Employer-Reporting Requirements Under the Affordable Care Act

The Affordable Care Act (ACA) has not only redefined employee-benefit plan requirements, but also employer-reporting requirements. In 2015, CFOs and their human-resources managers will be faced with the need to manage unprecedented employee-level data tracking in order to comply with the latest aspect of the “Pay or Play” mandate. Prior to Jan. 1, 2015, employers must ready themselves from a data systems and personnel perspective to ensure they are well-positioned to meet ACA’s latest compliance requirements.

Starting in 2015, large employers (those with 50 or more full-time equivalent employees) are required to demonstrate their compliance with ACA’s employer mandate. Often referred to as the “pay or play” mandate, this piece of ACA establishes that large employers must offer the majority of their full-time employees, and their children, health-benefit coverage that is affordable and meets established minimum-value requirements. Otherwise, they may be subject to a financial penalty.

The Affordable Care Act added section 6055 to the Internal Revenue Code, which requires insurers and self-insured employers that provide minimum essential health coverage to their employees to report employee coverage to the IRS annually. Insurance carriers are required to submit the returns in the case of fully insured coverage, while employers are mandated to submit the returns in the case of a self-funded benefit plan.

Reportable minimum essential coverage does not include limited-scope vision and dental coverage, and other excepted benefits, however it does include COBRA coverage, major-medical coverage provided through a retiree-only plan, and retiree-only health-reimbursement arrangements (HRAs).

The IRS recently released draft versions of the forms that employers will need to complete under tax code sections 6055 and 6056. The mandate requires that employers compile monthly employee data throughout the year and submit an annual report to demonstrate their compliance with ACA’s requirements regarding the availability and affordability of their employee health benefits. While the first report will not need to be submitted until January 2016, employers must spend all of 2015 tracking coverage detail at the employee level in order to provide an accurate submission.

The mandate requires that employers collect and disclose employee data that includes some elements that most employers are likely capturing today, such as the name, address and Social Security number of all employees and their health-plan-eligible dependents.

Additional required data, which may not be tracked by employers today, includes the number of full-time employees and full-time equivalent employees for each calendar month, and the employees’ share of the lowest-cost monthly premium for self-only, minimum-value coverage for each calendar month. For organizations not currently tracking this level of health-coverage data, in order to comply with the mandate, they may be facing data-infrastructure upgrades relative to time and attendance systems, record management, and payroll systems, as well as human-resources personnel staffing enhancements.

The first coverage-verification report will be due by employers to their employees by Jan. 31, 2016, and then to the IRS by Feb. 28, 2016, or March 31, 2016, if filing electronically.

Both self-insured health plans and fully insured carriers must provide a health coverage/health-insurance form to each of their enrollees and members. The forms must then be filed together with a transmittal of health coverage/health-insurance coverage information return form with the IRS. Employers are required to file returns electronically if they file 250 or more of tax form 1095-C or 1095-B. The forms may be delivered to employees electronically.

To ensure compliance, penalties are expected to be enforced for failure to file timely and/or accurately. However, as we have seen before with other aspects of ACA, the IRS does not intend to impose penalties on employers that have made a good-faith effort to comply in the first year.

ACA has also set goals to streamline the transmittal of electronic-payment transactions. In order to accomplish this goal, certain health plans, including self-funded plans, must obtain a health-plan identifier (HPID) by Nov. 5, 2014.

The HPID is a unique 10-digit identifier issued by the Centers for Medicare and Medicaid Services (CMS) and obtainable through the CMS Enterprise Portal, known as the Health Plan and Other Entity Enumeration System (HPOES), at no cost to the employer plan. As of Nov. 7, 2016, health plans, medical providers, health insurers, third-party administrators (TPA), and all other entities that make standard HIPAA electronic transactions must use their assigned HPID for all transactions.

The purpose of the consistent identifier format is to increase the efficiency and accuracy of all electronic-data exchanges subject to the Health Insurance Portability and Accountability Act (HIPAA). CMS has also reported that the HPIDs will be used to help the United States Department of Health and Human Services (HHS) to implement various administrative-simplification initiatives.

Small employers, as defined by those with total claims paid of less than $5 million, are granted a one-year extension and are not required to comply with the mandate until Nov. 5, 2015. In order to be approved for the extension, small employers must complete an online application with CMS.

There is still time to take the steps necessary to prepare your organization for ACA’s newest reporting requirements. With proper documentation in 2015, meeting the reporting requirements in 2016 will be smoother and more efficient for both you and your human-resources staff.

Vanessa Flynn is vice president of client services for the POMCO Group.