Change is hard.
Obamacare has brought about big changes for a lot of people, and you may feel a bit lost when it comes to implementing the new requirements. However, when broken down piece by piece, complying with Obamacare isn’t as overwhelming as it appears from a distance.
As you probably already know, now that it’s 2014, under Obamacare, every taxpayer has to have health insurance. But, there are two other entities that need to worry about Obamacare compliance: Applicable Large Employers (ALEs) and health insurance issuers. So how does the IRS define those terms?
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ALEs – Employers “who employed an average of at least 50 full-time [FT] employees on business days during the preceding calendar year” [Section 4980H(c)(2)].
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FT – “…with respect to any month, a staff member who is employed on average at least 30 hours of service per week” [Section 4980H(c)(4)(A)].
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Full-Time Equivalent (FTE) – A business’s number of FTE employees for each month can be determined by adding up all hours worked by part-time employees during the month and dividing the total by 120 [Section 4980H(c)(2)(E)].
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Health insurance issuers – Any entities that provide health insurance
Every ALE must offer health insurance that meets Obamacare requirements to every FT employee, or face penalties. So, what are the requirements that insurance must meet? Well, it must be affordable, minimum essential coverage that is of minimum value. Confused? Let’s look at these terms a little more simply.
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Affordable – The lowest cost of the premium for an employee only (no spouses or dependents) is less than 9.5% of the employee’s household income (Section 36B, paragraph 1).
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Minimum essential coverage – Included in group health insurance plans offered through:
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Specified government-sponsored programs
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Eligible employer-sponsored programs
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Small or large group markets within states
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Grandfathered health plans offered in group markets
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The Secretary of Health and Human Services [Section 5000A(f)(1)(B)]
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Minimum value – The insured will not be required to pay more than 40% of medical expenses out of pocket [§ 36B(c)(2)(C)(ii)].
If ALEs can certify that a qualifying offer was made to 98% or more of their employees (regardless of full-time/part-time status), plus their spouses/dependents for every month of the year being reported, they may file simplified reports (Section X, Subsection B, pages 43-44). For 2015 only, ALEs can get away with only making qualifying offers to 95% or more of their FT employees (plus spouses/dependents), and will be provided with simplified reporting as well. This simplified reporting method will require only that the ALE give a statement (a form created by the IRS) to each employee with the ALE’s contact person’s name and phone number, and information about the offer that was made and whether or not the employee is eligible for a premium tax credit (Section X, Subsection A, 2, pages 40-41).
If you’re not eligible for simplified reporting, there’s a little more information you need to provide. Some ALEs are self-insured and must complete combined section 6055 and section 6056 reports (Section 5, pages 19-21). Some ALEs use third party health insurance providers and only need to complete section 6056 reports (Summary, page 1). Insurers who are not ALEs are required to complete section 6055 reporting only (Summary, page 1). Employees must be given the same information that is filled out on the reports.
You’re probably thinking that this all still sounds complicated. But, let’s just focus on addressing Obamacare one step at a time. Everyone has to have insurance. Insurance must be made available. The insurance has to meet certain requirements so it’s reasonably accessible. Those who offer and provide insurance have to be able to prove that it meets the requirements.
Here’s a quick recap:
So, what exactly is required on the reports?
(View the full 6055 and 6056 requirements.)
See? Obamacare isn’t as complicated as it sounds. If you’re an ALE, you probably already have most of the required information on other documents, like W-2s. If you’re a health insurance issuer, you’ve probably been tracking the information you’re required to report as well. It’s just a matter of knowing ahead of time what will be required of you, so that nothing slips through the cracks. Are you a large employer? Are you a health insurance issuer? Are you both? Start tracking the necessary information now, and be ready for Obamacare as soon as possible!
