Open Enrollment – Will States See the Silver Lining?

With all of the debate and squabbling about health care costs, there has been a general recognition that individuals who don’t qualify for a subsidy under the ACA have been hard hit by premium increases over the past years. In fact, CMS data released earlier this year indicated that non-subsidized enrollees saw a 20 percent decline in enrollment while subsidized enrollees declined by three (3) percent. Premium increases were considered to be a major factor accounting for the drop in enrollment.

In an effort to make coverage more affordable for individuals who pay the full price of coverage, CMS is encouraging states to take action. CMS issued a recent letter encouraging states to allow individual market plans that are not on the exchange to price their plans without “the silver load” for CSRs. The letter also encourages state where a load was placed on all exchange plans due to CSRs to also offer unloaded plans.

A bit of background explains what the letter is referencing by “the silver load.”

The Affordable Care Act (ACA) categorizes health insurance by “metal” levels ranging from bronze to platinum. There is also a catastrophic plan. Silver plans are the level used to determine premium assistance such as advanced premium tax credits (APTC) and cost-sharing reductions (CSRs).

CSRs were intended to make coverage more affordable. defines CSR as “a discount that lowers the amount you have to pay for deductibles, copayments, and coinsurance.” Depending on income, a person enrolling in coverage could qualify for the extra help provided by CSRs.

But, questions arose regarding the CSR payments. At issue was that funds for CSRs were not appropriated by Congress. Lawsuits and political rhetoric ensued. As a result, CSR payments from the federal government were stopped in 2017.

Without federal funds to make up the extra CSR amounts, premiums would have to increase as the ACA required that insurance plans sold on the marketplace include CSR payments. A number of state regulators calculated that since CSRs were applicable for silver plans, any increase due to the lack of federal funding for CSRs should only be “loaded” in premiums for those plans. And, much of the increase would be offset by commensurate increases in APTCs.

This was a workable solution for marketplace buyers. Individuals who didn’t qualify for a subsidy or those who purchased coverage outside of the marketplace didn’t fare as well. These unsubsidized buyers experienced larger than expected premium increases.

And, that’s where the CMS letter comes into play. The ACA requires that plans have the same cost on and off the exchange. The letter encourages states to allow issuers to “offer and market plans that are available exclusively off-Exchange that do not include the CSR load that are “similar, but not identical” to a plan on the exchange.

Whether states will embrace this flexibility and whether insurers will file plans to take advantage of it remains to be seen.

IRS Eases Filing Requirement for Individuals

In response to the Trump administration executive order that directed federal agencies to use discretion to reduce regulatory burdens, the IRS recently reversed course regarding individual tax returns and ACA compliance. The IRS had planned to reject individual tax returns if they were filed without information relating to whether the taxpayer had health coverage. In response to the executive order, these returns will be processed rather than rejected.

An individual shared responsibility payment for tax year 2016 is reported on line 61 of Form 1040, line 38 of Form 1040A, or line 11 of Form 1040EZ.

This doesn’t give individual filers who may not have had health coverage for all or part of 2016 a free pass. The IRS notice specifically notes that “legislative provisions of the ACA law are still in force until changed by the Congress, and taxpayers remain required to follow the law and pay what they may owe.”

The IRS reserves its right to follow-up with questions about a return and pursue amounts owed.

The announcement regarding this change in processing returns can be found here.

More information on the individual shared responsibility provision can be found on the IRS website here.


Marketplace Appeals — The Results

At the risk of sounding like Nick Cannon on the television show  America’s Got Talent when they’re announcing performers advancing to the next round of competition, employers are beginning to see the results of appeals that they’ve filed when employees receive subsidies in the marketplace. Employers are finding some of these appeal decisions perplexing, especially when an appeal is denied. And, some employers fear that penalties will follow as a result of the lost appeal.

First, and of most importance, the marketplace appeal does not determine if an employer has to pay an employer shared responsibility penalty to the IRS. This point is made clear on both the appeals form and on the webpage that addresses employer appeals.

Second, an appeal that is denied may be due to the particular facts and circumstances of the employee and his/her family. In particular, even though an employer may have offered coverage that meets the minimum value and affordability safe harbors, the measure of affordability at the marketplace is based on household income. Household income may be quite different from an employee’s W-2 income. The marketplace’s decision regarding an employer’s appeal will not reveal personal and income information of the employee subject to the appeal.

The appeal decision letter explains that the marketplace will not consider whether an employee is a full-time employee or whether the employer employs 50 or more full-time employees and is subject to the employer shared responsibility payments. The reasoning cited in the letter is that “neither of these issues affect the employee’s eligibility for advance payments of the premium tax credit and cost-sharing reductions (if applicable).

Another employer found that the information which the employer sent to support their appeal did not go far enough. The employer submitted proof that the employer had offered coverage to the employee that met minimum value and was affordable. The hearing officer wanted proof of this offer in the form of the employee’s response to the offer. Employers that have been reluctant to require that employees sign waivers when they decline coverage may decide to require signed waivers or take other steps that can buttress the fact that an offer was made and rejected.

