Covered California Begins Sending Employer Notices of Employee Coverage

Posted: September 06, 2016

by Wendy Barnett

Beginning in August 2016, Covered CA will be sending notices to employers about their employees who have enrolled in Covered CA and are receiving the Advance Premium Tax Credit (APTC). The notice serves to inform employers that their employees may have indicated that their employer has not offered “affordable, minimum value standard coverage” and that they may be subject to the “employer shared responsibility payment” otherwise known as the tax penalty.

Prior to a consumer applying and qualifying for a subsidy through Covered California we highly recommend reviewing Covered California Eligibility: How do I know if I qualify? to understand what constitutes eligibility.

Background

The Affordable Care Act (ACA) through Health Care Reform requires all large employers to provide affordable, minimum value standard health insurance to their employees and dependents or pay a tax penalty.

• Large Employer

An employer who employees over 50 full-time equivalent employees

• Affordable employer coverage

Exists when the employee’s contribution for self-only coverage on the lowest priced plan is less than or equal to a certain percentage of the employee’s total household income (currently 9.66% in 2016 but is updated annually by the IRS)

• Minimum Value Standard

Plan coverage that pays, on average, at least 60% of the total cost of medical services and includes substantial coverage of physician and inpatient hospital services (which typically means it is equivalent or better than a bronze plan)

• Dependents

For purposes of employees, dependents are considered to be the children of the employee and not the spouse 

What This Means for Employers

Basically, Covered CA is giving a “heads up” to employers before tax time regarding how some of their employees may be receiving health insurance and how it might affect them as the employer. If an employer receives a notice from Covered CA titled “Important information about your employee’s health insurance coverage through Covered California,” he should investigate whether or not he is required to pay the employer shared responsibility payment/tax penalty. At this time, Covered California is only sending a notice out to an employer whose contact information was provided on an application (which is optional for employees to include).  This means that employers may not receive notices for every employee who is receiving a subsidy. Therefore, it is advisable that the employer checks all of his employee’s health insurance statuses and/or to consult a tax professional regarding ACA compliance.

If the employer disagrees with Covered California’s determination, an appeal can be made with the U.S. Department of Health and Human Services (HHS). The appeal must be made within 90 days of the date of the notice. If appealed, HHS will consider evidence provided by both the employer and employee to evaluate the eligibility of APTC. 

Filing an appeal doesn’t necessarily mean that an employer will not have to pay the tax penalty. The IRS will determine independently whether or not a tax penalty is required.  For more information, check out employer-shared-responsibility-provisions.

Employers are prohibited from firing or retaliating against employees who receive tax credits or who report violations of the ACA.

What This Means for Employees

Employees must understand that the ACA requires Marketplaces, such as Covered CA, to send these notices to applicable employers as monetary consequences could result. Employees should be aware that they do have certain protections from employer retaliation under the ACA.

Employees must also understand that most employers who give employee health benefits offer affordable, minimum value standard insurance which disqualifies employees from receiving tax credits. If employees are found to be receiving tax credits when they do not qualify, then they will be subject to paying the tax credit back at tax time! In this case the employer would not be penalized.

An employee may be required by HHS to submit information for verification of APTC during an employer appeal. Consumers should note that the IRS is the ultimate authority on whether or not an individual or an employer is subject to a tax penalty. It is advisable to speak to a tax professional when evaluating eligibility for APTC verses obtaining employer offered health insurance.

Consumers can find more information about their employer offered plans by asking their employer or by visiting the IRS and reviewing Minimum Value and Affordability.