Tag Archives: Employer Mandate

5 Ways the Affordable Care Act Affects Small Businesses

Small Businesses have been cited by the White House as the ‘backbone’ of the United States Economy. That backbone of 28 million small employers saw dramatic changes  October 1, when the Health Insurance Exchanges opened, giving way to a new era of Health Care in the United States. So how exactly will the Affordable Care Act, which takes full effect on January 1, 2014 affect the ‘backbone’ of the US Economy? Here are 5 ways America’s small businesses will be affected by ‘Obamacare.’ health care benefits

Health Insurance

First and foremost, the Affordable Care Act provides for every single US citizen to purchase Health Insurance of some form or another come January 1, or else face hefty fines. This is the first step in what is expected to be a long, long road to nationwide coverage, along which businesses, big and small, will have a major role to play.

Come January, big businesses (50 employees or more) will be legally obliged to provide health insurance or pay a tax of $2,000 per employee (for all but the first 30 employees) starting January 2015. Smaller businesses (less than 50 employees) will also have to provide health insurance but will not be subject to fines, provided their employees get tax credits through an exchange. For small businesses with less than 25 employees, a tax credit of 35% will be made available to contribute towards health insurance provision.

Workplace Wellness

The Affordable Care Act will also create new incentives promoting workplace wellness programs, encouraging employers to take greater interest and more opportunities to support the health and well-being of employees. Funding will be provided as part of this preventative measure which has already been embraced by many businesses nationwide.

A study titled ‘Employee Benefits: Today and Beyond’ which surveyed US businesses found that: “almost half of employers (44%) are already increasing the use of wellness programs to improve the health of employees. Among these companies that have already implemented this approach, 33% have been very successful in achieving their desired cost savings.”

The Affordable Care Act will allow Businesses with workplace wellness programs, effective after 1, 2014, an tax credit increase of up to 20%, and a further 10% of the cost of health coverage if programs are designed to prevent or reduce tobacco use.

New Tax Credits

As mentioned above, one of the key factors in the implementation of the Affordable Care Act is the introduction of new tax credits, designed to help make Health Insurance readily accessible to US citizens. This includes tax credits for Businesses, aimed at helping employers provide coverage for employees.

The small business tax credit, for example aims to help businesses with less than 50 employees afford the cost of healthcare coverage. The Affordable Care Act aims to raise this tax credit to 35% for by 2015 for businesses that purchase coverage through the SHOP marketplace which opens October,1.

SHOP Marketplaces

Those SHOP (Small Business Health Insurance Options Program) Marketplaces will offer Small Businesses a portal through which to shop for health coverage on a competitive marketplace. These marketplaces include web portals that provide standardized, easy-to-understand information, making comparing and purchasing coverage easier for businesses.

The new SHOP Marketplaces will also allow small groups to pool risks and reduce administrative complexity and subsequently increase their purchasing power while reducing costs.

Employer’s Mandate

All that said and done, the Employer’s Mandate has now been pushed back to 2015, so Businesses will not feel the full effects of the Affordable Care Act for at least another 18 months. Instead, the initial Health Care Reform procedure will be regarded as ‘real-world testing’ ahead of full implementation in 2015. This has caused an increased level of doubt among critics and supporters of how Health Care Reform will take full shape, if at all. Businesses are now in a state of concern thanks to mixed messages. While employers may have initially felt relieved that they would have more time to fully prepare for the introduction of the new legislation, President Obama has hinted that fines could swell for Companies that view the Employer Mandate delay as a let-off.

To conclude, this shroud of uncertainty should prompt employers to consult their Insurance Agents about the Affordable Care Act, its provisions and what it means for their business. The facts are there, it is now up to Businesses to assess the situation and consider what the best Insurance option for them instead of treating the Employer’s Mandate delay as a let-off.

If you are unsure of how the Affordable Care Act will affect your Business, or if you’re unsure of what to look for in the SHOP exchanges, speak to an expert directly for free.

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IRS Guidance on Delay of Employer Mandate Penalties and Reporting Requirements

On July 9, 2013, the Internal Revenue Service (IRS) issued Notice 2013-45 to provide formal guidance on the delay of the Affordable Care Act (ACA) large employer “pay or play” rules and related information reporting requirements. The provisions affected by the delay are:

  • § 4980H employer shared responsibility provisions;
  • § 6055 information reporting requirements for insurers, self-insuring employers and certain other providers of minimum essential coverage; and
  • § 6056 information reporting requirements for applicable large employers.

For 2014, compliance with the information reporting rules is completely optional and the IRS will not assess penalties under the pay or play rules. Both the information reporting and the employer pay or play requirements will be fully effective for 2015.

