Summary of State Mandated ACA Reporting

Several jurisdictions have recently adopted laws requiring individuals to purchase health coverage or pay a state tax penalty. Employers employing residents in a covered jurisdiction now need to facilitate compliance by reporting health coverage information to local governmental authorities. The following is a brief summary of the new health coverage reporting requirements.

State Individual Mandates

Under the Affordable Care Act’s (the “ACA”) individual mandate, beginning in 2014, individuals were required to either purchase minimum essential coverage (“MEC”) or pay a federal tax penalty for failing to maintain such coverage. MEC generally includes employer-sponsored group health plan coverage. The Tax Cuts and Jobs Act of 2017 effectively eliminated the individual mandate by reducing the penalty to zero starting in 2019. In response, however, California, the District of Columbia, New Jersey, Rhode Island and Vermont (“Adopting Jurisdictions”) have each adopted their own versions of the ACA’s individual mandate.

Note that Massachusetts had already adopted an individual mandate requirement in 2006, well before the ACA became law. This Advisory does not address coverage reporting requirements under Massachusetts law.

State Reporting Requirements

In order to administer the ACA’s individual mandate, employers that sponsor self-insured health plans are required to (i) report health coverage information by filing information returns (including a transmittal form) with the IRS and (ii) issue individual statements to covered persons (“Federal Reporting”). Except as noted below, similar reporting requirements were incorporated into the individual mandate of each of the Adopting Jurisdictions. Pursuant to such reporting requirements, employers that provide MEC to any resident of an Adopting Jurisdiction are required to file information returns with the applicable governmental authority and issue individual statements to covered persons (“State Reporting”).

Insurers that provide MEC to any resident of an Adopting Jurisdiction are also required to file information returns with the applicable governmental authority and issue individual statements to covered persons. California and New Jersey allow employers with fully-insured plans to satisfy State Reporting through the information returns filed with the state by their insurance providers. It is not yet clear whether the District of Columbia and Rhode Island will follow suit. Even if they do, employers that rely on their insurance providers may be held liable if such providers fail to file the required forms and meet the applicable deadlines.

Vermont will not require employers to satisfy coverage reporting requirements unless and until Federal Reporting is repealed. The reporting requirements adopted by the District of Columbia only apply to employers that covered at least 50 full-time employees during the applicable calendar year, at least one of whom was a resident of the District.

Information Returns and Individual Statements

For purposes of State Reporting, all jurisdictions permit the use of the same IRS forms used to satisfy Federal Reporting (i.e., Form 1095-B, Employer-Provided Health Insurance Offer and Coverage, and Form 1095-C, Health Coverage). State Reporting does not, however, require that employers issue duplicative individual statements. Instead, employers that issue individual statements for Federal Reporting will satisfy the requirement to issue individual statements for State Reporting. State acceptance of IRS forms may, however, change in the future if Federal Reporting is repealed or if an Adopting Jurisdiction issues its own standard forms.

To address data privacy considerations, employers using the same IRS forms used to satisfy Federal Reporting should consider redacting information for individuals residing outside the Adopting Jurisdiction for which the filing is made.

Deadlines

The expected upcoming deadlines for filing information returns and issuing individual statements in the Adopting Jurisdictions are as follows:

Employers with employees residing in the above jurisdictions should contact their health plans’ insurance provider(s) or third party administrator(s) to confirm that the required forms will be filed by the applicable deadlines.

If you have any questions regarding employer health coverage reporting requirements, please contact a member of our Employee Benefits Group.