Oops - Employer health coverage while in a Marketplace plan, due to employer error

OK, this is my first posting, and it will sound a little crazy.

I was “missed” by my employer for healthcare coverage for a year (Oct 21-Sep 22). I realize this sounds like something I should have caught, but let’s just say I didn’t because I was part-time, and it was a union job, so the contract was actually between the union and the employer.

So, this error was caught (by me) and I have an offer for recompense with two options:

  1. Move forward, and forget the past.
  2. Receive “retroactive” insurance coverage back to the date I was missed.

There are advantages to #2. I have some claims that I can file, and potentially get about $1700 back. Additionally, the employer will then have to pay me my HSA employer contributions, which would be about $1300. So the total to me would be about $4000.

The downside is that I was on an ACA (Marketplace) plan until I was offered insurance a year late. So there would be “retroactively” a one-year period where I was on a marketplace plan with a PTC and also later obtained employer coverage for the same period.

Understand that when I applied for, accepted, and received the ACA plan, I had no other coverage. I cancelled that plan immediately once I did have coverage.

If I accept the retroactive insurance, I gain about $4000, but I think I am looking at a huge tax mess. If I decline the retroactive insurance, I lose the $4000, but do I avoid the tax mess since I did not have employer coverage?

I attempted to settle with a simple cash-out with my employer, but that seems to not be an option. The only options I am offered are the two above.

Has anyone ever faced anything similar, or have guidance?



I don’t have any experience with this situation, but I notice that $1,700 + $1,300 = $3,000, not $4,000. Maybe that changes your decision, maybe not.

Also, when calculating that $1,700 you might get back, are you considering the deductible?

On the ACA plan, did you get a tax subsidy? That’s probably the biggest mess, and taking option 1 may not even avoid the mess, because the subsidy depends on eligibility for an affordable plan through your employer, not whether you actually enroll. I could see the IRS saying you were eligible through work, and so you have to repay the subsidy either way. Now whether you could retroactively cancel the ACA plan, I have no idea.

It might be worth calling a tax attorney to ask. Or maybe you decide it’s not worth all that and just go with door #1.

Thanks for the reply.

Yes, my numbers are wrong, but the $4000 is correct. I left some details out, but that total number is approximately correct, including deductibles.

Yes, on the ACA I took the subsidy. That is my biggest fear in the whole mess, having the IRS find that I had other health insurance, though at the time I did not. That mess could cost about $18,000, if I were found to have taken the subsidy in error.

What a mess. It sounds too ridiculous to be true.

Door #1 and :zipper_mouth_face: seems most prudent.

Was your subsidy $18,000? If so, I’d probably hire an attorney. My worry with door #1 is that the employer will issue you a corrected Form 1095-C, telling the IRS that they offered you insurance for that time period. Then the IRS would probably revoke the subsidy and send you a bill.

The good thing is that there is a max amount of the subsidy that they make you pay back. It seems like it’s in the neighborhood of $400/mo ($4,800 for the year), but don’t quote me on that.

Do you have a union rep you can ask? They may have someone who helps with benefits issues.

Once again, thanks for the input, @ratbert2k !

Yes, you are seeing it the same as I am. Yes, my subsidy was $18,000 (I am a semi-retired educator, and no longer a high earner).

I actually initiated the union rep idea before you wrote that. Hopefully this week I will be able to have a meeting with the employer rep and the union rep, and maybe we can work out something I have not thought of.

Thank you!