143 West Fifth Street, Oxnard CA 93030 Phone (805) 483-1995 www.barkleyins.com

Employer Tips for Responding to Exchange Notice Letters August 22, 2016 By J. Edward McClements, CLU, ChFC Author’s Note: Please see www.barkleyins.com for an article and links to important documents that describe the importance of these recent Employer Exchange Notice Letters. This article will provide a pathway for employers that have received an Employer Exchange Notice and want preliminary guidance on how to appeal the initial decision of the Exchange regarding an employee’s eligibility for Obamacare subsidized coverage.

Your overall goal in responding to an Employer Exchange Notice Letter should be to convince the reviewer of your Appeal that you understand the ACA and you have a well-documented strategy to address ACA issues as well as solid documentation of payroll and benefit details surrounding the person named in the Exchange Notice.

A Four Step Process: Step One: Clarify if your company is or is not an Applicable Large Employer (“ALE”). If you believe you are NOT an ALE, provide a sentence or two that describes why you believe your company is not an ALE. Technically, your company’s status as an ALE is irrelevant (in and of itself) to the determination of an employee’s eligibility for an Exchange Subsidy – BUT we believe defining this off the top in your appeal sets the stage in the mind of the appeal reviewer that your company is fully aware of the ACA and of your related responsibilities under the law.

Sample 1: “ABC Farms is not an ALE – in early 2015 we hired a CPA to review our 2014 payroll records and provide us with a certification that, based on our employment records, we did not have enough Full Time plus Full Time Equivalent employees to place us into the ALE category for the calendar year of 2015.”

Sample 2: “During 2014, ABC Farms had (at its highest employment month) only 37 Full Time employees and we have employed zero part time employees. Therefore we conclude that we are not an ALE for the 2015 calendar year.”

Step Two: Clarify the employment status of the person named in the Employer Exchange Notice Letter. Was this person an employee for your company at any point in 2015? If so, document their employment in a way that is fully sufficient for the Appeals reviewer to have all pertinent facts, without divulging too much detail.

Sample 1: “We can confirm EMPLOYEE NAME worked for our company on a Full Time basis for all 12 months of 2015.”

Sample 2: “Our payroll records show EMPLOYEE NAME was hired on June 26, 2015 and was terminated on November 12, 2015. During that time EMPLOYEE NAME was a Full Time worker (averaging more than 30 hours per week).”

Step Three: Clarify any Offer of Benefits made to the person named in the Employer Exchange Notice Letter. If your company offers ACA compliant health benefit plan(s) and the person named in the Notice Letter was offered enrollment, you will need to BRIEFLY describe your plan (using ACA specific language) and explain the circumstance around the offer of benefits to this person.

Sample 1: “ABC Farms offers an ACA compliant health benefit plan that is Minimum Essential Coverage and also provides Minimum Value (over 60% actuarial value). We make sure employee contribution levels are Affordable (< 9.5% of the employee’s income) for all Full Time workers. Our health plan is offered to all Full Time employees that are employed on the first of the month that follows the completion of an initial waiting period of 60 days. In accordance with our policies, EMPLOYEE NAME was offered an enrollment option (including the option to add dependents) in December 2014 (for proposed effective date of January 1, 2015).”

143 West Fifth Street, Oxnard CA 93030 Phone (805) 483-1995 www.barkleyins.com

Sample 2: “ABC Farms offers multiple ACA compliant benefit plans. Our offer of health benefits includes a plan that exceeds that Minimum Value standard of 60% actuarial value and it also includes doctor and hospitalization benefits. The MV level plan is offered to employees and their dependents within the 90th day of full time employment. The cost for the employee to participate in the MV plan is significantly less than the Affordability threshold for all Full Time workers.”

Step Four: Clarify any actual Coverage (or any Waiver) to/from the person named in the Employer Exchange Notice Letter.

Sample 1: “Our health plan records show EMPLOYEE NAME was covered under one of our ACA compliant plans from June 1, 2015 through December 31, 2015”

Sample 2: “EMPLOYEE NAME declined our offer of ACA compliant health benefits on December 18, 2014 for the 2015 plan year (see attached waiver form for EMPLOYEE NAME).”

Conclusion: Ask for approval of your Appeal of the Exchange’s decision that the person named in the Employer Exchange Notice Letter was eligible for a subsidy (formally known as an “APTC” – an Advanced Premium Tax Credit)

Sample 1: “Based on the above facts surrounding the employment and coverage records we have on file for EMPLOYEE NAME, we ask that you invalidate their eligibility for the APTC for all of 2015”

Sample 2: “Our payroll and health benefit records show that from June 1, 2015 through December 31, 2015, EMPLOYEE NAME was covered under one of our employer sponsored ACA compliant health plans and therefore should be ineligible for an APTC for those months of 2015”

Additional Tips: Tip 1: ASAP gather all of your payroll, benefits and 1095-C return data on the individual named in the Employer Exchange Notice. Double-check the accuracy and consistency of your internal and external reports.

Tip 2: Make sure you can document the ACA compliant status of your benefit plans. Are you absolutely sure your plan exceeds the Minimum Value standard? How have you assured that all employees have at least one MV plan option that is offered at a contribution level that is Affordable to them?

Tip 3: In your appeal, do not provide more detail than necessary – especially in terms of personally identifiable information. We recommend you identify the individual in the appeal in the identical manner that the original Exchange Notice identifies the person…with the name and DOB only. Although HIPAA allows Covered Entities to disclosure Personal Health Information (PHI) to governmental agencies that request the data as a part of a regulatory mandate, there is always a standard to use the least amount of PHI as is necessary. We recommend you do not provide SSN or employee home address in your appeal.

Tip 4: Refrain from providing too much documentation in your appeal. It is safest to assume anything you say (or in this case “attach”) can and will be held against you by the regulating authorities. There is (in our opinion) one general exception to this rule - we believe that a copy of an employee WAIVER form (if relevant to the employee in the Notice) SHOULD BE an attachment included in your appeal – just be sure to redact any data on that waiver form that is PHI (beyond the employee’s name).

Tip 5: Do not RUSH this appeals process. All employers have 90 days to respond and the earliest dates we have so far seen on Employer Exchange Notices is August 16, 2016. There might be significant intelligence gathered from the national benefits industry in this topic over the next few months. It would be a shame if your appeal missed having the value of considering that industry insight. Therefore we recommend employers PREPARE their appeals ASAP (in terms of researching coverage and payroll details relating to the person named in the Exchange Notice) but then use the Presidential Election as the target date to finalize and mail in your appeal requests (assuming you have an Exchange Notice dated August 10th or later).

Tip 6: Use the preformatted HHS “Employer Appeal Request Form”. Using (and fully completing) the HHS form will assure your appeal will not be missing the basic essential elements, even if you need to attach more pages to explain a specific situation.

Tip 7: Don’t do all of this in a vacuum. Engage your insurance broker, your benefit/labor attorney and your CPA early in this process. Getting their professional opinion and assistance is critical to the success or failure your company will experience.