Information Reporting Requirements

The ACA amended the Internal Revenue Code (Code) to require large employers, health insurance issuers and self-funded plan sponsors to report information about health plan coverage to the IRS so that the federal government can enforce the employer mandate.

Code § 6055 requires annual information reporting by health insurance issuers, self-insuring employers, government agencies and other providers of health coverage. Code § 6056 requires annual information reporting by applicable large employers related to the health coverage that the employer offers (or does not offer) to its full-time employees.

Employer Shared Responsibility Requirements

Under the ACA, large employers that do not offer their full-time employees (and dependents) health coverage that is affordable and provides minimum value may be subject to penalties. The ACA’s employer mandate provisions are also referred to as the employer shared responsibility or pay or play rules.

One-year Implementation Delay

The large employer pay or play rules and related reporting requirements were set to take effect in 2014. However, on July 2, 2013, the Treasury announced that these will be delayed for one year, until 2015. This means that:

  • Information reporting under §§ 6055 and 6056 will be optional for 2014 and no penalties will be applied for failure to comply with these requirements for 2014; and
  • No employer shared responsibility payments will be assessed for 2014.

However, both the information reporting and the employer pay or play requirements will be fully effective for 2015.

The IRS issued Notice 2013-45 to provide more information on the delay.

According to the IRS, the delay of the reporting requirements provides additional time for input from employers and other reporting entities in an effort to simplify these requirements, consistent with effective implementation of the ACA. This delay is also intended to provide employers, insurers and other providers of minimum essential coverage time to adapt their health coverage and reporting systems.

The delay of the employer mandate penalties was required because of issues related to the reporting requirements. Because the reporting rules were delayed, the Treasury believed it would be nearly impossible to determine which employers owed penalties under the shared responsibility provisions.

The pay or play regulations issued earlier this year left many unanswered questions for employers. The IRS highlighted several areas where it would be issuing more guidance. Presumably, the additional time will give the IRS and Treasury the opportunity to provide more comprehensive guidance on implementing these requirements.

Effect on Other ACA Provisions

The delay does not affect any other provision of the ACA, including individuals’ access to premium tax credits for coverages through an Exchange and the individual mandate.

Individuals will continue to be eligible for the premium tax credit to purchase coverage through an Exchange as long as they meet the eligibility requirements (for example, their household income is within a specified range and they are not eligible for other minimum essential coverage).

Future Guidance

Proposed rules for the information reporting provisions are expected to be published this summer. The proposed rules will reflect the fact that transition relief will be provided for the information reporting requirements.

It is still unclear how the new deadline will impact guidance that has already been issued, such as the transition relief for non-calendar year plans and the optional safe harbor for determining full-time status. Future guidance may affect these and other rules under the ACA.

What this Means for Employers

The Obama Administration’s decision to delay the employer mandate penalties and related reporting requirements will have a significant effect on many employers. See below for an overview of the ACA provisions that are affected by the delay, the provisions that are not affected by the delay and steps that employers are encouraged to take in 2014.

For 2014, the IRS is encouraging employers to voluntarily:

  • Comply with the information reporting requirements once the IRS issues information reporting rules (which are expected this summer)
  • Maintain or expand health coverage to prepare for when the employer pay or play rules become effective in 2015.

         Delayed                                                                              Not Delayed

Information Reporting Requirements

The following employers will not have to report on coverage they provide:

Pay or Play Requirements

Employers will not be required to:


Current Provisions

Future Provisions

Prohibition on pre-existing condition exclusions (PCEs) for children

Subsidies for low-income individuals for Exchange coverage

Large employers with at least 50 full-time employees, including full-time equivalents (FTEs) Consider whether they employ on average 50 or more full-time employees, including FTEs, on business days during the previous calendar year

Small business tax credit

Individual mandate

Appeals process and external review rules

Establishment of Exchanges

Lifetime limits prohibited

Limits on cost-sharing

Employers with self-insured health plans Count employees’ hours to determine whether they average 30 or more hours per week

Required coverage of preventive care services

New requirements for wellness programs

Patient protections

Annual limits prohibited

Offer minimum essential coverage to substantially all full-time employees and dependents

Over-the-counter drug reimbursement limits

Employee notice of Exchanges

Rescissions prohibition

Rating restrictions

Offer coverage to employees who average 30 or more hours per week

PCORI fees

Health insurance provider fee and reinsurance fee

Health FSA limits

Guaranteed issue and renewability

Offer coverage that is of minimum value

Additional Medicare tax for high-wage earners

90-day waiting period limit

Offer coverage that is affordable

Uniform summary of benefits and coverage

Comprehensive benefits coverage

W-2 reporting

Prohibition on all PCEs

Dependent coverage up to age 26

Coverage for clinical trial participants

Medical loss ratio rules

Cadillac tax

Increased tax on withdrawals from HSAs and Archer MSAs

Automatic enrollment for employers with 200+ employees and nondiscrimination rules for fully-insured plans (effective dates TBD, but not affected by this delay)

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Reporting Requirements for Employers and Health Plans

The Affordable Care Act (ACA) created a number of federal reporting requirements for employers and health plans. The additional reporting (in addition to current W-2 reporting) is intended to promote transparency with respect to health plan coverage and costs. It will also provide the government with information to administer other ACA mandates, such as the large employer shared responsibility penalty and the individual mandate.


