Affordable Care Act Reality Check

Last year, we began educating our clients on the Employer Shared Responsibility Payments – the penalties associated with the Affordable Care Act (ACA) – and what to expect when the IRS finally caught up and examined premium tax subsidies. In the spring, employers who had 50 or more full-time equivalent employees were required to file Form 1094-C and Form 1095-C for both the IRS and employees. Well… the first wave of employee exchange subsidy notices from the IRS are showing up on employer desks.

Why would an employer get such a notice? Only if the employee chose to enroll in the Healthcare Marketplace and received a premium tax subsidy. The employee could have enrolled with or without your knowledge, meaning if you provide health insurance and does not meet the affordability test, then the employee may be eligible for a subsidy. In many cases, you may be unaware that one of your employees elected not to enroll in your plan, told the Healthcare marketplace that health insurance was either unaffordable or not available. The employee’s actions, whether taken by mistake or intentionally, flag you as a company , and potential penalties may be forthcoming. Up until now, it really was the Wild Wild Wild West with no checks and balances, but as the ACA has matured under increasing pressure from the insurance industry, the IRS will attempt to validate subsidies and collect penalties.

The notice will be sent to you the employer from the Health and Human Services (HHS), with the employee’s name who received a subsidy. The determination on employer penalties will be handled by the IRS; however, we do recommend that any wrong information about eligibility for subsidies should be appealed to avoid any potential employer shared responsibility penalties.
For 2016, appeals of exchange subsidies for the marketplace will be handled through a paper process. The appeal form is attached and is rather simple. If an employer wants to appeal, it must do so by mail or fax within 90 days from the date the notice was sent, not received. Employers should include any evidence supporting their appeal such as ( employee was not eligible for coverage, employee’s share of individual coverage was affordable, etc). The exchange will then re-determine any employer liability.

Employers with multiple locations may discover that notices are mailed to a different facility. It is our recommendation to have a process in place when and if you receive a notice. The penalties for employers who offer health insurance but is considered unaffordable is $3,000 per year per employee who received a premium tax subsidy. For simplicity, you have 10 employees who intentionally or inadvertently received a premium tax subsidy that is considered legal, the employer penalty is roughly $30,000 annually.

Second, for new hires, we now recommend adding the exchange notice in all new hire packets. Finally, employers should note there is a whistleblower provision prohibiting employers from retaliating against an employee because of a marketplace subsidy, so be very diligent in responding to the HHS. In most cases, employees don’t understand the rules associated with the penalties. They were simply looking for the least expensive way to get health insurance, and with all of the chatter and promotions surrounding the new Healthcare marketplace, many employees purchased coverage and received a subsidy. In the event, it is determined that the health insurance was affordable through the employer, the employee will immediately lose their premium tax subsidy and will most likely have to pay it back to the beginning of 2016.

In summary, the letter from the HHS does not confirm penalties. It is a potential IRS letter that will outline any penalties involved, yet we strongly recommend you be proactive in eliminating any future IRS letters if your healthcare plan is considered affordable, the coverage was offered, and the employee declined coverage.

For more information do not hesitate to give us a call. We are here to help.

Burman S. Clark, RHU, CSA
President, Muneris Benefits

 

Burman S. Clark

Burman S. Clark

Burman S. Clark, RHU, CSA is the President of Muneris Benefits and a licensed insurance broker and consultant. His independent practice and focuses on employee benefits, individual life, disability, medical, and senior products. Burman has traveled extensively and provided guidance to large employer associations with regards to the Affordable Care Act.