Obamacare Update: Time is Running Short for Employers to Finalize 2014 Health Plans

BY CYNTHIA MARCOTTE STAMER --

Employer and union group health-plan sponsors and insurers of group and individual health plans agonizing over 2014 plan design decisions are running out of time.

Impending deadlines to update and deliver the initial Exchange Notice by October 1, 2013, the Summary of Benefits and Communications (SBC) disclosure before their next enrollment period begins, and 60-day prior notice of material reductions in benefits or services under the plan mandated by the Patient Protection and Affordable Care Act (ACA) require employers or other sponsors to finalize design decisions and amendments well in advance of January 1, 2014.  These new notification obligations create added urgency and pressure for Health Plans and their employer and other sponsors to finalize and implement their decisions on their plan designs and coverages, and make the necessary determinations to prepare and timely deliver the required notifications in accordance with these new notification mandates well before the start of the 2014 plan year or its enrollment period.

Editor’s Note:  This article comprises excerpts only from “10/1 Exchange Notice & Other New Notice Deadlines Shorten Deadlines For Employers To Finalize 2014 Health Plan Terms & Contracts,” written by Ms. Stamer and posted on Aug. 22, 2013.  The full text of her post can be found at www.cynthiastamer.com. 

ACA Exchange Notices Due By October 1

One of the biggest time constraints for finalizing 2014 plan designs, contracts and terms is the impending October 1, 2014 deadline for employers to provide the notice required by the Fair Labor Standards Act Section 18B.

Regardless if the employer sponsors a health plan or when the next plan enrollment period begins, all employers covered by the FLSA generally are required to deliver a notice to employees about the new option beginning January 1, 2014 to get health care coverage through a health care exchange (now rebranded by the Obama Administration as a “Marketplace”) created by ACA that meets the requirements of new FLSA Section 18B, which was enacted Section 1512 of ACA.

Absent a delay or other reprieve from the Obama Administration or Congress, individuals and employees of small businesses will have the opportunity beginning October 1, 2013, to apply for and, beginning January 1, 2014, to buy health-care coverage offered through the Marketplace established under ACA for their state. Open enrollment for health insurance coverage through the Marketplace begins October 1, 2013.  Some individuals who earn less than 400% of the federal poverty level and meet certain other conditions also are slated to qualify to receive federal subsidies that will pay all or part of the cost of buying coverage through a Marketplace.

To promote awareness among employees of the Marketplace as an option for getting health coverage, ACA creates a new FLSA Section 18B requiring a notice (Exchange Notice) to employees of coverage options available through the Marketplace.  Originally required by March 1, 2013,[i] the Department of Labor (DOL) extended the deadline for providing the Exchange Notice to October 1, 2013.  Employers must provide a notice of coverage options to each employee, regardless of plan enrollment status (if applicable) or of part-time or full-time status. Employers are not required to provide a separate notice to dependents or other individuals who are or may become eligible for coverage under the plan but who are not employees.

ACA SBC Mandate Overview

In addition to the Exchange Notice requirement, ACA amended the Public Health Services Act (PHS) Section 2715, Employee Retirement Income Security Act (ERISA) Section 715 and the Internal Revenue Code (Code) Section 9815.  They required that group health plans and group and individual health insurance issuers provide a SBC and a “Uniform Glossary” that “accurately describes the benefits and coverage under the applicable plan or coverage” in a way that meets the format, content and other detailed SBC standards set for ACA as implemented by the Department’s regulatory guidance.   

Employers or other health-plan sponsors and insurers will need to finalize plan designs and conduct the necessary analysis to decide the correct way to complete this language, then update SBCs to be provided for post-December 31, 2013, periods of coverage to include the required language appropriately completed based on the findings.  Where the design of the 2014 SBC is too advanced already to do this, the guidance allows group health plans to provide the required language by sending the language in a supplemental SBC communication.  However, most group health plans will want to avoid the added cost and expense of the printing and distribution of this notification.

60-Day Advance Notice of Material Changes Requirement

In addition to providing the required Exchange Notice and SBCs, employers, group health plans and their plan administrators also must ensure that participants and beneficiaries are given at least 60 days prior notice before the effective date of any “material reduction in covered services or benefits.”

Section 102 of ERISA has been amended to require 60-day advance notice of material plan changes for plan years beginning on or after September 23, 2012 before the change can be effective.  The 60-day advance notification requirement is a modification to the summary plan description/summary of material modification requirements generally applicable to employee benefit plans under ERISA.

Employer and other group health sponsors, issuers, fiduciaries and administrators also should keep in mind that courts historically refuse to enforce reductions in benefits or services provided under the plan until participants and beneficiaries are notified of the change.  For purposes of the ERISA notification rules, group health plans, their sponsors, insurers, administrators and fiduciaries are cautioned to take into account whether health-care providers or other parties who have assignments of benefits should be provided with notification under these or other ERISA rules in addition to the employees and dependents who are enrolled in coverage under the group health plan.

Notice Deadlines Mean Time is Short to Adopt, Communicate 2014 Plan Terms

Employer and other health-plan sponsors, insurers, administrators and others involved in 2014 group health-plan decisions and preparations must take into account these notification deadlines and allow adequate lead time to properly finalize, adopt and communicate their 2014 health-plan terms.

Since group health-plan design decisions must be finalized to properly prepare the minimum value disclosures required in the Exchange Notice and the SBC, and any material reductions required by the 60-day advance notice requirement, time is running short to finalize 2014 plan designs.  

Employer and other plan sponsors, fiduciaries, administrators and insurers are cautioned that their preparations should ensure both the necessary disclosures are made and that all disclosures are carefully prepared so that the notifications and the plan terms are consistent.

These preparations should include the critical review and coordination of the language of health-plan documents and summary-plan descriptions in light of these other notifications to identify and address potential differences between the government-mandated terms and language in the Glossary and SBC, the Exchange Notice and 60-day notice, and the plan terms and summary plan description.

Cynthia Stamer is a Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group.   She is a board certified labor and employment attorney, and has a peer-reviewed AV Preeminent^® rating from Martindale-Hubbell^®, a LexisNexis^® Company.