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DOL FAQs Address Deadline for Distributing Exchange Notices, HRAs and More
Practical Law Legal Update 1-523-7520 (Approx. 4 pages)
DOL FAQs Address Deadline for Distributing Exchange Notices, HRAs and More
by PLC Employee Benefits & Executive Compensation
| Published on 25 Jan 2013 • USA (National/Federal) |
The Department of Labor (DOL) issued additional FAQs on Affordable Care Act (ACA) implementation that delay the March 1, 2013 deadline for distributing notices of exchanges, address issues relating to health reimbursement arrangements and discuss certain other topics.
On January 24, 2013, the DOL issued additional FAQs on Affordable Care Act (ACA) implementation. The FAQs were prepared by the DOL, HHS and Treasury (the Departments). The FAQs delay the March 1, 2013 deadline for distributing employer notices of health insurance exchanges, address issues relating to health reimbursement arrangements (HRAs) and discuss other topics, including Patient-Centered Outcomes Research (PCOR) fees and fixed indemnity insurance. The FAQs, which are the eleventh in a series on ACA implementation, are available on the DOL website.
Delayed Deadline for Distributing Employer Exchange Notices
The ACA amended the Fair Labor Standards Act (FLSA) to require that employers provide new and current employees with a written notice containing information about coverage options available through the health insurance exchanges. The FAQs clarify that the notice of exchanges requirement will not take effect on March 1, 2013, the date specified in the FLSA (under the ACA). Rather, the Departments expect that the timing for distributing notices will be the late summer or fall of 2013, which would coordinate with the open enrollment period for the exchanges.
According to the FAQs, the DOL is considering compliance options that include:
- Model, generic language for use in satisfying the exchange notice requirement.
- Allowing employers to provide employees with information using the employer coverage template discussed in HHS proposed regulations, which were issued on January 22, 2013.
HRAs and Annual Limits under the ACA
The FAQs also address compliance by HRAs with the ACA's annual limit requirements (Section 2711 of the Public Health Service Act (PHSA)) (see Practice Note, Lifetime Limits, Annual Limits, and Essential Health Benefits Under the ACA). The preamble to interim final regulations implementing the annual limit requirements, issued in June 2010, distinguished between HRAs that are "integrated" with other coverage as part of a group health plan and non-integrated, or "stand-alone" HRAs. The preamble stated that when HRAs are integrated with other coverage that alone would comply with PHSA Section 2711, the fact that HRA benefits are limited does not violate the PHSA, because the combined benefit satisfies the requirements.
The FAQs further explain that, under guidance to be issued:
- Employer-sponsored HRAs, under PHSA Section 2711, cannot be integrated with individual market coverage or with an employer plan that provides coverage through individual policies.
- Employer-sponsored HRAs may be treated as integrated with other coverage only if the employee receiving the HRA is actually enrolled in the coverage. An HRA does not satisfy PHSA Section 2711 if it credits additional amounts to an individual when he is not enrolled in primary coverage that complies with PHSA Section 2711 provided by the employer.
- Regardless of whether an HRA is integrated with other group health plan coverage, unused amounts credited before January 1, 2014, consisting of amounts credited before January 1, 2013 and amounts credited in 2013 under HRA terms in effect on January 1, 2013, can be used after December 31, 2013 to reimburse medical expenses without causing the HRA to violate PHSA Section 2711.
Fixed Indemnity Coverage
Hospital indemnity or other fixed indemnity insurance policies under a group health plan are excepted benefits (and not subject to HIPAA's portability rules) only if:
- The benefits are provided under a separate policy, certificate or contract of insurance.
- There is no coordination between the provision of the benefits and an exclusion of benefits under any group health plan maintained by the same plan sponsor.
- The benefits are paid with respect to an event regardless of whether benefits are provided for the event under any group health plan maintained by the same plan sponsor.
To be hospital indemnity or other fixed indemnity insurance, the insurance must pay a fixed dollar amount per day, or other fixed period, of hospitalization or illness regardless of the amount of expenses incurred. According to the FAQs, policies that pay on a per-service basis (as opposed to on a per-period basis) are in practice a form of health coverage and do not meet the requirements for excepted benefits.
Other Issues
The FAQs also address:
- Payment of PCOR fees. The FAQ states that Title I of ERISA generally does not prohibit a multiemployer plan's joint board of trustees from paying the ACA's PCOR fees from plan assets, unless the plan document specifies a source other than plan assets for payment of the fees (see Legal Update, Final IRS Regulations Address Fees for Patient-Centered Outcomes Research).
- Employer group waiver plans that supplement Medicare Part D coverage. The FAQs state that, pending further guidance, the Departments will not take enforcement action against a group health plan that is an employer group waiver plan because the non-Medicare supplemental drug benefit does not comply with the health coverage requirements of the PHSA, ERISA and the IRC.
Practical Impact
The delayed compliance date for distributing exchange notices is welcome news for employers, and the FAQs indicate that additional guidance on complying with the notice requirement will be issued. For more information on the health insurance exchanges, see Article, Health Insurance Exchange and Related Requirements Under the ACA.