Companies are pushing back as the IRS moves in to collect the Affordable Care Act's employer mandate penalties from 2015. It's the first year companies are being required to pay the penalty, which helps fund the ACA.
And they may have a legal case to make against the agency's proposed assessments. Employer groups are seriously considering legal action against the penalty as they wait for Congress to pass a retroactive repeal of the penalty, said health law consultant Chris Condeluci.
While Republicans managed to eliminate the individual mandate penalty starting in 2019 through their massive tax overhaul, other ACA tax delays—prepared and introduced by Republicans on the House Ways and Means Committee—are still waiting in the wings.
Meanwhile, the IRS has been sending out letters with assessments of the mandate penalty. Most companies are appealing them. One such letter obtained by Modern Healthcare lists a penalty of more than $3.8 million. The company in question received the notice on Nov. 8 and had 30 days to respond with the money owed or evidence that the IRS was wrong about the penalty.
If a company with at least 50 full-time employees didn't offer minimum essential coverage to at least 70% of its workforce and their dependents, and at least one employee was eligible for an advanced premium tax credit, that company has to pay up according to the IRS.
A company that gave the option of a qualified plan to at least 70% of its full-time workforce and their dependents also has to pay the penalty if a full-time employee couldn't afford the plan on offer and therefore qualified for an advanced premium tax credit.
But companies subject to the penalty argue that federal and most state exchanges haven't followed the rules set out in the ACA statute and regulations and therefore can't levy the 2015 fines.
According to the regulations, exchanges were supposed to send employers certified notices regarding which of their employees enrolled in an exchange plan subsidized by a premium tax credit for one month or longer. Of the state-based exchanges, only Maryland, Connecticut and Washington state sent certifications for 2015 although it's not clear how many, Condeluci said.
Per the regulations, these letters must come from the ACA exchanges rather than the IRS, according to Condeluci, and the fact that most didn't send any in 2015 means the system may not have been in place to do so.
Not all companies that fall in the employer mandate category will get assessed for 2015 as the government deemed it a transition year and exempted some employers from the penalty through transition regulations. Some of these transition reprieves continued in 2016, but in 2017 all employers will be subject to the penalty if Congress doesn't act to delay or repeal the tax.
House Ways and Means Committee Chair Kevin Brady (R-Texas) has proposed a packet of bills —so far, only sponsored by Republicans— that would delay all the ACA taxes on insurers and medical-device companies and retroactively repeal the employer mandate for 2015 and onwards. Committee Democrats have signaled bipartisan support for the legislation, but are still negotiating with their GOP counterparts on how to pay for them.
However, even with Democratic support it isn't clear when these bills will make it to the floor as Congress keeps punting crucial legislation and funding priorities.
Brady, who wanted to include them in the end-of-year short-term spending bill, has said they are ready whenever leaders have agreed on a vehicle.
So far, the Trump administration hasn't sent out certified notices to employers for 2017. The Obama administration sent out some for the federally facilitated marketplace, but not all state-based exchanges followed the lead.