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Employers Must Provide Health Insurance Exchange Notice by October 1, 2013

By Hawley Troxell,

On or before October 1, 2013, all employers (regardless of size) must provide a notice to each employee explaining the Health Insurance Exchanges mandated by Health Care Reform (sometimes referred to as health insurance marketplaces).

The Department of Labor (DOL) has provided a model notice, but the notice is long and includes several confusing provisions. In our experience, employees rarely read lengthy, complex notices. As employers prepare these notices, we wanted to share our insight about how some employers may want to make the notice a more effective communication by supplementing the DOL’s model notice with a cover letter that simply and quickly educates employees about the Exchange and employer-provided coverage.

As employers draft the notice, they should keep the following in mind.

  • The notice must explain the benefits of obtaining      coverage through the Exchange (including possible tax credits and other      subsidies) and the limitations of obtaining coverage through the Exchange      (for example, insurance purchased through the Exchange in not paid for      with pre-tax dollars). Although the DOL has provided a model notice, there      is no legally mandated format for the notice.
  • Individuals obtaining insurance through the Exchange      will be required to answer several questions regarding employer-provided      coverage to determine whether they are eligible for premium assistance tax      credits and cost sharing subsidies. The model notice must be customized      with details about your health plan so that employees can answer these      questions, but, as a practical matter, it may be very difficult for      employees to identify the information they need in the confusing model      notice.
  • Beginning in 2015, large employers (with 50 or more      full-time equivalent employees) may be subject to significant penalties if      their employees receive premium assistance tax credits through the      Exchange. Employees that obtain premium assistance tax credits by      reporting inaccurate information regarding their employer’s health plan      could cause the employer significant administrative headaches. As a result,      it is essential that large employers help their employees understand the      employer’s health plan and how it affects the employee’s ability to obtain      premium tax credits on the Exchange.
  • A clearly worded cover letter may be provided with the      model notice to prevent confusion and misunderstanding. If applicable, the      cover letter should explain that your employees will not be eligible for      the tax credits or subsidies because you offer coverage that meets the IRS      minimum value and affordability requirements. The cover letter may also      provide simple instructions for answering the Exchange questions regarding      employer-provided coverage.

For help preparing this notice or for more information about employee benefits, please contact a member of our health care group at 208.344.6000.