IRS/CCIIO Seek Public Input on Key Employer Mandate Requirements
May 4, 2012
On April 26, 2012, the Internal Revenue Service (IRS) published three Notices, and the Center for Consumer Information and Insurance Oversight (CCIIO) issued a Bulletin. All are related to the "employer mandate" provisions of the Patient Protection and Affordable Care Act (PPACA).
Beginning in 2014, "large" employers (those with at least 50 full-time employees or full-time equivalents) that do not offer coverage that is "affordable" and provides "minimum value" may be subject to a penalty. This is called the "employer mandate." Beginning in 2015, PPACA also requires large employers to report to the Department of Treasury certain information about the coverage they provide on and after January 1, 2014. The IRS will use these informational returns to verify employer sponsored coverage under the employer mandate.
Below is a synopsis of each Notice and the Bulletin.
Under PPACA, beginning in 2014, individuals who buy coverage through an Affordable Insurance Exchange (Exchange) are eligible for a premium tax credit if they are not eligible for employer-sponsored coverage that is “affordable” and provides "minimum value." PPACA defines "minimum value" to mean that a plan’s share of the total allowed costs of benefits is no less than 60%. This notice describes and requests comments on the following three approaches being considered to determine whether employer-sponsored coverage provides "minimum value:"
a) Calculators: The Department of Health and Human Services (HHS) and the Treasury Department will provide an actuarial value calculator (AV calculator) or a minimum value calculator (MV calculator) for use by large employer-sponsored plans. Based on claims data, the calculators would allow an employer-sponsored plan to enter information about the plan's benefits, coverages and cost sharing to determine whether it provides "minimum value."
b) Checklists: Several design-based safe harbors in the form of "checklists" that would provide a simple, straightforward way to establish that employer-sponsored plans provide minimum value; no need to perform any calculations or obtain the assistance of an actuary.
c) Actuarial certification: Plans that have “nonstandard features,” which would rule out their using the checklists or the MV calculator without adjustments, will be allowed to seek “appropriate certification” from an actuary to demonstrate that the plan does provide minimum value in accordance with prescribed continuance tables, recognized actuarial standards and other conditions that the IRS would provide in future guidance.
Beginning in 2015, health insurance issuers, government agencies and employers that sponsor self-insured plans and other persons that provide minimum essential coverage must annually file information returns reporting relevant information (e.g., name, address, TIN, dates of coverage, etc.) for each covered individual with respect to coverage provided on and after January 1, 2014. The Treasury is requesting comments on issues that should be addressed in regulations implementing the information reporting.
The Notice seeks comment on issues arising in connection with the informational reporting discussed in Notice 2012-31 that would be helpful for the regulations to address, including how to coordinate and minimize duplication between the data employers must report under §6056 and other applicable Code or PPACA provisions.
Reporting to Employees
By January 31 following the calendar year referred to in §6056(a) and (b), the employer must provide each full-time employee whose information is required to be reported to the IRS with a written statement that furnishes employer contact information and data about coverage required to be reported on the §6056 return.
Addresses how employer-sponsored coverage will be verified to determine eligibility for advance payments of the premium tax credit available for the purchase of coverage through Exchanges.
The bulletin requests comments on a proposed interim strategy and possible regulatory approach to achieve verification of an applicant’s access to qualifying coverage in an employer-sponsored plan.
The August 17, 2011 Exchange Eligibility Notice of Proposed Rulemaking invited comments on which strategy would offer the best way for Exchanges to communicate and work together with employers to verify information about employer-sponsored coverage: (1) a sample template that employers and employees could use voluntarily to help applicants fill out the Exchange application or (2) a database for Exchanges to access that was populated voluntarily by employers.
After considering stakeholder comments, HHS proposes a standardized way to allow Exchanges to verify employer-sponsored coverage for the 2014 and 2015 plan years.
Through use of limited pre-enrollment verification based on data sources available to an Exchange, and a post-enrollment verification screening process where data sources are not available during the eligibility determination process, employees and employers will voluntarily collect and communicate employer-sponsored coverage information needed to complete an Exchange application.
The bulletin notes that pre-enrollment verification is the preferred approach. HHS also seeks comments on long-term verification strategies.
Cigna is evaluating these Notices and Bulletin and providing comments as appropriate. We will update communications as we continue our in-depth review, and encourage you to bookmark our health care reform website, InformedOnReform.com.