The ACA Exchanges will begin to send notices to employers whose employees have received government-subsidized health insurance through the Exchanges. The ACA created the "Employer Notice Program" to give employers the opportunity to contest a potential penalty for employees receiving subsidized health insurance on the Exchange. Think you may receive a penalty? Here's what you need to know.

When Will These Notices Be Sent? Who Will Receive Them?

These notices will be sent throughout the year to employers who had one or more employees that received an advance premium tax credit for at least one month during the year. The Centers for Medicare and Medicaid Services (CMS) has previously issued FAQs regarding the program. These FAQs educate employers on how to respond if they receive a notice that an employee received any form of a subsidy through the ACA’s Exchanges.

What Do You Owe?

You may recall that if a full-time employee of an applicable large employer receives a premium tax credit for coverage through the Exchange, the employer will be liable for the employer shared responsibility payment. The penalty in 2016 if an employer doesn’t offer full-time equivalent employees affordable minimum essential value coverage is $2,160 per full time equivalent (minus the first 30) whereas if an employer offers coverage that is not considered affordable, the penalty is the lesser of $3,240 per subsidized full time employee. These penalty amounts are indexed annually for inflation.

How Can you Appeal This Penalty?

Employers will have an opportunity to appeal the employer notice by proving they offered the employee access to affordable coverage. If the employer’s appeal is successful, the Exchange will send a notice to the employee informing the employee to update their Exchange application to reflect that he or she has access or is enrolled in other coverage. The notice to the employee will further explain that failure to provide an update to their application may result in a tax liability.  If the employee gave inaccurate information to simply qualify for a subsidy, he or she will be penalized based on improper benefits received. Early reports indicate that this will be a common occurrence.

Key Take Away for Employers

Employers should have a process in place for timely handling and responding to these Exchange notices and employers should appeal any penalty assessment in the event the employee provided inaccurate information to the Exchange.