Verification of access to employer-sponsored coverage bulletin

How will the government verify whether an employee is entitled to premium subsidies under health care reform? It’s an important question, since that verification can trigger penalties for the employer.

On April 26, 2012, the Internal Revenue Service and Department of Health and Human Services issued a bulletin which addresses one part of that verification: whether an employee has access to “minimum value” employer-sponsored coverage.

Quick background information
Premium subsidies, which are tax credits for coverage purchased through the Health Insurance Exchanges that are based on:

• A household income of less than 400% of the federal poverty level, which is $89,400 for a family of four in 2011
• Employer-provided health coverage that does not meet one of the following:
  
  
  • Affordability mandate
  • Minimum value mandate

To learn more about the “minimum value” employers must offer, see the article “IRS and HHS issue new guidance on minimum value,” on this website.

What you need to know now
The Health Insurance Exchanges are responsible for verifying whether employees indeed are eligible for the premium subsidy tax credit. The guidance document released in April outlines a proposed interim strategy for verifying coverage in 2014 and 2015, with a request for comments to best determine a long-term strategy for 2016 and beyond.

Under the proposed interim strategy, individuals who believe they are entitled to the premium subsidies will request an eligibility determination and attest whether they have access to affordable employer-sponsored coverage that meets minimum value requirements.

The Exchange would then compare the information provided by the individual to existing public data sources, such as a state directory of new hires or the state quarterly wage data base.

If the information provided by the applicant doesn’t appear to line up reasonably with the public data sources, the Exchange could grant a temporary acceptance of the request for 90 days, but request that the applicant submit additional documentation to resolve the inconsistency.

The guidance also proposes an additional post-enrollment screening of a representative sample of enrollees who were granted subsidies based purely on their attestation. In these screenings, the Exchange would compare data from a selection of applications with information gathered directly from their employers.

A call to comment
The Bulletin also requests comments on a long-term strategy for verifying access to employer-sponsored coverage. This includes specific requests for ideas on how to identify and/or develop data sources that would allow for real-time verification of access to employer-sponsored coverage information during the enrollment process.

This will be an essential element, because existing data sources do not contain all the data elements necessary to verify access to employer-sponsored coverage.

Impact on employees — In the near term, employees are responsible for providing additional documentation to support their application for subsidies on the Exchanges. This is only required when the information in the application cannot be verified or isn’t consistent with existing public data sources.

Impact on employers — In the near term, the Exchanges will be reaching out to employers to verify information for enrollees whose eligibility determination was based purely on the self-reported information. Those requests will likely be intermittent and will add some administrative burden.

In the long term, each employer will likely need to build a centralized data source of employee information to make it easy to provide required information to the government.

Impact on brokers — Brokers will need to be well-informed about the verification process to effectively provide guidance to employers. Employees who are granted subsidies may require broker assistance to sign up for coverage through the Health Insurance Exchanges.