ACA News & Publications

ACA Pathways: Play or Pay Mandates, Employer Reporting, and Health Insurance Fee

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20, 2017 that directed the various federal agencies to provide relief from the burdens of the ACA until the law can be repealed and eventually replaced.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.

Play Or Pay Penalties

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:

  • Employer shared responsibility penalties continue to apply for applicable large employers (ALEs) that fail to offer acceptable health coverage to their full-time employees (and dependents); and
  • Individual mandate penalties continue to apply for individuals that do not obtain acceptable health coverage (if they do not qualify for an exemption).

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.

Employer Reporting Forms Released

On July 28, 2017, the IRS released draft 2017 forms for reporting under Code Sections 6055 and 6056.

  • 2017 draft Forms 1094-C and 1095-C will be used by applicable large employers (ALEs) to report under Section 6056, as well as for combined Section 6055 and 6056 reporting by ALEs who sponsor self-insured plans.
  • 2017 draft Forms 1094-B and 1095-B will be used by entities reporting under Section 6055, including self-insured plan sponsors that are not ALEs.

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:

  • Section 4980H Transition Relief. Several forms of transition relief were available to employers under Section 4980H for the 2015 plan year (including any portion of the 2015 plan year that fell in 2016). However, this transition relief no longer applies for 2016 plan years and beyond. As a result, references to this transition relief on Form 1094-C have been removed. For example, the following two sections on Form 1094-C related to this transition relief have been designated as "Reserved" and should not be used: Part II, in the "Certifications of Eligibility" Section on Line 22, Box C; and Part III, in the "ALE Member Information - Monthly" table, column (e).
  • Instructions for Recipient. Both individual statements (Forms 1095-B and 1095-C) include an "Instructions for Recipient" section. On both of the 2017 draft Forms 1095-B and 1095-C, the following paragraph was added: "Additional information. For additional information about the tax provisions of the Affordable Care Act (ACA), including the individual shared responsibility provisions, the premium tax credit, and the employer shared responsibility provisions, see or call the IRS Healthcare Hotline for ACA questions (1-800-919-0452)."

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.

Health Insurer Fee Assessment Resumes

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

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.

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