  • Large employer health coverage reporting (Code § 6056)
  • Reporting of health coverage by health insurance issuers and sponsors of self-insured plans (Code § 6055)
  • Transparency in coverage reporting and cost-sharing disclosures
  • Quality of care reporting

It is expected that federal agencies will issue more guidance on the new reporting requirements in the future. The Department of the Treasury recently announced that it is considering ways to simplify the new reporting requirements consistent with the ACA, particularly the reporting required under Internal Revenue Code (Code) sections 6055 and 6056, and that it expects to issue more guidance later this summer.

Texas Associates Insurors will continue to monitor health care reform developments and will provide updated information when it becomes available.

Form W-2 Reporting – currently effective

The ACA requires employers to report the aggregate cost of employer-sponsored group health plan coverage on their employees’ Forms W-2. The purpose of the Form W-2 reporting requirement is to provide information to employees regarding how much their health coverage costs.

In general, all employers that provide “applicable employer-sponsored coverage” must comply with the Form W-2 reporting requirement. Applicable employer-sponsored coverage is, with respect to an employee, coverage under any group health plan made available to the employee by the employer which is excludable from the employee’s gross income under Code section 106.

The Form W-2 reporting requirement is optional for small employers for 2012 and 2013. Small employers will continue to be exempt from the reporting requirement for later years, unless and until the IRS issues further guidance. An employer is considered a small employer if it had to file fewer than 250 Forms W-2 for the prior calendar year.

Large employers (those that file 250 or more Forms W-2) were required to comply with the reporting requirement beginning in 2012 for the Forms W-2 that were due by the end of January 2013.

Large Employer Health Coverage Reporting (Code § 6056) – Delayed until 2015

Large employers subject to the ACA’s shared responsibility provisions must file a return with the IRS that reports the terms and conditions of the health care coverage provided to the employer’s full-time employees for the calendar year. Related statements must also be provided to employees. The effective date for this reporting requirement has been delayed for one year, until 2015. Returns will be due in 2016 for coverage provided in 2015.

An employer qualifies as a “large employer” under the ACA’s shared responsibility provisions if it employed on average at least 50 full-time employees, including full-time equivalents (FTEs) on business days during the preceding calendar year.

The IRS will use the information that employers report to verify employer-sponsored coverage and administer the ACA’s shared responsibility provisions for large employers. The ACA’s shared responsibility provisions impose penalties on large employers that do not offer affordable, minimum value coverage to their full-time employees and dependents. The ACA’s employer penalties were set to take effect on Jan. 1, 2014, but have been delayed until 2015.

The large employer’s return must include the following information:

  • The employer’s name and employer identification number (EIN);
  • The date the return is filed;
  • A certification of whether the employer offers its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan;
  • The number of full-time employees for each month during the calendar year;
  • The name, address and taxpayer identification number (TIN) of each full-time employee employed by the employer during the calendar year and the months (if any) during which the employee and any dependents were covered under the eligible employer-sponsored plan during the calendar year; and
  • Any other information required by the IRS.

Most employer-sponsored health plans will qualify as minimum essential coverage. The ACA broadly defines “minimum essential coverage” to include both insured and self-insured group health plans, as well as plans with grandfathered status under the ACA. However, minimum essential coverage does not include specialized coverage, such as coverage only for vision care or dental care, workers’ compensation, disability policies or coverage only for a specific disease or condition.

In addition, large employers that offer the opportunity to enroll in minimum essential coverage must report:

  • The duration of any waiting period with respect to the coverage;
  • The months during the calendar year when coverage under the plan was available;
  • The monthly premium for the lowest-cost option in each enrollment category under the plan; and
  • The employer’s share of the total allowed costs of benefits provided under the plan.

Large employers must also provide each full-time employee with a written statement that includes the information relating to that employee (and dependents) that is required to be reported on the IRS return. The statement must be provided to full-time employees by Jan. 31 following the calendar year for which the information was required to be reported to the IRS.

In Notice 2012-33, the IRS requested comments on how to implement this employer reporting requirement. It is expected that future guidance will address how to coordinate this reporting requirement with similar ones, such as the return required under Code § 6055, to minimize duplication. For example, under the ACA, the IRS may allow a large employer with an insured health plan to agree with the issuer that issuer will include the information required under Code § 6056 with the return and statement provided by the issuer under Code § 6055.

