Proposed Bill Would Streamline Employer Reporting Under ACA

On October 3, bipartisan legislation was introduced in the House and the Senate to streamline the employer health-coverage reporting requirements under the Affordable Care Act (ACA).  In contrast to the ACA repeal-and-replace bills proposed in the past several months, which do not directly affect ACA information reporting provisions (see prior coverage), the Commonsense Reporting Act would direct the Treasury Department to implement a more streamlined, prospective reporting system less burdensome than the current requirements.  Specifically, the legislation would create a voluntary prospective reporting system for employer-provided health coverage and permit employers who use this system to provide employee statements under section 6056 only to employees who have purchased coverage through an exchange, rather than to the entire workforce.  The Commonsense Reporting Act has bipartisan support, and may gain more traction if Congress seeks to improve the ACA and its exchanges rather than repeal and replace the ACA entirely.

The ACA requires employers and insurance carriers to gather monthly data and report them to the IRS and their employees annually under sections 6055 and 6056.  This reporting is intended to verify compliance with the individual and employer mandates, and to administer premium tax credits and cost sharing subsidies under the state and federally-facilitated insurance exchanges.  Section 6056 requires applicable large employers (ALEs) to file a return with the IRS and provide a statement to each full-time employee with information regarding the offer of employer-sponsored health care coverage.

At its core, the Commonsense Reporting Act would create a voluntary prospective reporting system.  This system would allow employers to make available data regarding their health plans not later than 45 days before the first day of open enrollment, rather than at the end of a tax year.  The data required includes the employer’s name and EIN, as well as certifications regarding:

  • whether minimum essential coverage under section 5000A(f) is offered to the following groups: full-time employees, part-time employees, dependents, or spouses;
  • whether the coverage meets the minimum value requirement of section 36B;
  • whether the coverage satisfies one of the affordability safe harbors under section 4980H; and
  • whether the employer reasonably expects to be liable for any shared responsibility payments under section 4980H for the year.

The employer would also need to provide the months during the prospective reporting period that this coverage is available, and the applicable waiting periods.

The proposed legislation would also ease an employer’s obligation to furnish employee statements (Forms 1095-C) regarding employer-provided coverage pursuant to section 6056.  Specifically, employers who use the voluntary prospective reporting system must provide employee statements only to those who have purchased coverage through an Exchange (based on information provided by the Exchange to the employer), rather than to the entire workforce.  Presumably, the rationale is that an employee covered through an Exchange can use information provided in Part II of the Form 1095-C—regarding whether, in each month, the employer offered minimum essential coverage (MEC) that is affordable and that provides minimum value—to apply for the premium tax credit.  This credit is available only for employees covered through an Exchange and only for the months in which the employee was not eligible for affordable employer-provided MEC that provides minimum value and any other MEC outside the individual market.

In addition to these changes to employer health-coverage reporting, the proposed legislation would also: (a) direct the IRS to accept full names and dates of birth in lieu of dependents’ and spouses’ Social Security numbers and require the Social Security Administration to assist in the data-matching process; (b) allow for electronic transmission of employee and enrollee statements without requiring recipients to affirmatively opt-in to electronic receipt; and (c) require the Government Accountability Office to study the functionality of the voluntary prospective reporting system.

Although the legislation has attracted the support of a large number of business groups, it remains unclear whether it can overcome the current reluctance among Republican Representatives and Senators to take any action that may further entrench the ACA.  Given the White House’s recent actions that appear designed to weaken the ACA, White House support may also be difficult to garner.  We will monitor the legislation for further developments.