With mid-term elections around the corner, employers all over the country are pondering whether they will need to continue to report offers of coverage to employees through Forms 1095-C and 1094-C with the IRS. After all, there was so much hype in 2017 about repealing and replacing the Affordable Care Act (“ACA”), widely referred to as “Obamacare.” The GOP was ultimately successful in reducing the penalty for the Individual Mandate (requirement for individuals to have insurance coverage) to zero (beginning in 2019), effectively eliminating this mandate. They achieved this as part of their comprehensive “Tax Cuts and Jobs Act of 2017” that passed in December of last year. The purpose of the Individual Mandate was to spread the cost of healthcare across both the young and old, healthy and sick, so not only those that need healthcare coverage are paying for it. Although this mandate was officially eliminated and will have an effect on the overall healthcare picture of our country, the GOP was not successful in repealing the entire ACA, including the Employer Mandate (requirement for employers with 50 or more full-time employees to offer affordable health insurance) and the subsidies and tax credits that accompany the ACA itself.
The penalties associated with the Employer Mandate are in place to help support the subsidies and tax credits the government needs to cover the cost of healthcare for millions of Americans. By removing the Employer Mandate, the government would need to find other ways to fund the increasing number of individuals who cannot afford insurance, as the premiums continue to significantly increase due to the smaller pool of people contributing. The ACA subsidies help provide billions of dollars of healthcare coverage to millions of Americans. It would be extremely difficult to just completely remove these subsidies, a cornerstone of the healthcare marketplace.
It’s helpful to understand that in order for individuals to be eligible for subsides/tax credits to help pay for health insurance, the IRS must know if they were offered affordable coverage by their employers, what they paid for it and if they actually enrolled in it. If employers/insurance carriers are not required to report offers of coverage and enrollment data to the IRS, the government would not be able to determine eligibility for the ACA subsidies and tax credits.
As companies, insurers and individuals struggle with rising healthcare costs, many approaches are being tested, such as states passing legislation reinstituting penalties for individuals who do not have insurance coverage. In May, New Jersey passed a bill, which is their own version of the Individual Mandate, requiring all residents to have insurance or pay a penalty. The new law goes into effect in January of 2019. Vermont has also passed similar legislation, and their mandate is scheduled to go into effect January 1, 2020, but they are working on the details of enforcement and penalties. This movement will likely continue with other states following suit. Of course, this trend only strengthens the argument that employer ACA reporting will need to continue.
Although there is plenty of uncertainty surrounding whether the Democrats or Republicans will have control of the House and Senate after mid-term elections, it is clear that repealing the entire ACA will be a monumental hurdle. Even in the unlikely event of an Employer Mandate repeal, it would be extremely difficult to completely eliminate the subsidies and tax credits that currently exist. Thus, the employer reporting on Forms 1095-C and 1094-C are paramount to determining the eligibility of ACA subsidies and tax credits, which are likely here to stay in one form or another.
