How Will Employers Communicate with Exchanges?

We received the proposed regulations for reporting requirements under IRS 6055 and 6056 and they are under review. These reports are meant to inform the IRS, Treasury Department, and individual-covered employees of qualified coverage, and coverage and cost by each month covered. This information will ensure that the appropriate true up can be done at tax filing time, and that employees have what they need to file their 1040 each year.

Wouldn’t it be great if employers were linked to the federal hub—the database where the Exchanges will be able to tap into information from the IRS, DOL, HHS, and SSA—and quickly and easily certify qualified plans and monthly cost, and update employee information in real time? Such “blue-sky” ideas require a direct communication link between employers with both state and federal Exchanges, regardless of their offer of employer-sponsored health coverage.

Employers currently file corporate taxes and supply W-2 data to the IRS for employees and 1099s for its independent contractors. In addition, beginning in 2015, employers will be required to submit very thorough information under 6055 and 6056 regarding every employee and dependent name, SSN, plan coverage, and cost of coverage for every month that the employee is/was employed. All we know right now is the general information that will be needed and when it is due. Given that this information will be held in this government hub, shouldn't it be possible to enable employers, in addition to the state Exchanges, to access this same or a “like” database that will allow for up-to-date information regarding an employee, their eligibility, and the required plan cost information? Not all organizations have long-term employees who have long tenure. Many companies have highly variable employees who, based on the nature of their jobs, have income that changes monthly or even weekly. This fact alone begs the question of how it is that individuals and employers alike will all be providing the most up-to-date and proper information to the entities that are making what may be deemed a very important decision for an individual regarding health coverage and financial assistance?

With some “high-tech” thinking, as an employee submits an application to an exchange, rather than have the applicant return to the employer to gather the required information to take with them, the applicant could complete the application online or submit via paper. The Exchange could then verify employment/eligibility via a database using the applicant’s SSN. A regular feed to this database would occur from participating employers so that all new hires, ongoing employees, and employee status is kept current—thereby ensuring the Exchange knows immediately if the applicant:

1) has been offered affordable coverage of minimum value,
2) is in a measurement or wait period, or
3) has waived an offer of affordable coverage by the employer.

This could be a secure database employers automatically feed information to on their qualified health plans, whether an employee is in a wait or measurement period, and when they became eligible and were offered a qualified plan, or if they had waived coverage. This could allow for an immediate determination of eligibility. In return, the determination could be communicated to the employer without delay, thereby allowing an immediate response should an appeal be required.

The current plan to use a manual process for managing communications with Exchanges will be a heavy and costly burden on employer benefits/HR staffs. And the reconciliation of this issue as a manual process will also be very burdensome.

Health E(fx) is lobbying for the automation of this process, has pre-developed the capability, and is well positioned to deliver employer data directly to Exchanges if/when this automation occurs. But to date, this rests with the Exchanges and nobody is discussing it.

Exchange Notices

In less than a month, the employer exchange notification is due to be delivered to every employee—either via the old-fashioned snail mail or email. And every employee means every employee—not just those eligible for benefits, but every employee on your payroll: active, leave, temporary and let’s not forget those who are not on your payroll but once were. (Yes, your COBRA participants are eligible and will require a notification, but this may be released during your annual enrollment period.)

By October 1, employers are required to ensure every employee receives this notice of the existence of the Exchange/Marketplace option. After January 1, 2014, every new employee must receive this notification within 14 days of hire to remain compliant. HHS released a model notice earlier this year that every employer can use, and edit if necessary, to meet corporate needs (as long as the standard required information remains in the body of the notice). Two notices exist: one for employers offering coverage and one for those not offering coverage. The notice includes information on whether the employer is offering coverage—to whom and if that coverage is affordable. It directs employees to for more information on assessing the options available in the employee’s state. One section is identical to the Marketplace Employer Coverage Tool on the Exchange application. What is not included in this notice? Specific information for each employee that will assist him or her in filing an application with the Marketplace in the resident state if so desired.

