Information reporting of minimum essential coverage under the Affordable Care Act is like being stuck between a rock and a hard place. On the one hand, insurers and many employer plan sponsors must keep records about their coverage and lives covered for every month of 2015. Details include Social Security numbers (for self-insured plans) and months covered.
On the other hand, insurers and employers have never been asked to report at this level of detail to the IRS, and understandably they are uncertain over the sheer technicality of the task. Note: IRS recently updated its instructions for Forms 1094-B and 1095-B (for insured coverage and small self-insured employers) as well as its instructions for Forms 1094-C and 1095-C (for large employers).
Employers face trouble because they have to figure out which employees require an offer; they may face uncertainty over who was covered and the duration. Large employers must report on full-time employees. Companies with a lot of part-time and variable hour workers and companies in high-turnover industries could have trouble meeting the employer mandate, and these filings will be tests of their success in complying with the ACA duties.
“The employer’s success in [identifying who’s full time and who’s part-time via use of] of measurement and stability periods; their answers to the questions of and whether employees have been offered coverage and whether the coverage is affordable and minimum value will be put to the test in these forms,” says Stacy Barrow, partner at Marathas Barrow & Weatherhead LLP in Boston. “[That’s] because this is how the government will enforce the employer mandate, the individual mandate and how they will administer the premium tax credit program,” he added.
Many Employers File B Series
At a Sept. 22 webinar, IRS officials answered essential questions about the ACA’s reporting duty and summarized some recent guidance. Topics included:
- Why report on MEC? Employers furnish IRS forms to their employees attesting that they were “offered” MEC, so their employees can use the information when filing their taxes and avoid penalties if they enrolled in the coverage they were offered. The paperwork is instrumental in helping the government enforce individual mandate.
- Who does the reporting? Every “provider” of MEC, be they employers or insurers selling policies on health insurance exchanges or on the individual and group markets, must file an annual report with the IRS and to furnish a statement to individuals (insurers file the B-series forms on behalf of their insured health plans).
- What reporting procedures do filers need to know? Individuals get the forms first, on Jan. 31, because individual filers must use the forms they get from their insurers or employer plan sponsors to prove they are covered and do not pay extra taxes for lack of coverage.
- What information is reported? On the Form 1095-B (“Health Coverage”), there are four main categories: the responsible individual who will receive the form and file taxes with it; the employer sponsoring the coverage; the insurer or other coverage provider; and the summary of covered individuals.
- Deadlines: ACA statements about coverage must be furnished to employees Jan. 31, 2016 and to the IRS on either Feb. 29, 2016 (for paper filing), and or March 31, 2016 (for electronic filing).
What Are We Reporting On?
MEC is medical coverage that will satisfy the individual mandate and the employer mandate, provided by:
- Government-sponsored programs. Examples include Medicare, Medicaid, CHIP, Veterans Administration, TRICARE and Peace Corps coverage.
- Employer-sponsored coverage. This includes insured or self-insured health plans, grandfathered plans, retiree coverage and COBRA coverage.
- Individual coverage. Qualified health plans purchased through a state-based health insurance exchange, and coverage purchased on the open market.
- Coverage designated by HHS. An example of this is self-funded student coverage issued by education institutions before Dec. 31, 2014. Thereafter, self-funded student plans will have to seek approval through application to the U.S. Department of Health and Human Services; otherwise they will be considered “other coverage.” (Insured student plans are by definition MEC.)
MEC requires: (1) no annual or lifetime dollar limits on covered essential health benefits; (2) extension of coverage to dependent children to age 26 if they’re offering dependent coverage; (3) no coverage rescissions; (4) no exclusion of people based on preexisting conditions; and (5) coverage for preventive care services.
Note: For large employers to avoid penalties, it behooves them to provide MEC that: (1) is affordable; and (2) has minimum value. IRS recently expanded the definition of “minimum value” to say physician and hospitalization services must be covered. If purchased on an exchange or on the open market, MEC will cover 10 essential health benefits outlined in the law and rules.
What Is Not MEC
Coverage that is comprised only of excepted benefits is not MEC. Employer-sponsored coverage that fails affordability or minimum value tests or offers no benefits for physician and hospitalization services, is MEC but is not “minimum value”; that is, it is not at least as good as a bronze plan available on an exchange.
Supplement and wraparound coverage is usually not MEC. And if a “provider” of coverage gives an employee two policies, then the issuer of the major medical — not the supplemental coverage — would have to report. This includes situations when an employer sponsors major medical coverage and a health reimbursement arrangement. Another non-MEC situation (in which separate employer reporting is not required) is when an employer provides coverage that coordinates with primary Medicare coverage.
