Affordable Care Act Update: What Employers Must Provide on October 1, 2013

DOL Issues Model Exchange Notice and Sets Compliance Deadline
Beginning Jan. 1, 2014, individuals and employees of small businesses will have access to insurance coverage through the Affordable Care Act’s (ACA) health insurance exchanges (Exchanges). Open enrollment under the Exchanges will begin on Oct. 1, 2013. ACA requires employers to provide all new hires and current employees with a written notice about ACA’s Exchanges. This requirement is found in Section 18B of the Fair Labor Standards Act (FLSA).

On May 8, 2013, the Department of Labor (DOL) released Technical Release 2013-02 to provide temporary guidance on the Exchange notice requirement. This temporary guidance will remain in effect until the DOL issues regulations or other guidance. According to the DOL, future regulations or other guidance will provide employers with adequate time to comply with any additional or modified requirements.
In connection with the temporary guidance, the DOL announced the availability of model Exchange notices for employers to use to satisfy the Exchange notice requirement. The DOL also set a compliance deadline for the Exchange notices. Employers must provide employees with an Exchange notice by Oct. 1, 2013.

In addition, the DOL’s temporary guidance includes a new COBRA model election notice, which has been updated to include information regarding health coverage alternatives offered through the Exchanges.

EXCHANGE NOTICE

Affected Employers
ACA’s Exchange notice requirement applies to employers that are subject to the FLSA. In general, the FLSA applies to employers that employ one or more employees who are engaged in, or produce goods for, interstate commerce. In most instances, a business must have at least $500,000 in annual dollar volume of sales or receipts to be covered by the FLSA.
The FLSA also specifically covers the following entities: hospitals; institutions primarily engaged in the care of the sick, the aged, mentally ill, or disabled who reside on the premises; schools for children who are mentally or physically disabled or gifted; preschools, elementary and secondary schools, and institutions of higher education; and federal, state and local government agencies.
The DOL’s Wage and Hour Division provides guidance relating to the applicability of the FLSA in general, including a compliance assistance tool to determine applicability of the FLSA.
Required Content
In general, the Exchange notice must:
· Inform employees about the existence of the Exchange and describe the services provided by the Exchange and the manner in which the employee may contact the Marketplace to request assistance;
· Explain how employees may be eligible for a premium tax credit or a cost-sharing reduction if the employer's plan does not meet certain requirements;
· Inform employees that if they purchase coverage through the Exchange, they may lose any employer contribution toward the cost of employer-provided coverage, and that all or a portion of this employer contribution may be excludable for federal income tax purposes; and
· Include contact information for the Exchange and an explanation of appeal rights.
Model Notices
The DOL provided the following model Exchange notices:

· A model Exchange notice for employers who do not offer a health plan; and

· A model Exchange notice for employers who offer a health plan to some or all employees.

Employers may use one of these models, as applicable, or a modified version, provided the notice meets the content requirements described above.
Providing the Notice
Who Must Receive a Notice?
Employers must provide the Exchange notice to each employee, regardless of plan enrollment status or of part-time or full-time status. Employers are not required to provide a separate notice to dependents or other individuals who are or may become eligible for coverage under the plan but who are not employees.
What Is the Deadline for Providing the Notice?
ACA required employers to provide the Exchange notice by March 1, 2013. However, on Jan. 24, 2013, the DOL announced that employers would not be held to the March 1, 2013, deadline and that employers would not have to comply with the Exchange notice requirement until more guidance was issued.
The DOL’s temporary guidance sets a compliance deadline for providing the Exchange notices that matches up with the start of the first open enrollment period under the Exchanges.
Employers must provide the Exchange notice to both new hires and current employees as follows:

· New Hires – Employers must provide the notice to each new employee at the time of hiring beginning Oct. 1, 2013. For 2014, the DOL will consider a notice to be provided at the time of hiring if the notice is provided within14 days of an employee’s start date.

· Current Employees – With respect to employees who are current employees before Oct. 1, 2013, employers are required to provide the notice no later than Oct. 1, 2013.

