The first round of notices from the federally-facilitated health insurance exchange (also known as the Marketplace) have been sent out at the end of June.
If you received one of these notices, it is because the named individual:
- purchased individual health insurance through a Marketplace (www.healthcare.gov);
- is getting (or is asking to get) federal premium assistance to reduce monthly premiums for that health insurance;
- named your company as his or her employer; and
- told the Marketplace that he or she did not receive an offer of affordable, minimum value health coverage from your company or any other employer.
Am I required to appeal a Marketplace Notice?
It’s your choice, but your are not required to appeal a Marketplace Notice.
Should I appeal a Marketplace Notice?
You can consider appealing if you made an offer of affordable, minimum value coverage to the individual named in the Notice for one or more months in 2016. Here’s why:
- It may help the employee avoid a tax bill. When you file the 2016 Form 1095-Cs, the IRS will see that your company offered the employee affordable, minimum value health coverage. If the IRS determines that the employee was not entitled to premium assistance, they will ask the employee to repay part (or, in some cases, all) of the premium assistance. This repayment obligation can be a substantial, avoidable burden on the employee. Better to get the facts now.
- It may help avoid a later IRS appeal process related to the employer penalty. If the Marketplace and the employee find out that the employee is not entitled to premium assistance and the employee does not in fact get premium assistance, the IRS won’t have any reason to contact you about that employee after year end.
The Marketplace Notice appeal process is run by the Department of Health and Human Services (HHS) and is intended to determine whether the named individual is or is not entitled to premium assistance to purchase health insurance in the current year. The Marketplace is purely interested in facts that show the named individual is not eligible for premium assistance in 2016, and more specifically if the individual was offered affordable, minimum value health coverage. The appeal should identify the months that the individual elected coverage or could have elected coverage (even if they waived coverage). Appeal forms and additional information is available at http://www2.workforcetactix.com/e/54982/lace-appeals-employer-appeals-/9sk78m/385340716.
When shouldn’t I appeal a Marketplace Notice?
There is no use in appealing a Marketplace Notice for an individual who was not offered affordable, minimum value health coverage in 2016 – nothing will impact whether the IRS will assess an unaffordable/inadequate coverage penalty.
What if I hear from the IRS?
The IRS will administer a separate notice and appeals process before assessing the employer pay or play penalty under Code §4980H(b). A notice from the IRS regarding potential pay or play penalties proposes attention – expect to see IRS notices later this year regarding these penalties that occurred during 2015.
Employer Pay or Play Penalties Under IRC §4980H(b)
The “pay or play” penalty is imposed when an employer offers health coverage that is unaffordable/inadequate (i.e., doesn’t provide minimum value) and a full-time employee buys health insurance through the Marketplace with premium assistance.
- For 2015 – $260 penalty for each month that the full-time employee got premium assistance
- For 2016 – penalty is raised to $270, but the IRS won’t attempt to assess these penalties until 2017
||HHS Marketplace Notice
|Purpose of the
|The Marketplace wants to determine
whether the named individual is
eligible for 2016 premium assistance.
|The IRS wants to determine
whether the employer is liable for
a 2015 pay or play penalty for
failing to offer affordable,
minimum value coverage to an
individual who was a FT
employee in 2015.
||Expect to get additional Marketplace
Notices throughout the year (when
an individual applying for premium
assistance names your company as
his or her employer).
|IRS notices are expected later
|Notices will be
|Address provided by the individual
||Address listed in 2015
|The employer offered affordable,
minimum value coverage to the
individual for one or more months
|The employer believes it is not
liable for 2015 unaffordable/
inadequate coverage penalty.
– Individual was not employed
in the months in question
– Individual was not a FT
employee in the months in
– Individual was enrolled in
the employer’s coverage in
the months in question
– The employer offered
affordable, minimum value
coverage for the months in
- A health plan is “affordable” if the employee contribution for single coverage does not exceed 9.56% (in 2015) or 9.66% (in 2016) of an employee’s household income. Since the employer will not know the employee’s household income, the IRS provided three affordability safe harbors (Federal Poverty Line, Rate of Pay and Form W-2). If an employee was eligible for but waived affordable, adequate coverage in 2015, Line 16 of his or her Form 1095-C should have a code for the applicable safe harbor.
- A health plan provides “minimum value” if: (a) it is designed to pay at least 60% of the total cost of medical services for a standard population; and (b) it provides substantial coverage of physician services and inpatient hospitalizations. This is generally equivalent to a bronze level plan sold in the Marketplace.
Sources: Crawford Advisors citing Vorys | Labor and Employment Alert: Back to Basics – Why I am getting this Marketplace Notice?