The October 1, 2013 deadline for providing employees with a notice of their coverage options through the newly established public health insurance exchanges (referred to as the “Marketplace”) is quickly approaching. This news alert summarizes the key points of the notice requirement.
The notice requirement is contained within section 18B of the Fair Labor Standards Act (FLSA), as added by the Patient Protection and Affordable Care Act (ACA). In January, the Department of Labor (DOL) announced that it was delaying the original March 1, 2013 deadline for providing the notice, in part to coordinate delivery of the notices with open enrollment for the Marketplace, which begins on October 1, 2013. The DOL subsequently released model notices and, in recent weeks, clarified other questions relating to the notice requirement, such as who may provide the notice and the penalties for failure to provide the notice.
Employers Subject to the Notice Requirement
The notice requirement applies to all employers who are subject to the FLSA, regardless of whether they provide health benefits. In general, the FLSA applies to employers who employ one or more employees and have $500,000 or more in annual sales or receipts. In addition, the FLSA specifically applies to certain types of entities regardless of their annual sales or receipts, including hospitals; schools; institutions primarily engaged in the care of the sick, the aged, mentally ill, or disabled who reside on the premises; and federal, state and local government agencies. (For more information on FLSA applicability, see http://www.dol.gov/elaws/esa/flsa/scope/screen24.asp)
Who Must Receive the Notice
Employers must provide the notice to each employee, regardless of whether they are enrolled in (or eligible for) the employer’s group health plan and regardless of whether they are part-time or full-time. However, employers do not need to provide a separate notice to dependents or other non-employees, such as retirees or terminated employees on COBRA.
Content of the Notice
Pursuant to FLSA section 18B, the notice must include the following items:
The DOL has provided two model notices that employers may use: one for employers that offer health coverage, and one for employers that do not offer health coverage. The model notices include the three required items listed above, as well as supplementary information about the employer and the employer’s health coverage (if applicable) that employees will need if they apply for coverage through the Marketplace, including the following:
Employers can modify the model notices, provided that the modified version still includes the three required items set forth above. While the supplementary information is not specifically required by the statute, employers that anticipate having a high number of employees seeking coverage through the Marketplace may want to go ahead and provide this information, to the extent it is known. The supplementary information corresponds to the “Employer Coverage Tool” that is part of certain Marketplace applications, so employers may face inquiries from employees who need assistance in completing the Employer Coverage Tool if the information is not provided upfront.
The model notices can be found here:
Timing and Delivery of the Notice
Employers must provide the notice of coverage options free of charge to all current employees no later than October 1, 2013 and to new employees hired on or after October 1, 2013 at the time of hire (but no later than within 14 days of the employee’s start date). The notice can be furnished by first-class mail, or electronically for any employees who have access to the employer’s computer system as an integral part of their job duties.
In addition, the DOL released guidance earlier this month which confirms that entities other than the employer, such as third-party administrators, issuers and multiemployer plans, may provide the notice to employees on behalf of the employer. The guidance cautions, however, that the requirement to deliver the notice to all employees remains unchanged. Accordingly, where such entities provide the notice only to a subset of employees (such as those enrolled in the employer’s plan), the employer itself will need to take steps to provide the notice to all other employees.
In guidance released last week, the DOL stated that there are no penalties or fines for failing to comply with the notice requirement. This guidance clarifies unsettled questions surrounding the applicable penalties. Because the requirement is contained within section 18B of the FLSA, failure to provide the notice would constitute a FLSA violation. Prior to the DOL guidance, it was not clear what this meant, since the penalty provisions and remedies under the FLSA—such as recovery of back wages for minimum wage or overtime violations—are incompatible with a failure to provide the notice.
While employers no longer need to be concerned about penalties, officials from the Employee Benefits Security Administration (EBSA), a division of the DOL, have cautioned against disregarding the notice requirement. The EBSA officials informally stated that employers should not interpret the no-penalty announcement as meaning that there will be no adverse consequences for failing to provide the notice. While it is not clear what those adverse consequences might be, we recommend that employers still provide the notice to current employees by October 1, as well as newly hired employees going forward.
As always, feel free to contact us for more information regarding these requirements and any other health care reform questions.
Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and colleagues. If you have any questions about this Alert or would like to discuss the topic further, please contact your Foley attorney or the following:
Gregg H. Dooge
Leigh C. Riley
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