Employers that decide to inform their employees about the Exchanges earlier than the Oct. 1, 2013, deadline are permitted to use the model notices and rely on the DOL’s temporary guidance.
Method of Providing Notice
The notice is required to be provided automatically, free of charge.
The notice must be provided in writing in a manner calculated to be understood by the average employee. It may be provided by first-class mail. Alternatively, it may be provided electronically if the requirements of the DOL’s electronic disclosure safe harbor are met. This safe harbor allows plan administrators to send certain disclosures electronically to:
· Employees with work-related computer access; and
· Other plan participants and beneficiaries who consent to receive disclosures electronically.
The safe harbor does not require the use of any specific form of electronic media. However, plan administrators are required to use measures reasonably calculated to ensureactual receipt of the material by plan participants and beneficiaries. Merely placing a disclosure on a company website available to employees will not by itself satisfy this disclosure requirement.
cobra election notice
Under COBRA, a group health plan must provide qualified beneficiaries with an election notice, which describes their rights to continuation coverage and how to make an election. The election notice must be provided to the qualified beneficiaries within 14 days after the plan administrator receives the notice of a qualifying event. The DOL has a model election notice that plans may use to satisfy the requirement to provide the election notice under COBRA.
According to the DOL, some qualified beneficiaries may want to consider and compare health coverage alternatives to COBRA continuation coverage that are available through the Exchanges. Qualified beneficiaries may also be eligible for a premium tax credit for an Exchange plan.
The DOL updated the model COBRA election notice to help make qualified beneficiaries aware of other coverage options available in the Exchanges. Use of the model election notice, appropriately completed, will be considered by the DOL to be good faith compliance with the election notice content requirements of COBRA.

Source: Department of Labor

Texas HR & Employee Benefits Summit

Texas HR & Employee Benefits Summit

July 15 and 16, 2013
Hyatt Regency Hotel, Richardson, North Dallas Texas

 

The Texas HR & Employee Benefits Summit is specifically organized for senior HR Managers and Directors who are directly involved with their organization's human resource and personnel management operations.

 

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Benefit News from Waldman Brothers

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March, 26, 2013

Agencies Propose Regulations on 90-day Waiting Period Limit and Elimination of HIPAA Certificates

On March 21, 2013, the DOL, HHS and IRS published in theFederal Register a joint set of proposed regulations implementing the PPACA requirement that group health plans and health insurance issuers offering group health insurance cannot apply a waiting period that exceeds 90 days. The proposed regulations make the rules regarding 90-day waiting periods consistent with previously issued regulations implementing the employer mandate (also known as the “pay or play penalty”).

The proposed regulations define a waiting period as the period that must pass before coverage can become effective for an employee or dependent who’s otherwise eligible under the terms of the group health plan. Plan sponsors are allowed to impose substantive eligibility requirements (i.e., full-time employment) for coverage without restriction. However, waiting periods based solely on the passage of time cannot exceed 90 days. This means coverage for otherwise eligible employees and dependents must become effective on the 91st day.

Note that no extension is permitted in the event that the commencement of coverage is tied to the first day of the month. Thus, in that case, the waiting period cannot be extended to the first day of the month following the completion of a 90-day wait. Plans may still require the completion of a specified number of hours to become eligible for health coverage. The proposed regulations indicate that the specified number of hours cannot exceed 1,200 and can only be imposed on a one-time (as opposed to an annual) basis.

In addition, the proposed regulations provide some flexibility regarding variable-hour provisions for new employees. In these circumstances, the plan sponsor may apply a measurement period of up to 12 months to determine whether the new variable-hour employee satisfies the eligibility conditions. The proposed regulations explain that the plan will not violate the 90-day waiting period requirement for this limited subset of employees if coverage is effective no later than 13 months from the employee's start date, plus the time remaining until the first day of the following month if the employee started midmonth.

The proposed regulations also include several changes to conform existing regulations to other PPACA provisions. First, the proposed regulations make changes to the pre-existing condition (PEC) limitations and other portability provisions of HIPAA. The regulations would amend HIPAA to remove provisions superseded by PPACA’s prohibition on PECs. This includes eliminating the need to provide HIPAA certificates of creditable coverage. The proposed amendment to eliminate the requirement to issue a certificate of creditable coverage is proposed to apply Dec. 31, 2014 (as opposed to Jan. 1, 2014, when the prohibition on PECs takes effect). This delayed effective date is so that individuals needing to offset a PEC exclusion under a plan that operates with a plan year beginning later than Jan. 1 would still have access to the certificate for proof of coverage. Second, the regulations propose updating certain examples in other regulatory provisions — for example, to reflect the prohibition on annual and lifetime dollar limits and the provision of coverage to dependent children until age 26. Lastly, the regulations propose clarifying that a multistate plan must comply with PPACA’s federal external review process.

