New Health Care Plan Notice Requirements are Effective in October - Is Your City Prepared?

As most Oregon cities should be aware, many portions of the Federal Patient Protection and Affordable Care Act (ACA) become effective January 1, 2014.  While not all cities are directly impacted by the ACA (depending on the number of employees), they are impacted by a change to the Fair Labor Standards Act (FLSA), specifically the addition of Section 18B, which was added through provisions in the ACA.  Section 18B is designed to enhance employer notice to employees of health care coverage options available through the health insurance exchange or marketplace as labeled by the U.S. Department of Labor (DOL).  The marketplace will offer a choice of plans that meet standards for health care coverage and provide information to consumers and employers to assist them in making educated choices about the policies they are purchasing. Background

In May, the DOL issued Technical Release 2013-02, which provides temporary guidance on health care reform notice requirements now contained in the FLSA.  All employers covered by FLSA, which includes local governments, must meet the new notice requirements beginning October 1, 2013.  These guidelines are temporary until such time as DOL promulgates regulations and/or additional guidance.

The technical release also provides an updated model election notice for group health plans for purposes of the continuation coverage provisions under Title X of the Consolidated Ombnibus Budget Reconciliation Act of 1985 (COBRA) to include additional information regarding health coverage alternatives offered through the marketplace.  While COBRA requirements will not change under the ACA, DOL has long provided a model election notice that plans may use to satisfy COBRA requirements  and it is this model election notice that has been updated to make qualified beneficiaries (under COBRA) aware of other coverage options that are available in the marketplace.

The Notice Requirements

The required written notice under the new FLSA provisions must be provided to every employee, regardless of whether or not they are enrolled in a health plan of the employer or whether they are a part-time or full-time employee.  The notice must inform the employee of the following:

  1. The existence of the marketplace (referred in the statute as the exchange), including a description of the services provided as well as contact information.
  2. If the employer plan’s share of the total allowed cost of benefits provided under the plan is less than 60 percent of such costs, the employee may be eligible for a premium tax credit under Section 36B of the Internal Revenue Code if the employee purchases a qualified health plan through the marketplace.
  3. If the employee purchases a qualified health plan through the marketplace, the employee may lose the employer contribution (if any) to any health benefits plan offered by the employer and all of a portion of such contribution may be excludable from income for Federal Income tax purposes.

Beginning October 1, 2013, employers must provide this notice to each new employee at the time of hire.  Current employees as of October 1, 2013 must be given notice before that date.

DOL has created model notice language to comply with the new FLSA provision which can be found at www.dol.gov/ebsa/healthreform.  This web page has a model notice for employers who do not offer a health plan and another for employers who offer a health plan to some or all employees.  The new COBRA model notice can be found at www.dol.gov/ebsa/cobra.html.

The Impact on Local Governments

It is important to note that these new requirements apply to all local governments regardless of the impact of the ACA because these are new requirements under the FLSA.  These requirements will also apply regardless of whether the ACA marketplace is operational by January 1, 2014.  Local governments would be wise to begin revising these notices now with the appropriate employer offered health care plan information.  It is also advised that cities consult with their plan administrator and city attorney to ensure that any changes to the model notice are appropriate and also to ensure all notices are accurate.