As most know by now, the Affordable Care Act individual mandate was repealed as of January 1, 2019. Although the ACA individual mandate is gone; many states have begun to implement their own ACA state individual mandates, which require residents to purchase and maintain qualifying health coverage or face a state tax penalty. Overall, the penalty amount for failure to obtain qualifying health coverage varies by state, but most states have decided to reestablish the previous ACA penalty.
What does this mean for employees?
The process for verifying individual health coverage will be very similar to the employer ACA process. When filing state tax returns, taxpayers will be required to confirm if they were enrolled in health coverage during the calendar year and may also be required to submit documentation. The initial guidance indicates that some states will allow taxpayers to submit their 1095-C forms as documented proof of insurance. Naturally, the enforcement of these state mandates will impose a reporting obligation on employers as well.
What does this mean for employers?
While the employer obligation has not yet been fully specified; we do know that most employers will have some kind of reporting responsibility for employees who reside in states with individual health insurance mandates. So in addition to the ACA federal reporting obligation, some employers will also have a reporting obligation at the state level.
This means that employers may be required to comply with various state reporting requirements, and different deadlines and processes.
Employers residing in a state with no ACA individual mandate will still need to determine if they have reporting obligations for employees who reside in states with an effective mandate.
We do anticipate that more states will follow suit in pursuing ACA state individual mandates. So employers should anticipate some reporting changes at the state level. Now is a good time to determine if you have employees who reside in a state with an ACA individual mandate. If so, you may also want to discuss these potential changes with an ERISA attorney and start to assess your possible new reporting obligations.
Which states are affected by the ACA state individual mandate?
As of October 2019, six states have successfully passed a statewide individual mandate:
- California – Effective January 1, 2020
- District of Columbia
- New Jersey
- Rhode Island – Effective January 1, 2020
- Vermont – Effective in 2020
States that are actively considering and/or pursuing a statewide individual mandate:
Again, at this point there is still very little guidance as to state specific employer reporting requirements. Remember that you can count on Integrity Data to keep you informed as more ACA updates become available.