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A Message from NAHU: Exchange Notice Requirement

September 17, 2013

in Compliance, Employee Benefits, Health Care Reform

Originally posted by BenefitMall on http://links.mkt1973.com/servlet/MailView?ms=Njc4OTg4NwS2&r=MjI1MjgxMzg2OTES1&j=MTY4NTg1NjE5S0&mt=1&rt=0

The Patient Protection and Affordable Care Act (PPACA) requires all employers subject to the Fair Labor Standards Act (FLSA) to provide notices to current employees and new hires about the forthcoming health insurance exchanges and subsidies that may be available through the exchanges for qualified individuals. In January of 2013, the federal Department of Labor (DOL) issued guidance delaying the notice requirement under Section 1512 of the law to better coordinate it with the open enrollment period for the new health insurance exchange marketplaces. In May of 2013, further guidance was issued indicating that employers are to provide these notices to employees by October 1, 2013. This Frequently Asked Question (FAQ) document is intended to assist NAHU members who are working with their employer clients to implement the notice requirement.

DOL Issues Clarification about Exchange Notice Penalties

On Wednesday, September 11, the Department of Labor issued a Frequently Asked Question document that addressed the issue of penalties to employers that fail to provide their employees with notice of the exchanges by October 1. Just as NAHU pointed out in its compliance document for members issued last week, the Department of Labor FAQ clarifies that the law does not specifically include a fine or penalty for employers who fail to comply with the notice requirement.

Initially, many individuals and policy experts believed that failure to comply with the notice requirement could trigger either penalties under the Fair Labor Standards Act or other PPACA market reform penalty requirements, including a $100/day per violation fine under the Public Health Services Act. However, legal research made it clear that the health reform law does not specifically tie compliance with the exchange notice requirements to any penalty provision.

However, just because there is no automatic fine for noncompliance, it does not mean that noncompliance is a good option or that agents and brokers should ever advise their clients to ignore the law. In fact, many employers may very well have liability in this area, as employees in plans subject to ERISA likely have the right to recover damages sustained as a result of the employer’s failure to provide information as directed under the law’s notice requirement. ERISA also provides for recovery of legal fees and other related damages. Furthermore, compliance with notice requirements could be a focus of routine Department of Labor audits of group health plans subject to ERISA. Employers with questions about potential liability should consult a labor attorney.

The law is very clear that businesses subject to the Fair Labor Standards Act must notify their employees about the exchange and that the notice should inform employees:

  • About the Health Insurance Marketplace;
  • That, depending on their income and what coverage may be offered by the employer, they may be able to get lower cost private insurance in the Marketplace; and
  • That if they buy insurance through the Marketplace, they may lose the employer contribution (if any) to their health benefits.

Employers do not need to use the model notices provided by the Department of Labor, but need to ensure that their notices include the key elements of information listed above.

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