Health Insurance Marketplace launches employer notice program
Employer action advised on health insurance notices
INSIGHT ARTICLE |
Due to the Affordable Care Act (ACA), employers with at least 50 full-time and full-time equivalent employees can be penalized by the IRS if they fail to offer ACA-compliant health coverage and their employees obtain coverage with tax subsidies through the Health Insurance Marketplace (also known as the exchange).
When employees enroll in Marketplace health insurance, they are asked about the health coverage offered by their employers. An employee’s response to this inquiry determines whether he or she will be granted tax subsidies to reduce the cost of Marketplace coverage. Furthermore, the employee’s response can prompt the Marketplace to notify the IRS that an employer is not offering ACA-compliant coverage. The IRS may then mail the employer a penalty assessment for failing to comply with the ACA. Penalties can be substantial, over $2,000 for each full-time employee.
Since details about an employer’s health plan can trigger tax subsidies for employees plus penalties on the employer, it is important that this information obtained by the Marketplace from employees be accurate. But how will an employer know whether an employee enrolled in Marketplace coverage and provided correct information about its health plan to the Marketplace?
Health Insurance Marketplace employer notice program
The ACA requires the Health Insurance Marketplace to notify employers about employees who have enrolled in health coverage and received advance premium tax credits (APTC) or cost sharing reductions. The Marketplace will determine an employee’s eligibility for these tax subsidies based on the employee’s representation that (1) he or she is not enrolled in employer-sponsored coverage, and (2) the employer’s coverage (if any) is not affordable or does not meet the ACA’s minimum value standard.
Starting in 2016, the Marketplace will mail an employer a notice indicating that a given employee is receiving tax subsidies for health insurance. The notice will be sent to the employer address provided by the employee on his or her application for Marketplace coverage. The notice will identify the specific employee and state that the employee is enrolled in Marketplace coverage with APTC, but it will not contain the employee’s personal health information or federal tax information. For 2016, employers will not be notified if an employee terminates Marketplace coverage.
The purpose of the notice is to let employers know that they may be liable for an employer shared responsibility penalty, and give them the opportunity to appeal if they believe an employee does not qualify to receive tax subsidies on Marketplace coverage. An employee does not qualify to receive tax subsidies if he or she is enrolled in the employer’s health plan, or chooses not to enroll in the plan even though the plan meets the affordability and minimum value standards established by the ACA.
Responding to Marketplace notices
Employers have no obligation to respond to Marketplace notices and the Marketplace cannot assess a tax penalty on employers. However, employers can voluntarily respond if they believe the Marketplace has made an incorrect determination which impacts their exposure to employer shared responsibility penalties.
Since small employers with fewer than 50 full-time and full-time equivalent employees are not subject to employer shared responsibility penalties, they have no need to respond to Marketplace notices. Large employers with at least 50 full-time and full-time equivalent employees are subject to employer shared responsibility penalties so it may be beneficial for them to establish a process for responding to these notices.
When an employer knows that an employee enrolled in its health plan or declined ACA-compliant health coverage, it can appeal an incorrect determination by the Marketplace. The Marketplace could make an incorrect determination if it was unaware that an employee was enrolled in employer-sponsored coverage, or that the coverage offered was ACA-compliant. An employer’s appeal efforts when the Marketplace notice is first received may protect it from being assessed employer shared responsibility penalties by the IRS at a later date.
The Marketplace notice will contain details about how the employer can appeal the determination made by the Marketplace. The notice may include an appeal request form, or it may provide a link to a form on the internet. An employer has 90 days from the date of the notice to request an appeal. In addition to submitting the appropriate appeal request form, the employer should include supporting documentation for its position.
Once the Marketplace receives the appeal request from the employer, it will send an acknowledgement to the employer and notify the employee about the appeal. The Marketplace will review the appeal request form and supporting documentation provided by the employer. The employee will also have an opportunity to submit supporting documentation. An appeal judge may request a hearing or additional documentation prior to making a decision on the appeal. Both the employer and the employee will be notified of the decision of the appeal judge.
If the employer is successful with its appeal, it reduces its exposure for employer shared responsibility penalties. The appeal outcome also provides the employee an opportunity to avoid potential future tax liability as the Marketplace will ask the employee to update his or her application to reflect that he or she has access to ACA-compliant coverage or is enrolled in employer-sponsored coverage. By taking this action promptly, the employee can pay the correct amount for Marketplace coverage during the year and likely avert an additional tax when filing Form 1040 after year-end.
Action plan for employers
Since responding to Marketplace notices may help ward off employer shared responsibility penalty assessments, large employers are advised to take the following actions:
- Know whether their health plans meet the ACA’s affordability and minimum value standards. An overview of these standards is provided in this article
- Keep documentation showing which employees were offered health coverage, including forms signed by employees reflecting their decision to accept or decline coverage.
- Route Marketplace employer notices to a single department and assign responsibility for responding to the notices to one person.
- Review each Marketplace notice received and determine whether an appeal is warranted.
- Appeal all Marketplace determinations within 90 days if they are based on inaccurate information about the health plan or the offer of coverage to the employees.
- Educating employees may avoid Marketplace notices
Since Marketplace notices are generated based on information provided by employees, incorrect information can trigger unnecessary notices. To avoid this, some employers are giving employees data about their health plans prior to the employees applying for Marketplace coverage. When employers provide employees the health plan information they need for the Marketplace application, it simplifies the application process for the employees and helps ensure that the details provided by the employees to the Marketplace about the employer’s health plan are accurate.
Employers can provide information to their employees by completing the employer coverage tool available from the Marketplace and distributing it to their employees. By filling in the employer information section, an employer can tell employees who the health plan contact is at the company, the cost of the coverage, and whether the coverage meets the minimum value standard. Employers should encourage employees to refer to this completed employer coverage tool when applying for Marketplace health insurance. The employer coverage tool should be revised whenever changes are made to the health plan.