Five Top Questions About the Affordable Care Act
The employer mandate for the Patient Protection and Affordable Care Act (ACA) went into effect for most employers on January 1, but many individuals and some employers are still unclear on how the ACA requirements impact them.
So, is your company required to report? Do small companies have to report? And how do the employer mandate penalties work if an employer does not offer coverage?
Today, we’d like to share five of the most commonly asked questions (and answers) that Wanda Shaw and her team at Insurance Brokers of Georgia field each day.
Question 1: What do we need to know about the ACA employer reporting requirements?
Answer: There are two main reporting purposes for employers who are now required to report health plan information annually to the IRS.
1. The IRS Code Section 6055 reporting requirement is to help the IRS identify which persons have met the law’s individual mandate by showing which employees and dependents are enrolled in group health insurance coverage that meets the law’s minimum essential coverage requirement.
2. The IRS Code Section 6056 reporting is to capture the information regarding employer compliance with the employer shared responsibility requirements, so that the IRS can assess employer penalties, if applicable.
Compliance with the employer reporting requirements was delayed, but will be mandatory for calendar year 2015. Reporting forms covering calendar year 2015 will be due in 2016, but employers subject to these requirements will need to track coverage information throughout 2015 in order to submit accurate forms in 2016.
Question 2: Does it make a difference if a group is a large or small group when determining whether employees are eligible for a subsidy?
Answer: A person is not eligible for a subsidy (in most cases) if they are eligible for coverage through an employer and the employer’s coverage meets the coverage and affordability requirements. The coverage must be 60% minimum value and an employee must not have to pay more than 9.5% of household income for self-only coverage. This prohibition is not tied to group size.
Question 3: How do the employer mandate penalties work if an employer does not offer coverage?
Answer: In 2015, the “no offer” penalty will apply if an employer does not offer coverage to at least 70% of full-time employees and their dependents. The percentage that must be offered coverage to avoid the “no offer” penalty will revert to 95% of employees and dependents in 2016. An employer would owe $2,000/12 x (number of full-time employees – 30) each month if any (as in only one) of the employees get a subsidy from the exchange. The tax forms and procedures an employer would use to remit these payments have not yet been developed by the IRS.
Another change for 2015 is that the penalty will be based on the number of full-time employees less 80 for employers with 100 or more employees. In 2016, this requirement will revert back to the number of full-time employees less 30 and apply to all employers with 50 or more full-time equivalent employees.
Question 4: Do employers between 50 and 99 full-time equivalents need to file a form for employer reporting? If so, which form?
Answer 4: Yes, if they are insured they will need to file the forms regarding their offer of coverage to employees. 1095-C is the form.
Question 5: Do small employers have to report?
Answer 5: Based on the new criteria, it is our estimation that many small employers will not have to report information under either Code Section 6055 (individual mandate) or 6056 (employer mandate), but some will and a group’s status for either employer reporting requirement could change annually. Therefore, it is important for all employer groups and their licensed health insurance agents and brokers to review the group’s employer reporting status carefully each year.
The employer reporting form requirements are not based on the traditional large group/small group employer group health plan size definitions that HIPAA made commonplace. Instead, they are based on new criteria established by the ACA, and the criteria for reporting information applicable to IRS Code Section 6055 and 6056 are different. So all employers, both small and large, must examine the new criteria and determine which, if any, employer reporting requirements are applicable to their group health plan.
The Section 6055 reporting requirements are based on whether or not the employer offers a fully insured group health plan or a self-funded or partially self-funded plan. All employers, regardless of size, that sponsor a self-funded or partially self-funded plan must comply with the reporting requirement, and all fully insured health plan will not be required to file annual reporting forms as a provider of health coverage under Section 6055. Instead, the responsibility for the reporting for fully insured group plans will be borne by the health insurance carrier.
With regard to Section 6056, if an employer is subject to the employer shared responsibility provisions contained in IRS Code Section 4980H, then the employer is also responsible for reporting information under Section 6056 about the coverage it offers to its full-time employees. Most employers that are eligible to purchase coverage in the small group market are not also subject to the ACA’s employer shared responsibility requirements, but some are, particularly if they are part of a larger controlled group or employ a large number of part-time workers. These small employers will be required to report under Section 6056.
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