Notices to Employees of Availability of Health Insurance Through Exchanges

Notices to Employees of Availability of Health Insurance Through Exchanges

 by Elise Klein & Joelle Sharman

The Department of Labor recently issued guidance on how and when employers are to notify employees about the availability of state-run health insurance exchanges, and provided sample notices for employers to provide to their employees.  Both large and small employers must comply with this notification requirement, and employers must comply whether or not they provide health insurance to their employees. 

There are two sample notices.  The sample notice for employers who offer health insurance may be found at http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf.  The sample notice for employers who do not offer health insurance may be found at http://www.dol.gov/ebsa/pdf/FLSAwithoutplans.pdf.

Employers must provide the requisite notices to all current employees by October 1, 2013.   Employers are required to provide notice to each new employee at the time of hiring beginning October 1, 2013.  The guidance provides that notice will be considered to have been provided "at the time of hiring" if the notice is provided within 14 days of an employee's start date.

The notice must be provided in writing in a manner calculated to be understood by the average employee.  It may be provided by first-class mail. Alternatively, it may be provided electronically pursuant to Department of Labor regulation 29 CFR 2520.104b-1(c), which governs the delivery, format and content of notices, and the consent which recipients must give before notices such as this may be sent by electronic delivery.    

In addition to these two model notices, the DOL also published a new model COBRA election notice that incorporates the coverage options that eligible beneficiaries will have available to them through an exchange. Employers who use the model COBRA notice will be considered by the Department of Labor to be in good faith compliance with COBRA's election notice requirements.  The new model COBRA notice and the guidance may be found on the DOL's Affordable Care Act Website at http://www.dol.gov/ebsa/healthreform/index.html.

The bottom line

The anticipated  unavailability of health insurance exchanges in some states may result in a modification or delay of the guidance.  However, employers should be prepared to provide the required notice on or before October 1, 2013. 

 

Update on Wellness Programs

Background: Employers have been permitted to offer wellness programs for years.  These  programs are either outcome-based (rewarding participants who achieve certain goals) or participation-based (rewarding people for participating).  The recent regulations, while making few changes in the manner in which these programs operate, provide additional guidance about how the program must operate to be non-discriminatory.

New Regulations.

Generally, these regulations apply only if participation in a wellness program potentially results in a reward or in reduced health insurance premiums.

To be non-discriminatory, both outcome-based and activity-only wellness programs must meet five basic requirements.

First, individuals eligible for the program must be given the opportunity to qualify for the reward at least once a year.  This requirement is unchanged from the 2006 regulations. 

Second, the size of the reward cannot exceed the applicable percentage of the total cost of employee-only coverage under the plan.  That percentage increased from 20% under the 2006 regulations to 30% under the 2013 regulations, with the possibility of increasing to 50% if the wellness program seeks to end tobacco use.  If a dependent is covered, and participates in a wellness program, the employer has flexibility to determine how to apportion the reward between family members.  The Departments specifically reserved the right to issue additional guidance on apportionment. 

Third, the plan must be reasonably designed to promote health or prevent disease.  The final regulations are very flexible, with the goal of encouraging innovation.  The final regulations state that a wellness plan is reasonably designed if "if it has a reasonable chance of improving the health of, or preventing disease in, participating individuals, and it is not overly burdensome, is not a subterfuge for discriminating based on a health factor, and is not highly suspect in the method chosen to promote health or prevent disease."  Additionally, wellness plans can establish more favorable rules for eligibility or premium rages for participants with an adverse health factor than for individuals without the adverse health factor.  Finally, an outcome-based program must provide a reasonable alternative standard, so that those who do not meet the health factor standard can still qualify for the reward. 

Fourth, the full reward must be uniformly available to all similarly situated individuals.  If, for example, an individual does not initially meet the requirements of an outcome-based program, but meets the requirements later in the year, the full year of the reward must be made available to the individual.  Plans and insurers have flexibility to determine how to provide the portion of the reward corresponding to the period before an alternative was satisfied (e.g., payment for the retroactive period or pro rata over the remainder of the year) as long as the method is reasonable and the individual receives the full amount of the reward. Plans and insurers are not required to  establish a particular reasonable alternative standard in advance of an individual's specific request for one, as long as the alternative is provided upon an individual's request. The alternative standard can be applied to an entire class of individuals or on an individual-by-individual basis.  An employer or issuer may require physician verification of the individual's inability to meet the standard in an activity-based program before providing a reasonable alternative standard.

Fifth, the availability of the opportunity to meet a reasonable alternative standard must be disclosed. 

The factors which will be considered in determining whether a plan or issuer has provided a reasonable alternative standard include, but are not limited, to the following:

1.     The cost of any program must be born by the employer or insurer. 

2.     The employer or insurer must make any educational program available, or assist the employee in finding an appropriate program.  The new regulations clarify that any time commitment must be reasonable.

3.     If the employee's personal physician believes that the alternative plan is not appropriate for the employee, the plan or issuer must provide a reasonable alternative that accommodates the personal physician's recommendations for medical appropriateness.   Plans and issuers may impose standard cost sharing under the plan or coverage for medical items and services furnished in accordance with the physician's recommendations.

4.     Reasonable alternatives are suggested for outcome-based plans that require participants to stop smoking or lose weight.  Because tobacco cessation and weight control often depend on environmental factors, employers and plans are required to  offer alternative plans for more than one year.   

Wellness programs are unlawful if they are a subterfuge for discriminating or underwriting based on a health condition or factor.

Significantly, compliance with the final regulations does not assure compliance with any other applicable federal or state law, such as the Americans With Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA), which may impose additional requirements on wellness programs.

Finally, additional regulations and/or guidance are anticipated.

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