By Barry Fields, Vice President – Employee Benefits
The Affordable Care Act (ACA) requires that certain employers (those with at least fifty full-time equivalent employees) provide health insurance coverage to their employees that meets “Affordability” and “Minimum Value” guidelines. If your medical plans did not meet those requirements and an employee purchases individual insurance through the Marketplace (or “Exchange” or “Obamacare”), the employee may be eligible for a subsidy for the individual insurance. If the employee receives a subsidy, this may trigger a penalty from the IRS:
- If you had fifty or more full-time equivalent employees last year and the employee received a subsidy through the Exchange, you will not be assessed a penalty if the coverage you offered met the Affordability and Minimum Value requirements.
- If you had fewer than fifty full-time equivalent employees last year and the employee received a subsidy through the Exchange, there will be no penalty because the Employer Mandate does not apply and the coverage you offer does not need to meet the Affordability and Minimum Value requirements.
The US Department of Health & Human Services (HHS) is routinely sending notice letters to employers that had some employees purchase coverage through the Exchange and receive a subsidy. The purpose of the notice is for the HHS to check the subsidy eligibility of these individuals and allow employers to address or avoid any potential penalties. Employees who received the subsidy (their names will be listed on the letter) will have reported that they
- were not offered health care coverage through the employer (this is why having signed waivers on file is very important);
- were offered health care coverage but it was not affordable or did not meet minimum value; or
- were in a waiting period and unable to enroll in health care coverage.
If an employee was eligible for the health care coverage offered through the employer (based on full-time status or working the required number of hours per week), the employee is not eligible for the subsidy and the employer will need to file an appeal. The appeal instructions are on the letter, but it just involves completing the appeal form and mailing or faxing it to the Health Insurance Marketplace (fax and mailing information are in the letter). You have ninety days from the date of the notice to request an appeal. The Marketplace will review the information to determine if the employee is indeed eligible for a subsidy. You should note that only the IRS can determine whether a penalty will apply to the employer. Since the appeal is filed with HHS, a separate appeal may be required if the IRS determines the employer owes a penalty when, in fact, there is no liability. This will be determined after reviewing the 1094 and 1095 reports.
If the employee was not eligible for the health coverage offered through the employer (because the employee was part-time or temporary or does not meet the eligibility requirements), then the employee should be entitled to the subsidy. You do not need to file an appeal. The appeal is only to advise the Marketplace that the individual is not entitled to the subsidy and the reason(s) why.
This is a good opportunity to remind you that any eligible employee who waives coverage needs to complete, sign, and date a waiver form. This is your proof if the employee ever claims that he or she was not offered coverage.
The ACA requires employers to provide employees with a written notice informing them about the Marketplaces where they can obtain individual health coverage. A lot of employee confusion and follow up by HHS can be avoided if you meet the requirements of providing employees with this notice. The notice is very important because it helps clarify whether the employee will be eligible for Marketplace subsidies (eligibility for subsidies depends on whether the health plan meets certain standards related to coverage and affordability). The concern is that employees are accepting the subsidies from the Marketplace even though they are not eligible, because eventually, the employees will need to refund the money. The annual notice will serve as an important reminder about the eligibility for subsidies.
The notice requirements were originally effective on October 1, 2013, but it is often overlooked that new employees must be given the notice within fourteen days of their date of hire.
Open enrollment in the Marketplace for 2018 runs from November 1, 2017, to December 15, 2017. It is advisable to provide all current employees with the notice prior to your open enrollment every year so they are reminded of the eligibility requirements to receive a discount on their health insurance.