Health e(fx)’s goal is to help remove the complexities of Affordable Care Act (ACA) compliance so that you are able to focus on the success of your employees and your business.
As open enrollment season begins and the 2016 filing season is rapidly approaching, we want to ensure you remain up-to-date on information regarding the ACA legislation and its impact.
This update includes information on:
- The final release of the 2016 Forms 1094 and 1095-B and C
- Proposed changes to Form 5500 annual return
- ACA nondiscrimination provisions
- San Francisco Health Care Security Ordinance update
- Transitional reinsurance fee due dates
- Medicaid expansion states
The IRS released the final versions of the 2016 Forms 1094/1095-C on Monday October 3, 2016. Final 1094/1095-B and related instructions were released on September 28. All changes are outlined in the instructions for Forms 1094-C and 1095-C.
Key points you need to know about these forms include:
Form completion. Applicable large employers (ALEs) and self-funded employers with greater than 50 full-time or full-time equivalent employees will be required to report and will be subject to pay or pay penalties commencing on January 1, 2016.
- Fully-insured large employers will complete Parts I and II of Form 1095-C.
- Self-funded large employers will complete Parts I, II and III of Form 1095-C.
New and reserved coverage codes. The IRS has updated 1095-C indicator codes with two codes applicable in 2015 (1I and 2I), now “reserved” for 2016. The IRS has also added two new offer of coverage codes relating to contingent spousal coverage offers. Additionally, for 2016, Form 1094-C, line 22, box B is designated “Reserved.” The Qualifying Offer Method Transition Relief is not applicable for 2016.
Reporting of non-employees and surviving dependents under a self-funded program. Use of a 1094-B form will be limited to non-employees/or COBRA beneficiaries who were non-employee status during the entire calendar year. For this purpose, a non-employee includes, for example, a non-employee director, an individual who was a retired employee during the entire year, or a non-employee COBRA beneficiary. COBRA includes former employees who terminated employment during a previous year and enrolled in coverage.
Employer identification number. The employer identification number (EIN) may be truncated on statements that health insurance issuers and carriers provide to taxpayers. It cannot be truncated on statements provided to the IRS.
Multiple MEC plans. The final instructions for completing Forms 1095 and 1094-B include provisions on reporting for individuals with coverage under more than one MEC plan (e.g., a MEC Only plan and Major Medical coverage). If an individual is covered by more than one plan provided by the same employer or insurer that provides minimum essential coverage (supplemental plans), reporting is required only for the plan that is deemed “primary” coverage. If an individual is enrolled for a month in a self-insured group health plan as well as a self-insured health reimbursement arrangement (HRA) provided by the same employer, the employer is required to report only one type of coverage for that individual.
Taxpayer identification on Form 1095 statements. Employers are required to report an individual’s taxpayer identification number (TIN) on Form 1095 statements. The final instructions provided a reference to IRS Publication 1586 (Reasonable Cause Regulations and Requirements for Missing and Incorrect Name/TINs), which clarifies solicitation of employee/dependent and spouse taxpayer identification numbers requirements.
Critical deadlines. In 2016, the IRS will no longer accept “good faith efforts” with regard to filing and form distribution deadlines, accurate reporting, and code calculation.
- Employee statements (Form 1095-C) or non-employee statements are due to employees/non-employees on or before January 31, 2017.
- Generally, you must file Forms 1094-C and 1095-C by February 28 if filing on paper (or March 31 if filing electronically) of the year following the calendar year to which the return relates. For calendar year 2016, Forms 1094-C and 1095-C are required to be filed by February 28, 2017, if filing on paper or March 31, 2017, if filing electronically.
- Filing for extension. If needed, you may file for an automatic 30-day extension by completing Form 8809, Application for Extension of Time to File Information Returns. The form may be submitted on paper, or through the FIRE System either as a fill-in form or an electronic file. No signature or explanation is required for the extension. Form 8809 must be filed on or before the due date of the returns. Under certain hardship conditions, you may apply for an additional 30-day extension. See the instructions for Form 8809 for more information.
- Extensions of time to furnish statement to recipients (Form 1095). You may request an extension of time to furnish the statements to recipients by sending a letter to Internal Revenue Service, Attn: Extension of Time Coordinator, 240 Murall Drive, Mail Stop 4360, Kearneysville, WV 25430. The letter must include (a) filer* name, (b) filer TIN, (c) filer address, (d) type of return, (e) a statement that extension request is for providing statements to recipients, (f) reason for delay, and (g) the signature of the filer* or authorized agent.
Your request must be postmarked by the date on which the statements are due to the recipients (January 1, 2017). If your request for an extension is approved, generally you will be granted a maximum of 30 extra days to furnish the recipient statements.
