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On May 8, 2013, the Department of Labor (DOL) provided temporary guidance and model notices that employers can use to inform their employees about the Exchanges, which will be available January 1, 2014. Please note that the Department of Health and Human Services (HHS) now calls the Exchange the “Health Insurance Marketplace,” and DOL refers to the notice as the “Employee Notice of Coverage Options.”

The original deadline for providing this notice to employees was March 1, 2013. The effective date has been changed to October 1, 2013 to coincide with the Exchange or Marketplace open enrollment period, which also begins on that date. Employers who want to start providing notices sooner can follow this temporary guidance and use these model notices. However, employers are not required to provide notices under this temporary guidance and can wait until formal guidance is provided later this year.

Impacted Employers

The notice requirement applies to all employers that are subject to the Fair Labor Standards Act (FLSA). Most employers fall into this category, but there are exceptions. The following link may assist employers in making this determination: http://www.dol.gov/elaws/esa/flsa/scope/screen24.asp

Recipient and Distribution Requirements

This one-time notice must be provided to all current employees as of October 1, 2013 and to new employees as they are hired. For 2014, if the notice is provided within 14 days of an employee’s start date, the notice will be considered as having been provided at the time of hiring.

Employers must provide a notice to all full-time and part-time employees, regardless of whether the employee is enrolled in an employer-sponsored medical plan. Employers must provide this notice even if they do not offer any health coverage to employees.

The notice does not have to be provided to employees’ dependents.

Notices must be in writing and can be delivered electronically by the employer if the ERISA standards for electronic delivery are met.

What Must be Included in the Notice

There are two versions of the model notice:

·         Notice for employers that DO offer medical coverage to some or all of their employees

·         Notice for employers that DO NOT offer medical coverage to any employees

Employers can use the model notices or create their own notice as long as the notice includes the following required information:

·         Verbiage that the Exchange or Marketplace exists including a description of the services it provides and direction for employees to visit HealthCare.gov for more information.

·         Employees who purchase coverage through the Exchange or Marketplace may be eligible for a premium subsidy if their employer does not provide coverage that is “affordable” and provides “minimum value.” Coverage is affordable if the employee-only option for the lowest-cost plan offered costs less than 9.5% of an employee’s W-2 wages. Coverage provides minimum value if the plan pays at least 60% of allowed charges for covered services.

·         Employees who purchase coverage through the Exchange or Marketplace will pay for that coverage with after-tax dollars.

·         If applicable, information about the medical coverage the employer offers to its employees.

Changes to COBRA Notice

Employees and dependents who become eligible for COBRA will also have the option to purchase coverage through the Exchange/Marketplace and potentially receive a premium subsidy. The model COBRA notice that employers and COBRA administrators use has been revised to include information about the Marketplace

Assessing the Applicability of the Employer Mandate to your Organization

Beginning on January 1, 2014, employers with 50 or more full-time employees (including full-time equivalent employees) will be subject to the Patient Protection and Affordable Care Act’s (PPACA) “employer mandate.” Under the employer mandate, such “applicable large employers” must offer the vast majority of their full-time employees (and their dependents) the opportunity to enroll in coverage or face the possibility of a tax penalty.

Under PPACA, a full-time employee, with respect to any month, is an employee who provides an average of 30 hours of service per week. However, enrolling and disenrolling employees on a monthly basis would raise significant administrative issues for employers and regulators. To address these issues, the Internal Revenue Service has promulgated regulations which allow employers to use a “look-back measurement method” to determine an employee’s full-time status under the law. This Legislative Alert provides key information related to this look-back measurement method of determining full-time employees.

What is the “look-back” period as defined by PPACA?

In general, the look-back measurement method allows the employer to select a look-back period of time to measure whether the employee worked an average of 30 hours per week. If the employee worked an average of 30 hours per week during the look-back period, the employer must consider the employee a full-time employee during the subsequent “stability” period, regardless of the number of hours the employee works during the stability period.

How do I calculate the look-back period?

Calculation of the look-back period depends on whether the employee is (1) an ongoing employee, or (2) a new variable hour employee or seasonal employee.

Ongoing employees. For an ongoing employee, an employer may determine full-time status by using a look-back period of between three and 12 months. Under the rules, the employer is given discretion to choose the length of the look-back measurement period provided it conforms with the length of time rules discussed above and that the determination is made on a uniform and consistent basis for all employees in the same category.

New variable hour employees and seasonal employees. An applicable large employer may also use a look-back measurement period for new variable hour employees and for seasonal employees in certain circumstances. A new employee is a variable hour employee if, based on the circumstances at the employee’s start date, it cannot be determined that the employee is reasonably expected to work on average at least 30 hours per week. Through at least 2014, employers may use a reasonable, good faith interpretation of the term “seasonal employee.” For new variable hour and seasonal employees, an employer may use a look-back period of between three and 12 months that begins on any date between the employee’s start date and the first day of the first month following the start date.

Do I have to use a consecutive period of time?

Yes. The look-back period must use a consecutive period of time.

What is the “stability period” as defined by PPACA?

