Beginning June 1, 2016, employers will start receiving notifications from the Department of Health and Human Services (HHS) when an employee in their organization receives a subsidy to purchase health coverage from the Federal Exchange. 

These notices, a sample of which is available here, will report employees who have received subsidized Exchange coverage for the 2016 calendar year. Therefore, employers could receive notifications for employees who received a subsidy for coverage during the 2016 Open Enrollment that took place from November 2015-January 2016. Notifications will be sent via regular mail to the address the employee provided when they completed their application for Exchange based coverage.

It is important to be aware that a notification from HHS that an employee is determined to be eligible for subsidized Exchange coverage is different from a notification from the IRS that an employer is liable for penalties for not offering coverage or not offering affordable, minimum value coverage to employers as part of the Employer Mandate.  The notices that are being sent from HHS are part of the verification process that was required to be established under the Affordable Care Act (ACA) to ensure that an individual awarded a subsidy is eligible to receive one.  Employers who receive a subsidy notification and believe one was awarded to an employee in error have the option to appeal the award. 

While subsidy award notices can be sent individually, HHS has indicated that they will batch notices; gathering notices that need to be sent to one employer and mailing those notices together.  HHS has not provided a timeframe between when an employee receives subsidized Exchange coverage and when a subsidy award notice will be mailed other than to state that notifications will be sent in a reasonable amount of time. 

Employers who receive notices from the Federal Exchange will have 90 days to respond if they wish to appeal a subsidy award to an employee.  Employers will need to submit the following with their appeal:

  • Original subsidy award notice mailed to the employer by HHS
  • Completed Employer Appeal Request Form available at www.Healthcare.gov
  • Copies of documentation showing offers of coverage, offers of affordable coverage or other certifications that a subsidy should not be awarded to the individual listed on the award notice

The appeal needs to be submitted via regular mail or fax and a decision will be communicated in writing by HHS to the employer and individual.  The decision made by HHS will be final for the employer; however, the individual will have the right to a second appeal.  Any decision made by HHS after the second appeal is filed will be final.  Inclusive of a second appeal, the entire process can take up to 300 days. 

There are best practices an employer can establish now to be prepared to handle any subsidy award notices they receive.

  • Develop a process for managing appeals – determine who is going to be responsible for responding to appeal notifications and ensure that they are able to access the information needed to address coverage offers, affordability of health coverage and employment records.  To avoid conflicts of interest, persons responsible for managing appeals should not have the ability to discipline employees.
  • Inform remote locations how they should manage any subsidy award notices that arrive at their site(s).  Subsidy award notices will be mailed to the place that the employee states is their work location on their Exchange Application, this may not be the preferred location that an employer wishes the notice to go.  It will be important to let other locations know what to do with any subsidy award notices that arrive at other business sites so they are handled properly and any appeals are filed in the appropriate timeframe.
  • Review all subsidy award notices carefully in order to identify the employee.  In addition to the employee name, a month and day of birth and possibly a truncated Social Security number may be provided.  This limited information may make it difficult to accurately identify employees, particularly those with common names (for example John Smith).
  • Only appeal when there is a reason to do so.  If, after a review of an employee’s information, the award of a subsidy on the Exchange is substantiated, there is no reason to file an appeal.  In some cases, the rewarding of a subsidy will not trigger any penalties on part of the employer, for example, if the employee is a part time employee.  If there is any penalty that an employer may be liable for, that notification will come from the IRS at a later date.