Legally Speaking: Affordable Care Act Deadines Near
Three important deadlines are approaching for certain aspects of the Patient Protection and Affordable Care Act (PPACA), also known as the Affordable Care Act (ACA). The following
article discusses these 3 deadlines, whom they apply to, and the necessary forms and reporting information
employers will need.
1. Health-Care Reform Reporting
There are 3 main components or pieces to health-care reform: 1) the individual mandate; 2) the employer-shared responsibility provisions—also called the play-or-pay rules; and 3)
the health-care exchanges or marketplaces.
The individual mandate requires most people to have health coverage or pay a penalty. The employer-shared responsibility or play-or-pay rules require large employers to offer full-time
employees quality/affordable health coverage or pay a penalty. The health-care exchanges or marketplaces
are where people can go to get health coverage. Individuals may, depending on their household income, be eligible for government subsidies to help pay for their health coverage through
the exchanges or marketplaces.
Sections 6055 and 6056 of the Internal Revenue Code obligate most employers to provide certain information to the government and the employees. The government will use the information
to determine which individuals are eligible for subsidies under the exchanges or marketplaces and whether
the employer owes a penalty under the employer-shared responsibility provision or play-or-pay rules. The employees will use the information when they complete their personal tax returns
(i.e., Form 1040s).
The Internal Revenue Service (IRS) has released, in draft format, the forms (with the accompanying instructions) that employers have to complete to comply with these reporting
requirements. There are 4 forms. The employer’s size and whether the employer’s group health plan is insured or
self-funded dictate which forms and what sections of the forms the employer has to complete.
Employers may, but are not required to, report data for 2014. If they choose to report this information, it will be due early in 2015. It is doubtful that many employers will report
2014 information. Employers must, however, start gathering the information beginning January 1, 2015, and will
have to submit the forms to the IRS and provide the information to the employees early in 2016. The following is a brief summary of the rules.
Small Employer—Fully Insured Health Plan
If the employer has fewer than 50 full-time (i.e., employees working 30 hours or more per week) and full-time equivalent employees, and the employer sponsors a fully insured health
plan, the employer need not prepare and file any reports with the IRS or distribute anything to the employees.
Small Employer—Self-Funded Health Plan
If the employer has fewer than 50 full-time (i.e., employees working 30 hours or more per week) and full-time equivalent employees, but sponsors a self-funded health plan, then the
employer has to complete IRS Forms 1094-B and 1095-B, submit both forms to the IRS, and provide a copy of Form
1095-B to the employees.
Large Employer—Fully Insured Health Plan
If the employer has at least 50 full-time (i.e., employees working 30 hours or more per week) and full-time equivalent employees, and sponsors a fully insured health plan, the employer
has to complete only the top 2 parts of IRS Forms 1094-C plus Form 1095-C, submit both forms to the IRS,
and provide the employees with a copy of Form 1095-C.
Large Employer—Self-Funded Health Plan
If the employer has at least 50 full-time (i.e., employees working 30 hours or more per week) and full-time equivalent employees, and sponsors a self-funded health plan, the employer
has to complete all 3 parts of IRS Forms 1094-C plus Form 1095-C, submit both forms to the IRS, and provide
the employees a copy of Form 1095-C.
Following are the links to drafts of the 4 forms and the instructions. It is important to determine which forms you have to complete and begin gathering the data starting January 1,
- IRS Form 1094-B: tinyurl.com/m9vbkgt
- IRS Form 1094-C: tinyurl.com/m7bm354
- IRS Form 1094-B and 1095-B: tinyurl.com/oynkf5z
- IRS Form 1095-B: tinyurl.com/lzdrn4w
- IRS Form 1095-C: tinyurl.com/ns6t7cy
- IRS Form 1094-C and 1095-C: tinyurl.com/qhas5os
There are special transitional rules that provide simplified reporting methods for the 2015 calendar year. However, now is the time to start preparing for the reporting requirements.
2. Health Plan Identifier (HPID)
To help streamline the U.S. health system, which can be complicated, group health plans will have to obtain and use a health-plan identifier, or HPID. The HPID is a uniform
identification number health plans will use to receive and transmit data. If the employer sponsors a fully-insured
health plan, the insurance carrier will get the HPID. However, if the employer sponsors a self-funded health plan, the employer will have to get the HPID.
If the self-funded health plan is considered a large plan, the due date to register and get the HPID is November 5, 2014. The due date for a small self-funded health plan is November
5, 2015. A self-funded health plan is considered large for these purposes if the self-funded health plan paid
at least $5 million in claims during the previous calendar year.
The following is the government’s website devoted to getting the HPID. This site contains educational material including videos on how to get the HPID.
- Health Plan Identifier Information: tinyurl.com/kpf5ke7
If you are sponsoring a self-funded health plan, now is the time to contact your third-party administrator to start the process of getting your HPID.
3. Transitional Reinsurance Fee
As previously mentioned, one of the main components of health-care reform is the marketplaces or exchanges where individuals can go to get health coverage. It is anticipated that the
carriers participating in these exchanges or marketplaces will experience adverse selection. In other words,
initially there will be a lot of sick and unhealthy people signing up for coverage under the exchanges or marketplaces, and their premiums probably will not cover all the claims.
As a result, all group health plans have to pay a transitional reinsurance fee to help stabilize the premiums for the products being offered through the health-care exchanges or
marketplaces. In short, the transitional reinsurance fee is designed to help compensate the carriers participating
in the marketplaces or exchanges. The reinsurance fee is only in place for 2014, 2015, and 2016. The annual rate for 2014 is $63 per person covered under the plan; and for 2015, the
annual rate per person is $44. The rates have not been released for 2016.
In the case of a fully insured health plan, the carrier will pay the reinsurance fee but, not surprisingly, the fee has been built into the premiums. In the case of a self-funded
health plan, the employer has to report and pay the reinsurance fee. The employer has to report the number of
people participating in the self-funded health plan to the government by November 15, 2014.
The government will then invoice the employer for the transitional reinsurance fee. The fee has to be paid electronically and can be paid in either 1 or 2 installments. If the employer
wants to pay the entire amount in one installment, the payment of $63 per person is due January 15, 2015.
If the employer wants to pay the fee in 2 payments, the first payment of $52.50 per person is due January 15, 2015, and the second installment of $10.50 per person will be due November
15, 2015. Here is the link to the government’s webpage listing the transitional reinsurance fee rules:
- Transitional Reinsurance Fee Rules: tinyurl.com/l5kmz6u
The government is still in the process of developing the reporting forms, but if you sponsor a self-funded health plan, now is the time to start gathering the information. As a final
note, the IRS has ruled the transitional reinsurance fee is tax deductible, and the Department of Labor has
ruled that employers can require the employees to pay some or all of the transitional reinsurance fee without violating the Employment Retirement Income Security Act (ERISA).