Beginning on January 1, 2014, individuals and employees of small businesses will be able to access health insurance coverage through the Health Insurance Marketplace created by the Affordable Care Act (ACA), commonly known as “Obamacare”. Among other things, the ACA requires that employers provide a notice to employees with information regarding their coverage options, including those available in the Marketplace, by October 1, 2013. Importantly, this notice requirement is separate from the universal mandate pushed back a year by the Administration this past summer.
Under this requirement, found in the newly-minted Section 18B of the Fair Labor Standards Act (FLSA), employers are required to provide current employees with written notice about the Marketplace and new employees hired after October 1, 2013 must receive such notice within 14 days of their start date.
Because this aspect of the ACA is promulgated under the FLSA, all employers who are subject to the FLSA are required to send this notice – NOT just those that employ the commonly known minimum of fifty employees for the ACA’s general mandate. Covered employers must provide a notice of coverage options to all employees, regardless of whether or not they are eligible for or enrolled in coverage under an employer-sponsored health plan. This notice requirement even extends to part-time, seasonal and temporary employees.
As for the notice itself, it must be in writing and be written in a manner calculated to be understood by the average employee. At a minimum, the notice must contain the following information:
- The existence of the Marketplace (referred to in the statute as the “Exchange”), including a description of the services provided by the Marketplace, and the manner in which the employee may contact the Marketplace to request assistance;
- The possibility that employees may lose the employer contribution to any employer-provided health plan if they purchase a qualified health plan through the Marketplace;
- The possibility that employees may lose the ability to exclude employer and employee contributions from their income for federal income tax purposes if they purchase a qualified health plan through a Marketplace; and
- The possibility that the employee may be eligible for a premium tax credit if the employee purchases a qualified health plan through the Marketplace.
To assist employers with their notice obligations, the Department of Labor (DOL) has promulgated two model notices, one for employers who do not offer a health plan and another model for employers who do offer a health plan to some or all employees. Employers can use one of these models or create their own so long as the notice meets the above content requirements.
As to delivery, employers may deliver the notice via first-class mail, but they can also distribute the notice electronically, per Department of Labor Regulations, 29 CFR 2520.104b-1(c), so long as the recipient is either (a) an employee who uses a computer as part of his or her normal job function, or (b) an employee who has consented to electronic delivery in a manner that demonstrates they can effectively receive the electronic delivery.
What about penalties for non-compliance? Although there are no specific fines or penalties for failure to give proper notice, we encourage employers to comply with this requirement because failing to do so could expose employers to FLSA liability from employees who suffer damages as a result of such failure. Although the government is working hard to provide employers and employees with updated compliance information, outside counsel can assist in developing a step-by-step, deadline-by-deadline plan to ensure that employers do not run afoul of the ACA.