July 11, 2014

Update on Employer Shared Responsibility, 6055/6056 Reporting Requirements

Earlier this year, the federal government released final rules on Employer Shared Responsibility (ESR) and the Internal Revenue Code Sections 6055 and 6056 reporting requirements related to the Affordable Care Act (ACA).

We wanted to provide an update on these two critical components of ACA.

In July 2013, the Internal Revenue Service (IRS) announced that ESR, also known as “pay or play” or the “employer mandate,” would be delayed until 2015.

The U.S. Treasury Department released the final rule in February 2014. It will now take effect Jan. 1, 2015, for employers with more than 100 full-time or full-time equivalent employees and certain employers who employ 50 to 99 full-time or full-time equivalent employees (if certain criteria are not met).

Final Rule Highlights

• Employers with between 50 and 99 full-time employees are exempt from the shared responsibility penalty until 2016, if the employer provides an appropriate certification and meets certain conditions.
• In 2015, employers subject to the mandate may face a penalty if they don’t offer coverage to 70 percent of their full-time employees and child dependents.
• In 2016, employers subject to the mandate may face a penalty if they don’t offer coverage to 95 percent of their full-time employees and child dependents.

With regard to the ESR provisions and potential penalty, it is important to understand that the responsibility lies with employers to determine with their tax, legal and compliance counsel whether they may face a penalty for offering inadequate insurance to full-time employees and their child dependents.

Employer Coverage
Generally, an applicable large employer may face a penalty if:

• It doesn’t offer minimum essential coverage (MEC) to all or substantially all of its full-time employees and their child dependents; and/or
• The lowest-cost, self-only coverage offered to its full-time employees fails to meet minimum value (a plan’s share of the total allowed costs of benefits provided under the plan is at least 60 percent of those costs) and/or is not affordable (generally, an employee’s contribution to the premium for that coverage does not exceed 9.5 percent of household income).

For employers, MEC includes fully insured or self-insured group health insurance coverage offered by, or on behalf of, an employer to the employee that is a governmental plan, any other plan or coverage offered in the small or large group market, or a grandfathered health plan. It does not include coverage consisting solely of excepted benefits.

Sections 6055 and 6056 Reporting Requirements
As of Jan. 1, 2014, most U.S. citizens and lawfully present individuals are required to have MEC or pay a tax penalty. In March 2014, the IRS released final rules related to reporting requirements under Internal Revenue Code Sections 6055 and 6056.

The IRS has not yet released the forms referred to in the final reporting rules.

Below is a quick snapshot about the reporting requirements.

6055 Overview
Section 6055 requires health insurers and sponsors of self-insured plans to report on this coverage to the IRS yearly. The reporting to both individuals and the IRS for 2015 is due in early 2016. It also requires insurers and self-insured plans to report to their MEC recipients, so the individuals can report that coverage when filing their federal taxes.

The 6055 reporting requirement has two goals. It helps individuals verify that they have MEC. At the same time, it enables the IRS to cross check that information with insurers or self-insured plans.

Entities subject to 6055 reporting are health insurance issuers, sponsors of self-insured coverage, government-sponsored programs, such as Medicaid, and providers of other arrangements designated as MEC, such as high-risk pools. It applies to all employers.

The final rule states that self-insured employers are responsible for reporting this information to the IRS. Blue Cross and Blue Shield of Texas (BCBSTX) will provide reporting to the IRS for fully insured groups and off- individual coverage. We have not made final decisions on how we will support self-insured groups.

Information required to be reported to the IRS by persons who provide minimum essential coverage:

• The name, address and Employer Identification Number (EIN) of the reporting entity required to file the return.
• The name, address and Taxpayer Identification Number/Social Security Number (or date of birth if a TIN/SSN is not available and applicable requirements are met), of the responsible individual, except that reporting entities may, but are not required, to report the TIN/SSN of a responsible individual not enrolled in coverage.
• The name and TIN/SSN (or date of birth if a TIN/SSN is not available and applicable requirements are met), of each individual who is covered under the policy or program.
• Whether the coverage is a Qualified Health Plan (QHP) provided through the Small Business Health Options Program (SHOP) and the SHOP’s unique identifier.

Information required to be reported to responsible individuals:

• The phone number for a person designated as the reporting entity's contact person and policy number, if any.
• All information required to be shown on the Section 6055 return for the responsible individual and each covered individual listed on the return.

6056 Overview
Section 6056 reporting requires applicable large employers to report to the IRS information about the health coverage they provided to their employees. The IRS will use this information to determine if the employer has to pay any penalties for failing to offer coverage or failing to offer coverage that meets minimum value and is affordable. The reporting to both individuals and the IRS for 2015 is due in early 2016. 

Employers also have to provide statements to employees regarding their health coverage, primarily so employees can determine if they are eligible for a premium tax credit for health insurance through the Marketplace. 

Information required to be furnished to full-time employees by applicable large employers:

• Name, address and EIN of the applicable large employer member
• The information required to be shown on the 6056 return with respect to the full-time employee. Various data elements include employer location and contact information, employee address and TIN/SSN, and information about the employer’s health care coverage. For a complete guide of what is required, see final rule Section IX, Part B.
• Information as to whether the coverage offered to full-time employees and their dependents under an employer-sponsored plan provides minimum value and whether the employee had the opportunity to enroll his or her spouse in the coverage.
• The total number of employees, by calendar month.
• Whether an employee’s effective date of coverage was affected by a permissible waiting period.

BCBSTX is reviewing the final rules and will provide an update on how we will be implementing the final rules when more information is available.

This communication is intended for informational purposes only. It is not intended to provide, does not constitute, and cannot be relied upon as legal, tax or compliance advice. The information contained in this communication is subject to change based on future regulation and guidance.