You may receive a notice from the Health Insurance Marketplace or an Exchange regarding former or current employees who received a tax credit on an exchange. (Click here to view a redacted notice example.)
If you receive such a notice, this communication summarizes the purpose of the notice, why you as an employer are receiving the notice, and what you may need to do in response to the notice. For more information, a detailed Question and Answer document has been provided by the IRS here.
What are the notices?
The notices from the Exchanges are in connection to the employer shared responsibility provisions, sometimes referred to as “pay or play” tax provisions, and notify the employer about individual(s) who:
(1) have received a premium tax credit to purchase health insurance on the Exchange, and
(2) who reported the name of their employer during the tax credit application process.
These notices are part of the Exchange verification process under the Affordable Care Act (“ACA”) for determining eligibility for premium tax credits and reduced cost-sharing, and for exemption from the individual mandate tax.
Why would an employer receive these notices?
Under the ACA, certain employers (those with at least 50 full-time employees or full-time equivalents, also known as applicable large employers) might have to pay an employer shared responsibility payment for any month that at least one full-time employee enrolled in Marketplace coverage and received an advanced premium tax credit, or cost sharing reduction. You can read about eligibility thresholds here.
Individuals are only eligible for tax credits on the Health Insurance Marketplace/Exchange if they do not have “minimum essential coverage” available through their employer, or they are not offered affordable minimum value employer coverage. (Additionally, they must meet specified income and US residency requirements). Thus, employees who have affordable employer coverage available should not qualify for subsidies to buy health insurance in the Exchange.
As part of the application process for a premium tax credit or cost-sharing reduction, an applicant may submit to the Exchange that their employer:
- did not offer coverage to the employee while employed by the employer,
- the employer provided coverage but it was not “affordable” or did not provide “minimum value”, or
- the employee was in a waiting period and unable to enroll in health care coverage. (Please see IRS Notice 2012-58 for an explanation of waiting period rules).
If an Exchange determines that an applicant is eligible to receive an advanced premium tax credit or cost-sharing reduction, and that finding was based at least in part on the above factors, the Marketplace will likely investigate to determine if the employer must pay an employer shared responsibility payment.
Why should an employer pay attention to these notices?
In 2016, employers with at least 50 full-time employees or full-time equivalents are subject to “play-or-pay” penalties if at least one full-time employee receives a subsidy to buy insurance in an Exchange. These notices from the Exchanges alert employers that some of their employees have qualified for premium tax credits and the employer faces potential penalties. Please note that only the IRS, not the Marketplace, can determine whether an employer will owe an employer shared responsibility payment.
The notice provides a 90-day response window from the date stated on the notice. Thus, employers will want to respond to the Exchange if they did offer a particular employee coverage that was affordable and provided minimum value, or if the notice is otherwise inaccurate.
What should employers do if they receive a notice?
Employers are not required to respond to Exchange notices, but it will be in an employer’s best interest to respond if the notice is regarding a full-time employee who was actually offered coverage, or if the employee misreported information and was not actually entitled to coverage. If you choose to appeal the notice, you can do so here, at the HealthCare.gov website. Any responses must be made within the 90-day verification process time. Please note that it is likely Exchanges will send notices to whatever employer address the employee provided on his/her application for Exchange coverage.
How can an employer file an appeal?
Employers have 90 days from the date stated on the notice from the Marketplace to file an appeal. This appeal can be filed either by:
- Completing the Employer Appeal Request Form or:
- Submitting a letter with the following information:
- Business name
- Employer ID Number (EIN)
- Employer’s primary contact name, phone number and address
- The reason for the appeal
- Information from the Marketplace notice received, including date and employee information
Mail the appeal request form or letter, along with a copy of the Marketplace notice, to the following address, or fax the documents to 1-877-369-0129:
Department of Health and Human Services
Health Insurance Marketplace
465 Industrial Blvd.
London, KY 40750-0061
Information supporting your appeal may be included.
This blog post should not be considered as legal advice. For more information, consult your broker, legal advisor or the Department of Health and Human Services.