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The Next PPACA Constitutional Hurdle: Employer Due Process vs. Taxpayer Privacy

HHS and the Department of Treasury have not cleared this hurdle, which may prevent the Department of Treasury from collecting employer shared responsibility excise taxes for failure to provide affordable coverage. Will HHS belatedly step up to resolve this issue, or will we be back in the U.S. Supreme Court?  PPACA Section 1411(e)(4)(B)(iii) requires HHS to send an advance premium tax credit subsidy notice to an employer, explaining that the employer may be assessed a monthly penalty with respect to an employee seeking subsidized coverage, and to provide an appeal process for the employer, whereby HHS must provide access to data used to make the determination, and the employer would have an opportunity to present information for review. PPACA Section 1411(f) requires the Secretaries of HHS, the Treasury, and Homeland Security, along with the Commissioner of Social Security, to establish an appeal process. These advance notices  and appeal process would serve the important function of allowing employees to limit their exposure to liability to repay premium tax credits for which they were not eligible, and allowing employers to limit their exposure to penalties. 

Instead of issuing these notices and requiring this appeal process, HHS announced that it was delaying the process for federal based exchanges, and making the process optional for state based exchanges. In a November 16, 2015 letter to HHS Secretary Sylvia Burwell, Senator Orrin Hatch (R-Utah), chairman of the Senate Finance Committee, threw a red flag on the fact that HHS has still not provided the advance tax credit premium notices that were anticipated in January 2014. His concern is that individuals will be penalized for the fact that HHS failed to timely tell them that they were not eligible for subsidies, based on information that would have been provided by employers if they had received timely notices. 

I have the same concern from an employer perspective: is the Department of Treasury going to demand excise taxes from an employer for not providing affordable coverage to an employee, when HHS and the Department of Treasury failed to timely notify the employer that an employee was seeking a subsidy, tell the employer what dollar amount constituted affordable coverage for that employee, and afford the employer an appeal process?

When the IRS does try to assess these penalties on employers, there is an additional significant constitutional issue that is going to finally receive attention. PPACA Section 1411(i) directed the Secretary of HHS to consult with the Secretary of the Treasury, study administration of employer responsibility, and provide a report to Congress by January 1, 2013 that addressed the procedures and/or legislative changes necessary to:

  • protect the rights of employees to confidentiality of their taxpayer return information and the right to enroll in an exchange health plan if the employer does not provide affordable coverage; while
  • protecting applicable large employers’ rights to adequate due process and access to information necessary to accurately determine any shared responsibility penalty assessed on them.

Has the Secretary of HHS provided that report to Congress, or are these irreconcilable differences? This hurdle could prevent HHS from ever implementing the advance notice and appeal process, and prevent the Department of Treasury from ever assessing any employer shared responsibility excise taxes. Yet current guidance makes no mention of the advance notice and appeal process, and no mention as to how these constitutional problems with the advance notice and assessment process will be resolved. If the Department of Treasury tries to collect employer shared responsibility excise taxes for time periods before these issues are resolved and advance notice is given, we can anticipate a new round of PPACA litigation.

Category: Affordable Care Act