Under the Patient Protection and Affordable Care Act of 2010 (“PPACA”) each state is required to establish an American Health Benefit Exchange (“Exchange”) that:
- facilitates the purchase of qualified health plans;
- provides for the establishment of a small business health program that is designed to assist qualified small employers in the state with facilitating the enrollment of their employees into qualified health plans offered in the small group market in their state; and
- meets certain organizational and operational requirements.
Although the Exchanges are not set to come on line until January 1, 2014, employers have an obligation in 2013 to inform current employees and new hires of the availability of the Exchange, of the employees ability to shop for coverage and if eligible to obtain coverage from the Exchange.
The employers notice must be in writing and must be issued by the following deadlines:
- Information to new hires: March 1st and
- Information to current employees: March 13th
The notice should explain:
- General information concerning the employers health plan,
- The employee’s right to purchase health insurance coverage through a state Exchange;
- The services provided by the Exchange;
- How to contact the Exchange;
- The employee’s possible eligibility for government subsidies under the Exchange if the employer’s share of the aggregate cost of benefits is less than 60%; and
- The employee’s possible loss of an employer subsidy, if any, (in the form of a tax-free contribution to the employer-provided health coverage) if the employee purchases health insurance coverage through the Exchange.
PPACA guidance on the “aggregate cost of benefits” defines it as the aggregate cost of applicable employer-sponsored coverage. Thus the aggregate cost for an individual employee is the total cost of coverage under all applicable employer-sponsored health coverage provided to the individual employee. The amount reported may differ among a company's employees depending on each employee's specific election of coverage (i.e. PPO, HMO, single, family, etc.). The cost of coverage under a particular group health plan is referred to as the "reportable cost," and the aggregate cost of applicable employer-sponsored coverage is referred to as the "aggregate reportable cost." The aggregate reportable cost generally includes both the portion of the cost paid by the employer and the portion of the cost paid by the employee, regardless of whether the employee paid for that cost through pretax or after-tax contributions. In addition, the aggregate reportable cost also includes any portion of an employer-sponsored group health plan's cost of coverage that is includable in the employee's gross income.
For the purposes of the notice requirement, "applicable employer-sponsored coverage" means coverage under any group health plan (including onsite primary-care medical clinics) made available to the employee by an employer that is excludable from the employee's gross income under Section 106 or would be excludable if it were employer-provided coverage. (Thus, employee-pay-all group health coverage is included.) However, when calculating the applicable employer-sponsored coverage do not include the following coverage:
- Long-term care
- Accident or disability income insurance, or any combination of the two
- Supplement to liability insurance
- Liability insurance, including general liability insurance and automobile liability insurance
- Workers compensation or similar insurance
- Automobile medical payment insurance
- Credit-only insurance
- Other similar insurance coverage, specified in regulations, under which benefits for medical care are secondary or incidental to other insurance benefits
- Any coverage under a separate policy, certificate or contract of insurance that provides benefits substantially for treatment of the mouth (including any organ or structure within the mouth) or for treatment of the eye
- Coverage only for a specified disease or illness
- Hospital indemnity or other fixed indemnity insurance