Earlier this year, rules were issued expanding health reimbursement arrangements (HRAs) in the individual market. HRAs are employer-funded accounts that employees may use to pay for medical expenses, including health insurance premiums. It was clarified that employees may use HRA amounts to purchase individual insurance policies outside of the workplace. These “individual coverage HRAs” allows employees to use tax-free employer dollars to buy individual health insurance. HRA funds are tax free to employers and employees, which means individual HRAs give the same tax benefits as traditional employer-sponsored group health plans.
The Affordable Care Act requires an applicable large employer to offer health coverage to its full-time employees or pay a tax penalty. A full-time employee is one who works 30 or more hours per week (130 or more hours per month). There are two methods for determining full-time status: the monthly measurement method and the look-back measurement method.
The open enrollment period for the Affordable Care Act Marketplace runs from November 1, 2019 through December 15, 2019 for coverage beginning January 1, 2020.
The IRS released an updated Affordable Care Act (ACA) Information Returns (AIR) submission Composition and Reference Guide. The new Guide provides guidance to 1094 form transmitters about composing and successfully transmitting compliant submissions to the IRS. The Guide addresses details about Forms 1094/1095-B and Forms 1094/1095-C by transmitters to the IRS. It sets forth the parameters that will be needed to transmit 2019 forms in processing year 2020.
Starting with Tax Year 2019, the State of New Jersey requires employers, insurers and other providers of health coverage to send health care coverage information to the State. The health care coverage returns will be used by the State to verify that each New Jersey resident has health insurance, has a valid exemption from having health insurance or pays a penalty. The New Jersey requirement, set forth in the New Jersey Health Insurance Market Preservation Act (HIMPA), is a continuation of the federal Affordable Care Act (ACA).
With calendar-year plan open enrollment season approaching, employers should consider how they treat payments made for opting out of health coverage.
- What is Form 1095-C?
Form 1095-C is an IRS form for Affordable Care Act reporting. Form 1095-C provides employees with information about their health coverage and their employer’s offer of health coverage. Applicable Large Employers (those with 50 or more full-time employees in the prior year) must furnish Form 1095-C to their full-time employees confirming the offer of health coverage to employees and their dependents.
An Applicable Large Employer (ALE) must provide affordable, minimum value coverage to its full-time employees and their dependents or be subject to a tax penalty. An ALE is an employer with 50 or more full-time employees in the prior year. Some employers may consider themselves “small employers,” but may actually be ALEs because they are part of a controlled group.
The Medical Loss Ratio (MLR) provisions of the Affordable Care Act require insurers to spend at least a certain percentage of employees’ premium dollars on clinical care, instead of on administrative expenses such as executive salaries, overhead, marketing and profit. If an insurer does not spend enough on patient care to satisfy the MLR provisions, the insurer must make financial adjustments and provide rebates to customers. Health care reform sets the minimum MLR level at 85 percent for the large group market (policies covering over 50 employees) and 80 percent for the small group market. This means that administrative and other non-clinical costs can be no more than 15 or 20 percent of the insurer’s revenue. If an insurer fails to meet these standards, the insurer will be required to provide a rebate to customers.