Covered California Notices

4 Oct

October Image-Con-Con
A number of our clients provide health benefits to employees 
and yet those employers who’ve recently received letters from Covered California (the Exchange) stating that because some of 
their employees received subsidies, the employer now owes ACA penalties.  These notices contain demand for payment, ranging 
from $2,000 – $3,000 per employee.  
Not Good!
Employers that offer health coverage can avoid these penalties … if they respond to these letters .. and indicate that they offered coverage to their employees that met ACA guidelines, and subsidies would be unavailable to their employees, and no penalty to them is due.  Unfortunately, now those employees who received subsidies by mistake are responsible for the payments and will have to repay those amounts at some time.
Small business is encouraged to review their options beyond the exchanges and ensure that they have a good response to penalty notices.  Health insurance experts can help your company plan for both your company’s circumstances and, the right plans for the firm and its employees. This is a complicated area and fortunately we have worked with a firm which is very knowledgeable and able to help employers: Moore Benefits Inc.

The IRS has now began levying penalties on employers under the ACA employer shared responsibility provision. Often called the employer mandate or Pay-to-Play, the ACA provides for the IRS to assess penalties on employers that do not offer adequate health coverage to their full-time employees. Although the mandate was instituted in 2015, the IRS is just now starting to send penalty notices. What follows defines the IRS process and the steps employers can take if/when they receive a penalty notice.

Back to the Beginning:
The first round of penalty notices pertains to calendar year 2015. At that time, Applicable Large Employer (ALE): Play-to-Pay rules applied only to employers that had an average of 50 or more full-time employees, including full-time equivalents.

Employer Mandate:
Penalties were triggered only if a full-time employee received a government subsidy to buy individual health insurance through a Marketplace. In that case, penalties were based on a two-prong test:
  1. Penalty A if the ALE failed to offer minimum essential coverage to at least 70% of its full-time employees
  2. Penalty B if the ALE failed to offer affordable minimum value coverage to its full-time employees
IRS Penalty Process:
The IRS is using information from 2015 Forms 1095-C and 1094-C, and information about employees who received a Marketplace subsidy for any month in 2015, to determine which ALEs it believes are liable for penalties. It appears that a Form 1095-C on which line 16 is blank is one of the triggers the IRS is using to identify ALEs for penalty notices.

In August 2016 Covered CA began 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 the guidelines.

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).

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.

For More Information Contact: Cathy Solomon, Moore Benefits, Inc.- 949-872-2380
The Bottom Line:
IRS notices recently began arriving in corporate mailboxes, in some cases demanding millions of dollars in fines.  Yet in 2015, the year the government began enforcing the employer mandate, neither the federal government nor most states operating their own exchanges managed to alert employers. In
late 2015, the Department of HHS, which manages the federal marketplace, announced that it would began sending notices to “certain” employers in
2016, and “expand to more employers in later years”  
Visit our website: 

or Call:  949-533-3742

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