No Penalty for Employers Not Telling Employees About Obamacare

Employers will not face a penalty if they fail to inform their workers by Oct 1 about changes under President Barack Obama’s healthcare law, the administration said, in what will likely come as a relief to many small businesses.

The federal government is requiring businesses to notify employees about the new health insurance marketplaces created by the law that are set to start enrolling millions of Americans beginning Oct 1.

Employers are also required to inform employees that they may be able to get lower-cost insurance on the exchanges, but if they buy insurance on the exchange, they may lose their employer contribution.

Media reports have said that many small businesses had been unaware of the requirement, and therefore were at risk of potential penalties.

A notice posted on the Department of Labor’s website on Wednesday said employers cannot be fined for failing to provide such notice.

“If your company is covered by the Fair Labor Standards Act, it should provide a written notice to its employees about the Health Insurance Marketplace by October 1, 2013, but there is no fine or penalty under the law for failing to provide the notice,” the Labor Department said, under the heading “FAQ on Notice of Coverage Options.”

Businesses covered by the FLSA have annual sales of at least $500,000.

A Labor Department spokesperson confirmed on Thursday that businesses faced no consequences for missing the deadline. Asked why the department posted the notice, the spokesperson said: “The reason all the FAQs go out is to provide further clarity.”

Some labor attorneys had been speculating that businesses that miss the deadline would face fines of $100 day per worker, in line with other penalties under the Affordable Care Act, said John Barlament, an employee benefits attorney with the firm Quarles & Brady.

“It’s helpful for employers to have that clarification,” Barlament said. “There was some uncertainty before about whether or not there was a penalty.”

Barlament said most large employers were aware of the notification requirement.

“But among smaller clients you do see a little bit less awareness of this, and some of them probably would have been caught a little flat-footed here,” Barlament said.

(Reporting by Lewis Krauskopf; editing by Andrew Hay)

Topics Commercial Lines Business Insurance