This is part of an article, the original of which is available here in its entirety, by Timothy Jost. The final rules state that if your employee decides your coverage is unaffordable, that’s good enough. This is long but important, as your company could receive a tax bill because of the employees representation. – Reeve
At over 600 pages, this rule is very long and very technical. Much of the rule’s preface, which fills 509 of its 606 pages, responds in numbing and repetitive detail to the 741 comments HHS received on the proposed rule. I would not recommend anyone trying to read it through. Most of the rule’s provisions amend current rules, thus the printed text consists of snippets of additions or modifications which can only be understood by locating the existing rule and putting the change in context. While a few of its provisions represent major policy initiatives for the ACA, on the whole the rule addresses administrative issues well below the radar screen of most of those who follow ACA developments. I intend to post two summaries of the rule, this one addressing its exchange provisions and a second addressing the changes it makes in Medicaid and CHIP. These posts will offer an overview of the rule, but cannot begin to capture its full complexity.
Verifying Premium Tax Credit Eligibility
Employer coverage. The provisions of the July 5 rule that drew the most media attention (indeed one of the few provisions that drew any attention on a day no one was reading the news) address verification of eligibility for premium tax credits. The Administration had shocked ACA observers by announcing on July 2 that it was delaying until 2015 the enforcement of the ACA’s employer and insurer reporting requirements and employer mandate. This raised the question of how the exchanges would verify whether or not an applicant for advance premium tax credits had employer coverage and whether or not employer coverage was adequate and affordable. The final rule answers that question.
It had never been intended that the exchanges would rely on employer and insurer reporting to determine the existence and scope of an applicant’s employer coverage. Indeed, the premium tax credit eligibility provisions of the ACA itself require that applicants, not employers, provide information on employer coverage. Under the final rule, an applicant for premium tax credits will be required to attest whether or not he or she has employer coverage, and if so its cost and extent. The application form includes an appendix for this information. The applicant can, but is not required to, ask the employer to provide information to fill out this form. The employer is not required to help, but it is hoped that employers will help their employees fill out these forms and make pre-populated forms available to employees.
Once the exchange receives this information, it will check available databases to verify the information, including Office of Personnel Management data for federal employees and the state’s SHOP exchange data. If the exchange finds information incompatible with the applicant’s attestation, it will ask the applicant to provide evidence to resolve the inconsistency. In most instances, however, there will be no electronic data available to confirm the attestation. In these cases, the exchange will select a statistically significant random sample of cases in which it only has the attestation and, after notice to the applicant, contact the employer to verify the information. If the employer provides information incompatible with the applicant’s claims, the exchange will ask for further proof. In cases where the employer does not respond, however, or that are not part of the random sample, the exchange will rely on the applicant’s attestation.
HHS will offer to perform this verification procedure for the states, but will not be able to do so technically until 2015. Because some states were relying on HHS being able to do this for them, the states are excused from conducting the sampling procedure until 2015 as well.
Some commentators have claimed disparagingly that this approach effectively creates an honor system for applicants. In many respects, however, our income tax system relies on the honor system. Another provision of the ACA that would have required businesses to file 1099s reporting purchases of goods in excess of $600, which was expected to produce $22 billion in revenue over 10 years, was repealed in 2011, apparently because Congress believed businesses could be trusted to self-report their income
There are, moreover, serious consequences for applicants who misrepresent their employer-coverage. The exchange must still notify employers every time one of their employees receives premium tax credits. The IRS will do so as well. Applicants who receive tax credits for which they are ineligible will have to pay them back when they file their taxes, and the exchange will inform applicants of this fact if it provides the applicant with tax credits pending verification of information provided by the applicant. Negligent misrepresentation of eligibility information can result in a $25,000 fine, while knowing and willful violations are punishable by a $250,000 penalty.