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
The bottom line
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.
on Wellness Programs
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.
Generally, these regulations apply only if participation
in a wellness program potentially results in a reward or in reduced health
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
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
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:
cost of any program must be born by the employer or insurer.
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.
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.
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
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
Finally, additional regulations and/or guidance are
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