Here’s the coming dilemma: let IRS assess employer mandate taxes based on errant Healthcare.gov subsidy certifications or appeal those errors to prevent those assessments. “Where’s the dilemma?” you say. Here: once you know which employees received subsidies, you are exposed to ACA retaliation charges if you later take adverse action action against them. The best time to escape this trap is before you’re in it. We have a solution. But first, some necessary background.
As originally conceived, Healthcare.gov was to notify applicants, their purported employers, and the IRS electronically, immediately, when a subsidy application was granted. The employer was to have 90 days (45 C.F.R. § 155.555(c)(1)) from receipt of that notice to appeal the decision to Healthcare.gov. Unless reversed on appeal, that subsidy would trigger an IRS assessment of the employer’s tax exposure under 26 U.S.C. § 4980H.
As it turned out, there were not enough IT resources on Earth to enable Healthcare.gov to go live, reliably, in October 2013. It did anyway. What was built was untested and much was left to build later, including employer notice and appeal processing functions. As best we can tell, they still have not been built.
Here’s what the HHS rule says that Healthcare.gov and IRS were supposed to have done already.
(h) Notice of an employee’s eligibility for advance payments of the premium tax credit and cost-sharing reductions to an employer. The Exchange must notify an employer that an employee has been determined eligible for advance payments of the premium tax credit or cost-sharing reductions upon determination that an employee is eligible for advance payments of the premium tax credit or cost-sharing reductions.
Such notice must:
(1) Identify the employee;
(2) Indicate that the employee has been determined eligible for advance payments of the premium tax credit;
(3) Indicate that, if the employer has 50 or more full-time employees, the employer may be liable for the payment assessed under section 4980H of the Code; and
(4) Notify the employer of the right to appeal the determination.
(i) Certification program for employers.
As part of its determination of whether an employer has a liability under section 4980H of the Code, the Internal Revenue Service will adopt methods to certify to an employer that one or more employees has enrolled for one or more months during a year in a QHP for which a premium tax credit or cost-sharing reduction is allowed or paid.
See 45 C.F.R. § 155.310(h). In October 2014, HHS announced that appeals would be processed on paper forms through 2015, but published only forms for applicant appeals of subsidy denials. More recently, IRS announced that it would address its communications about potential tax assessments to employer representatives identified on Form 1094-C, which must be filed by February 29, 2016 (March 31 if filing electronically).
Neither the HHS nor IRS will have the data needed to dispute false subsidy applications before employers file their Forms 1095-C or respond to subsidy certification notices, unless the applicant submitted the Employer Coverage Tool on the Healthcare.gov web site, correctly completed by the applicant’s employer. We have not heard of any such form being presented to an employer in 2014 or 2015. So, we expect most employers to be tasked to appeal an unexpected number of errant subsidy certifications in early 2016 while, or just before, the IRS will be contacting the same employers about taxes purportedly triggered by those errant certifications. Help may be needed.
Every Healthcare.gov applicant sees this Marketplace notice:
It’s against the law for your employer to fire or retaliate against you because you get a premium tax credit when you buy a health plan in the Marketplace.
It’s also against the law for your employer to fire or retaliate against you if you report violations of the Affordable Care Act’s health insurance reforms to your employer or the government.
These health insurance reforms appear in Title I of the Affordable Care Act. They don’t include the Medicare or Medicaid reforms, and don’t relate to quality of patient care.
You can file a complaint with the U.S. Occupational Safety and Health Administration (OSHA) if you think you were fired or retaliated against because you:
- Received premium tax credits when you bought a health plan in the Marketplace
- Reported a violation of the reforms found in Title I of the Affordable Care Act
Visit www.whistleblowers.gov for more information.
FLSA § 18C will protect from employer retaliation every employee named on a subsidy certification notice, far more aggressively than if the employee had filed an EEOC charge. To read just how aggressively, see OSHA’s rules. They are substantially identical to the Sarbanes-Oxley rules that protect securities fraud whistleblowers. OSHA is more than adequately staffed to enforce this. Unions are training their staffers to use those rules against employers just as they leverage OSHA complaints, overtime claims, etc.
Employers most at risk are those with large numbers of low wage workers located in counties with high subsidy rates. See our regional summary or read the data posted online at http://aspe.hhs.gov/sites/default/files/aspe-files/106911/county-level-data-2-22-2015.xlsx. But it’s not only your current, uninsured full-time employees who expose you to this legal risk. In 2104 and 2015, Healthcare.gov did very little to verify applicant statements. Applicants enrolled in 2014 were re-enrolled for 2015 unless they opted out. Uninsured part-time employees might have received subsidies, claiming to have been full-time employees. Contractors and temps may have done the same. Former employees who declined COBRA coverage might have bought much cheaper subsidized coverage through Healthcare.gov. You won’t know until you see the certification notices, but you shouldn’t know.
The best way for an employer to avoid or defeat a retaliation claim is to keep the identity of subsidy recipients secret from employment decision makers, provably. The more internal attention given to subsidy certification notices, the more difficult it will be to prove the required confidentiality. Outsourcing subsidy appeals should minimize exposure to retaliation claims if the subsidy recipients are later disciplined or discharged.
We searched, just as we did for responsible vendors of ACA compliance IT tools and services. We came up empty, probably for two reasons. Appealing a legal status determination for another, for compensation, may constitute “the practice of law,” and there is no such thing as legal malpractice insurance for unlicensed law practice. Also, confidentiality is a big part of the value proposition. Only communications with lawyers and their staff are covered by the attorney-client privilege.
In response to needs voiced by our clients, Balch’s ACA Strategists recently mapped out a standard process for successfully handling Healthcare.gov subsidy appeals on a flat-fee basis. For information regarding the process, reach out to firstname.lastname@example.org.