Is the assumption that the employer will send this blank form notification out en masse and wait for the employee to come back to the HR department and ask, “Would you please fill out the employer section as I would like to apply for coverage in the Marketplace?” Based on what is included and excluded, that seems like the plan. To complicate matters, the employer must fill out the Marketplace Employer Coverage Tool, but the employee must enter the information into the application; he or she is not allowed to submit the employer-completed section.

Health E(fx) solves this issue of incomplete employer information and automates the generation of all employee notifications. It also solves what could be overwhelming and unsustainable pressure on the HR/Benefits staff to complete forms and act as advisors to perhaps thousands of employees trying to meet enrollment deadlines. The Health E(fx) system has automated the entire notification process. After an employee census data load, all the information needed for an individual employee is pre-filled in the model notice and the Marketplace Employer Coverage Tool. Employers can send the form to a fulfillment vendor to mail or email by the deadline. The employee now has all the information needed: employer name, address and contact, affordability information, and the cost of the QHP the employer offers. The employee then can use the Marketplace tools and compare offered plans. If the Marketplace has a plan that meets the employee’s needs, he or she now has everything needed to make an informed decision and complete the application in a timely manner without the need to call the HR department for data, questions, and manual workarounds.

October 1 is approaching quickly, and there is still much confusion around the ACA, the Exchange/Marketplace offerings (for example, Utah announced that its citizens will be able to choose from 99 different plans!), and employer plan changes and pricing. It is going to be a very long fall and a difficult enrollment season for employers on a calendar year plan who have made substantial changes to meet the ACA requirements. No one is exempt from the Notice of Exchange/Marketplace coverage delivery. The penalties are unclear, if any, for employers’ failure to deliver the notice in a timely manner or at all. Failing to deliver violates the ACA and the Fair Labor Standards Act (FLSA), subjecting employers to investigations and possible monetary punishment. And any employee reporting the failure to distribute will have full employment protection under the ACA.

How Will Employers Communicate with Exchanges?

With the release of the Final Exchange/Marketplace Application for individuals (see our blog HHS Releases Streamlined Exchange Applications for more information), communication with the state and federal exchanges regarding eligibility and potential tax credits and federal subsidy requires employers to provide very specific information—but via paper! And that information is NOT to be submitted by the employer. The applicant must use the employer-supplied information to complete the application that he or she then submits.

Why this process? Good question. What we know is that this is a potentially daunting task at hand, assuming employees will even know what they will have to do come Open Enrollment for 2014.

Is there a better way? Absolutely. There are alternative, automated processes that are both intuitive and allow the employer the opportunity to ensure true and correct information on each employee that is submitted in a timely fashion. This process does not require the employer to submit the information to the employee who then hopefully transfers the information to the individual employee application for submission to the exchange for eligibility and subsidy determination. It is possible that communication could be direct to the exchange, in which case there would be no employee transfer, translation, or risk for miscommunication.

Such “blue-sky” ideas require a direct communication link between employers and both state and federal exchanges, regardless of their offer of employer-sponsored health coverage. Health E(fx) is ready to communicate with the exchanges once these links are established, putting the employer in a proactive position regarding employee coverage and enrollment choices.

Top 10 Issues Employers Should Consider Now

1.  Review and revise documents related to healthcare plans and arrangements. Employers need to verify that they have made all necessary changes and eligibility provisions. Employers may have already had plan design changes in play in preparation for the Employer Mandate, and they should consider what to implement in 2014 and what to delay to 2015.

2.  Continue to prepare for the Employer Mandate. Employers do not have to worry about enforcing the Employer Mandate tax penalties and reporting requirements in 2014, yet they should continue to prepare by evaluating their workforce—both employee classification and hour counting.

3.  Review cost-sharing for 2014 coverage of the Employer Mandate. Even though the affordability requirement will not be enforced in 2014, limits on cost-sharing provisions are still effective in 2014. Employers should take the time to review their cost-sharing structures and evaluate whether to implement or delay any shifts in employee-contribution cost-sharing.

