Understanding ACA Subsidy Notices
What are they, and what should I do if I get one?
As part of the Affordable Care Act (ACA), the Department for Health and Human Services (HHS) sends ACA subsidy notices to alert employers of their employees’ qualification for premium subsidized health insurance through the health insurance marketplace. The intent of these notices is to ensure that employees who qualified for subsidies are actually eligible—not to accuse the employer of making a mistake. Identifying faulty subsidy assistance could save both you and your employee(s) in the long run.
If you receive one of these notices and suspect that an employee obtained an insurance subsidy unnecessarily, knowing your options will help you decide what to do next.
What are insurance subsidies?
Also referred to as advance premium tax credits or premium assistance, the federal government offers subsidies to some people shopping for insurance on the public exchange. Employees are eligible if they work for a business with fewer than 50 employees, purchase coverage through a federal or state exchange, and meet income level requirements. In addition, employees who do not qualify for full coverage at their workplace can enroll on the exchange.
If employees at your business have applied for and received subsidies, you should receive a marketplace subsidy from the HHS. How you respond will depend on whether your company is classified as an applicable large employer (ALE).
What should I do if I receive a notice?
Businesses with fewer than 50 employees
As a small business, you can offer coverage that provides support to employees purchasing their insurance on the public exchange—which makes them eligible for subsidies. While you should confirm that you are in compliance with the ACA, a subsidy notice may not be anything to worry about if you expect employees to purchase from a healthcare exchange.
Businesses with 50 or more full-time employees
Health care law dictates that an applicable large employer (ALE), generally defined as one with 50 or more full-time employees or equivalents, must offer health insurance coverage that meets certain affordability criteria. Businesses who do not offer coverage must instead pay what’s known as the Employer Shared Responsibility Payment. If your business is receiving subsidy notices this could indicate:
- You are not offering coverage that meets the affordability criteria or minimum value standards required by law.
- The employee was ineligible for coverage.
If you are receiving notices for full-time, vested employees, you’ll want to investigate these. While receiving a notice does not necessarily mean you’ll be penalized by the ACA, it’s important that you address each notice and appeal any that appear erroneous. All unappealed notices or lost appeals are reported to the IRS for a penalty investigation.
If you think the coverage you offer is both affordable and meets minimum value standards based on the employee, you can file an appeal. If you do so, be sure to inform the employee of your actions and reasoning. Those who receive subsidies in error will have to repay the amount to the IRS at the end of the year.
Do I have to appeal each notice?
Not all subsidies need to be appealed. You shouldn’t appeal notices received if:
- The employee is in an initial measurement period
- The notice applies to a part-time employee
- The employee was terminated during an enrollment waiting period
- The notice identifies an employee’s spouse or family member as recipient of the subsidy, but not the employee
You have 90 days from the date of the notice to appeal an employee’s qualification for subsidized health insurance. After reviewing the employee, their coverage options and status through your business, and determining that the subsidy was distributed in error, complete an Employer Appeal Request Form (PDF) and submit it to the HHS.
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