In Spring 2016, Exchanges began issuing notices to employers when an employee is determined by the Exchange to be eligible for a health insurance subsidy. This subsidy notice (Notice) is particularly important to Applicable Large Employers (ALEs), but all employers should be prepared to receive a Notice and respond appropriately.
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 subsidies. 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.
Importantly, ALEs are subject to potential penalties under the ACA’s employer shared responsibility provisions when a full-time employee receives a subsidy from an Exchange. Although 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.
Opportunity to Appeal
Employers have the opportunity to appeal a subsidy eligibility determination they believe to be erroneous. Upon receipt of the Notice, an employer has 90 days to submit a request for an appeal, after which time the Exchange will provide further instruction on the appeals process. Both the employer and employee will participate in the appeals process, and a determination will be issued no later than 90 days following the submission of the employer’s request for an appeal.
All employers should prepare to appeal a 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 penalties under the employer shared responsibility rules due to the erroneous determination, and will also 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.