What Employers Need To Tell Their Workers During Health Care Reform

Minnesota employers are required to send a new notice to their employees denoting the existence of the MNsure health insurance exchange, among other items.

While sweeping changes under health care reform can be convoluted and portend diverse effects on employers of various sizes, there’s one condition that virtually every employer can rest easy knowing it must comply with by October 1: the employee notification requirement.

Employers are required to notify employees about the existence of health care exchanges, the fact they may be eligible for tax credits, and that they may lose employer contributions if they opt out of group coverage and instead procure insurance from an exchange. Employers are also encouraged to notify employees about what services such exchanges provide.

Exchanges or “marketplaces” are new sales channels being offered by states or the federal government. They provide a place where individuals, including those who receive public program coverage, can shop for coverage. Small businesses (those with fewer than 50 full-time or full-time equivalents) can also shop there, although employees of “large” companies that offer group plans are not expected to use the exchange, as they won’t be eligible for subsidies.

All employers that are subject to the Fair Labor Standards Act must send the employee notification. That includes the government, schools, health care organizations, any business in the private sector that is engaged in interstate commerce—which includes any business that accepts credit cards—as well as any business earning $500,000 or more in gross annual revenue.

In other words, just about everyone. Very few employers are exempt from the Fair Labor Standards Act. “The vast majority of employers will need to do this,” according to Julie Bunde, director of product management and product and market solutions at Bloomington-based HealthPartners. “And this notification needs to go to all of their employees, whether they’re full-time or part-time, and whether or not they’re offered coverage by the employer.”

The original deadline for the notification was March but it was delayed to October, which according to Bunde, “is a much more logical time for notices since that is typically when employers will be doing open enrollment periods.” Any employee hired after October 1 will need to be notified within 14 days of their hire date.

The federal government has provided forms for employers to use as a template for the notification. Businesses also have the option to create their own form, assuming its covers all of the aforementioned requirements.

Two different forms are offered by the government—one for employers that offer coverage and another for those that do not. Both forms include a “Part A,” in which the employee is provided information about the new exchanges.

“Part B” of the form offers employers a place to give their workers information about their health coverage, so for employers that aren’t offering coverage, that section is rather short. Employers that do offer coverage, however, use that space to inform employees about who receives its coverage, whether it meets the “minimum value” standard (meaning the employer pays at least 60 percent of the total allowed cost of benefits under the plan), and whether its coverage is “affordable” based on employee wages, meaning the employee’s contribution for health coverage must constitute 9.5 percent or less of his or her household income.

There is also a third page, “Part C,” which is optional for employers to include. It regards more specific plan information.

Greg Thurston, director of benefits at Edina-based Doherty Employer Services, says that Part C “would be customized for each employee, and that page will be something that would add a lot of administration time for employers.”

“If you’ve got age-rated plans you would have to do a different form for each employee, you know, ‘You’re 29 years old so here’s your cost, and you’re 47 so here’s your cost,’” he explains. “My belief is that a lot of employers will bypass this last, customizable page.”

To view examples of the model notice for employers that do offer health insurance, including how to fill in each section, click here. To access the model notice for employers that don't offer coverage, click here.

While the notification is designed to help employees become more informed, Bunde anticipates some confusion from employees about their individual plans. “We’re expecting to get a lot of questions from our employees, our members, and our brokers,” she said. “There’s likely going to be a need to help employees with questions about issues like eligibility for exchanges, premium impacts, and the benefit impacts of reform plans.”

Bunde said that education for employees and employers can be difficult because “the right level of information is so conditional . . . whether they’re a small employer or large employer, whether they’re buying individually, and based on the type of plan a person has. So we expect to do a fair amount of individual education.”

While small employers are looking at the small-group rates on the MNsure exchange as they determine what, if any, coverage to offer their workers, large employers are expecting more questions from their employees about the exchange, even after sending out the mandatory notification. For more details about MNsure rates, click here.

As Bunde mentioned, details of the form will change depending on whether a business is a small or large employer—a distinction that is still surprising some employers. Click here for more information about how to determine if you’re a “large” or “small” employer.

“You’d think determining whether or not you’re a large group would be easy but there really are a lot of nuances you need to be careful of,” Thurston said.

To determine whether a business is considered a large group for 2015, it actually looks at its average number of full-time equivalent employees in 2014. The graph below illustrates two companies that are both on the edge of being a large employer—one is growing and one is downsizing.

DownsizingExample.jpg


The growing company, represented by the blue line, starts 2014 with 40 employees. But over the course of the year it slowly grows to 52 by December, and then jumps again to 58 in January 2015.

Meanwhile, the downsizing company, shown in red, begins the year with 80 employees but lays off half of its work force in its first quarter. So for nine months of the year, the company has only 40 employees, only to drop again in January to 25 employees.

At the start of 2015, the growing company has more than double as many employees as the downsizing company. But the growing company only averaged 49 employees while the downsizing company—despite ending well below 50—averaged 50 full-time employees. So even though the downsizing company ended with 25, they are still considered a large employer for 2015.

As a large employer, the downsizing company will be subject to penalties (beginning in 2015) if it fails to offer a qualifying health plan. The penalty is applied to such a company for each employee, with the exception of its first 30 employees.

So although the downsizing company in the example above is technically a large employer and is thus subject to the so-called “play or pay” provision, it wouldn’t incur a penalty in 2015 if it retained its 25 employees—because of the 30-employee exception. But if it grew to more than 30 workers, it would need to offer coverage or face monetary penalties.