Exchange Notice: The Ins and Outs of the New Exchange Notice Requirement

Written By: Michael Dollar

Date: August 28, 2013

The Patient Protection and Affordable Care Act (PPACA) requires that applicable employers provide each employee with a written notice providing information about the exchange (also referred to as “marketplaces”) and how to request assistance.  It also describes the availability of a premium tax credit and outlines the implications for the employee if they choose to purchase a qualified health plan through an exchange. The law requires employers to distribute the notice by October 1, 2013.

 

 

Who:  All employers subject to the Fair Labor Standards Act (FLSA). This wide-sweeping definition can include small and large employers, federal, state and local governments, schools (including preschool, elementary and universities) and nonprofit employers – regardless of whether they currently offer health insurance coverage.

 

What:  The DOL has provided model notices for employers to use for notification, which are dependent on whether the employer currently offers a health plan or not.  Copies of each version can be found below.  Please click the “hyperlink” for whether you currently offer a health plan to your employees or not.

 

 

Importantly, employers are only required to complete questions 1-12 of the notice.  See next page for FAQ when completing these questions. Questions 13-16 are optional until future guidance states otherwise.

 

When:  Employers must provide employees with an exchange notice by October 1, 2013. Any employee hired on or after October 1, 2013, must be provided the notice within 14 days of the employee’s start date.  Employers should note that the current version of the notice will expire on Nov. 30, 2013.  Employers should be mindful of this date and watch for an updated version in the fall.

 

How:  Employers must provide the notice automatically and free of charge.  The notification may be a paper document or electronic version.  For paper notification, it may be provided by first-class mail.  If sent it is sent via email, the requirements of the DOL’s electronic disclosure safe harbor policy must be met.  These rules provide that the exchange notice may be sent via email to employees who have electronic access as an integral part of their job.  The employer must take the necessary steps to ensure that the email system: “results in actual receipt of transmitted information” (which would be satisfied by return receipts or failure to deliver notices), protects the employee’s confidential information, maintains the required style/format/content requirements, includes a statement as to the significance of the document and provides a statement as to the right to request a paper version.

 

If employees do not have electronic access as an integral part of their job, they may provide the employer with an email address to provide the notice and they must affirmatively give consent to the electronic notice before each electronic document is provided.  The email must explain what documents will be provided electronically, that their consent can be withdrawn at any time, procedures for withdrawing consent and changing the email address, the right to request a paper copy of the document and if there is an applicable fee, and what hardware or software will be needed.  Importantly, delivering the notice by hand (such as in an enrollment packet or paycheck stuffer) would not satisfy the distribution requirement.  Finally, the notice may be posted to an intranet, but a separate notification must still be sent to each employee notifying them of the document’s availability and the significance.

 

To Whom: Employers must provide a notice of coverage options to each and every employee, regardless of plan enrollment status (if applicable) 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.

 

Model Notice FAQ

 

How do I determine if my plan provides “minimum value?”

 

A plan provides “minimum value” if it pays at least 60% of the cost of covered services (considering deductibles, copays and coinsurance). HHS has developed a minimum value calculator that can be used to determine if a plan provides minimum value. The minimum value calculator is available at http://cciio.cms.gov/resources/files/mv-calculator-final-2-20-2013.xlsm

How is “affordable coverage” determined?

 

Coverage is considered “affordable” if employee contributions for employee only coverage do not exceed 9.5% of an employee’s household income. There are three safe harbor methods for determining affordability:

  • 9.5% of an employee’s W-2 wages
  • 9.5% of an employee’s monthly wages (hourly rate x 130 hours per month)
  • 9.5% of the Federal Poverty Level for a single individual
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