Just a couple months ago, you could not watch any major news show without at least some of the show being dedicated to the repeal and replacement efforts of the Affordable Care Act. However, since the passage of the American Healthcare Act (AHCA) by the House of Representatives in early May, the topic of healthcare reform has been relegated to the back rooms of the Senate.
The AHCA contained some welcome changes for employers, most notably
- removing the coverage penalties aka the penalties for not offering coverage to qualified employees (> 30 hours/week on average) and for not offering “affordable” coverage.
- “simplified” reporting for employers. So the reporting requirement remains for offers of coverage by month (now line 14 on the 1095-C) but this information would be moved to the W-2 after the 2019 tax reporting year. This has some inherent challenges the employers and the American Payroll Association (APA) fought vehemently to avoid when the regulations for the ACA were being drafted several years ago. These challenges are primarily reflected by the fact that health insurance enrollment information is not normally in the payroll system which generates the W-2. Rather, that information is often stored in an HR or benefits administration system. The APA is actively engaged in a lobbying effort with the Senate to ensure that employers are not burdened with reporting this information on the W-2. Self-insured employers would likely still have a reporting element similar to Part III of the 1095-C. There is no specific guidance in the law as to how that reporting would be completed by employers.
The Senate has made it clear that they are moving forward with the creation of a whole new bill and not starting from the bill passed by the House. This will dictate that if and when the Senate gets a bill written and passed, it will have to go back to the House for reconciliation and possibly even a full vote. Given the narrow passage of the bill in May, the outlook of a repeal and replace effort is far from certain. The Senate is actively reaching out to the governors of various states which have an expanded Medicare and Medicaid program as this is one of the areas that was nixed in the House version of the AHCA. The Senate version of the bill is reported to focus on these key areas:
- Power to states
- Cap income inclusions instead of Cadillac tax
- Consumer driven (HSAs)
- Tax neutrality: employer sponsored versus individual
Regardless of how Congress acts, assuming it does so at all, employer reporting on the 1095-C and 1094-C will remain in effect for the next few years at minimum. We have heard that any passage of a bill out of the Senate is still quite a ways off and some are predicting that it is not likely to happen this year at all. Senate Republicans have met several times over the last few weeks and still do not have consensus on the framework for a replacement bill.
Also clear, is that the IRS is continuing to move forward according to current laws and regulations. On the Payroll Industry Call from June 1, 2017, the IRS indicated that they are moving forward in preparation for the 2017 filing season. They will be releasing updated drafts of the 1095-B and 1095-C in early summer and updated instructions in August. The electronic filing schema are anticipated to have only slight modifications and should be available sometime “this summer.”
The result of this uncertainty has many employers scratching their heads on how to proceed. They know that the process they used last year was less than ideal and as a result are evaluating their current processes and software solutions used to comply with the ACA. Some employers are now coming to the realization that they need an effective compliance strategy and they need it now. Make sure you have a plan for compliance with the ACA. Want more information on these changes? Register for one of our upcoming webinars where we take the opportunity to educate employers on what compliance with the ACA means for them and their options to mitigate the risk of potential penalties.