Health Insurance Marketplaces are now sending letters to notify certain employers that one or more of their employees has been determined eligible for advance premium tax credits and cost-sharing reductions and has enrolled in a Marketplace plan. Because these events may trigger employer penalties under the Affordable Care Act’s “pay or play” provisions, employers may seek to appeal an employee’s eligibility determination.
Employer Appeals Process
Marketplaces must notify employers within a reasonable timeframe following any month of the employee’s eligibility determination and enrollment. Employers have 90 days from the date stated on the Marketplace notice to file an appeal. In the appeal, the employer may assert that it provides its employee access to affordable, minimum value employer-sponsored coverage or that its employee is enrolled in employer coverage, and therefore that the employee is ineligible for advance payments of the premium tax credit or cost-sharing reductions.
An appeal will not determine if the employer is subject to a “pay or play” penalty, as only the IRS, not the Marketplace or the Marketplace Appeals Center, can make such determinations.
The Pay or Play section of your HR library features step-by-step guidance, worksheets, and calculators that can help employers understand if they will be subject to a penalty and how to calculate it.
New IRS guidance clarifies certain aspects of the Affordable Care Act’s “pay or play” provisions related to determining affordability of employer-provided coverage and calculating penalty amounts for calendar years 2015 and 2016.
Adjusted Affordability Threshold
Under the new guidance, the 9.5% threshold for determining whether employer-provided health coverage is affordable for purposes of “pay or play” (including for use of the affordability safe harbors) is adjusted to 9.56% for plan years beginning in 2015, and 9.66% for plan years beginning in 2016. Coverage will be considered affordable if the portion of the annual premium an employee must pay for self-only coverage does not exceed the applicable percentage of his or her household income.
The guidance also addresses how certain HRA contributions, flex credits, or opt-out payments are taken into account for purposes of determining whether an employer has made an offer of affordable minimum value coverage under an eligible employer-sponsored plan.
Adjusted Penalty Amounts
In addition, the new guidance confirms that for calendar year 2015, the adjusted $2,000 dollar amount used to calculate the penalty (for employers not offering coverage) is $2,080, and the adjusted $3,000 dollar amount (for employers offering coverage that is not affordable or does not provide minimum value) is $3,120. For calendar year 2016, the adjusted $2,000 dollar amount is $2,160, and the adjusted $3,000 dollar amount is $3,240.
Our Pay or Play Affordability and Penalty Calculators can help employers determine their potential liability.
The Pay or Play Penalty Calculators in your online HR library have been updated to include the inflation-adjusted penalty amounts for 2015. There are two separate calculators for 2015, depending on an employer’s number of full-time employees (including full-time equivalents):
To use the updated calculators, simply enter data on the number of full-time employees and employees receiving a premium tax credit or cost-sharing reduction for a month, and the spreadsheet will calculate the estimated penalty for the month.
As a reminder, employers with 100 or more full-time employees (including full-time equivalents) are subject to the pay or play requirements starting in 2015, while those with 50 to 99 full-time employees (including full-time equivalents) do not need to comply until 2016 if they meet certain eligibility criteria related to workforce size, maintenance of workforce and overall hours of service, and maintenance of previously offered health coverage.
More tools, checklists, and notices are available in our section on Health Care Reform.