FAQs: Nondiscrimination Provisions and Employer Exchange Notification Requirements

FAQs: Nondiscrimination Provisions and Employer Exchange Notification Requirements https://wahospitality.org/wp-content/uploads/2013/02/HC_reform-379x198.jpg

The federal Patient Protection and Affordable Care Act (ACA) includes a non-discrimination provision that affects all employers providing health care coverage to their employees.  The provision prohibits employers from restricting participation in their health plan based on an employee’s salary or wage, and from requiring lower wage employees to contribute more toward health care premiums than higher wage employees.  Employers violating this provision will face a penalty of $100 per day per employee impacted by the violation.

The Department of Labor developed initial rules in 2011 to implement this requirement but the initial rules have not been finalized.  In the absence of the final rules, no penalties will be assessed against an employer failing to comply with the law.  The department is considering additional rules to further define nondiscrimination in accordance with the law.  Among those items being discussed is whether employers not required to provide coverage to full time employees will still be allowed to provide coverage for select employees.  Currently many small employers unable to provide coverage for all employees are choosing to provide coverage to just their managers or just those who have met longevity requirements.  The final rules issued by the department will provide clarification on whether this will still be allowed.

In addition to the nondiscrimination rules, by October 1, all employers are required to notify their employees of the availability of the new government exchanges, contact information for the exchanges, and the availability of public subsidies for low-income individuals who purchase coverage through the exchanges.  The rules require employers to provide this notification in writing, at a level that the employer’s average employee can understand.  In addition to the initial notification requirement, employers must provide this notice to all new employees within 14 days of hire.

The following are Frequently Asked Questions regarding the non-discrimination provision and the employee notification requirement:

Non-Discrimination

How does the law describe “discrimination” as it applies to the offer of health benefits/health care coverage to employees?

Section 2716 of the ACA states the following: “(a) IN GENERAL – the plan sponsor of a group health plan (other than a self-insured plan) may not establish rules relating to the health insurance coverage eligibility (including continued eligibility) of any full-time employee under the terms of the plan that are based on the total hourly or annual salary of the employee or otherwise establish eligibility rules that have the effect of discriminating in favor of higher wage employees.”

How has the Department of Labor interpreted the nondiscrimination provision? 

The Departments of Labor has issued initial rules that prohibit employers from: a) offering coverage to only those full-time employees that have hourly wages or annual salaries exceeding a set amount; or b) offering higher wage employees lower premium contributions or richer benefit packages if those same options are not also available to lower wage employees.

What about part-time employees – am I subject to these same restrictions if I offer coverage to my part-time employees?

Not at this time.  The discrimination restrictions currently apply to coverage provided to full-time employees only.  However, the Department of Labor is still developing the final rules that will govern this issue and it is possible they will include requirements that extend to part-time employees as well.

What if I am a small employer and not required to provide coverage, but want to provide coverage to long-time employees in recognition of their loyalty – is that allowed?

While there is no requirement for small employers to provide coverage to their full-time employees, the federal Department of Labor is still contemplating whether a small employer may offer coverage to only certain employees.  Such employers can continue their current offerings until a final decision has been made.

We currently pay 100% of the health care premiums for our managers, while requiring non-management employees to make premium contributions.  Is this still allowed?

Typically employers are allowed to establish different fringe benefits for classes of employees.  However, this is an issue that is currently being contemplated as the Department of Labor finalizes the non-discrimination rules.

Employee Notification

What information must be included in the employee notification of the state-based health insurance exchange?

The notice to inform employees of the state health insurance exchange must include the following:

  • Information regarding the existence of the exchange, as well as the contact information and description of the services provided in the exchange;
  • Notification that the employee may be eligible for a federal subsidy if the employee purchases coverage through the exchange; and
  • Notification that if the employee chooses coverage in the exchange, that he or she may lose the employer contribution (if any) to coverage offered by the employer and that all or a portion of such contribution may be excludable from income for Federal income tax purposes.

How am I supposed to know how to write at the “level” in which my “average” employee can understand the written notification?

The Department of Labor has issued model language that employers are encouraged to use either in its entirety or as a guideline for how to draft a more tailored notification.  Two versions are provided, one for employers that offer coverage and one for those that do not.  The model language is provided in both English and Spanish versions.   You may find the model language at:  http://www.dol.gov/ebsa/healthreform/index.html

I offer coverage to some employees but not others.  Which model notice should I use?

The DOL model notices are advisory only, employers are not required to issue those specific notices. Employers for which neither model notice addresses their specific situation can choose to write their own notices.  To ensure that the notice meets the requirement to be written at a level your average employee can understand, copy and paste the relevant text from the model notice into the notice you intend to distribute.

Why must I provide the information on Pages 2 and 3 of the model notice to my employees?

Employers are not required to provide the information on pages 2 and 3 of the model notices to their employees.  Employers are required to provide this information to the exchange if an employee applies for a federal subsidy to purchase coverage in the exchange.  Once an employee applies, the exchange will require the information from the employer.  At that time you can choose whether to provide the information to the employee or to submit it directly to the exchange.

How do I prove that I issued the notice to my employees?

Employers are not required to document that they provided the notification to each of their employees, but they should consider doing so.  Asking employees to sign or initial receipt of the notification provides the highest level of assurance, but is not required.  Employers should feel free to document the distribution in any manner that works for them.

Can I just hold a staff meeting and verbally tell all employees about the exchange?

You may hold a meeting to discuss the availability of the state-based health insurance exchange, but the official notification must be provided in writing to all employees and must be written at a level in which your average employee will understand the information in the notice.  If your business is organized to allow electronic notification, you may provide the information electronically to your employees, but you must follow the Department of Labor’s safe harbor guidelines for electronically transmitting notifications.

How often must I share this information with my employees?

The law indicates that employers must provide this information annually to all employees.  However, the rules recently issued are temporary and speak to notification of all current employees prior to October 1, 2013, and to all new hires within two weeks of hire.  Permanent rules regarding communication of this information after 2013 will likely be released next year.

I am not currently providing coverage but plan to in 2014.  Which notice should I issue in October?

Employers not currently providing coverage are on safe ground using either available version so the choice is up to you.