Wrapping your health insurance marketplace notice
Published: September 6,2013
By Oct. 1, employers who are subject to the Fair Labor Standards Act are required to provide a health insurance marketplace notice to employees. This is a requirement under the Patient Protection and Affordable Care Act.
The notice contains important information about whether an employer’s health plan is a “qualified” PPACA plan. Qualified plans provide coverage for essential health benefits, defined by the government, and are considered “affordable” based on the government’s actuarial formulas. If an employer chooses to offer a qualified plan, the employer does not have to pay the government a penalty. However, some employers may choose to offer a nonqualified plan or not offer health plans at all. If those employers have more than 50 employees, they will pay a penalty – and in this scenario – employees who buy insurance through the marketplace could qualify for tax credits to help pay for premiums and discounts on out-of-pocket costs like deductibles and coinsurance.
The new health insurance exchange, called Your Health Idaho, is scheduled to open on Oct. 1. There, individuals can purchase insurance online, much like they would book a hotel room on a travel website like Expedia.com.
Most of the employers I work with have spent the summer considering the best approach to distributing this notice. For many, it is a little more complicated than just sending it out without context. Most are choosing to provide some customized text – what we call a “wrapper” – to explain more about health care reform and how it is affecting their organization, as well as how their plans are affected by the law. In addition, they want to make it very clear to employees that starting Jan. 1, 2014, most Americans whose employers do not provide affordable, qualified health insurance plans will be required under PPACA to buy health insurance or pay the government a tax penalty. This is known as the individual mandate.
There are several reasons employers believe this kind of context is important. First, many surveys show Americans are confused about PPACA and how it affects them. As recently as March, the Kaiser Family Foundation found 68 percent of Americans said they don’t have enough information about health care reform to know how it affects them personally – and it does. The tax penalties for noncompliance are relatively small in 2014: just $95 or 1 percent of taxable income, whichever is greater. But, those penalties go up each year, and by 2016, they will be the greater of $695 or 2.5 percent of taxable income.
Another important reason the context is important is that many employers will continue to provide insurance to employees that meets both the coverage and value requirements under PPACA. That means most employees eligible for employer coverage will not get a better deal shopping on Your Health Idaho. This is because eligible employees will pay for individual coverage using after-tax dollars (most contributions to employer-based plans are paid pre-tax), and they likely won’t be able to receive tax credits or discounts that individuals not eligible for a qualified employer plan could benefit from.
Still, other employers have a split workforce. They may have some employees who are eligible for qualified employer coverage, but maybe a large population of employees who work less than 30 hours per week and are therefore not eligible. Employers want to help those people understand that although their organization is not offering health insurance, they could benefit from shopping on the exchange and could qualify for tax credits and discounts.
Those credits and discounts are based on the size of employees’ households and their income levels. A family of four making nearly $98,000 a year could qualify for a tax credit to help pay insurance premiums. For employees who make even less, if they live in a state that is participating in Medicaid Expansion, they may now be able to qualify for Medicaid, paying even less for health care out of pocket.
All organizations and employee populations are different. Helping employees understand the context of Your Health Idaho and their options is important for ensuring employees receive coverage that is the best value and coverage level for them and their families. Reinforcing the need to understand the individual mandate is also important so an employer doesn’t have to deal with the concerns of employees who find they have to pay the tax penalty– and may protect an employer offering a qualified plan from being subject to a penalty audit if employees try to receive tax credits or discounts on the marketplace.
All employers know health care reform is complicated. Many who continue to provide health insurance are dealing with more administration, greater fees and new compliance requirements. But those employers often have staff or consultants helping them sort through the PPACA maze. Employees need that kind of support, too. So while you’re required to provide the health insurance marketplace notice, you can help your workers understand your organization’s approach and the employee’s role in complying with the individual mandate.
Michelle Hicks, a senior professional in human resources, is a director in the communication practice of Buck Consultants, a Xerox company.