Obamacare compliance tips for employers

October typically signifies the start of open enrollment season in the workplace. This is the time of year when employees can switch health insurance plans and add or drop benefits. This year, open enrollment has a special significance and a dual meaning because of the Affordable Care Act (aka Obamacare).

As of Oct. 1, the phrase “open enrollment” should really mean open enrollment for employer plans and open enrollment under the Affordable Care Act (ACA). These are two parallel enrollment periods. Employers will have to communicate their own open enrollment options and time frames to employees. Additionally, employers also have responsibilities because of the ACA.

Open enrollment under the Affordable Care Act

For benefit year 2014, the ACA’s open enrollment period runs from Oct. 1, 2013 through March 31, 2014. During this time, individuals can enroll in a qualified health plan in the health care exchange/marketplace. To help individuals learn about the existence of the health care marketplace and the options available through it, the law mandates that employers provide a notice to current and newly hired employees.

The notice must be provided by every employer subject to the Fair Labor Standards Act — the law that regulates minimum wage and overtime obligations. If your workplace differentiates between employees who are exempt and nonexempt or subject to minimum wage and overtime pay, your organization is likely covered by the Fair Labor Standards Act and will need to provide the open enrollment notice, regardless of whether you have a small or large business.

Starting Oct. 1, the notice must be provided to newly hired employees within 14 days of hire. Current employees should already have received the notice by Oct. 1. The notice must inform employees that:

1.     There is a new health care marketplace. (It should also include contact information and a description of the services provided through the marketplace.)

2.     Individuals may be eligible for a premium tax credit for purchasing a qualified health plan through the marketplace.

3.     Individuals purchasing through the marketplace may lose contributions to health care benefits provided by their employer, and they may also lose federal tax benefits. In other words, an individual who purchases from the marketplace may forfeit employer contributions to health care plans and will have to fully fund the health care purchase using personal after-tax funds.

Fortunately, employers do not have to provide a separate notice to others who may be eligible for coverage, such as employees’ spouses or other dependents.

Model notices available

Notices must be written in such a way that an “average” employee would understand them. The U.S. Department of Labor has model notices available for employers to use. While there is no obligation to use these model notices, using them may eliminate the need for an organization to create its own notice. Presumably, the Department of Labor’s model notices satisfy the “understood by an average employee” standard.

1.     Employers that offer health plans for some or all employees should use this notice. A Spanish version is also available.

2.     Employers that DO NOT offer health plans should use this notice. A Spanish version is also available.

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Is there a penalty for not providing the notices?

At this time, the Department of Labor has not indicated that employers will be assessed a penalty for failing to provide the required notices. However, this should not mean employers should ignore giving a notice.

For one thing, these notice requirements will only get more regulated starting next year, once final regulations are published. Currently, the administrative agencies are focused on employers complying with the ACA. A year from now, they may well add penalties and stricter enforcement standards. Therefore, employers should use 2013 and early 2014 as a trial run to put processes into place for evaluating whether they want to create their own model notices, how to deliver notices to employees, and how to maintain the records.

Additionally, providing notices to employees is the fair thing to do. Starting Jan. 1, 2014, many individuals who can afford health care coverage are expected to have it, either through their employer or the marketplace. Failure to have proper health care coverage may result in those individuals paying a penalty. Employers should provide the required notices so employees can make the best-informed choice about what health plan suits their needs. Even if an organization provides health care benefits, those benefits may not meet the ACA’s minimum standards, or there may be better options employees can explore through the marketplace.

Finally, for organizations that will not offer health care benefits for some or all of their employees, it is especially critical that those individuals know they can purchase coverage directly from the marketplace. 

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