an employee to get help paying for Marketplace coverage although the DOL did pick up on this fact and does mention affordability in the model notice.  Remember – if an employee has to pay more than 9.5% of household income for single coverage then an employer plan is not considered to be affordable.
  • If an employee purchases Marketplace coverage then the employee may lose the value of any contribution an employer makes toward the cost of coverage and must also use “after-tax” dollars to purchase Marketplace coverage.

The notice may be provided by first class mail or electronically if the DOL rules for the electronic disclosure of information such as ensuring receipt of transmitted information are followed.  Employers have the option to use the DOL model notices or create a modified version as long as the required content noted above is properly disclosed.

Model Notices

The DOL created a notice for employers that offer coverage to some or all employees with general statements about the Marketplace (which seems to satisfy the legal requirements noted above) and also includes a section for additional information (about the employer’s plan) that employees will need to provide to the Marketplace if that’s where they opt for coverage:

  • Employer Name, address, and phone number.
  • Employer Identification Number (EIN).
  • Who the Marketplace may contact about the healthcare coverage that is offered including an email address.
  • Which group of employees and dependents are eligible for coverage.
  • Whether the plan provides minimum value coverage and is considered affordable to the employee.

Page 3 of the draft model notice is optional however; this information will help ensure employees understand their coverage choices and requests more details about the employer’s plan waiting period and the amount and frequency of the wages you pay to the employee.

Employers may need to prepare two versions of this notice depending on whether the coverage is affordable or unaffordable for each employee and be sure to issue the proper notice at the time of hire (or at the time the notice is issued to current employees).   Employers may wish to tailor the notice or complete the optional Page 3 for new hires in a waiting period to indicate if coverage will be affordable at the time of initial eligibility (the 90-day waiting period) to enroll in the employer plan.

A separate model notice has been created for employers who do not offer coverage and requests similar employer contact information noted above.  It certainly seems more appropriate to use this version of the model notice for employees who may not be eligible for employer-sponsored coverage (such as part-time employees) however; it’s unclear whether the DOL really wants part-timers to receive the notice that the DOL states is for employers that offer coverage to some or all employees.

COBRA

The ACA does not repeal or modify COBRA however; employees who become eligible for COBRA (or other state continuation programs) upon certain Qualifying Events such as termination of service, separation or divorce or aging off a parents plan will have a new option to obtain coverage from a healthcare Marketplace and so the DOL has modified the model COBRA election notice which can be found on the DOL website under Notice to Employees of Coverage Options.  A redline version is also available for easy reference to the noted changes.

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