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September 4, 2013
The ACA requires that employers provide employees with a written notice containing the information regarding exchanges and possible subsidies when purchasing individual coverage through a public exchange. Originally the ACA required the notice be provided to employees by March 1, 2013; however, the DOL issued guidance delaying the notice requirement.
Employers are now required to provide the notice to all current employees no later than October 1, 2013. We are recommending that employers wait to send the notice until mid-September to avoid any confusion since the details of the exchanges will not be available until October 1st. Employers are also required to provide the notice to each new employee at the time of hire. For new hires, a notice provided within 14 days of an employee’s start date will be considered timely through the end of 2014 (pending additional guidance).
How to Send the Notice
DOL Guidance and DOL Model Notices
The DOL published model notices for employers to use – one designed for employers offering health coverage and one for employers not offering health coverage. The models can be found at www.dol.gov/ebsa/healthreform. Since the DOL model notices have been released there has been significant confusion regarding what information must be provided to employees. The DOL models contain a considerable amount of extra information that is not required by the law. This additional “optional” information creates a significant administrative burden on employers.
Understandably, employers are nervous about making changes to the DOL model notices. Importantly, however, the statute requires only that the following information be addressed in the notice:
Furthermore, the DOL guidance released in conjunction with the model notices makes it clear that employers are not required to use the model notice as long as the required elements (described above) are included in an employer’s communication.
What’s Missing from the Model Notice?
The DOL model notices fail to communicate what is arguably the most important thing an employer may want to communicate to employees. Most employees (and their eligible family members) will not qualify for federal subsidies described in the model notice because the employee is eligible for “affordable” employer-sponsored health insurance.
The ACA defines that an employer plan is affordable to the employee if the required employee contribution to participate in single (employee only) coverage is no more than 9.5% of that employee’s household income.
For a large majority of full time employees (other than relatively low wage workers), their employer plan will be affordable, and all the information about federal subsidies does not apply to them. For example if an employee has an annual household income of just $24,000, the required contribution for single coverage would need to be more than $190.00 per month for the employer plan to be considered “unaffordable”.
Most employers should focus on the fact that if the employer plan is relatively affordable, very few, if any, employees or their family members will qualify for subsidies when purchasing individual coverage through a public exchange.
It is expected that media coverage will increase as the October 1 opening of enrollment approaches, generating questions from employees. For many employers, the answer to these employee questions is simple. If the employer offers affordable minimum value coverage (as defined by the ACA) to an employee, the employee and their family will not be eligible for subsidized individual coverage. On the other hand, employers may wish to more aggressively promote the availability of the exchange insurance options to categories of employees (such as part-time or seasonal employees) not currently eligible for the employer’s plan. As always, should you have any questions about the Notice of Exchange or require assistance, please contact your Parker, Smith & Feek Benefits Team.
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