Every “provider” of MEC must report. There are exceptions. For example, qualified health plans offered through exchanges are reported by those exchanges. Also, when an individual has two policies and one of those supplements the other, the issuer of supplemental coverage would not have to report.
MEC “providers” (such as employer plan sponsors and insurers) must report all their covered individuals whether those individuals are subject to the individual mandate or not. Employers also may use the B Forms to report coverage for individuals who were not current employees for any month during the applicable calendar year, the IRS officials said.
Who Files?
Insurance companies that issue individual, exchange, small group and large-group insured coverage; entities that issue government-sponsored coverage (such as Medicare and Medicaid); and all self-insured employers must file coverage data to the IRS. “Applicable large employers” (subject to the employer mandate) have to file information regarding all full-time employees about offers of coverage as well.
Large self-insured employers have to carry out combined reporting of the information required under sections 6055 and 6056. They have to file 1095-C to report on employer-provided insurance coverage and offers for each of its full-time employees. They must file Form 1094-C (transmittals) for all of the returns filed for a given calendar year. Section 6055 is about enrollment in coverage, whereas Section 6056 requires reporting for all full-time employees and their offers of coverage, if any. The “B” series of tax forms is mainly for insurers (“providers of coverage”); while the “C” series is for ALEs (to prove compliance with the employer mandate, the officials said.
Form 1095-B
Insurers and some employer sponsored plan sponsors must file the Form 1095-B, which reports health coverage. When a plan is insured, it is filled out by the insurer. Here is the lists of self-funded plan sponsors that have to fill out the form.
- Employer plans
- Multiemployer plans (such as associations, committee, board of trustees)
- MEWA (each participating employer for the employer’s employees)
- Union plans (the employee organization)
- Others: person identified as sponsor or administrator
Four kinds of information have to be included.
- Part 1. The policy holder. This would be the primary name on the coverage; that is, the primary subscriber for insured coverage. Information to be reported includes the name and address of the primary insured. The recipient should be the taxpayer (tax filer) who would be liable under individual mandate. A statement recipient may be a parent on behalf of covered minor children, a primary subscriber for insured coverage, an employee or former employee in the case of employer-sponsored coverage, a uniformed services sponsor for TRICARE, etc. If an SSNis not available after reasonable efforts have been made to collect one, then date of birth can be used. Line 8 is a space where the source of coverage is specified: SHOP coverage; employer-sponsored; government; open market, etc.
- Part 2. The employer sponsor of coverage. The insurer filing the form fills out this section about the employer sponsoring the coverage. Small employers will fill this section out only they get coverage on a small business health options exchange; if a small employer is self-insured, part 2 is left blank. Line 11 is where the employer identification number goes. The employer’s complete mailing address also goes in this section.
- Part 3. The insurer. This section includes name, EIN and complete mailing address; contact phone numbers are included. Line 18 filers will put the telephone number of a contact person who can be reached by agents seeking information. If self-insured, the contact number would belong to somebody in the company.
- Part 4. A summary of covered individuals. This is the most important information on the form, the IRS officials said. The plan sponsor or insurer must list SSNs and months of coverage. The month is reported even if they were covered even one day of that month. Dependents and spouses have to be included in addition to employees. Plan sponsors and insurers can check a “covered all 12 months” box. But sometimes monthly boxes have to be used; for example, when a newborn child is added in the middle of the year or when a spouse is added in the middle of the year, month by month check boxes will be used. If somebody doesn’t have an SSN and the insurer or plan sponsor has made reasonable efforts to collect one to no avail, the filer may enter date of birth.
Form 1094-B
Insurers and plan sponsors transmitting 250 or more identical information returns to the IRS are required to file electronically; if they file fewer than 250, they may file paper 1094 B (transmittal) forms, which must be signed by a company official. Line 9 of the transmittal form tells total number of forms 1095-B submitted with the transmittal to the IRS.
- Statements to employees may be furnished electronically only with express informed consent, unless that person is an expatriate, in which case electronic transmission is allowed without getting express consent first, under new proposed rules.
Click here for information about the ACA’s tax provisions; here for more information on reporting MEC data; here are questions and answers on Section 6055 information reporting.
Forms and Instructions
Form 1094-B http://www.irs.gov/pub/irs-pdf/f1094b.pdf
Form 1095-B http://www.irs.gov/pub/irs-pdf/f1095b.pdf