Federal Register

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Federal Health Exchange Application Available

On Jan. 25, 2013, CMS released the application that will be used by individuals to apply for health insurance coverage through federally facilitated exchanges in 2014. These applications, which will be used beginning with the initial open enrollment on Oct. 1, 2013, will collect financial and demographic information. This information will be used to determine whether an individual is eligible to purchase health care coverage through the exchange, and whether the person further qualifies for a premium tax credit. Individuals will be able to submit applications online, through the mail, over the phone or in person.

In addition to paper applications, many individuals applying for affordability programs and for insurance through the exchange will apply online. CMS also released a draft list of all possible questions that could be asked in an online application. There is also information about two video demonstrations of the online application.

Please note that the paper application for health insurance (and cost assistance) contains a draft template of an employer coverage form to assist individuals with gathering the requested information on employer-sponsored coverage from their employers.

Application Materials

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Agencies Extend Transition Period for State External Review Process

On March 15, 2013, the DOL, HHS and IRS jointly released Technical Release 2013-01. The guidance provides relief to health insurers offering non-grandfathered fully insured plans and non-grandfathered self-insured non-ERISA plans in states working to bring their external review processes into compliance with National Association of Insurance Commissioners (NAIC) standards.

Previous guidance provided a grace period until Jan. 1, 2014, for these non-grandfathered plans to provide an external review process using either the state’s process or the federal process. Typically, self-insured ERISA plans would use the federal process. Self-insured non-ERISA plans (e.g., plans sponsored by municipalities, county governments, public school systems), as well as fully insured plans, would typically use the state’s process. However, because some states either did not have external review processes in place or did not use an external review process that provided the level of protections required in the NAIC Uniform Health Carrier External Review Model Act (known as the “NAIC-parallel process”), there was concern as to whether such plans would be in compliance by Jan. 1, 2014. In June 2011, the agencies provided for a transition period where a state could use a process that meets temporary standards, (known as the “NAIC-similar process”), if the states did not have an NAIC-parallel process in place.

The additional transition relief now provides that insurers and self-insured non-ERISA plans will be treated as complying with the external review requirements if they follow a state process that meets the temporary NAIC-similar process standards, a less burdensome process than the NAIC-parallel process. Such plans may utilize the transition relief until Jan. 1, 2016, but if a state still does not adopt the NAIC-parallel process standards by that date, the plans will be required to use the federally administered external review process.

The guidance ends with clarification that the agencies intend to issue additional guidance on state external review standards, incorporating comments received. The transition relief in Technical Release 2013-01 should be relied upon for guidance until this additional guidance is released.

Technical Release 2013-01

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Corrections to the Employer Mandate Guidance

On March 15, 2013, the IRS printed in theFederal Register four corrections to the original employer mandate guidance, which was issued on Dec. 28, 2012 (and published in theFederal Register on Jan. 2, 2013). The corrections make several minor changes to the employer mandate guidance (also known as the “pay or play penalty” or “shared responsibility requirement”).

While the corrections seem minor, they provide much-needed clarification where, in two cases, an incorrect cross-referencing citation was provided. Another correction replaces language applicable to the transition relief for fiscal plan years (non-calendar-year plans) so that the word “member” is deleted. The deletion of the word “member” is vital because there was concern that the transition relief only applied to members of a controlled group, instead of all applicable large employers subject to the employer mandate guidance.

The final correction was lengthier, and applies to applicable large employer members who are required to make contributions to a multiemployer plan under a collective bargaining agreement, with respect to some or all of its employees. The IRS provided replacement text that is more easily understood and also corrects one citation (the definition of “affordable”). The correction adds a new sentence, which clarifies that such plans may also utilize the transition relief with respect to offers of coverage to dependents.

Federal Register