Appealing ACA Exchange Subsidy Notices

The Department of Health and Human Services (HHS) recently began notifying employers when their employees are eligible to receive health insurance subsidies through the Affordable Care Act (ACA) Marketplace.

The Marketplace subsidy notifications relate to two aspects of the ACA:  the health insurance subsidies and the employer shared responsibility penalties. Individuals are eligible for subsidies if they enroll in an Exchange plan, meet tax and income requirements and are not eligible for minimum essential coverage. Minimum essential coverage includes employer-provided coverage if it is affordable and provides minimum value.


Under the pay or play rules, applicable large employers (ALE) may be subject to a penalty if they do not offer affordable, minimum value health coverage to their full-time employees. The penalty is triggered if any full-time employee receives an Exchange subsidy, and the penalty is imposed by the Internal Revenue Service (IRS). The IRS will send separate notifications of these penalties to ALEs.

Each Exchange is required to send a notice to employers regarding any employees who receive subsidies to purchase Exchange coverage. These notices – called Section 1411 Certifications – will be sent to all employers with employees who receive a subsidy to purchase coverage through an Exchange (including ALEs and non-ALEs).

This certification must identify the employee and indicate that the employee has been determined to be eligible for a subsidy. It must also indicate that, if the employer has 50 or more full-time employees, the employer may be liable for an employer shared responsibility penalty, and it must inform the employer of the right to appeal the determination.

Because of this connection between subsidies and penalties, ALEs may be understandably concerned when they receive a subsidy notice. However, receiving a determination of subsidy eligibility does not always mean that a penalty will be imposed. Also, it is not always appropriate to appeal a subsidy determination. Employers that receive subsidy notices will have to determine if a subsidy determination should be appealed.

Appealing Subsidy Determinations

An appeal will allow an employer to correct any inaccurate information the Exchange may have received from an employee who was incorrectly deemed eligible for a subsidy. For example, the employer could show that it offered affordable, minimum value coverage to a particular employee, who would then not be eligible for a subsidy (and, for an ALE, would not trigger an employer shared responsibility penalty).

Keep in mind that an ALE will not always be subject to a pay or play penalty when one of its employees receives a subsidy. For example, an employee who was not offered coverage because he or she was not a full-time employee or was in a limited non-assessment period (such as a waiting period) may be eligible for a subsidy, but will not trigger a penalty for the employer.

In these types of situations, where the employee is eligible for a subsidy and the eligibility determination was correct, an appeal of the subsidy determination itself is not necessary. The Exchange is interested only in whether individuals were properly deemed eligible for subsidies, not whether the employer will be subject to a penalty. Rather, the employer would have an opportunity to explain the situation to the IRS after receiving notice of a shared responsibility penalty.

Employer Appeals Process

If the employer wishes to appeal a subsidy eligibility determination after receiving an Exchange certification, it must file an appeal request within 90 days from the date the notice was sent. Information on how to file an appeal request in the federally facilitated Exchanges, as well as some state-based Exchanges, is available here.

During the appeals process, the appeals entity must give the employer an opportunity to review the information that the Exchange used to make the eligibility determination. This information will not include the employee’s tax return information.  An appeals entity must make, and send written notice of, an appeal decision within 90 days after the date it received the appeal request.

If the appeals decision affects the employee’s eligibility, the Exchange must promptly make a redetermination. Employees and their household members, if applicable, will have the right to appeal an Exchange redetermination that occurs as a result of an appeals decision.

This blog is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.