Responding to Marketplace Notices

by McDermott Will & Emery
Contact

McDermott Will & Emery

In Depth

Summary

Employers have begun to receive notices from the Health Insurance Marketplace Exchanges (Marketplace) notifying them that one or more of their employees is eligible for governmental subsidies under the Marketplace. Employers may want to consider appealing these notices to both correct any misinformation contained in the notices as a defense to potential penalties that may be assessed in the future by the Internal Revenue Service (IRS), as well as prevent employees from having to repay governmental subsidies to the IRS.

Background

In 2015, the Affordable Care Act’s (ACA) employer shared responsibility (ESR) rules became effective. The ESR rules apply to employers who employ 50 or more full-time employees (FTE) or full-time equivalent employees (FTEE) (100 FTEs in 2015). Employers who meet the FTEE threshold must offer affordable, minimum value health insurance to their FTEs or potentially be assessed a penalty by the IRS. An employer’s penalty assessment is triggered when an FTE is not offered affordable, minimum value coverage by the employer and receives a subsidy under a federal- or state-facilitated Marketplace. Effective for 2016, the Marketplace is required to send a notice to an employer identifying employees who received governmental subsidies from the Marketplace and explaining that an ESR penalty may be assessed.

What is a Marketplace Exchange Notice?

The Marketplaces have begun to send notices to employers whose employees have obtained Marketplace coverage, received a governmental subsidy, and self-reported that he or she:

  • Didn’t have an offer of health care coverage from the employer
  • Did have an offer of health care coverage, but the offer was not affordable or did not provide minimum value
  • Was in a waiting period and unable to enroll in health care coverage

Once an employee applicant meets these criteria, a notice is automatically generated by the Marketplace and sent to the employer (as identified by the employee applicant). According to an FAQ issued by the Centers for Medicare and Medicaid Services (CMS), the federally facilitated Marketplaces will send out notices in batches throughout 2016.

The Marketplace notices generally provide the employee’s name, birthdate, last four digits of their Social Security Number and the Marketplace Application ID Number.

It is important to note that receipt of a Marketplace notice does not mean the IRS has or will assess a penalty on the employer and failure to appeal the notice does not preclude the employer from later appealing an assessment of an ESR penalty by the IRS.

The notice merely serves as an initial declaration that there may be a problem with the employer’s offer of health insurance to the named individual. Keep in mind that notices may have been generated due to an employee’s misunderstanding of certain details and eligibility provisions of the employer’s health insurance plan. Also, some of these notices have been issued for former and part-time employees who will not trigger ESR penalties.

What Should I Do If I Receive a Marketplace Notice?

Employers may appeal the Marketplace notices if there has been a mistake regarding assertions made by the employee. Employers should carefully review the notice to determine how to respond. Employers receiving notices from a federally facilitated Marketplace or a state-based Marketplace operating in California, Maryland, Colorado, Massachusetts, District of Colombia, New York, Kentucky or Vermont may find online. Some of the other states have posted appeal forms on their Marketplace websites.

The appeal process serves an important purpose in overall compliance with ESR requirements by both setting the record straight with respect to potential ESR assessments by the IRS and ceasing the payment of additional governmental subsidies to employees who may not be eligible for such subsidies and will have to repay them or offset the amount of overpayment from any refunds on their tax returns. With the complicated nature of the ESR rules, health care eligibility and offers of coverage, it is to be expected that employees may make mistakes in reporting the details of their insurance and even who is their actual employer. Preemptively correcting these mistakes benefits employers, employees and the government bodies regulating the ESR requirements.  

The standard appeal forms permit an employer to provide additional facts refuting any erroneous information or for mitigating the possibility of a potential penalty. Additionally, an employer may substantiate any claims made with attached documentation. Marketplaces that do not utilize the standard appeal form may send different Marketplace notices which contain different appeal processes.

It is important for employers to maintain detailed records to substantiate statements made during the appeals process. An employer may need records in order to:

  • Confirm that the employee was actually employed by the employer during the timeframe for which he/she applied for Marketplace coverage and received a premium tax credit
  • Confirm that the individual was considered an “employee” and not an “independent contractor”
  • Confirm whether the employee was an FTE or part-time employee (and possibly excluded from eligibility under the health plan on that basis)
  • Determine how long the employee received Marketplace coverage that included a tax subsidy (to estimate the employer’s potential ESR penalty).
  • Determine whether the employer offered that employee affordable, minimum value coverage during the timeframe identified in the Marketplace notice
  • Determine whether the employee was an active employee or receiving COBRA coverage during the period in question
  • Determine whether the employee was offered health care coverage that was affordable and provided minimum value, but was waived by the employee

The appeal process is the employer’s first line of defense in refuting a claim that could potentially lead to an ESR penalty. For example, an employee who was below the hours’ requirement to be considered an FTE might claim that he or she was not provided an offer of coverage and subsequently obtain a tax subsidy or advance premium payment for coverage on the Marketplace. The appeal process allows the employer to provide documentation substantiating that the employee at issue was not owed an offer of coverage due to his or her employment status.

Employers should also examine the timeframe provided to request an appeal. Marketplaces which utilize the standard appeal form provide a 90-day deadline to appeal from the date of the Marketplace notice.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© McDermott Will & Emery | Attorney Advertising

Written by:

McDermott Will & Emery
Contact
more
less

McDermott Will & Emery on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.