Earlier this year, the Department of Health and Human Services released an updated form for employers to appeal an individual receiving a subsidy for individual coverage through an Exchange/marketplace. The subsidy is a tax credit to help lower the cost of premiums for the individual coverage. As a reminder, employers are supposed to receive a notice when one of their employees (or someone claiming to be their employee) obtains a subsidy from the state exchange.

As employers subject to the Affordable Care Act (ACA) employer mandate may recall, at least one full-time employee must receive subsidized individual coverage through an ACA Exchange/marketplace (among other conditions) for the IRS to assess a penalty. Therefore, these notices, and the employer’s ability to appeal them, can be an important part of employer mandate enforcement.

When to Appeal

The appeal notice can be used to appeal subsidy notice for states with federally-run marketplaces and for state-run exchanges in California, Colorado, Connecticut, Maryland, Massachusetts, New York, Rhode Island, Vermont, and Washington, D.C. If an employer receives a subsidy notice from one of those Exchanges/marketplaces, it should appeal if one of the following applies:

  • the employee was enrolled in employer-sponsored coverage; or,
  • the employee was offered affordable employer-sponsored coverage which met the minimum value standard; or,
  • the employee was eligible for affordable employer-sponsored covered that met the minimum value standard after the end of a waiting period. (Note: The employer will need to show when the employee was offered employer-sponsored coverage and when the waiting period ended.)

These are the only permitted appeal triggers under the form. Under each of these circumstances, the employee would not be eligible to receive a subsidy. The employer will need to explain its rationale on Step 4 of the appeal form. The employer may also want to submit additional documentation to support its appeal, such as the summary of benefits and coverage for the plan stating that the plan provides minimum value and other evidence that the plan was offered to the employee.

How to Appeal

To appeal the notice, an employer should complete an appeal form for each employee the employer believes is ineligible to receive a subsidy. An employer may use a single appeal form for all employees listed on the subsidy notice letter from the Exchange/marketplace. The employer must simply click on the Add another employee button to appeal the notice for more than one listed employee. For each employee, the employer must state why they believe the employee was not eligible for the premium tax credit (in Step 4 on the appeal form).

Once the appeal notice is complete, the employer should mail the appeal to the Exchange/marketplace listed on the subsidy notice letter. Note that by signing the appeal notice the employer is stating that claims made on the appeal form are true and correct, under the penalty of perjury.

When not to Appeal

On the other hand, an employer should not appeal if:

  • the employee was part-time/benefit-ineligible (or not employed at the time) during the months the employee received a subsidy (no ACA employer mandate penalty should be due in this case);
  • the employee was in permitted lookback-measurement period (no ACA employer mandate penalty should be due in this case);
  • the employee was working full-time hours, but unfortunately not offered affordable, minimum value health insurance coverage (an ACA employer mandate penalty would be due in this case);
  • the individual was not actually your employee, such as an independent contractor (no ACA employer mandate penalty should be due in this case); or
  • the ACA employer mandate does not apply to the employer.

In each case, the individual may in fact be eligible for a subsidy (depending on his or her income), so there is not a reason for the employer to appeal. Additionally, as the appeal form indicates, HHS is not equipped to handle appeals related to any of the above points.

The employer should make sure they have adequate records to back up any of the above claims (whether they are appealing or not).

Exchanges are sending subsidy notices again

The presence of the revised appeal form may be a sign that Exchanges are going to start sending subsidy notices again. In fact, after a nearly two-year absence, Covered California (California’s state-based individual marketplace) recently resumed sending subsidy notice letters to employers for the 2018 calendar year. Other states may soon follow suit.

If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory.

NOTICE OF DISCLAIMER

The information herein is intended to be educational only and is based on information that is generally available. HUB International makes no representation or warranty as to its accuracy and is not obligated to update the information should it change in the future. The information is not intended to be legal or tax advice. Consult your attorney and/or professional advisor as to your organization’s specific circumstances and legal, tax or other requirements.