*For purposes of requesting an extension of time to furnish the statements, the term “filer” means the ALE Member, or the Designated Government Entity, if applicable. NOTE: Extensions on furnishing statements to recipients are not automatic.
- 2016 tax year penalties
- Failure to file correct information return. The penalty for failure to file a correct information return is $260 for each return for which the failure occurs, with the total penalty for a calendar year not to exceed $3,193,000.
- Failure to provide a correct payee statement. The penalty for failure to provide a correct payee statement is $260 for each statement for which the failure occurs, with the total penalty for a calendar year not to exceed $3,193,000.
- Intentional disregard. If there is institutional disregard of the requirement to file the returns and furnish the required statements, special rules apply that increase the per-statement and total penalties.
On July 21, 2016, the Department of Labor (DOL), the Internal Revenue Service (IRS), and the Pension Benefit Guaranty Corporation (PBGC) published proposed rule revisions to the forms and regulations governing the Form 5500 annual reporting process for employee benefit plans.
The Proposed Published Revisions include the following:
All ERISA-covered plans to file Form 5500. All ERISA-covered plans that provide group health benefits, regardless of size, would be required to file a Form 5500, including the new Schedule J (Group Health Plan Information) and any other applicable schedules.
- The proposed changes would eliminate the current filing exemption for small group health plans, and instead, small, fully insured plans would be required to answer a limited number of questions on the Form 5500 and Schedule J.
- The proposed Schedule J would report information about group health plan operations and ERISA compliance, plus compliance with certain provisions of the Affordable Care Act (ACA).
Conversion of data for analysis. The proposed revisions include converting more components of the Form 5500 into data that is organized for datamining and analytic purposes.
Reporting changes. Additional reporting changes were proposed.
- Improved reporting on alternative financial investments, hard-to-value assets and investments through collective investment channels.
- Additional reporting on service provider relationships, benefit plan operations, and financial management of plans.
- Simplified reporting of plan service provider fees and expenses.
- Updating disclosure requirements on Schedule C (Service Provider Information) with the DOL’s service provider fee disclosure requirements under Section 408(b)(2) of ERISA. Most of the proposed changes are expected to simplify the reporting requirements for indirect compensation.
Elimination of alternative “eligible indirect compensation” reporting rules. The proposal also would eliminate the alternative reporting rules for “eligible indirect compensation.” This includes finder’s fees, soft dollar revenue, float and brokerage commissions. This would more closely align the actual compensation required to be reported on Schedule C with the expected compensation included in the Section 408(b)(2) disclosures provided by plan service providers.
If finalized, the changes would apply for plan years beginning on or after January 1, 2019. Employers are encouraged to monitor these proposed changes and consider the impacts if they are finalized.
The Office for Civil Rights (OCR) of the US Department of Health and Human Services (HHS) published final regulations implementing Section 1557 of the Affordable Care Act (ACA) in May of 2016. Section 1557 prohibits discrimination based on race, color, national origin, sex, or disability in health activities and programs that receive federal funding or assistance.
The scope of the final regulation is wide and impacts health care providers (including pharmacies and medical clinics), health insurance issuers, and some group health plans. Employers sponsoring group health plans must comply with the following key provisions:
Discrimination is prohibited as it relates to both health plan design and administration. This means a health plan or entity that is subject to the regulations may not: deny or limit health coverage, deny a claim, employ discriminatory marketing or benefit designs, or impose additional cost sharing on the basis of an individual’s race, color, national origin, sex, age, or disability. Coverage for medically appropriate health services must be made available on the same terms and conditions for all individuals.
Sex stereotyping and gender identity. In the wake of this publication, much attention has been focused on the prohibition on discrimination on the basis of sex stereotyping and gender identity. Specifically, the final regulations indicate that a health plan subject to the regulations may not:
- Deny benefits to a participant based on the participant’s sex or gender identity
- Categorically exclude or limit health services related to gender transition
- Deny or limit benefits for medically appropriate sex-specific health care based on the covered individual’s gender identity (e.g., when a plan covers medically appropriate pelvic exams, coverage cannot be denied for an individual for whom a pelvic exam is medically appropriate because the individual either identifies as a transgender male or is enrolled in the health plan as a man).
In summary, coverage for medically appropriate health services must be made available on the same terms and conditions for all individuals, regardless of sex assigned at birth, gender identity, or recorded gender. In addition, categorical exclusion of coverage for all health services or care related to gender dysphoria or associated with a gender transition is prohibited. The final regulations explicitly state that the nondiscrimination rule does not require coverage for all medically necessary health services related to gender transition regardless of the scope of coverage for other conditions. Furthermore, group health plans may use reasonable medical-management techniques for covered services related to gender transition. However, health plans are expected to provide a neutral, unbiased reason for any denial or limitation.
