Time to get serious about the Affordable Care Act’s employer reporting requirements
The Affordable Care Act (ACA) has consumed us for the last four and a half years. As employers, we have spent so much time trying to figure out what the ACA requires, trying to hit the government’s moving regulatory targets, and trying to figure out how we are going to pay for all of this. For the last few years in particular, most of our focus has been on the so-called “play-or-pay” rules, which give large employers a choice between (a) offering full-time employees certain health coverage, or (b) paying certain penalties. We have spent hours and lots of money identifying our full-time employees so that when January 1, 2015 gets here, we know to whom we must offer health coverage.
Countdown to the new year
The new reporting requirements help the Internal Revenue Service enforce various tax provisions of the ACA. At the end of August 2014, the IRS finally issued the proposed instructions for the reporting forms, and even today as I write this, the IRS issued updated questions and answers regarding the reporting rules. While those rules remain somewhat in flux, we have no time to waste – because beginning January 2015, you will need to have the systems in place to capture the data necessary to comply with these complex reporting rules on a month-by-month basis.
There are two separate reporting requirements: (1) individual mandate reporting and (2) employer mandate reporting. Both reporting requirements become effective January 1, 2015.
Individual mandate reporting
Why? The purpose of the individual mandate reporting is to provide the IRS and individuals with information regarding “minimum essential coverage” (MEC) and whether an individual satisfied the individual mandate (to have coverage or pay a penalty) for the preceding calendar year. Insurance companies who issue individual and group health insurance will be required to comply with the individual mandate reporting requirements, as will employers who sponsor self-funded health plans (even those private employers with less than 50 full-time equivalents and governmental employers).
When? The reporting will basically require a two-step process: (1) reporting to the employee by January 31 of the following year; and (2) reporting to the IRS by March 31 of the following year (or February 28 if filing by paper). For example, for the 2015 calendar year, an employer who has a self-funded health plan will be required to report certain information to each employee by January 31, 2016. That same employer will be required to report certain information to the IRS by March 31, 2016.
An employer is not required to report information for every welfare benefit that the employer provides. For example, an employer who sponsors HIPAA-excepted self-funded coverage that is not minimum essential coverage (e.g., an onsite medical clinic) is not required to report such coverage.
What? A self-funded employer who is considered a large employer (50 or more full-time equivalents) will report on Form 1094-C and Form 1095-C, which were just released in proposed form in late July. Reporting entities who are not large employers (e.g., insurance companies and smaller self-funded employers) will report using Form 1094-B and Form 1095-B. The information reported will include:
- Name, address, and employer identification number of the reporting entity;
- Name, address, and Social Security number (or a date of birth if a SSN is not available), of the “responsible individual”;
- Name, address, and SSN (or a date of birth is a SSN is not available) of each individual who is covered under the policy or program
- Months during the calendar year when the individual was covered;
- For insured group health plans – name, address, and employer identification number of the employer sponsoring the plan; and
- For insured group health plans – whether coverage is a qualified health plan enrolled through the SHOP exchange and the SHOP’s unique identifier.
Because this reporting requires the reporting entity to report the SSN of each individual who is covered under the policy or program, many self-funded employers who will be required to do this reporting will need to take steps – now – to track down the SSNs of their employees’ dependents. There is a step-by-step process that a reporting entity must follow to satisfy its obligation to track down this information.
Individual Statements. In addition to the reporting to the IRS as mentioned above, a reporting entity will also be required to furnish a statement – with the same information that is reported to the IRS – to the “responsible individual,” which includes the primary insured, the employee, or the former employee. Note that there is no requirement to provide statements to beneficiaries or dependents (such as spouses or covered adult children).
Why? The purpose of the employer reporting requirement is to help the IRS determine which large employers are subject to play-or-pay penalties and identify which individuals are eligible for federal subsidies through a marketplace exchange.
When? Just like the individual mandate reporting described above, the employer mandate reporting will be a two-step process: (1) reporting to the employee by January 31 of the following year; and (2) reporting to the IRS by March 31 of the following year (or February 28 if filing by paper). For example, for the 2015 calendar year, a large employer will be required to report certain information to each employee by January 31, 2016. That same employer will be required to report certain information to the IRS by March 31, 2016.
What? An employer who is considered a large employer (50 or more full-time equivalents) will report on Form 1094-C and Form 1095-C. Please note that large employers who are self-funded are subject to both (a) the required individual mandate reporting (described above) and (b) the employer mandate reporting. Those large employers will report for both at the same time on the same forms. The information reported will include:
- Name, address, and employer identification number of the employer;
- Name and telephone number of the employer’s contact person;
- Calendar year for which the information is reported;
- Certification as to whether the employer offered its full-time employees and their dependents the opportunity to enroll in minimum essential coverage, by calendar month;
- The months during the calendar year for which minimum essential coverage under the plan was available;
- Each full-time employee’s share of the lowest cost monthly premium (self-only) for coverage providing minimum value offered to that full-time employee under an eligible employer-sponsored plan, by calendar month;
- The number of full-time employees for each month during the calendar year;
- The name, address, and SSN of each full-time employee (not spouse or dependent) during the calendar year and the months, if any, during which the employee was covered under the plan; and
- Any other information prescribed by forms or instructions.
Certain other information will be required through indicator codes, including:
- Whether coverage was not offered to an employee during certain months because of a permissible waiting period;
- Information as to whether the coverage provides minimum value, and whether the employee had the opportunity to enroll his or her spouse;
- Total number of employees by calendar month.
As you move forward with your overall ACA compliance strategy, you should consider devoting an appropriate amount of time – now – to complying with these reporting requirements. The information you will need to do the reporting will likely be housed in different departments within different databases in your organization. Even though reporting will first be required in early 2016, you will need to start capturing the needed data beginning in January 2015. Thus, now really is the time to be working on a plan.