Reporting of Health Coverage for issuers and self-insured plans (Code § 6055) – delayed until 2015

The ACA requires every health insurance issuer, sponsor of a self-insured health plan, government agency that administers government-sponsored health insurance programs and any other entity that provides minimum essential coverage to file an annual return with the IRS reporting information for each individual who is provided with this coverage. Related statements must also be provided to individuals.

The effective date for this reporting requirement has been delayed for one year, until 2015. Returns will be due in 2016 for coverage provided in 2015.

For employers with insured group health plans, it is anticipated that future IRS regulations will make the health insurance issuer, and not the employer, responsible for this health coverage reporting.

The IRS will use the information from the returns to implement the ACA’s individual mandate (that is, the requirement that individuals obtain acceptable health insurance coverage for themselves and their family members or pay a penalty). The ACA’s individual mandate goes into effect in 2014.

The return must include the following information:

  • The name, address and TIN of the primary insured and each other individual covered under the policy or plan;
  • The dates each individual was covered under the policy or plan during the calendar year;
  • If the coverage is health insurance coverage, whether the coverage is a qualified health plan (QHP) offered through an Exchange;
  • If the coverage is a QHP offered through an Exchange, the amount of any advance payment of the premium tax credit or of any cost-sharing reduction for each covered individual; and
  • Any other information required by the IRS.

In addition, if health insurance coverage is through an employer’s group health plan, the return must contain the following information:

  • The name, address and EIN of the employer maintaining the plan;
  • The portion of the premium (if any) to be paid by the employer; and
  • Any other information the IRS may require to administer the ACA’s small employer health care tax credit.

The entity required to file the IRS return must also furnish a written statement to each individual listed on the return. The statement must be provided by Jan. 31 following the calendar year for which the information was required to be reported to the IRS.

The IRS may allow for a return or written statement required under this health insurance coverage reporting provision to be coordinated with the reporting requirement for large employers under Code § 6056. In Notice 2012-32, the IRS requested comments on this reporting requirement, including how to coordinate and minimize duplication of ACA reporting.

Transparency in coverage Reporting and cost-sharing disclosures – delayed until at least 2015

The ACA requires health insurance issuers seeking certification of a health plan as a QHP under an Exchange to disclose certain information to the Exchange, Department of Health and Human Services (HHS) and state insurance commissioner. QHP issuers must also make this information available to the public. The information subject to reporting includes, for example, claims payment policies and practices, data on enrollment and disenrollment, data on the number of claims denied, data on rating practices and information on cost-sharing and payments for any out-of-network coverage.

Also, a health plan seeking QHP certification must provide certain cost-sharing disclosures (including deductibles, copayments and coinsurance) to participants upon request. At a minimum, this information must be made available through an Internet website and by other means for individuals without Internet access.

The ACA’s transparency in coverage reporting and cost-sharing disclosure requirements also apply to non-grandfathered group health plans and health insurance issuers offering group or individual coverage outside of an Exchange. The reporting requirements are identical to those for QHPs, except plans and issuers outside of the Exchange are not required to report information to an Exchange.

Because QHP insurers will not have certain required data until the first year of operation, this reporting requirement will go into effect after a QHP has been certified for one benefit year. This reporting requirement will become applicable to other group health plans and insurers no sooner than when the QHP reporting requirement becomes effective.

It is expected that HHS will issue more guidance on this reporting requirement, including how it applies to health plans and issuers offering coverage outside of an Exchange.

Quality of Care Reporting – Effective date To Be Determined

The ACA requires group health plans and health insurance issuers to submit an annual report to HHS regarding plan benefits and provider “reimbursement structures” that may affect the quality of care in certain ways. Grandfathered plans are not subject to the ACA’s “quality of care” reporting requirement.

In general, the report must address whether the plan or coverage:

  • Improves health outcomes through activities such as quality reporting, effective case management, care coordination, chronic disease management, and medication and care compliance initiatives (including the medical homes model);
  • Implements activities to prevent hospital readmissions using a comprehensive discharge program and post-discharge reinforcement;
  • Implements activities to improve patient safety and reduce medical errors through best clinical practices, evidence-based medicine and health information technology; and
  • Implements wellness and health promotion activities.

The annual quality of care reports will be available to the public through an Internet website. This report must also be provided to enrollees under the plan or coverage during each open enrollment period.

The ACA does not include a compliance deadline for the quality of care reporting requirement. The ACA required HHS to issue guidance on this reporting requirement by March 23, 2012 (that is, two years after the ACA’s enactment date). However, HHS has not yet issued this guidance. When this guidance is issued, it will likely specify a compliance deadline for plans and issuers.

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