The Affordable Care Act (ACA) requires the state and federal health care exchanges to notify employers if an employee has been determined to be eligible for a premium tax credit or cost-sharing reduction for exchange coverage. The notices are issued for those individuals who have been determined to be eligible for such a subsidy. As employers begin receiving notices, they should consider how best to track this information and whether it would be worthwhile to appeal the subsidy eligibility determinations where the information is incorrect.
Content of the Notices
Regulations require the notices to do the following:
- Identify the employee;
- Indicate that the employee has been determined eligible for advance payments of the premium tax credit;
- Indicate that, if the employer has 50 or more full-time employees, the employer may be liable for the payment assessed under section 4980H of the Internal Revenue Code (the “Code”); and
- Notify the employer of the right to appeal the determination.
Note in this regard that the “affordability” definition is different for purposes of the individual subsidies than for the penalties under Code section 4980H employer coverage mandate. Thus, an exchange determination that an individual is entitled to an individual subsidy due to unaffordability does not automatically mean that the employer will be liable for such penalties. (For more information on the employer mandate, see our April 21, 2014 entry on the final regulations.)
Appeals may be submitted by phone, mail, in person (if the relevant entity is capable of receiving in-person appeal requests) or via the internet. Each state may establish its own appeals process; if no such process is established, then the Department of Health and Human Services (HHS) will provide the appeals process. The exchange must allow the employer to request an appeal within 90 days from the date the notice was sent, and to submit relevant evidence to support the appeal. The appeal request can be sent to the applicable exchange or its appeals entity if the exchange establishes an appeals process, or to the HHS appeals entity, if the exchange has not established an appeals process.
Upon receiving a valid appeal request, the relevant appeals entity is required to notify both the employer and employee of the receipt of the appeal. The notice to the employee will include an explanation of the appeals process, instructions for submitting additional evidence, and an explanation of the potential effect of the appeal on the employee’s eligibility for a subsidy. The appeals entity must also notify the exchange of the appeal if the employer did not appeal directly to the exchange.
In connection with the appeal, the employer will be permitted to provide relevant evidence for the review of the employee’s eligibility for the subsidy, and to review, among other things, information regarding whether the employee’s income is above or below the affordability threshold, as well as certain data used to make the initial determination of the employee’s eligibility for the subsidy.
Deciding Whether to Appeal
Appeals are not required, as the government has indicated that the failure to appeal will not affect the employer’s ability to challenge the employee’s status or subsidy eligibility for purposes of the section 4980H employer coverage mandate penalties. Whether or not to appeal notices may depend on various factors. For example, employers may want to consider whether there is an employee relations advantage to informing employees up front that they are not eligible for a subsidy, rather than waiting until IRS forms for 2015 are filed in early 2016, at which time the employee will have received a subsidy for the entire year.
In addition, employers, particularly those with multiple locations or an extensive workforce, may find that the notices are mailed to different locations based on the information that the employee provided to the exchange, which may make it more difficult to track and process such notices and make an appeal in a timely manner. Lastly, while the employer coverage mandate only applies to “full-time” employees (generally, those working 30 hours or more per week), notices will be provided for any employee regardless of his or her work schedule. Therefore, it is possible that many of the notices will cover employees who are not subject to the coverage mandate and, hence, would not be a concern for the employer in this context.
While it may be helpful to get ahead of the issue by responding to the initial notices, any penalties for failure to comply with the section 4980H employer coverage mandate will ultimately be determined based on filings submitted after the end of the tax year. (For more information on the forms and filings for applicable large employers under the Affordable Care Act, see our March 12, 2015 entry on the final forms and instructions.)