Should you appeal a health insurance exchange notice?

Should you appeal a health insurance exchange notice?

Posted by Jerry Karlin and Jamie Gross on September 07, 2016.

Many of our clients have reached out to us about notices they have received from public (federal or state) health insurance exchanges. The notices inform employers about employees who have qualified for subsidies to purchase coverage through the exchange, and give employers the chance to appeal this determination. To appeal, employers have to demonstrate they have offered “affordable” coverage that provides “minimum value” to the employee. The question we’re hearing from clients: Should I respond to the notice?

Part of their uncertainty (and frankly, concern) stems from a few areas. Some companies are finding they are receiving exchange notices for people who are no longer their employees or for employees that are not eligible for company-sponsored health coverage, such as part-time employees, and wonder if they should respond anyway. Others are confused by articles they’ve read or information they’ve received indicating a need to respond. In some cases, companies have received costly quotes from vendors who want to assist them in responding.

One reason typically given in favor of responding to the exchange notices is that it may help companies avoid potential tax penalties from the Internal Revenue Service (IRS) under the Affordable Care Act’s (ACA’s) employer mandate. In reality, however, there is no tax reason for an employer to appeal its employees’ subsidy eligibility determinations.

The exchange notices are not distributed by the IRS, but by the federal Department of Health and Human Services (HHS) or a state exchange, nor is the information from the exchange notice shared with the IRS. Both HHS and the IRS have made it clear that the employer notices sent by the exchanges do not necessarily mean that an employer mandate tax will be owed by the employer. That determination is based on data from individual employees’ tax returns, not by exchange notices.

That said, there may be other, nontax reasons to appeal an employee’s subsidy eligibility determination (employers may wish to consult with legal counsel to determine whether this is the case). The exchange notices may also help employers confirm certain aspects of their health care administration and ACA compliance efforts.

Our recent Washington Bulletin provides more background and insights into the exchange notices and employer appeals—please check it out and share it with your colleagues.


Jerry Karlin is the co-leader of Deloitte Tax LLP’s Global Employer Services Health Care Reform team and the Global Employer Services leader of the Kansas City office.
Jamie Gross is a managing director in Deloitte Tax LLP’s Global Employer Services practice.

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