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Your Guide to ACA Employee Subsidy Notifications

The next Affordable Care Act (ACA) compliance hurdle that schools, cities and counties are facing is employee subsidy notifications and appeals. Subsidy notifications will be sent out this summer and it’s important you are ready to manage the process.

Managing subsidies and appeals could be a time consuming process and if handled incorrectly, it could bring hefty fines.


What is a subsidy and how is it determined?

Subsidies are available to individuals and families enrolled in the Health Insurance Marketplace/Exchange who earn less than 400% of the Federal Poverty Level (FPL) and do not have access to affordable coverage, as defined by the ACA.

For those individuals or families under the FPL, the ACA provides a health insurance contribution table, which varies by income level. The table determines what percentage of their income can be spent on health insurance. If the cost of the least expensive silver plan exceeds the percentage of allowable income determined by the subsidy table, the amount over the percentage can be subsidized.


 What is an Employee Subsidy Notification?

An employer will receive a subsidy notification in the form of a letter from the Department of Health and Human Services (HHS) if one or more of their employees has enrolled in the Health Insurance Marketplace/Exchange and received an Advanced Premium Tax Credit (APTC)/subsidy. If you receive this in the mail, you have 90 days from the date on the notification to file an appeal.

A subsidy can be a trigger for a penalty. If you fail to offer coverage to an eligible employee and they receive a subsidy, you may be liable for a fine. It’s important to know what your options are in case you receive a notification.


How do I know if I should appeal?

If your employee receives the Advanced Premium Tax Credit and… Employee Action
is working full-time[1] and offered affordable[2] coverage Appeal
is working full-time and has not been offered affordable coverage No appeal
is working part-time No appeal

Note that if you choose not to appeal, you may face a $270 per month penalty (in 2016), multiplied by each full-time employee who qualifies for a subsidy through the exchange.


The appeal process

If you choose to appeal, you must respond within 90 days. Complete the appeal request form and submit supporting documentation – proving that the employee should not have been awarded a subsidy. A decision will be made by HHS and be communicated in writing to the employer and employee. The decision is final for you, the employer; however, the employee has a right to a second appeal. The decision after the second appeal is final.


How to manage the subsidy process successfully

It is important to understand that the subsidy notification has little bearing on the penalties associated with the ACA employer mandate. The subsidy notice is put out by the Health Insurance Marketplace/Exchange, whereas the Internal Revenue Service (IRS) enforces the employer mandate and the penalties associated with not adhering to it. However, if an employee receiving the APTC does not qualify, the employer should definitely appeal, because the IRS will likely request this appeals paperwork when evaluating mandate penalties.


Tip for communicating with employees about appealed subsidies

If the employee is receiving the APTC and does not qualify for the subsidy, the amount already subsidized will be claimed back. The employer should communicate the appeal immediately to the employee, and this communication should be documented.

Are you happy with the ACA compliance issue advice you are receiving from your consultant or broker? Find out the way we work and our stellar consulting team.


[1] Working full time is defined as 30 hours or more per week

[2] Affordable as defined by the ACA

National Insurance Services is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Readers are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the readers’ business activities.

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Pierre Guilfoile

Pierre Guilfoile

Pierre Guilfoile believes that “every situation, positive or negative, provides an opportunity to learn and to grow.” Clients will appreciate his overall expertise, communication skills, and his willingness to dig deep to find the right solution. He is a licensed insurance agent, member of the Minnesota Association of Health Underwriters (MAHU), member of the Self-Insurance Institute of America, Inc. (SIIA), and has a background in health and dental insurance. Pierre's primary responsibility will be monitoring the financial health of client's health insurance plans, evaluating medical renewals, overseeing claim evaluation creation and delivery, and working closely with our Employee Benefit Consultants.