Communicating with Employees About Health Care Benefits Under the Affordable Care Act

 

December 5, 2019
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Scope—This toolkit is designed to provide guidance for employers on information they can or must convey to employees about health benefits and health coverage options under the Patient Protection and Affordable Care Act of 2010. The article is intended to summarize the various types of such messages to employees; it does not include the deepest details of health coverage communications under the act.

Overview

Employers, particularly those that offer health care benefits, know the importance of communicating the value and details of benefits options to employees. The introduction of the Patient Protection and Affordable Care Act—commonly referred to as the Affordable Care Act, or the ACA—creates new requirements and opportunities for communicating with employees.

Employers have long been required to inform their employees about the benefits offered by their organizations. In many instances, rules and required formats exist for conveying such information. In general, such notices about health care benefits and the means of delivering them still stand under the ACA and have been expanded. Moreover, under the ACA, employers will have opportunities, as they have in the past, to provide additional communications to employees about the value, details and available educational tools of their benefits plan options.

The following information will address the principal types of notices to employees that the ACA generally requires as well as the types of additional communications that are not required but are recommended and would likely be beneficial for employers and employees over the long term.

HR's Role

In most organizations, the primary responsibility for communicating to employees about benefits and benefit options lies with human resources. HR may also facilitate communications in both directions between employees and management. And HR is usually in the best position within management to know the organization's employees and to decide on the message and the medium when communication to employees is necessary.

However, although HR tends to "own" the benefits-communication effort, HR is not always the primary conveyor of information to employees. HR can sometimes serve strictly as the organizer of communications delivered by other resources. Such resources can include insurance carriers, agents and brokers; financial advisers; third-party administrators (TPAs) of benefits programs; employee assistance programs; professional communicators or facilitators; and health care reform navigators. The role of navigator, created for the ACA, is essentially to provide information and education about the existence of and enrollment processes for health plans and to help people enroll if so requested.

Employers should not hesitate to ask for help from the organizations and experts that serve the employer and employees on benefits matters. Such providers often have valuable experience in communicating to employees, and those providers in turn may have access to additional communication resources such as printed materials, websites and hotlines.

Principal Notices and Communications

A number of communications to employees are mentioned in the ACA and are generally required, although penalties for employers that do not comply have been relaxed somewhat in a few instances. The communications may be issued by the employer or, in some instances, may be put out by insurers or TPAs. Some of the ACA-required notices are expanded versions of benefits notices that have been required for many years. Principal notices under the ACA include the following.

Exchange notices

These notices are to provide employees with information about how to access and use the exchanges. Topics in the exchange notices should include the existence of the exchanges, the employer's health coverage (or lack of it), the services provided by the exchanges and information on how employees can contact an exchange to request assistance. The notices are to be provided to all employees upon hire. See What is the health insurance marketplace notice requirement under the ACA?

Although in 2013 the DOL announced that no penalty would be imposed on organizations that fail to provide exchange notices to workers, benefits specialists advise that these notifications nevertheless be distributed either in printed form or electronically. The DOL offers model exchange notices. See Notice to Employees of Coverage Options.

Summary of benefits and coverage

A summary of benefits and coverage (SBC) is a standard communication tool issued by employers' health plan providers and by insurance companies. Among other things, SBCs summarize a plan's major provisions such as covered benefits, limitations and cost-sharing. SBCs are intended to help employees and their family members make informed health coverage decisions by enabling them to compare plans offered by the employer and those available on the exchanges. The SBC must be delivered at open enrollment and to all employees who become eligible for coverage during the plan year. See Summary of Benefits and Coverage and Uniform Glossary and What is the summary of benefits and coverage under the Patient Protection and Affordable Care Act?

Summary plan description

A summary plan description (SPD), a benefits plan communication that has long been required of employers, informs participants in an employer-sponsored benefit plan about the plan's provisions and operating procedures. As explained by the DOL, the SPD provides information on topics such as "when an employee can begin to participate in the plan, how service and benefits are calculated, when benefits become vested, when and in what form benefits are paid, and how to file a claim for benefits." Whenever changes are made to an employer-sponsored health plan, an amended SPD or a summary of material modifications must be completed and communicated to employees. Under the ACA, notice of material modifications to a plan must be provided to participants at least 60 days in advance of the effective date of change.

SPDs must be provided within 90 days of the employee becoming a participant in the plan. Updated SPDs must be provided to all participants every five years if there have been material modifications and every 10 years even if no changes were made. See What Are Our Responsibilities with Respect to Summary Plan Descriptions?

W-2 reporting of health costs

The ACA requires employers to report the value of employees' health care coverage provided under an employer-sponsored group health plan annually on the W-2 forms. "In general," according to the IRS, "the amount reported should include both the portion paid by the employer and the portion paid by the employee." The value of the employer's contribution to employees' health coverage is not taxable. The reporting is for informational purposes only and could help employees compare the costs of various health coverage options.

