Q. I’ve heard that If I have access to an employer health plan but decline it and go through the exchange instead, I can’t get a premium subsidy. But how would the exchange or the IRS know whether I had access to an employer plan?
A. They will know — they don’t leave this to the honor system. There’s confusion about how this works, and some people may try to go around the law and get a subsidy even though they have access to an employer plan that provides minimum value and is considered affordable (meaning just the employee’s portion of the premium isn’t more than 9.86 percent of household income in 2019).
When you enroll through the exchange, the application asks if you have access to an affordable, minimum value, employer plan. It’s possible to provide a false answer and get a subsidy as a result. And to be clear, if the plan your employer is offering is not considered affordable and/or does not provide minimum value, then you would be eligible for a premium subsidy if you meet all of the other eligibility rules.
But assuming the plan your employer offers does provide minimum value and does meet the definition of affordable (even if it’s not affordable for your family members), the IRS will catch that when your employer reports coverage offers on Form 1095-C. Employers use Form 1095-C to report whether coverage was offered, even if the coverage was declined (1095-C instructions here).
Premium subsidies must be reconciled (and excess subsidy amounts must be paid back, in part or in full) when recipients file their taxes. But if applicants lie to the exchange in order to receive a subsidy, it’s possible the IRS may view that as fraud, which could come with steeper penalties than just having to repay the subsidies.
Be honest when applying for subsidies. Doing otherwise will catch up with you at tax time.
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.