Final regulations. The final regulations are generally effective July 18, 2016. However, if the regulations require changes to health plan design (e.g., cost sharing, covered benefits, benefit limitations or restrictions) they are not effective until the first day of the first plan year beginning on or after January 1, 2017.
As of January 1, 2017, the health care expenditure rates will increase under the San Francisco Health Care Security Ordinance (HCSO). Rates will increase to $2.64 per hour for large businesses (100 or more employees total), and $1.76 per hour for medium-sized businesses (20 to 99 employees total).
The San Francisco HCSO provides qualified individuals who work in San Francisco with affordable health care through a Health Access Program. To participate, workers must be qualified as an employee entitled to minimum wage. They also must have been employed for more than 90 days and regularly work at least eight hours per week. The HCSO requires covered employers to spend a minimum amount of money each quarter on behalf of their covered employees’ health care.
The definition of a covered employer is determined when an employer meets the following three conditions for any quarter of a calendar year:
- Employs one or more workers within the geographic boundaries of San Francisco;
- Is a for-profit business with 20 or more persons performing work,** or a nonprofit organization with 50 or more persons performing work;** and
- Is required to obtain a valid San Francisco business registration certificate.
**For purposes of determining employer size, employees are counted regardless of whether they live in San Francisco or not.
Affordable Care Act’s 2016 Transitional Reinsurance Fee submissions: filing deadlines are fast approaching
The ACA created a three-year transitional reinsurance program that reimburses health insurers in the individual market (both inside and outside the Marketplace/Exchanges) for losses they sustain when they enroll individuals who are higher-cost claimants. Health insurers and group health plans must contribute to this program by paying fees over a three-year period. 2016 is the third and final year for which these fees will be assessed.
The submission required for this final year’s fees must be filed by November 15, 2016, by going to www.pay.gov. (the process is unchanged). The required form for submitting the fees, 2016 ACA Transitional Reinsurance Program Annual Enrollment and Contributions Submission Form, has been recently added to the www.pay.gov website.
Reinsurance fees are assessed on plans that provide major medical coverage. The fees are paid on a per-person basis for each “covered life” under the plan, including dependents. For 2016, the fees are $27 per covered life, with payments due in 2017. The fees are determined based on the plan’s enrollment count during the first nine calendar months of the year (2016), regardless of the plan’s actual plan year.
Enrollment counts for the first nine months of 2016 must be submitted by November 15, 2016. The form that contributing entities are required to submit with their enrollment counts must also include the date(s) in 2017 that the payments will be made, as one or two automatic debits from the entity’s designated bank account.
Self-insured plans that are self-administered are exempt (unchanged from 2015) and are not required to pay the fees for 2016. To be regarded as self-administered, a self-insured plan must retain responsibility for claims processing, claims adjudication (including internal appeals) and enrollment. Exceptions permit a self-insured group health plan to use a third-party administrator (TPA) in the following limited circumstances, and still avoid paying the fee if:
- Use of a TPA is only for pharmacy benefits or for certain ancillary benefits (e.g., limited-scope dental/vision).
- Use of a TPA is for a de minimis amount of services (up to 5 percent).
- Use of a TPA is to obtain or lease a provider network, and obtain provider network development, claims re-pricing, and similar services.
Plan sponsors that are eligible for the self-administered exemption do not need to take any action to claim exemption. In other words, if you are exempt, no filing or submission is required for 2016 fees.
Supporting documentation is only required for form submissions with four or more contributing entities. If supporting documentation is required, the 2016 Supporting Documentation Job Aid is a macro-enabled Excel file on which Reporting Entity and Contributing Entity information is reported. The tool creates the necessary .csv file. There is an associated 2016 Supporting Documentation Job Aid Manual for guidance on the process of using the Job Aid. Both are available to download on the REGTAP and the CCIIO webpages.
As part of the ACA’s broader effort to ensure health insurance coverage for all U.S. residents, the federal government will pay to expand Medicaid eligibility in every state that chooses this option. From 2014 to 2017, the federal government will pay 100% of the difference between a state’s current Medicaid eligibility level and the ACA minimum. Federal contributions to the expansion will drop to 95% in 2017 and remain at 90% after 2020, according to the law.
Thirty-two states, including Washington, D.C., have chosen to expand Medicaid. The map below identifies those expansion states (indicated by dark blue shading). Health e(fx) is tracking these states and the eligibility levels for ACA minimums to ensure affordability is accurately calculated for each employee at the mandated level for each U.S. state of residence.