“Health Insurance Marketplace” Notifications: Here we go!

School districts have begun to receive notifications from the “Health

Insurance Marketplace” alerting the district’s “Benefits Manager” that some

employees have obtained their insurance on the health insurance exchange

(healthcare.gov) and are eligible for “advance payment of premium tax

credit” (APTC) or “cost-sharing reductions” (CRS). While these terms are

worded slightly differently, we have been discussing them as “credits and

premium assistance” in our presentations regarding PPACA for years. We

have referred to these notifications as “section 1411 certifications,” because

they come from §1411 of the Affordable Care Act. For short, we will call

them “notifications” in this email update.

A few clients have been uncertain about whether this is an official

government communication. We believe it is. The Marketplace has

indicated that it will be sending these notifications out in batches, so if you

have not yet received one, you should be on the lookout for yours in the

next few months. On the next page, we have included a screen shot of the

first page of the letter so that you can be sure to identify the official notice if

or when you receive it.

Marketplace Verification and Applicability to PPACA Tax

Penalties. Essentially, the notification means some of your employees have

indeed purchased insurance on the Marketplace (which we’ve often called

“the exchange”) and are eligible for government assistance toward their

premiums. These notifications are part of a multi-step verification process

which will be used by the federal DHHS and IRS to do the following: (1)

confirm the eligibility of your employees for government assistance on the

Marketplace, and (2) assess whether your district will owe a penalty for

failing to offer insurance or offering unaffordable insurance to that


If you are a “large employer” who has stayed informed regarding your

PPACA obligations, this should start to sound familiar. As you have heard

many times by now, school districts subject to PPACA’s insurance offer

requirements because of their “large employer” status can be penalized on a

per-employee basis for any employee who meets the following criteria:

1. Is a “full time” employee under the PPACA regulations;

2. Receives no offer or an “unaffordable” offer from the district;

3. Declines the district’s offer and enrolls in coverage from the

Marketplace; and

4. Obtains credits or premium assistance (the form calls these APTC or

CRS) from the Marketplace.

Not until each of those things are met will the district be potentially

subjected to a tax penalty for that particular individual. That’s where this

notification comes in. Section 1411 of PPACA requires the government to

notify you if your current or former employee could subject you to one of

those penalties. If you have received one of these notifications, they likely

state at least one and possibly all 3 of the following things near the top:

This person [your employee] reported that he or she:

 didn’t have an offer of health care coverage from [the district];

 did have an offer of health care coverage, but it wasn’t

affordable or didn’t provide minimum value; or

 was in a waiting period and unable to enroll in health care


As you can see, those assertions made by your employee or former

employee start to hint at the government’s analysis of your potential tax

penalty liability under PPACA. In fact, the notification goes on to say that

“This is only a notification that [the district] may have to pay an employer

shared responsibility payment,” aka, a tax penalty. The notification amounts

to the government indicating that the particular employee has done at least

part of what’s required to subject your district to penalty, assuming your

district is a “large employer” and assuming the employee might meet the

other requirements (such as being a “full time” employee).

Appeals Process. Alongside this multi-step verification process is a

multi-step “appeals” process. This is discussed in the notification, as well,

under the “What can I do next?” and “What are my appeal rights?” sections.

As we think of it, this is your first bite at the apple toward avoiding potential

tax penalties if you do not believe you should be penalized for that particular

employee. According to PPACA, you will have another chance to appeal their

penalty determinations later, but we recommend taking this appeals process

seriously and putting all of your applicable arguments into the appeal. For

example, if you offered “affordable” insurance to that employee, then you

should appeal the notification to start making your case with the


Click here for appeal form and here the explanation of the appeal

process that can also be found on healthcare.gov. As you will see, the

appeal form has 4 basic sections, and most districts will ignore section 2.

Section 1 is the employer information, and section 4 is for your signature.

Section 3 is where you will need to apply the rules of PPACA and the

information you know about the employee for whom you received the

notification. The introduction to section 3 states as follows:

Tell us why you’re appealing the Marketplace determination of

this employee’s eligibility for help with the costs of Marketplace


An individual may qualify for help with the costs of Marketplace

coverage if the coverage that’s offered by the employer doesn’t

meet minimum value requirements or isn’t affordable with

respect to the employee.

Use the space below to explain why this employee shouldn’t

have been eligible for advance payments of the premium tax

credit and cost-sharing reductions (if applicable). Use extra

paper, if necessary. If you’re including documents to support

your request, send us copies. Keep all original documents.

The appeal is asking you to tell the government why this person is not

eligible for their assistance on the Marketplace. However, what they’re

actually asking you to do is assist them in fact-checking your employee’s

insurance application on the Marketplace and more importantly, instructing

you to provide the reasons you should not be penalized, including supporting


Individualized Appeals. Because of the nature of the PPACA tax

penalties, you will need to appeal or not appeal each notification on a very

individualized basis. While some appeals may look alike, they each require a

careful analysis of the employment data for the individual employee, such as

which offer they received and how many hours they worked. This is why we

have recommended for many years that you should be tracking and

centralizing all of the hours for all your employees, especially each non-

certificated employee (including subs, community coaches, and bus drivers).

Even though some of those employees will never subject you to penalty, you

may receive notifications for them.

Take, for example, a substitute teacher who only subbed for the

district a few times each month. It is very unlikely that the employee could

ever attain “full time” status under the PPACA regulations during the

applicable time period (must work 30 hours per week on average).

Assuming the sub never attained “full time” status, he or she cannot subject

the district to a penalty. However, that person may still be eligible for an

APTC or CSR on the Marketplace, so you will still receive a notification if they

apply on the Marketplace and list you as an employer. The fact of the

matter is, in most cases you may have no idea whether that person is

otherwise eligible for government assistance, which is what the appeal form

asks you to verify. But you do know the employee cannot subject you to

penalty. Are you better to err on the side of providing more information and

tell the IRS that you’re unsure of their exchange eligibility but the employee

is not a “full time” employee? This question remains unclear, but for now,

we think you should discuss it with your legal counsel and err on the side of


Contents of the Appeal. Assuming you do decide to appeal, you will

need to determine how to word your position on the form, which does not

provide appeal response options. You will also need to determine whether

you want to include documentation, and you must include a copy of the

notification you received with your appeal. Appeals must be filed within 90

days. Remember, what you send to the IRS now will help you in the future,

but it could also limit your options later if you are not careful in how you

structure your response.

Over the long run, we believe each district will get to a point where

you shouldn’t need to involve legal counsel for each appeal. For now, we

recommend discussing your appeal options with your legal counsel. If you

have received one of these notifications or if you have questions about the

appeal process, you should consult with your school district’s attorney or call

Karen, Steve, or Bobby.