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ACA Employer Exchange Notices Resources for FELS Newsletter Subscribers

Employers of employees who have sought federal health insurance subsidies through Covered California or (in states other than California) a health insurance marketplace have been receiving notices from Covered California or the health insurance marketplace to the effect that they may be assessed a penalty by the Internal Revenue Service if they are found to be an Applicable Large Employer (ALE -- an employer who on average employs 50 or more employees, triggering the Affordable Care Act's "play or pay" health insurance mandate.

Individual health insurance subsidies have been flowing through to (approximately 90% of) Exchange enrollees since January 1, 2014. But only in recent months have the Exchanges taken begun to implement their mandated employer notice requirements. Starting in June 2016, the health insurance exchanges in other states started mailing out these letters to employers and Covered California is about to begin doing so.

Please see the documents linked below for samples of the Covered California and the other states' health insurance exchange notices. We have also included the Covered California “Employer Quick Guide” that deals with these forms. IF YOU RECEIVE ACTUAL COPIES OF THESE NOTICES, DO NOT SET THEM ASIDE OR IGNORE THEM.  THEY ARE YOUR EARLY WARNING THAT YOU MAY BE SUBJECT TO AN ACA PENALTY

If you receive one these notices,  it doesn’t necessarily mean that your company is subject to a “Applicable Large Employer Shared Responsibility” penalty. The notice is simply informing you that you were listed as the employer for a person who has received financial assistance with their health plan purchased on the Exchange.

You may be exempt from any employer ACA penalty for any of several reasons:

1. Your company was not an ALE (Applicable Large Employer) during the period of time the Exchange provided the subsidy,

2. This individual was NOT a full time worker for you during the period of time the Exchange provided the subsidy,

3. This individual was a full time employee, but was in a “Limited Non-Assessment Period” (such as a new employee waiting period during the period of time the Exchange provided the subsidy,

4. This individual WAS offered a health plan (that met the requirements of Minimum Essential Coverage, Minimum Value and Affordability) but they declined your employer plan and signed a waiver during your Open Enrollment period,

5. This individual was covered under an employer provided benefit plan that met at least the Minimum Essential Coverage requirements,

6. And there are additional reasons you MIGHT not have to face an IRS penalty.

It is critical to understand that the Exchange is not the governmental agency responsible for issuing shared responsibility penalties. All ACA penalties are issued by the IRS. This Notice is simply your first clue that the Exchange will be notifying the IRS that there may have a penalty exposure. You can use this notice as your opportunity to appeal to HHS (the Federal Department of Health and Human Services) that – according to your records - this individual is not actually eligible for the subsidy financial assistance. If your appeal is successful, HHS will revoke the individual’s subsidy and will inform the IRS that these individuals may have to repay some or all of the subsidy they have received. The named individual can appeal your appeal, so the whole process could take months to resolve.

Consider this Notice your first but not your only opportunity to avoid an IRS penalty. Since appealing this first Notice (within the 90 day timeframe) will likely save you time and headaches in the future, you should take the opportunity to research this individual’s payroll records, your employee health plan records and the 1095-C you recently issued to that employee. If you need to file an appeal, please do so with caution (and consider professional assistance.)  You do not want to volunteer too much information and you should avoid disclosing anything that could be considered HIPAA Protected Health Information (such as SSN and DOB data).

If your investigation finds that the employee was not offered coverage, but should have been, now is the time to offer them coverage and avoid continuing to accrue the shared responsibility penalties for the rest of the year. Also, if it is the case that the individual should have been offered coverage but was not provided that opportunity, you should review your entire ACA compliance strategy and documentation, since it only takes one incidence of an employer’s non-compliance to trigger a an IRS ACA audit. Also, please keep in mind that you cannot in any way discriminate against that employee in question.

Employer Resources:

Covered California Model Employer Exchange Notice

Covered California Employer "Quick Guide" to Employer Exchange Notices

HHS Model Appeal Form (for use by state exchanges for appeals)

Federal Exchange Employer Notice (if you have employees in states other than California)

Other help/informational resources:

Ed McClements, Jr., CLU, ChFC
Senior VP of Benefits
Barkley Insurance and Risk Management
143 West Fifth Street
Oxnard, CA  93030
office (805) 483-1995
fax (805) 483-0703
cell (949) 232-9178