Health Care Marketplaces Open October 1st - Did You Notify Your Employees?
On Tuesday, October 1st, 2013 the federal and state health insurance Marketplaces will go live! These Marketplaces, which were created by the Patient Protection and Affordable Care Act (commonly referred to as the ACA or Obamacare) are the federal and state exchanges where small business owners and individuals can shop for and purchase health insurance for themselves, their families, and/or their employees.
If you’re a small business owner, I’m certain you’ll agree that the Obamacare requirements are undoubtedly some of the most confusing rules for small business!
First of all, there’s a whole new set of rules and unfamiliar terms, and different government agencies involved in the rule setting and administration, such as the Department of Labor (DOL), the Treasury Department, the Internal Revenue Service (IRS) and the individual state governments. There have also been delays in the implementation of certain aspects of the ACA. But which requirements have been delayed, and which haven’t, as well as who is impacted by the delays, hasn’t always been easy to follow.
For instance, this past summer, the Treasury Department announced a one-year delay in the enforcement of the “employer mandate” also known as the “pay-or-play” rules. The employer mandate, which is the requirement imposed on “applicable large employers” (those that employ 50 or more full time equivalents - “FTEs”) to provide health insurance, was originally set to go into effect on January 1, 2014 but was extended until 2015. Many small business owners who employ fewer than 50 employees may have believed that there was nothing left for them to do – either because they employ fewer than 50 or they “heard about a delay”.
Employers Subject to Fair Labor Standards Act Are Required to Notify ALL Employees of Health Care Marketplaces
But the “employer mandate” delay did not extend the requirement on employers subject to the Fair Labor Standards Act (“FLSA”) to provide every employee with a notification of the ACA’s health care Marketplaces by October 1, 2103. This included notifying all full-time, part-time, and seasonal employees (and in some situations, independent contractors too) -– regardless of whether the employee qualified for the employer’s health plan or not. Because the FLSA applies to all companies with at least one employee and $500,000 in annual revenue, many small businesses are subject to this notification requirement.
This doesn’t mean that these “smaller” employers were now being asked to provide health insurance, only that they notify their employees of the following:
- The existence of the government-run health insurance Marketplace (exchange), including a description of the services provided and how employees may contact an exchange to request assistance.
- That an employee may be able to get lower cost private insurance through their health care exchange depending on their household income and whether coverage offered by their employer meets certain standards.
- That if an employee chooses to purchase qualified health insurance through an exchange, they could lose their employer’s contribution to any health plan their employer offers. (Note, this is important because an employer’s contribution to their own health plan might be on a “before tax” basis, but payments for health insurance purchased through an exchange are on an “after tax” basis.)
To help businesses comply with this notice requirement, the DOL posted two model notices on its website for employers to use. The first model notice is for employers that currently offer a health insurance plan to some or all of their employees. The second notice is for employers that do not currently offer a health plan. By the way, you can link to the two model notices here (both documents open as a pdf):
- Model Notice for employers who offer a health plan to some or all employees
- Model Notice for employers who do not offer a health plan
Another point of confusion in recent months was whether businesses that fail to give this notice would be penalized. This is because, in general, the ACA imposes a $100/day penalty for failing to comply with its provisions, meaning that failing to send the required notice to all employees by October 1st would subject a business owner to this penalty.
But on September 11th the DOL make it clear in an FAQ document that employers would not be penalized for failing to send the DOL notice on time (or at all). The specific DOL FAQ addressing this issue states:
Q: Can an employer be fined for failing to provide employees with notice about the Affordable Care Act’s new Health Insurance Marketplace?
A: No. If your company is covered by the Fair Labor Standards Act, it should provide a written notice to its employees about the Health Insurance Marketplace by Oct. 1, 2013, but there is no fine or penalty under the law for failing to provide the notice.
On September 12th, the Small Business Administration also wrote in a blog post debunking myths about the ACA that there is no fine or penalty under the law for failing to provide the written notice required under the FLSA. (See “Myth vs. Fact: Myth #3: Business Owners Will Be Fined If They Don’t Notify Their Employees About the New Health Insurance Marketplace,” SBA.gov community blog, September 12, 2013)
So does this mean that businesses that haven’t sent out the notice shouldn’t bother? Well, with the health Marketplaces opening Oct. 1st, employers who haven’t sent out notices should do so despite the DOL and SBA’s informal guidance. One reason is simply that not giving employees this information may mean they would not have the information they need to shop for and evaluate their insurance options. As a tax advisor, I also often caution clients that an informal FAQ is just that – informal guidance - which does not carry the same weight as something written into a law or regulation. Note also that new employees must be provided the same notice within 14 days of their start date.
But where should employees and small business owners go to shop for insurance?
Federal and State Health Care Marketplaces
As of today, there are 18 states that have created their own state Marketplace (exchange website), where individuals and business owners can shop for health insurance. In general, these 18 states will run and administer their own health care Marketplace. States that do not have a state specific site -– generally those whose health insurance Marketplace will be run by the federal government or by the federal and state government jointly –- will use the federal Marketplace. https://www.healthcare.gov/
What this means is that if an employer or employee is a resident or based in one of the eighteen states listed below, the state Marketplace listed below is where they should go to shop for and sign up for health insurance. Many of the state specific sites have numerous resources, including FAQs and webpages specifically on the Small Business Health Options Plans (SHOP) for small business owners that wish to offer health insurance to their employees. Once again, residents of and businesses in other states should go to the federal Marketplace exchange website at: https://www.healthcare.gov/
Finally, note that open enrollment begins October 1st everywhere and continues until March 31, 2014. However, the earliest date that health coverage will begin is January 1, 2014.
Final Thoughts
October 1st is the start of the first open enrollment period under Obamacare. For many small business owners, the Obamacare rules – which ones apply, when they apply, and which federal or state agency administers them – have created more complexity that most small business owners are equipped to handle. Which is one reason why I’ll be back blogging on other aspects of “what small business needs to know about Obamacare” in the coming weeks, such as on what it means to be an “applicable large employer” (it’s more complex than just about having 50 full-time employees) and how the Small Business Tax Credit for small employers (those with less than 25 FTE employees) that choose to contribute towards their employee’s health insurance works. What is important as the October 1st deadline approaches, is notifying employees and understanding where the health insurance Marketplaces can be found. Also important is knowing that although the first open enrollment period begins on October 1, 2013 (and continues until March 31, 2014), the earliest that health insurance purchased through a Marketplace will be effective is January 1, 2014.
10/2/13 Update - Impact of Federal Shut-Down, Delay in federal Marketplace SHOP:
On October 1st the federal government officially shut down, however, the federal health insurance Marketplace at https://www.healthcare.gov/ still opened. The was possible because much of the ACA is mandatory spending, and not part of the annual appropriations battle Congress is debating. What has been delayed, however, is the ability for small business owners to purchase a health plan on-line via the federal health insurance Marketplace. Recently, the U.S. Department of Human & Health Services, which has oversight of the federal Marketplace, issued a news release that all aspects of the SHOP (small business) Marketplace will not be fully functional until November 1st. Note that this only impacts small business owners who must use the federal Marketplace (not those in one of the states listed in the table above) and primarily impacts the small business owner's ability to complete their transaction on-line.
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- Missed my last post? Catch it here: “Five Things SMBs Should Know About State Tax Nexus”
- Future topics I’ll be blogging on? More on what Obamacare Means for Small Business, An Update on Those Controversial Amazon Laws, What Small Business Needs to Know about the Demise of DOMA, Taxing the Cloud, The Best States for Small Business, Stock Options and Small Business, and so much more.
