Your Health Plan's Paperwork Could Go Digital by Default. Here's What the Labor Department Proposed

Your 401(k) went digital years ago. Since 2020, retirement plans have been allowed to post their required notices on a website and send participants a short alert, while health plans have mostly kept mailing paper ^{[1, 2]}. On July 22, the Labor Department proposed closing that gap, and the proposal was published in the Federal Register the next day ^{[1, 3]}. If you offer a health plan to your employees, even a small, fully insured one, this is about the envelopes your plan sends every year.

What the Labor Department proposed

ERISA, the federal law that governs most job-based benefits, requires a health plan to hand participants a stack of documents: the summary plan description (the plain-language rulebook for the plan), summaries of plan changes, the summary annual report and a long list of notices added by later health laws ^[1]. The rules require delivery “reasonably calculated to ensure actual receipt,” which in practice has meant paper unless the plan fits a 2002 electronic safe harbor ^[1].

That 2002 safe harbor covers two groups. One is employees who are “wired at work,” meaning they use the employer’s computer system as an integral part of their job. The other is anyone who affirmatively consents to electronic delivery, after receiving a disclosure statement about what they’re agreeing to ^[1]. Everyone else gets paper.

The new proposal adds a third route, modeled on the 2020 rule for retirement plans ^{[1, 2, 4]}. Here’s the short version:

• The plan posts covered documents on a website, which can include a mobile app or a login-protected portal ^[1].
• It sends each person a notice of internet availability, a short message headed “Disclosure About Your Health Plan,” to an email address or a smartphone number for text messages ^[1].
• No prior consent is required. The person just needs to have given the employer, plan or administrator that address or number. A work email assigned by the employer counts ^[1].
• Before switching anyone over, the plan sends an initial notice explaining the change and the right to paper ^[1].
• Anyone can request a free paper copy of any document, and anyone can opt out entirely ^{[1, 4]}.

Two differences from the retirement version stand out. First, a health plan could not email the documents themselves; it could only send the notice pointing to the website. The department cites privacy, saying it wants to avoid protected health information landing in a company inbox the employer may monitor ^{[1, 5]}. Second, the health version would cover documents a plan only has to provide on request, which the 2020 rule leaves out ^[1].

Who this touches

Almost every small employer that offers a health plan. The department counts 2,765,373 ERISA-covered group health plans, and 2,576,811 of them have fewer than 100 participants ^[1]. Of those, 1,407,999 have fewer than 10 ^[1]. Small plans together cover about 34.7 million participants ^[1].

It does not reach life, disability or other non-health welfare benefits. The department asked for comment on whether it should ^{[1, 5]}. Groom Law Group points out a practical wrinkle for employers that use one “wrap” plan document bundling health with other welfare benefits: only the health portion would qualify ^[5].

Does this apply to you? Two hypotheticals

Hypothetical one: a 25-person HVAC contractor. Say a hypothetical heating and cooling company has 25 people on its health plan. The office staff use the company’s computers every day, but the technicians spend their days in trucks and attics. Under the 2002 rules, the office staff can probably get notices electronically as “wired at work,” while each technician would have to affirmatively consent first, or get paper ^[1].

Under the proposal, if the company has a cell number on file for each technician, the plan could text them a notice that the updated plan summary is posted, as long as it has already sent the initial notice ^[1]. A technician who wants paper asks for it, free, and the plan sends it ^[1]. The department estimates the cost of complying for a 25-participant plan at $5.30 a year, against an estimated $348,600 in annual premiums ^[1]. It figures printing the four-page initial notice at about 20 cents a copy ^[1].

Hypothetical two: a dental practice with an insured plan. Say a hypothetical three-location dental practice buys a fully insured plan, and the insurer sends most of the required documents. The proposal lets an insurer use the safe harbor too, if it has a written agreement with the plan sponsor to furnish the ERISA information ^{[1, 5]}. The practice’s job would be to know which party is sending which notice and through what channel. That question belongs to your agreement with the insurer, not to the rule.

One more detail that matters to family plans: a dependent child who has turned 18 and given the plan an email address or phone number would count as a covered individual on their own ^[1].

The money, as the department counts it

The department estimates the change would save group health plans about $402 million a year in printing and mailing, which it calls “nearly a 70 percent decrease” ^[1]. The American Hospital Association reports the department’s ten-year figure as $3.9 billion ^[3]. Those savings rest on an assumption: electronic delivery climbing from 67.8 percent of disclosures under today’s paper-default rules to 90 percent once electronic is the default ^[1].

The proposal has paper backstops. If a notice bounces, the plan has to fix the address promptly or treat the person as having opted out and mail paper ^[1]. Documents have to stay online for at least a year, or until replaced ^[1]. And plans can bundle recurring notices into one combined alert per plan year, sent no more than 14 months apart ^[1].

If you want to compare this with the employer health rules covered here two days ago, my column on the 2027 affordability percentage walks through the employer mandate side.

What to do now

Nothing changes yet. You can keep using paper or the 2002 rules, and the proposal leaves both in place ^{[1, 5]}. The useful step this summer is housekeeping: find out whether you have a current email address or cell number for everyone on the plan, and ask your insurer or administrator what it intends to do. Groom suggests employers also think through how they would handle opt-out requests and whether their service contracts would support the new process ^[5].

If you have views, the department asked for them on several points, including whether to allow email delivery of the documents themselves and whether the start date should come sooner ^[1].

What I’m keeping an eye on

The September 21 comment deadline. Comments go in under RIN 1210-AC35 ^{[1, 4]}.

When a final rule lands. The safe harbor would apply starting the first day of the first calendar year after the final rule is published, so its timing decides which year small plans could first use it ^[1].

— Sally