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Exchange Notices, Due October 1, Can Be Distributed by TPAs and Insurers
Practical Law Legal Update 2-540-1765 (Approx. 5 pages)
Exchange Notices, Due October 1, Can Be Distributed by TPAs and Insurers
by Practical Law Employee Benefits & Executive Compensation
| Published on 06 Sep 2013 • USA (National/Federal) |
The Department of Labor (DOL) has issued additional FAQs addressing implementation of the Affordable Care Act (ACA). Jointly prepared by DOL, Health and Human Services (HHS) and Treasury, the FAQs address the employer exchange notices and the 90-day waiting period limit under the ACA.
On September 4, 2013, the DOL issued FAQs addressing the Affordable Care Act (ACA) rules regarding:
- The notice of coverage options available through the health insurance exchanges (exchange notices).
- The 90-day waiting period limit.
The FAQs were jointly prepared by the DOL, HHS, and Treasury (the Departments).
Exchange Notices
Under Section 18B of the Fair Labor Standards Act (FLSA), added by the Affordable Care Act (ACA), employers must provide all new hires and current employees with a written notice about either:
- The state-based health insurance exchanges.
- If applicable, the federally facilitated exchange.
Exchange notices can be provided by first-class mail or electronically (if the requirements of the DOL's safe harbor for providing notices electronically are satisfied, see Practice Note, DOL Safe Harbor for Electronic Disclosure of Plan Information).
Among other things, the exchange notices must:
- Describe the exchanges.
- Provide information about the premium subsidies for health insurance that may be available if an employer's plan is unaffordable or does not provide minimum value.
- Explain the consequences if an employee decides to purchase a qualified health plan through the exchange instead of employer-sponsored coverage.
In an FAQ, the Departments clarify that another entity besides the employer (such as a third-party administrator (TPA), insurer or multiemployer plan) may send exchange notices on an employer's behalf if the notices are timely and complete. The FAQ notes that:
- Exchange notices must be provided to all employees, regardless of whether an employee is enrolled in, or eligible for, group health plan coverage.
- It is inadequate for exchange notices to be sent only to participants enrolled in the plan, if some employees are not enrolled in the plan.
As a result, when providing exchange notices on an employer's behalf, TPAs, insurers and multiemployer plans should either:
- Ensure that exchange notices are provided to all employees regardless of plan enrollment.
- Communicate clearly to employers that the TPA, insurer or plan will provide exchange notices only to a subset of employees (for example, employees enrolled in the plan), and remind the employer that it will need to provide notices to the rest of the employees (for example, employees not enrolled in the plan).
90-day Waiting Period Limit
For plan years beginning on or after January 1, 2014, the ACA prohibits group health plans and insurers, including grandfathered plans, from imposing waiting periods of more than 90 days (see Practice Notes, Ninety-day Limit on Waiting Periods under the ACA and Grandfathered Health Plans under the ACA).
In August 2012, the Departments provided temporary guidance regarding the 90-day waiting period limit in IRS Notice 2012-59, which was coordinated with other guidance (IRS Notice 2012-58), providing guidance on the ACA's employer mandate (see Practice Notes, Employer Mandate under the ACA: Overview and Employer Mandate under the ACA: Determining Full-time Employees for Employer Penalties). The Departments published proposed regulations on the waiting period in March 2013 (see Legal Update, Proposed Rules Implement 90-day Waiting Period Limit under the ACA). In the preamble to the proposed regulations, the Departments indicated that they would consider compliance with the proposed regulations as compliance with the 90-day waiting period limit at least through the end of 2014.
In an FAQ, the Departments state that, to the extent the final regulations are more restrictive on plans and insurers than the proposed rules:
- The final regulations will not be effective before January 1, 2015.
- The Departments will plan to give plans and insurers sufficient time to comply.
Also, the FAQ notes that under the proposed regulations, health plans and insurers may impose eligibility provisions not based solely on the lapse of time if the provisions are not designed to avoid compliance with the 90-day waiting period limit. For example, a multiemployer plan operating under a collective bargaining agreement may include an eligibility provision that allows employees to become eligible for coverage by working hours of covered employment across multiple contributing employers, which:
- Often aggregate hours by calendar quarter.
- Permit coverage to extend for the next full calendar quarter, regardless of whether an employee terminates employment.
The Departments would consider this provision designed to accommodate a unique operating structure, rather than designed to avoid compliance with the 90-day waiting period limit.
Practical Impact: Providing Exchange Notices
Under DOL guidance issued earlier this year, beginning October 1, 2013, employers generally must provide exchange notices to each new employee at the time of hire. Current employees must be provided exchange notices no later than October 1, 2013. Because TPAs and others may be accustomed to dealing with only a subset of an employer's full employee population (for example, enrolled plan participants), these entities should keep in mind that exchange notices must be provided to all employees. Ultimately, however, it is the employer that bears responsibility for providing the exchange notices.