4.  Review and revise wellness programs and incentives based on the ACA guidance. Employers can financially incentivize employees to meet certain health standards. Compliance with the ACA's guidance on wellness programs does not guarantee compliance with other program provisions, however, so employers need to carefully develop their wellness programs.

5.  Prepare for the rest of the ACA. Although the Employer Mandate has been delayed, the rest of the ACA provisions are scheduled to move forward. Employees need to implement new employee notice requirements and communications, plan fees, and other ACA requirements as originally scheduled.

6.  Gear up for ACA notices. Significant ACA requirements involve communicating information regarding the employer’s health plan to employees. Employers are required to send notices to their employees regarding the “New Health Insurance Marketplace Coverage Options and Your Options.” All employers must produce and distribute this notice.

7.  Prepare for earlier open enrollment as a result of additional notice requirements. With the October 1, 2013, deadline for the distribution of the Marketplace Notice, employers should consider moving open enrollment to an earlier date to accommodate the Marketplace Notice deadline.

8.  Develop strategies for the Individual Mandate and Health Insurance Marketplaces. Even though the Employer Mandate is delayed to 2015, the obligation of employees to have individual coverage under the “Individual Mandate” begins January 1, 2014. The opportunity for individuals to purchase coverage on the Health Insurance Marketplaces starts October 1, 2013. Employers are required to provide notices to employees regarding the Marketplaces and will be required to respond to Marketplace requests to confirm employee data and coverage.

9.  Review HIPAA/HITECH—Updates required for the Final Rule. All employers should be reviewing and updating their HIPAA policies and procedures for their covered entity health plan. Reviews should include updating Privacy Notices and evaluating business associate relationships and underlying agreements. The deadline for compliance is generally September 23, 2013.

10. Evaluate changes necessitated by the Supreme Court's ruling related to the Defense of Marriage Act (DOMA). Although it is anticipated that guidance for this act will be issued soon, all employers should be evaluating their health

Model Notices—From an Employer Perspective

On May 8, 2013, the Department of Labor (DOL) issued Technical Release No. 2013-02 that provided temporary guidance for employers about the requirement to notify all employees of coverage options available through the exchanges. The release stated that all employers must provide notice free of charge to current full-time and part-time employees (whether or not they are enrolled in a health plan) before October 1, 2013.

This notice, which is an obligation, not an option or suggestion, has two model notices: one for employers that offer coverage and one for those that do not. Employers may use one of these models or create their own as long as the notice meets the content requirements outlined in the technical release. The employer may provide the notice by first class mail or electronically if in accordance with the DOL regulations. Employers are required to provide the notice to all current employees regardless of full-time status and each new employee at the time of hiring beginning October 1, 2013. For 2014, the DOL will consider a notice to be provided at the time of hiring if the notice is provided within 14 business days of an employee’s start date.

Each model notice includes a section that requires the employer to provide the employer’s contact information, tax identification number, and other information about any employer-provided health coverage.

The notice and the required sections are easy to fill in and distribute if the employer has the capacity and the right technology. There is a section that is optional to the employer to fill out. But if the employer leaves this section blank, it is extremely likely employees will ask the employer to help them in getting the information as it is required in the “Marketplace Employer Coverage Tool” section of the individual application for exchange coverage.

If an employer has limited staff and a large population, completing this form and distributing may be a huge administrative burden. This could result in application and timing delays. It may also lead to the need to ensure staffing levels are prepared for the potential run to the exchanges, especially if the employer does not offer coverage, or offers unaffordable coverage or coverage that does not meet minimum value.

HHS Releases “Streamlined” Exchange Applications

Early in 2013, HHS released a 21-page Exchange draft coverage application. This form was complex and confusing and employers were eager to submit comments regarding the release. In response to all submitted comments, HHS issued a shorter, more streamlined FINAL application that individuals enrolling in medical coverage in a public health exchange will use; the federal government refers to this application as the Health Insurance Marketplace. There are three versions: the Individual Short Form, the Individual Form with no Financial Assistance, and the Family Exchange Form.

On one of the forms, employers are required to complete a section requiring information on various elements of the employer-offered health plans, including eligibility, waiting periods, premiums for the lowest-cost, self-only plan option, wellness program incentives, whether the plan meets minimum value standards and what plan changes are contemplated for the new plan year.

