Why Everybody is Dead Wrong About the Mandated October First Obamacare Exchange Notices
There is a lot being said about the government-mandated Insurance Exchange Notices that employers are required to give to employees prior to October 1st, 2013. A quick Google search shows a mere 75 million results, but what does Google know? “Experts” have cropped up everywhere, each with a distinctive “take” on the issue – but oddly, most of those “takes” say pretty much the same thing. Their advice?
“Use the government’s model notice, or base your notice on what is included in the model notice.”
Surprisingly, what these experts are saying is both wrong, and it has the potential to put employers at risk.
I’ve been tracking news media and social media coverage of the notice, and reading the advice given by attorneys and other professionals. As an attorney myself, I noticed a pattern that began emerging earlier this month. This pattern has grown into the recent flurry of articles, almost all of which showed a frightening trend. A surprising consensus of attorneys, CPAs and benefit professionals – most of whom are very smart people with good intentions – are simply dead-wrong about the mandated October 1st employer notice.
Digging deeper, I uncovered six commonly-held beliefs about the notice – each of these are misconceptions that are just plain wrong. Here’s a quick rundown of the Six Big Mistakes About Obamacare’s Employer Notice:
- Mistake #1: The ACA’s “model notice” includes all the information employers must provide to their employees. Reality: This “model notice” includes a great deal of information not required by the law – some of which is potentially damaging because it can be used against the employer.
- Mistake #2: American businesses must tell all of their employees, by October 1, 2013, what it plans to offer in the way of health insurance in 2014. Reality: There are just three things employers are required to tell their employees – perhaps surprisingly, what kind of insurance (if any) the employer will be offering to employees in 2014 is not one of them.
- Mistake #3: Employers must state which employees will receive health coverage in 2014, and which will not. Reality: This is not one of the three reporting requirements. No notice regarding an employer’s intentions regarding offering insurance in the future is required by the government mandate.
- Mistake #4: Employers must tell employees if dependents will be covered, and if so, which ones will be covered and which dependents won’t be covered. Reality: There is no requirement for employers to tell their employees anything about dependent health coverage for 2014.
Mistake #5: Employers must provide employees with their EIN as part of this notification.
Reality: There is no requirement to disclose the company’s EIN on this notice.
- Mistake #6: Since the Department of Labor (DOL) will not be assessing penalties for non-compliance with this October 1st reporting requirement, companies are safe in ignoring it entirely. Reality: This is not a time to be picking and choosing which parts of the law you will follow. Audits are virtually inevitable – even with full compliance, they are going to be onerous.
This is the time to have every "i" dotted and every "t" crossed, in anticipation of weathering future audits with minimal complications or penalties.
That’s the overview of those six widely-held “truths” that are, in fact, completely wrong.
Let’s take a look at these one at a time.
Mistake #1 – Model Notice Reflects Required Information: Most experts seemed to accept the idea that the government-developed “model notice” represents all the information that must be in the notice. However, that is not the case. In the government’s Technical Release about the notice, it clearly states that the model is a suggestion, and that employers are free to use a “modified” version so long as it contains the required content. The model notice adds a great deal of information that is not required, and some which could be harmful to the employer.
Mistake #2 – The “Insurance Decision:” The model notice suggests that employers must inform their employees whether or not they will provide a health plan in 2014.
The truth is that employers are not required to give this information right now. And how could they? Insurance companies haven’t even published definite pricing yet. That means most companies can’t even begin to finalize their 2014 insurance strategy yet. Every prudent executive will agree that putting something in writing this year – before having all the facts needed to make an informed decision – is ill advised.
Mistake #3 – Stating which employees will be offered insurance and which employees will not be offered insurance: The government’s model notice offers two distinct options: One notice for employees who will be offered insurance and one notice for employees who will not be offered insurance. This option has caused many experts and employers to believe that employers are ‘required’ to give this information to their employees on or before October 1st.
This is just not true. Worse, acting on this belief and memorializing your employee insurance decision right now, before the insurance prices have even been released, is simply a bad idea. As a lawyer, I am constantly giving my clients three vital pieces of advice:
1. When you put it in writing, only present facts – not speculation or variable plans that may be subject to change; and,
2. When you put it in writing, be careful to not commit yourself to a course of action that you may later wish to change; and,
3. When you put it in writing, make sure it cannot be construed as a contractual promise of future employment, future insurance coverage or any other future actions.
This is one of those times when this advice is critical. If this information is not required (which it is not), why on Earth would you put in writing for all the world (and worse, the IRS) to see right now?
As noted, information included in the model notice regarding plans for future insurance might be construed by some employees (or by their attorneys) as creating a contractual right to health insurance – or even to future employment. In the notice my team rewrote, which can be found at our Obamacare Notices website, we include disclaimers to make it clear that your notice is not a contract for future employment or a binding promise of future health insurance coverage.
Mistake #4 – Stating if dependents will be covered, and – if so – which ones: First of all, employers are not even required to offer coverage to dependents until 2015. My guess, based on all the misleading news and blog commentaries you can find out there is that many employers do not realize this. Imagine the animosity that will be created by employers who first send this model notice to their employees, in effect promising dependent coverage, but who later decide it is in their best interest to delay offering benefit coverage until 2015. That is not going to make for a happy work force.
The smart action is to avoid saying anything about dependent coverage. Instead, wait until after the final, irrevocable decision has been made – and remember, such a notice, at this time, is not required under the law.
“Mistake #5: Providing your EIN Number: A company’s EIN number is included prominently in the model notice, yet there is no actual requirement in the statute that employers provide an EIN.
Now this EIN number is an interesting piece of data to collect. While these notices will not be submitted directly to the IRS, if you include the EIN in your employee notice, it will find its way into the hands of the Exchanges, the IRS auditors, friends and family of your employees, and possibly even the news media.
What possible good could come from sharing your EIN number so freely? None.
In fact, providing this extra information could prove to be something of a treasure map for the IRS auditor or a litigator, especially in the event of an audit or a lawsuit. Stick to the required information. Do not offer up bonus information that can be used to help those who mean you harm to track you down.
Mistake #6: The “I don’t need no stinkin’ notification” mistake: With the announcement last week that there will be no direct financial penalty imposed on employers who choose to ignore the notification requirement, there has been a sudden up-welling of the belief that a “no-harm/no-foul” situation now exists.
Some employers are reasoning that, “with no penalty, there is no cause to bother reporting to employees as required by law.” This reasoning is entirely false – worse, it is completely dangerous.
This law succeeds by assessing penalties. Penalties will be assessed through self-reporting in your tax returns, and through IRS audits. During these audits, the IRS auditors are going to look at your company’s overall compliance with the law.
Knowing audits are coming, this is not a time to be picking and choosing which parts of the law you find important and which you do not. Such behavior will invite more scrutiny into your business. Not only that, there is no benefit to avoiding the notice. This notice requirement is not overly demanding, or even difficult. Why would you take the risk of not doing such a simple thing when, by complying you can keep yourself remain squeaky clean?
That said, I do not recommend anyone to use the model notice. As the ancient’s nautical maps used to say, when illustrating terra incognita, “Here Be Dragons.”
Instead of using the government’s model notice, I recommend sending a notice that provides all of the information required by the law, but does so without making any promises that could later be used against you.
My team has created a revised Obamacare notice that only includes the bare minimum information as is required by law and can be downloaded at www.ObamacareNotices.com.