The stability period begins immediately after the look-back period and any administrative period. Calculation of the stability period depends on the type of employee and whether he or she is determined to be a full-time employee during the look-back period.

How do I calculate the stability period?

Ongoing employees. If an employer determines that an ongoing employee worked full-time during the look-back period, then the stability period must be at least the greater of six consecutive calendar months or the length of the look-back period. If the employer determines that the ongoing employee was not a full-time employee during the look-back period, then the stability period must be no longer than the look-back period.

New variable hour and seasonal employees. If a new variable hour or seasonal employee is determined to be a full-time employee, then the stability period must be the same as that for ongoing employees – either six consecutive calendar months or the length of the look-back period, whichever is longer. If a new variable hour or seasonal employee is determined not to be a full-time employee during the look-back period, then the stability period may be, at a maximum, one month longer than the look-back period. However, the stability period may not exceed the remainder of the employer’s look-back period for ongoing employees (plus any associated administrative period).

What is the “administrative period” as defined by PPACA?

Employers may impose an administrative period that begins immediately after the end of the look-back period and ends immediately before the stability period. The purpose of this administrative period, which may last up to 90 days, is to give employers time to determine employee eligibility for coverage, notify them of their eligibility, and enroll them in the plan.

How do I calculate the administrative period?

The administrative period may last up to 90 days. However, this administrative period cannot create a gap in coverage for ongoing employees who are enrolled in coverage because of full-time employee status. For new variable hour employees and seasonal employees, the look-back period and administrative period combined may not extend past the last day of the first calendar month beginning on or after the one-year anniversary of the employee’s start date.

Can I use different look-back periods, stability periods, or administrative periods for different categories of employees?

Yes. According to the proposed rule on the employer mandate, an employer may select different look-back periods, administrative periods, and stability periods for certain categories of employees. For example, the proposed rule states that an employer may select different periods for:

Each group of collectively bargained employees covered by a separate collective bargaining agreement,
Collectively bargained and non-collectively bargained employees,
Salaried employees and hourly employees, and
Employees whose primary places of employment are in different states.

Can I select a look-back period where I have the fewest number of employees? For example, I am a seasonal employer with 50 full-time employees for six months. For my look-back period, can I select the six months where those seasonal employees are not working for me?

No. For new variable hour and seasonal employees, the look-back period must begin on a date between the employee’s start date and the first day of the first calendar month following the employee’s start date. Therefore, a seasonal employer would not be able to use, as the look-back period, the six months where those seasonal employees are not working.

Where can I go for more information?

Please visit www.healthcareexchange.com for blog posts, polls, surveys, and numerous resources, or www.benefitmall.com to view previous Legislative Alerts.

The Department of Health and Human Services (HHS) has released a 149-page final rule detailing the essential health benefits (EHB) requirements. Beginning in 2014, all new small group and individual market plans will be required to cover EHB categories. The rule largely codifies proposed rules that were released last November.

HHS Secretary Kathleen Sebelius praised the rule, stating, “People all across the country will soon find it easier to compare and enroll in health plans with better coverage, greater quality and new benefits.”

Insurers must cover EHBs offered in 10 categories of care including emergency services, maternity, mental health, substance abuse, and prescription drugs. States are given substantial flexibility in selecting a benchmark plan, and many have been moving forward based on the proposed rule issued in November. Ian Spatz, a senior advisor for Manatt, Phelps and Philips, says the rule is good news for states as they continue to implement the Patient Protection and Affordable Care Act (PPACA). “Over the summer, we’ll get to see what the plans look like and especially how much they will cost,” Spatz said.

The rule also clarifies that insurers must have policies that permit patients to get “clinically appropriate” prescriptions, even if those drugs are not on the insurer’s list of covered medications. This will provide a great deal of relief to cancer patients that may have been hit with tens of thousands of dollars in prescription drug costs.

Stephan Finan, director of policy for the American Cancer Society’s Cancer Action Network, lauds this as an improvement. “It suggests that if you need a drug and that’s not on the formulary, you can get it, which was not the case before,” he said.

Under the new rule, insurers will not be able to charge a co-payment if a polyp is removed during a colonoscopy.  Until this new provision, insurers were able to reclassify the procedure as “diagnostic,” thus forcing liability back to the patient. The new rule also greatly expands mental health and substance abuse services.

While many are praising the final rule, the Children’s Hospital Association (CHA) expressed disappointment that HHS did not provide a strong definition of “habilitative” services for children. CHA released a statement expressing concern “that the flexibility HHS has given states to select services to include in essential health benefits packages could result in the exclusion of critical services for children, particularly those with severe disabilities and lead to state-by-state disparities.”

Although the final rule may, in fact, lead to disparities among states, the rule suggests HHS is taking a comprehensive approach to incorporating over 11,000 comments on previous EHB bulletins. According to HHS, comments were received by a wide variety of stakeholders including states, tribes, health plan issuers, consumer groups and health care providers. The final rule appears to be an effort to address many of these comments in a single, integrated platform.

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com to view previous Legislative Alerts.