Certifications of Employee Eligibility for Subsidies

The Affordable Care Act (ACA) requires health insurance Exchanges to send a notice to employers regarding employees who purchase coverage through an Exchange and qualify for a health insurance subsidy. These notices are also called “Section 1411 Certifications” because the notice requirement is contained in Section 1411 of the ACA.

The Section 1411 Certification is part of the process established by the Department of Health and Human Services (HHS) for verifying that only eligible individuals receive health insurance subsidies. Both state-run and federally facilitated Exchanges are required to send these certifications to employers. For 2015, it is expected that HHS will issue the certifications in batches, beginning in spring 2015.

These certifications are not directly related to the ACA’s shared responsibility rules for applicable large employers (ALEs). Starting in 2016, the Internal Revenue Service (IRS) will contact ALEs to inform them of their potential liability for a shared responsibility penalty for 2015, and it will provide them with an opportunity to respond. Employers that receive certifications may appeal a subsidy determination to help ensure, as much as possible, that employees are not mistakenly receiving subsidies. Appealing subsidy determinations may also help limit an ALE’s potential liability for a shared responsibility penalty.

Affected Employers

The Exchanges are required to provide the certifications to all employers with employees who purchase coverage through an Exchange and qualify for a health insurance subsidy. This includes ALEs that are subject to the ACA’s shared responsibility rules and small employers that do not qualify as ALEs. Also, for efficiency reasons, Exchanges can either send the certifications on an employee-by-employee basis as subsidy determinations are made, or the Exchanges can send the certifications to employers for a group of employees.

Employees who are eligible for employer-sponsored coverage that is affordable and provides minimum value are not eligible for a subsidy. This is significant because the ACA’s shared responsibility penalty for ALEs is triggered when a full-time employee receives a subsidy for coverage under an Exchange. An employee who is not eligible for a subsidy may still be eligible to enroll in a health plan through an Exchange. However, this would not result in a shared responsibility penalty for the employer.

Section 1411 Certification

The ACA directed HHS to establish a program for verifying whether an individual meets the eligibility standards for receiving an Exchange subsidy. As part of this verification process, an Exchange must notify the employer when it determines that an employee is eligible for subsidized coverage.

Final regulations issued by HHS on March 27, 2012, specify the content requirements for the Section 1411 Certifications.

Section 1411 Certifications must:

  • Identify the employee;
  • Provide that the employee has been determined to be eligible for advance payments of a health insurance subsidy;
  • Indicate that, if the employer has 50 or more full-time employees, the employer may be liable for a penalty under Code Section 4980H; and
  •  Describe the employer’s appeal rights.

Other Employer Considerations

To help avoid incorrect subsidy determinations, HHS encourages employers to educate their employees about the details of employer-sponsored health coverage. This includes information on whether their plans are affordable and provide minimum value. Employees enrolling in Exchange coverage will generally complete an Employer Coverage Tool that gathers information about the employers’ group health plans. HHS encourages employers to assist employees with their Exchange applications by providing information regarding the employer-sponsored coverage through the Employer Coverage Tool.

In addition, employers should remember that the ACA amended the Fair Labor Standards Act (FLSA) to include whistleblower protections for employees. Employees are protected from retaliation for reporting alleged violations of the ACA. Employees are also protected from retaliation for receiving a subsidy when enrolling in an Exchange plan. If an employer violates the ACA’s whistleblower protections, it may be required to reinstate the employee, as well as provide back pay (with interest), compensatory damages and attorney fees.

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The information provided is for informational purposes only and does not constitute legal advice. The information above contains only a summary of the applicable legal provisions and does not purport to cover every aspect of any particular law, regulation or requirement. Depending on the specific facts of any situation, there may be additional or different requirements. This is to be used only as a guide and not as a definitive description of your compliance obligations.