August 16, 2017
One consequence of this year's several attempts to repeal and/or replace the Affordable Care Act (ACA), is that it has generated much confusion as to whether the ACA individual and employer mandates and related reporting requirements continue to apply. Contributing to this confusion was an executive order issued on January 20, 2017 that directed the various federal agencies to provide relief from the burdens of the ACA until the law can be repealed and eventually replaced. The executive order broadly directed the Department of Health and Human Services and other federal agencies to waive, delay or grant exemptions from ACA requirements that may impose a financial burden.
To address some of this confusion, the Internal Revenue Service (IRS) has recently released a series of information letters to clarify that the ACA's individual and employer mandates remain the law of the land. Perhaps as a further indication that the IRS is proceeding with "business as usual," at least for the time being, it has also released draft forms for use to satisfy the employer reporting requirements under Internal Revenue Code Sections 6055 and 6056.
In addition, regarding another ACA requirement, HMOs, health insurance issuers and certain other entities will resume paying the health insurance provider fee in 2018 after a one-year moratorium.
The IRS' Office of Chief Counsel has recently issued several information letters regarding the ACA's individual and employer mandate penalties. These letters clarify that:
According to the IRS, the ACA's provisions are still effective until changed by Congress, and taxpayers are still required to follow the law, including paying any applicable penalties.
IRS Information Letters 2017-0010 and 2017-0013, addressing compliance obligations regarding the employer shared responsibility mandate, are available here and here, respectively, and IRS Information Letters 2017-0011 and 2017-0017, addressing compliance with the individual mandate can be found here and here, respectively. Additional information can also be found on the IRS website here.
On July 28, 2017, the IRS released draft 2017 forms for reporting under Code Sections 6055 and 6056.
Instructions for these 2017 forms have not yet been released. However, the 2017 draft forms are substantially the same as the final 2016 versions of these forms, with the exception of the following:
No additional changes were included in the 2017 draft forms. However, once released, the 2017 draft instructions for these forms may include additional changes or clarifications. In addition, the IRS may still make changes to the draft forms before releasing final 2017 versions.
The draft 2017 Forms 1094-C and 1095-C can be found here and here, respectively.
Of particular interest to those plan sponsors with fully insured group policies, the moratorium on collecting the annual health insurance fee, known as the Health Insurance Provider Fee is coming to an end. Beginning in 2018, insurers will recommence paying this fee, which in turn, will likely be passed down to plan sponsors in the form of higher premiums.
As a bit of background, Section 9010 of the ACA imposes a fee on each covered entity (generally HMOs and health insurance carriers offering fully insured health policies) engaged in the business of providing health insurance for United States health risks. The aggregate fee amount for 2018 is $14.3 billion, which will be allocated to each covered entity in proportion to the entity's relative market share, as determined by that entity's net premium written for the data year. In general, we anticipate this amount to be between 3 percent and 4 percent of premium, depending on the carrier.
For More Information
For more information about this ACA Pathways or about any other health care reform-related provisions, please contact your Burnham Benefits consultant or Burnham Benefits at:
Burnham Benefits does not engage in the practice of law and this publication should not be construed as the providing of legal advice or a legal opinion of any kind. The consulting advice we provide is intended solely to assist in assessing its compliance with the Patient Protection and Affordable Care Act and other applicable federal and state law requirements, and is based on Burnham Benefit’s interpretation of federal guidance in effect as of the date of this publication. To the best of our knowledge, the information provided herein, and assumptions relied on, are reasonable and accurate as of the date of this publication. Furthermore, to ensure compliance with IRS Circular 230, any tax advice contained in this publication is not intended to be used, and cannot be used, for purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another person any tax-related matter.