HHS – How to Verify Exchange Subsidy Eligibility

HHS – How to Verify Exchange Subsidy Eligibility

HHS: How to Verify Exchange Subsidy Eligibility

HHS (the Department of Health and Human Services) issued a proposed rule outlining the processes they and state regulators will use to verify individuals’ eligibility for federal premium subsidies to purchase health insurance through public exchanges.

In order to qualify for tax credits to buy health coverage through an exchange, individuals must qualify based on income, availability or cost of health plans they have access to.  The regulators (federal and state) must verify each of these data points.  Unless and until there is a centralized database available, exchange administrators will be permitted to use any available data electronic source approved by HHS, including paper records if necessary, in order to confirm an applicant’s eligibility for premium subsidies.  Or, state exchange regulators could choose to have HHS conduct the verification(s).

PPACA provides premium subsidies are not available to individuals enrolled in coverage (or eligible to be enrolled in coverage) if the employer-sponsored plan meets affordability and minimum value standards.  Recent IRS guidance made it clear that coverage is not affordable if the contributions paid by employees for single (employee-only) coverage exceeds 9.5% of their wages.  Also, these premium subsidies are not available to employees earning more than 400% of the FPL (federal poverty level).

Employer notification

The proposed rule also seeks to finalize the method and manner in which employers will be notified when one or more of their employees has been determined to be eligible for subsidized coverage through an exchange, as well as the process by which employers can appeal such determinations.

Under the proposed rule, employers would receive notice when an employee is determined eligible for subsidized coverage. If the eligibility was triggered because the exchange determined that an employer did not provide qualified coverage, that employer would be warned that they may be liable for tax penalties through the IRS.  Employers would be able to appeal determinations about the nature of the coverage they offer prior to the penalty’s enforcement, according to the proposed rule. HHS said it would establish a formal appeals process for employers in states that decline to construct their own.