The United States Department of Labor ("DOL") has postponed the March 1 deadline under the Affordable Care Act (the "Act") for employers to provide written notice of health insurance coverage options to their employees.
Background of the Notice Requirement. The Act requires all employers that are subject to the Federal Fair Labor Standards Act to provide a written notice, in accordance with regulations issued by the Secretary of Labor, no later than March 1, 2013, informing employees (i) of the existence of health insurance exchanges, (ii) that, if the employer-provided health plan pays less than 60% of total health costs of the employee, the employee may be eligible for a premium assistance tax credit for coverage purchased on the exchange, and (iii) if the employee purchases coverage on the exchange, the employee may lose the contribution (if any) that the employer would have otherwise made to pay for coverage under the employer-provided group health plan.
Postponement of Deadline. Under the DOL's FAQs issued on January 24, 2013, the DOL stated that, until the DOL issues implementing regulations, employers are not required to comply with the notice requirement. The FAQs do not establish a new deadline to provide the notice, but state that the new deadline is likely to be in late summer or early fall of 2013; the DOL believes that a later delivery date will better ensure a smooth implementation of the law by giving employers sufficient time to comply with the notice requirement and ensure that the employees receive the notice at a time closer to the open enrollment period for the exchanges.
The FAQs state that the DOL is considering issuing a model notice or generic language that employers may use to satisfy the notice requirement.
No Relief for "Stand-Alone" HRAs. Health Reimbursement Arrangements ("HRAs") are employer funded plans that reimburse employees for out-of-pocket health care costs. Most HRAs provide annual limitations on employer reimbursement. Many HRAs permit employees to carry over the unused portion of the employer reimbursement amount from year-to-year.
The Act generally prohibits group health plans and health insurance policies from imposing annual and lifetime limits on benefits. The Act also expanded the definition of "group health plan" to include employer-provided plans such as HRAs.
HRAs may, but are not required to, be integrated with an employer's primary group health plan. For example, an employer may offer its HRA only to employees who participate in a particular insured health plan offered by the employer. Integrated HRAs typically provide for reimbursement of co-pays, deductibles and other health costs not covered by the employer's insured group health plan. The DOL refers to such plans as "integrated" HRAs. However, a "stand-alone" HRA reimburses employees for any medical expense defined in the plan, so long as the expense would otherwise qualify as a deductible health care expense on the employee's form 1040.
In regulations issued by the DOL in 2010, the DOL took the position that an HRA that places an annual limitation on benefits does not violate the Act if it is integrated with another employer-provided plan that does not impose an annual or lifetime limit on benefits. In such case, the regulations provide that the HRA and the other employer plan are integrated parts of a single plan that does not limit annual or lifetime benefits. The regulations also provide that HRAs that provide benefits solely to retirees are not subject to the ban on annual or lifetime benefits.
The DOL's FAQs provide that an employer's stand-alone HRA cannot be "integrated" with individual coverage purchased by the employee on an insurance exchange. The FAQs further provide that this result does not depend on whether the employer offers a coverage option that satisfies the Act. If the employer offers coverage that satisfies the Act and the employee instead purchases coverage on the exchange, the employer's HRA will violate the Act if it provides an annual or lifetime limit on benefits and covers that employee.
A copy of the DOL's FAQs are available at the Department of Labor's website at www.dol.gov/ebsa/faqs/faq-aca11.html.
If you have any questions or require our assistance in preparing the required forms, please contact the Hiscock & Barclay lawyer with whom you normally work or any attorney in our Labor & Employment practice area.