Employer Coverage Notice Has Finally Been Issued

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On May 8, 2013, the Department of Labor (DOL) issued additional guidance to help employers comply with upcoming requirements under the Patient Protection and Affordable Care Act of 2010 (the "Affordable Care Act" or "ACA"). DOL Technical Release No. 2013-02 provides more details for affected employers regarding the provision of written notice to employees about health insurance coverage options available through the employer or the State or Federal new Health Insurance Marketplace (the "Exchange") that go into effect in 2014.

Under the guidance, beginning October 1, 2013, an employer who is otherwise subject to the Fair Labor Standards Act (FLSA) must provide written notice of health insurance coverage options that will be available in 2014 to all of its employees (including those who are currently not eligible for coverage, as well as those who presently do not elect to receive coverage through the employer's plan). Information concerning the employer's plan, as well as initial information about alternative coverage options available through the new Exchange in each state must be provided. Additionally, updated COBRA notice information will have to be provided to affected individuals regarding alternative health insurance options within the Exchange.

What Employers Should Do Now:

The DOL provided a proposed model notice (http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf) that is available for use in meeting the initial reporting obligation. Although this notice could be further modified at a later date, it is clear that at least for the initial reporting period, employers will need to provide certain key information about their coverage options beginning with the 2014 Plan Year. This notice should include, but is not limited to the following:

  • Whether the employer is going to offer health insurance coverage in 2014 that meets the "minimum value standard" guidelines (i.e., covers approximately 60 percent of the total cost of health care under the employer's plan(s));
  • Whether that coverage is "affordable," and is no more than 9.5% of "household income" for employee-only coverage for at least one health insurance option that meets the minimum value guidelines; and
  • Whether coverage is available to all employees or is limited to a portion of the overall employee population, and at what level coverage is excluded from any particular employee groupings (e.g., part-time employees working less than 30 hours per week).

The notice must be issued no later than October 1, 2013, either by first class mail, registered mail or other qualifying electronic means that meet the DOL's general electronic notification requirements for distribution of summary plan descriptions, etc. Employers will therefore have to be able to decide what coverage options they will be providing to their employees well in advance of this deadline.

For a calendar year plan, this may require an employer to accelerate the renewal process. Moreover, fiscal year plans that qualify for transition relief and have a longer time horizon to comply with the upcoming ACA obligations and mandates must still comply with the October 1, 2013 coverage notification deadline. Thus, such plans will still have to engage in early discussions about their 2014 health insurance options and renewal considerations.

As such, if they have not already done so, employers are urged to start working with their insurance brokers and consultants now to fully evaluate their 2014 health insurance renewal strategy and options for coverage for the 2014 Plan Year. Employers will also need to be updating and revising current COBRA health continuation notification forms that contain new information about alternative coverage options that begin in 2014. Accordingly, employers need to be working on a compliance strategy for affected COBRA participants as well. A model notice has also been provided for this use here.