An exception to the W-2 reporting rule is in place for employers with fewer than 250 W-2s in the prior year. See W-2 Reporting for Employer-Sponsored Health Plans Under the ACA.

IRS Form 1095 (Health Care Information Form)

Employers subject to the ACA must distribute reporting forms to employees and file with the IRS. By filing Forms 1095-C with the IRS and providing employees with copies, employers with 50 or more full-time or equivalent employees show they offered eligible employees health coverage that was compliant with the ACA. For smaller organizations, self-insured employers or insurance companies file and distribute Forms 1095-B.

Employers must send their 1095-C forms to employees by January 31 (extended to March 2 in 2020), and to the IRS by the end of February if paper filing, and by the end of March if filing electronically. These dates have been extended at times, so employers will want to keep abreast of this information. See IRS Grants Relief as Employers Prep for ACA Reporting in 2020 and Information Reporting by Applicable Large Employers.

COBRA notice

The DOL has issued a model election notice under COBRA to inform qualified beneficiaries of coverage options through the ACA exchanges. For departing employees—including pre-Medicare retirees—it might be in their interest, and in the interest of their former employers, to choose coverage through an exchange. COBRA enables former workers to keep their employer-provided coverage for up to 18 months if they pay the entire premium plus a 2 percent administrative fee. Some departing employees could make a more cost-effective choice by buying a plan on an exchange, where premium tax credits are available to qualifying individuals.

The COBRA Model Election Notice is available in modifiable electronic form. The notices and related information can be found on the DOL's COBRA Continuation Coverage webpage.

To use this model election notice properly, the plan administrator must complete it by filling in the blanks with the appropriate plan information.

Additional Communications

Employers whose employees understand and like their benefits are said to be more apt to be satisfied with their employer and willing to recommend the organization as a good place to work. Thus, it can be important for an employer to make sure its health plan communications—even those not required by laws such as the ACA—are thorough, readable and informative.

Benefits advisers recommend that employers use open-enrollment communications as an opportunity to explain the value of the health benefits they provide in comparison with offerings on the exchanges. For instance, workers should be made aware that they may be unlikely to find a better deal through the exchanges, and they should be informed as to whether they are likely to qualify for exchange-based federal subsidies. Employers should make it easy for workers to compare company-offered coverage with exchange-provided insurance plans.

Among a variety of nonmandated but highly recommended communications to employees about health benefits under the ACA are the following.

The Affordable Care Act is law. It is important to preface communications with employees that regardless of their personal or political beliefs about the ACA or its future, the ACA is the law of the land and requires their compliance.

Changes may occur. As the ACA continues to evolve and be challenged, regulatory changes may occur. The employer's responsibility is to interpret the impact of regulations, apply them to their health plans and communicate their effects to employees. Employees should understand that guidance on the ACA will be updated and possibly altered from time to time.

Coverage through the exchanges is available. It can be of value for employers if they make sure that their employees are aware of the federal and state exchanges—collectively, the health insurance marketplace—especially if the organization's employee-only coverage is affordable but if family coverage has a significant cost to the employee. Such employees may be able to find more affordable or cost-effective coverage through an exchange.

Subsidies are available. Providing employees with the information on whether they may qualify for a subsidy through a health care exchange will assist them in making the most appropriate choice of coverage.

Costs are calculable. Employers should provide information to employees about whether they have determined that the coverage offered is "affordable" according to ACA standards. This will assist employees in determining whether they may qualify for a subsidy through an exchange.

The Audience and the Message

Traditionally, employee benefits communications have been tailored to employees, but the employee audience is not the only one that needs communication from the employer. As has become increasingly common, the employee is not necessarily the sole decision-maker in the household regarding benefits, particularly given that all members could be affected. Employers should recognize spouses when shaping communications about benefits, as well as others who could be affected by an employee's health coverage decisions such as covered domestic partners and adult children eligible for coverage under a parent's plan until age 26.

The mechanisms through which employers communicate with employees vary considerably. It is important to remember that the communication strategy needs to be multifaceted and should include a number of different media. Common forms of communication include newsletters, employee meetings, webinars, social media, benefits fairs and one-on-one sessions with employees.

For more information about the ACA, see the section of the SHRM website titled ACA Resources.

Additional Resources

Read the Affordable Care Act

Affordable Care Act: Coverage Terms

Key Features of the Affordable Care Act

Reporting and Disclosure Guide for Employee Benefit Plans

Questions and Answers to Help Your Organization Understand ACA Reporting Requirements

Complying with and Leveraging the Affordable Care Act



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