A review of several decision letters finds that decisions often cite “insufficient information” as the basis for the decision to reject the appeal. Employers may want to develop a checklist of materials that they will provide to ensure that appeals are not lost for want of more information.

Still other employers have received a letter while an appeal is under review that asks for more information to support the appeal. The types of information requested and documents that may contain the requisite information are shown below in a table copied from a letter asking for more information.


While marketplace appeal decisions are not triggers for IRS penalties, a successful marketplace appeal may be helpful if the IRS does attempt to penalize an employer. The successful appeal would be another piece of information for an employer to include in the IRS appeal’s process. And, whether an appeal is successful at the marketplace level, or not, an employer will have already collected information that would be required to appeal an IRS penalty determination should one be received.





Employees Need to Beware Subsidy Farsightedness

People who are farsighted see things that are far away more clearly than they see something close to them. So it is with employees who have their eyes focused on the Affordable Care Act’s individual market subsidies.

A number of Compliance Corner questions are variations of: “If an employee has an offer of coverage through their employer that meets minimum value and is affordable can they enroll in an exchange marketplace plan and receive a subsidy?”

The short answer is “no.” An employee who is offered a health plan at work with a contribution for employee-only coverage that costs no more than 9.66% of the employee’s household income is not eligible for premium tax credits through the subsidy.

Employees who lament this fact may need to refocus their sight on the subsidy that’s right in front of them – the generous subsidies that they receive through their employer’s plan. The payments that an employer makes toward an employee’s health coverage are exempt from federal income and payroll taxes. And, if the employee’s state has a state income tax the premiums are excluded from the state income tax as well. This exemption of employer paid health premiums is generally referred to as “the employer exclusion.”

This tax exclusion amounts to a sizeable subsidy for many taxpayers. And, there is no guesswork about whether income will change during the year that would impact the employer exclusion as there is with the individual subsidy. H&R Block has just announced that returns they’ve processed so far for the 2015 tax year have 3 in 5 customers having to pay back some of their subsidies with the average repayment totaling $579.

In addition to this employer exclusion, most employers have implemented “premium only” plans that exclude any employee contributions toward health coverage from taxable income. The result is that the entire cost of health insurance is “tax-free” to the employee.

It would be even more short-sighted to focus entirely on the cost of a plan or the tax benefits of one. The plans available through employers often feature broader networks of medical providers and many have lower deductibles and out-of-pocket costs than those available in the individual market.

Subsidies for individual coverage help make health insurance coverage more affordable, of that there is no question. But, individuals who ignore the subsidies available to them through an employer’s plan may not be seeing clearly at all.

Tax and Enrollment Statistics of Note

We all know about the know the Benjamin Disraeli quote about lies and statistics but, in this case, a quote from Ron DeLegge II is more appropriate. He said,   “99 percent of all statistics only tell 49 percent of the story.”

And, with the ACA, the story is an ever evolving on

e! That being said, I found these statistics from two very different sources to be of interest.

H&R Block issued some interesting tax facts on February 24, 2015. They reflect on how the 2015 tax season and the ACA rules are impacting taxpayers and include:

  • Average penalty for no coverage — $172
  • Average subsidy amount thatmust be paid back — $530
  • About 1/3 of exchange users gettingmore of a refund due to overestimating income — amount $365
  • A number of taxpayers are claiming an exemption with the leading reason being that the taxpayer’s income was below the filing requirement.

Details can be found at:

HHS posted a “snapshot” of 2015’s Open Enrollment and Re-Enrollment. Highlights of the posting include:

  • More than half of the 4.17 million people who re-enrolled in coverage during open enrollment actively selected a plan at re-enrollment. More than one half of those selected a new plan
  • 22% of those re-enrolling were automatically re-enrolled into the same or similar plan with the same insurer
  • 53% of consumers on the marketplace are new consumers.

Details can be found at: .

Focus on Subsidies may Shortchange Employer Plan Benefits

It seems that everyone is focused on the availability of subsidies in the exchange plans. We get many questions about whether and how employees can qualify for a subsidy. The general answer is that if an employee has an offer of coverage from their employer and it meets the affordability and coverage requirements – they can’t waive the employer plan and qualify for a subsidy.

But, it’s important to remember – and remind – employees who have employer based plans available to them that an employer plan is also a subsidized plan. And, the subsidy through the employer plan – as well as the scope of coverage provided by the employer – may be of much greater value.

 Employer contributions to an employee’s coverage (and, if applicable, their family members) are tax free benefits. The subsidy, so to speak, is that the employee doesn’t pay taxes on the employer’s contribution to coverage!

 Most employers also deduct any employee contributions to premiums on a pre-tax basis. There’s another subsidy masquerading as a pre-tax contribution.

 An individual purchasing coverage in the health exchange may qualify for a subsidy to help pay premiums. But, the premiums that the individual pays are paid on an after-tax basis.

 And, I would be remiss in mentioning that employer-based coverage generally means that an employer – or the broker on the case – will assist with explaining the plan of benefits as well as help with any problems that may arise with claims.