These revised forms will be used by HHS not only for coverage in the Health Insurance Marketplace, but also to determine eligibility for Medicaid and CHIP coverage. This information will be used to determine eligibility for federal premium tax credits or other federal subsidies. This form, as developed by the HHS, will be used by states deferring to the federal government for Exchange coverage, and it looks now that most states that are operating their own Exchanges will also use these applications, yet they do have the option to create Exchange-specific forms.

As stated above, the HHS package has three versions:

    • Application for Health Coverage & Help Paying Costs (Short Form): Unmarried adults who are not offered coverage from their employer, who do not have dependents, who cannot be claimed as a dependent on someone else’s tax return, and who do not have items that can be deducted from their taxable income other than student loan interest use this 5-page form.

    • Application for Health Coverage & Help Paying Costs: Single individuals and those with a family who are offered health coverage from an employer use this 12-page application.

    • Application for Health Coverage: Anyone who wishes to enroll in a health plan offered in the Marketplace, but who is not eligible for premium tax credits, cost-sharing subsidies, Medicaid, or CHIP coverage fills out this 5-page application. Those individuals unsure about their eligibility can also complete this version of the application and will receive assistance regarding eligibility and enrolling in coverage.

Employer Requirements
The 12-page version of the application includes an “Employer Coverage Tool.” Instructions guide applicants to “take the Employer Coverage Tool on the next page to the employer that offers coverage to help you answer these questions.” The interesting part of this section is that this tool is NOT to be included when the application is submitted; but instead, the applicant uses the information provided by the employer in the Tool to respond to similar questions asked in the Health Coverage From Jobs section of the application.

This section is relevant is determining whether the applicant is eligible for federal premium tax credits and subsidies and thereby determining if an employer is liable for penalties under the play-or-pay requirements.

The application and the Employer Coverage Tool request the applicant to fill in very specific and important information that, if reported erroneously, may determine employer liability. Information required includes the following:

    • 1. Applicant’s before-tax wages and frequency of payment – determining affordability.2. Average number of hours worked each week by the applicant – determining eligibility.3. If income of the applicant changes from month to month, the applicant is required to identify his or her “total income this year” and “total income next year (if you think it will be different)” – this year being the year the application is submitted. So, if submitted in October 2013, “this year” refers to 2013, “next year” refers to 2014.

      4. The applicant’s eligibility for coverage including whether any waiting period applies.

      5. If the employer offers a health plan that meets minimum value standards.

      6. Employee premium requirement for self-only coverage under the lowest-cost plan offered by the employer. If the employer maintains wellness incentives, applicant is asked to provide the premium that the applicant would pay if he or she received the maximum discount for any tobacco-cessation program and did not receive any other discounts based on wellness programs.

      7. What plan changes will be made to the group health plan for the new plan year (if known), including the potential that the employer will not continue to offer coverage, or that the premium for the lowest cost plan will be changed or if the employer will start offering coverage.

As of now, the Employer Coverage Tool is expected to be completed manually by each employer for each employee who files an application for coverage in the Marketplace. A daunting task for current benefit staff levels in organizations of all sizes.

Automated solutions to the manual, cumbersome, and time-consuming process facing all employers are possible. Health E(fx) has all the data necessary for the Employer Coverage Tool already developed in the system. Should the Exchanges allow the pre-filled forms to be submitted (rather than having the employee fill out all the pertinent information themselves), there would be significant reduction in redundant, manual processes allowing for improved communication and less burden on both employers and employees.

Ultimately, to automate a solution between the employer and the Exchanges, there will need to be an electronic, regular feed to a National Exchange Database, where an employer can submit all the necessary information, by employee, so the Exchange can validate the Employer Coverage. This would allow for an effective and efficient means of employer plan validation at the Exchange. It would also allow for Qualified Health Plan (QHP) affordability and eligibility determination for the applicant to be assessed BEFORE subsidies are granted that may be erroneous and drive significant downstream reconciliation problems.