What Should You Do With a Marketplace Notice?

What Should You Do With a Marketplace Notice?
August 18, 2016

Summary
Employers of all sizes are receiving notices from Health Insurance Marketplaces (“Notice” or “Marketplace Notice”) alerting them that an employee or employees have obtained Exchange coverage and are eligible for and receiving financial assistance to purchase that coverage.  An applicable large employer (“ALE”) is subject to the employer shared responsibility provisions of the Affordable Care Act (“employer mandate"), and may be subject to assessable payments (“penalties”) if minimum value, affordable health care coverage (“sufficient coverage”) is not offered to any employee who works, on average, at least 30 hours a week (“ACA full-time employee”). There is no requirement to file an appeal of the determination that an employee is eligible for premium tax credits and/or cost sharing reductions (“subsidized coverage”), since only the IRS can assess penalties under the employer mandate.  

Notices are being mailed by state and federally-facilitated Health Insurance Exchanges to confirm whether individuals who purchased Exchange coverage are, in fact, eligible for subsidized coverage.  You may receive these Notices even if you are not subject to the employer mandate due to the size of your workforce.  If subsidized coverage is provided to employees who are not eligible, the individual will be required to reimburse the Marketplace.  

You are not required to do anything if you receive a Notice.  Only the IRS has the authority to determine whether an ALE will be subject to penalties under the employer mandate.  An ALE will not lose its right to challenge any assessable payment imposed by the IRS at a later date if it decides not to appeal any determination by the Marketplace that an individual is eligible for subsidized coverage. 

Most Notices being issued currently reflect subsidized coverage for the first half of the 2016 calendar year.  If you receive such a Notice, and you are an ALE, you should check your own records and determine whether the employee listed  in the Notice was eligible for subsidized coverage for any month during the first half of 2016.  If the employee should have been offered health coverage but was somehow “missed” during enrollment, you can reduce potential penalties if you offer sufficient coverage for the balance of 2016.  Marketplace Notices will let you know how many employees obtained subsidized coverage from the Exchange.

You should do nothing if your records indicate that the employee listed on the Notice should be eligible for subsidized coverage.  There is nothing to appeal.  If your records indicate that the employee listed in the Notice is NOT eligible for subsidized coverage, you have two options:  1) wait to see if the IRS imposes a penalty and challenge the penalty at that time; or 2) file a timely appeal.  Filing an appeal will provide you with documentation that can be used if the IRS does assess a penalty.  

Penalties assessed  under the employer mandate will be based upon the information returns and employee statements that employers are required to file with the IRS.  For ALEs, these returns and statements show whether an offer of sufficient coverage was provided to the employer’s ACA full-time employees.  Information returns and employee statements have now been filed with the IRS for 2015.  Any penalties for 2015 will be based upon those reports and should be assessed before the end of 2016.  Penalties for 2016 will not be assessed until 2017, after the  information reports and employee statements for 2016 have been filed with the IRS.  Even if you do file an appeal to a Marketplace Notice, you may want to make sure that  there is proper reporting and coding of the 2016  information returns and employee statements for any employee listed on a Notice.  

For more information about this and other employee benefits issues, please contact the authors or the attorney at the firm with whom you are regularly in contact.

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