Healthcare Exchange Letters Must Be Sent Out by October 1st

One of the primary provisions of the Affordable Care Act is the creation of public health insurance exchanges. Companies that are regulated by the Fair Labor Standards Act (most companies with at least one employee and $500,000 in annual revenue, which would include many revenue-generating startups and emerging companies) are to send out a letter to their employees informing them of the health insurance exchanges by October 1st (new hires after this date should receive the letter within 14 days of hiring)

The Department of Labor website has form letters that employers can use, but basically the letter should:

– Inform the employee that the exchange exists
– Describe the services provided by the exchange
– Let the employee know how to contact the exchange
– Inform the employee of any potential eligibility for subsidized coverage on the exchange if the company’s health plan doesn’t provide “minimum value”
– Notify the employee that he or she may lose employer contribution toward health insurance if the employee chooses to purchase insurance on the exchange

However, controversy exists over whether employers are truly *required* to send the letters, and what consequences may arise if they fail to do so. Although the Department of Labor recently published a FAQ noting that employers merely “should provide” the notice and that there is no fine or penalty for failure to do so, the Fair Labor Standards Act states that notices required under the Act “must” and “shall” be provided to employees — there is also a general $100/day penalty for non-compliance in the Affordable Care Act.

Employers who are subject to the Fair Labor Standards Act are better off sending the health insurance exchange notices. Even though the Department of Labor’s FAQ says there is no requirement or penalty for non-compliance, the law appears to say differently, and the DOL may later decide to enforce that law.

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