Have You Received an Exchange Subsidy Notice?

Employers have started receiving notices from Health Insurance Marketplaces (or Exchanges) when their employees are eligible for Exchange health insurance subsidies. Many employers are uncertain about what actions to take after receiving a notice.

This subsidy notice (Notice) is particularly important to Applicable Large Employers (ALEs), but all employers should be prepared to receive a Notice and respond if appropriate.

Background

Under the Affordable Care Act (ACA), individuals may purchase health coverage on an insurance Exchange, and each Exchange will determine whether an individual is eligible for a subsidy. Once an individual is deemed eligible for a subsidy, the Exchange will issue a Notice to alert the employer of the determination and provide an opportunity to dispute the decision.

Under the pay or play rules, ALEs may be subject to a penalty if they do not offer affordable, minimum value health coverage to their full-time employees. The penalty is triggered if any full-time employee receives an Exchange subsidy, and the penalty is imposed by the IRS. The Notice does not serve as a penalty assessment, it does indicate that a penalty may later be applied based upon the Exchange’s determination. IRS will send separate notifications of these penalties to ALEs.

Opportunity to Appeal

Employers have the right to appeal incorrect Exchange eligibility determinations of their employees. Appealing incorrect determinations can help protect ALEs from pay or play penalties and help ensure that individuals do not mistakenly receive health insurance subsidies.

If the employer wishes to appeal a subsidy eligibility determination after receiving a Notice, it must file an appeal request within 90 days from the date the Notice was sent. Information on how to file an appeal request in the federally facilitated Exchanges, as well as some state-based Exchanges, is available at https://www.healthcare.gov/marketplace-appeals/employer-appeals/. HHS guidance issued in March 2016 permits Exchanges to require that appeals be filed on paper through Dec. 31, 2016. An appeals entity must make, and send written notice of, an appeal decision within 90 days after the date it received the appeal request.

Next Steps
All employers should prepare to appeal a subsidy determination where the employee was offered affordable, minimum value health coverage under the employer’s group plan. An appeal will ensure that an ALE will not later be subject to pay or play penalties due to the erroneous determination, and will prevent an employee from mistakenly receiving subsidies for which he/she is not eligible.

Alternatively, if the employee was not offered affordable, minimum value coverage by the employer, no action should be taken.

Finally, employers should ensure that accurate records are maintained to demonstrate when an offer of coverage was made. Enrollment and waiver forms, along with details on the type and cost of coverage offered, are essential to the appeals process.