A Look at ACA: Open Enrollment through Affordable Care Act Reporting Forms

As the open enrollment period is upon us, the Affordable Care Act will likely be on the minds of many.  On the one hand, some employers will be offering benefits for the first time.  Also, some employees will be enrolling in health insurance coverage for the first time.  On the other hand, others will have been through the process countless times.  This goes for employees and employers alike.  Still, whether you are a newbie or you are a veteran of the process, the requirements for the Affordable Care Act can often be confusing.

Image with the words "HealthCare.gov OPEN ENROLLMENT IS NOVEMBER 1 - DECEMBER 15 #GETCOVERED."

So, here are some helpful tidbits. You need to know about not only open enrollment and the Affordable Care Act, but also the reporting forms you will need to file thereafter. The goal is for you to go confidently into the open enrollment period, and then feel fully prepared to file taxes properly in the new year.    

Company Benefits and the Affordable Care Act

Also called ACA or Obamacare, the Affordable Care Act is a healthcare reform law that went into effect in 2010.  There are three main objectives for this reform:

  1. Giving more people an affordable health insurance option
  2. Expanding the Medicaid programs to cover more people at or below the poverty line
  3. Supporting medical methods intended to lower the overall costs of healthcare
Photo by Christine Yanner

Not surprisingly, the ACA has evolved between the Obama administration and the Trump administration. Therefore, employers often have questions, since much has changed. In brief, the Trump administration has been scaling back on certain aspects of the act. This is because the “repeal and replace” effort fell short.

So, here is a brief overview of the current state of the act, as well as the changes you’ll want to be aware of.

The Affordable Care Act As It Stands

First, under the current Affordable Care Act, individuals are not required to purchase health insurance anymore.  The original version of the law penalized underinsured individuals.  When that part of the law was repealed, there was a rise in the uninsured. Surveys predicted an estimated 4 million Americans to forego coverage in 2019.  This is largely due to the expensive premiums required by many health insurance providers.

Second, some employers still must provide a range of coverage to employee. This is the case even though individuals are not required to purchase coverage.  This is called minimum essential coverage (MEC).  Companies employing 50 or more full-time employees are referred to as applicable large employers (ALEs).  The ACA requires ALEs to offer MEC.  The only way around this is for the employer to make a shared responsibility payment to the IRS. A shared responsibility payment is also called the “pay or play provision.”

Photo of a woman wearing black and holding an umbrella, as a sign of ACA health insurance coverage.
Source

Third, the government does not mandate businesses under the ALE threshold to offer health insurance coverage per the ACA.  Still, many small businesses choose to offer coverage. Therefore, they must choose among different types of plans.  Two of the options are as follows:

  1. Fully-insured plans require employers to pay premiums at a fixed rate an insurance carrier.  The premiums are based on the number of employees enrolled in the plan on a monthly basis.
  2. Self-insured plans are operated and level-funded by the employer. 

Enticing Employees

Now, if you are reading this, chances are you’re already offering health insurance coverage to your employees. Furthermore, you are likely familiar with the Affordable Care Act. So, you are probably aware of the best ways to entice employees to come work for your organization. One of those ways is to offer health insurance coverage.  However, if you are someone who doesn’t offer coverage and you are reading this out of curiosity, then let me give you a tip. Undoubtedly, there is a cost to offering coverage. Nevertheless, it is one that is worth the expense.  Research shows that providing fringe benefits to employees entices qualified candidates to interview and accept positions. Furthermore, it helps improve employee retention rates. 

However, let’s assume that you are already offering health insurance coverage. Hence, we’ll focus on the filing process and the different forms you will need to file come tax season.

First of all, be aware that the deadline for filing 2019 taxes is February 28, 2020, or March 31st if filing electronically.  Furthermore, if you file more than 250 forms, you must file electronically to the IRS.  However, the IRS encourages all filers to do so electronically, in order to expedite and automate the process.

Second of all, you need to familiarize yourself with the various forms available.  This is the part where you will need to understand which type of insurance plan you offer. Also, the number of employees on your payroll determines the form you will use. 

Image of ACA form 1094-C.

Filing ACA Forms 1094 and 1095

Whether you are an ALE or not, you will need to file one version of each form 1094 and 1095. The Affordable Care Act requires it.  Both versions of form 1094 require the employer to provide data. The required information includes business identification, contact information, and number of 1095s transmitted.  ALEs will file 1094-C, as this form provides extra details pertaining to the ALE members.  Non-ALEs, on the other hand, will file 1094-B.  Likewise, ALEs will transmit 1095-Cs proportionate to the number of employees during the previous year, while non-ALEs will transmit 1095-Bs. 

  • 1094-B: Transmittal of Health Coverage Information Returns
  • 1095-B: Health Coverage
  • 1094-C: Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns
  • 1095-C: Employer-Provided Health Insurance Offer and Coverage Insurance

You can find more information pertaining to these forms and the Affordable Care Act at IRS.gov.

Open Arms during Open Enrollment

In summary, the Affordable Care Act has left an impact on health insurance coverage. This goes for individuals and companies alike.  While the ACA does not require every business to offer health insurance coverage, many will still opt in.  Most employers see the value in offering benefits. The reason is qualified candidates often require it as a condition for employment.  So, if you have decided to offer coverage, you need to be aware of the type of coverage you are offering.  Then, based on the size of entity you operate, you will file forms 1094 and 1095 using version B or C.  Once you understand what the IRS requires, you will feel ready to greet your employees with open arms during open enrollment.  Finally, filing the appropriate forms by the deadline will be a cakewalk.

About Journey Employer Solutions

Service: Journey puts service above all. We believe if you offer a great price and great technology, but don’t have A+ level service, it’s worthless. 
Technology: Journey has the advantage of being forward thinking and fast moving. Our decisions are not based on stockholders, but on clients looking for advanced offerings. 
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This is not meant to provide legal counsel or advice. Every situation is different. Please contact an HR professional or employment attorney before taking any action.

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