Health Insurance Marketplace Notices: What to do?
In recent weeks, some employers have received Health Insurance Marketplace Notices from the Department of Health and Human Services (HHS). Generally, these notices are no cause for alarm, and in most cases, no response is necessary. In some cases, however, an employer may benefit from filing an appeal with the Marketplace Appeals Center.
Under the Affordable Care Act (ACA), a large employer (one with at least 50 full-time employees, including full-time equivalents) is subject to “shared responsibility” penalties if (a) the employer does not offer group health plan coverage that meets certain value and affordability standards, and (b) one or more of the employer’s employees get health insurance coverage through a state or federal exchange (the Marketplace) and qualify for financial assistance in purchasing that coverage. This financial assistance is in the form of advance premium tax credits and cost-sharing reductions.
The ACA requires the Marketplace to notify any employer whose employee was determined to be eligible for financial assistance because the employee attested that the employee was not offered health insurance coverage by the employer, or the employee was offered coverage but that coverage did not meet the value or affordability standards imposed by the ACA. The purpose of the Marketplace Notice is to inform the employer that, as a result of the employee having been determined to be eligible for the assistance, the employer might, in some circumstances, be subject to ACA penalties.
The open enrollment period for Marketplace coverage for 2016 began November 1, 2015 and ended January 31, 2016. The batch of Marketplace Notices sent in June 2016 is attributable to employees who enrolled during that period. Additional batches of notices are expected later in the year.
How to Respond to Marketplace Notices
Here is a summary of how an employer should respond to a Marketplace Notice, depending on the employer’s circumstances:
If you are a small employer (less than 50 full-time employees/full-time equivalents), you can disregard the notice, as there are no circumstances under which you can be subject to shared responsibility penalties. (The rules for counting full-time employees and full-time equivalents for purposes of determining large employer status contain several nuances. If you are not sure of your status as a large or small employer under these rules, please contact us for assistance.)
If the employee identified in the Marketplace Notice was not offered coverage under your group health plan because the employee was not full-time, the employee is entitled to financial assistance, but no penalty can be assessed against the employer, and therefore no response to the Marketplace Notice is needed. (Remember that for ACA purposes, “full-time” is defined with regard to a 30 hour per week threshold, and not the traditional 40 hour per week threshold.)
If the employee identified in the notice is in fact enrolled in your group health plan, or if coverage under your plan was at least offered to the employee (and that coverage meets the ACA value and affordability standards), you are not subject to any ACA penalty. However, as described in the Marketplace Notice, HHS is not the government agency responsible for assessing ACA penalties. Those penalties are assessed by the IRS. HHS does inform the IRS with respect to those individuals receiving financial insurance through the exchanges. The Marketplace Notice is your first opportunity to appeal the determination of the individual’s eligibility for financial assistance. Instructions for filing an appeal, and a form that can be used for this purpose, are found at HealthCare.gov/marketplace-appeals/employer-appeals. A request for appeal must be filed within 90 days of the date on the Marketplace Notice. While an appeal to HHS is not your last chance to challenge an assessment of ACA penalties, a successful appeal will prevent HHS from notifying the IRS of potential ACA penalties in the first place, thereby avoiding a situation in which you have to deal with the IRS in the future. A successful appeal will also result in a notice to the employee, explaining that failure to update the employee’s application may result in tax liability to the employee.
Coverage Not Offered
If you are a large employer and the employee identified in the Marketplace Notice is a full-time employee but was not offered coverage for some reason, the Marketplace Notice presents an opportunity to revisit the situation. Since ACA penalties are assessed on a monthly basis, offering coverage to the employee prospectively could at least avoid future penalties.
Employee Not Employed in 2016
If you did not employ the employee identified in the Marketplace Notice at any time during 2016, no ACA penalty can be assessed against you for 2016. This situation might occur, for example, if the employee applied for Marketplace coverage during the first two months of the latest open enrollment period (November or December 2015), but then the employee’s employment terminated before the end of 2015. In such a case, the individual may be entitled to financial assistance in 2016, but the Marketplace should be notified of the termination of employment in order to avoid a potential penalty notice from the IRS. This can be done by following the appeal process to simply communicate the last day of the employee’s employment.