The Affordable Care Act: What’s New that You NEED to Know

Several notable changes were made to the Affordable Care Act (ACA) in 2019. Given the complexity of the law and various changes to it since its onset, coupled by the fact that we have just entered a new year and decade, now is an ideal time to review the act's latest revisions and highlight potentially impactful developments.

Individual Mandate
Under the ACA as it was instituted, individuals who did not qualify for an exemption were required under a provision known as the “individual mandate” to have minimum essential health insurance coverage or be subject to a shared responsibility penalty. The penalty was assessed for each month the required insurance was not maintained. The Tax Cuts and Jobs Act (TCJA) reduced the individual shared responsibility payment amount to “zero” as of January 2019. Therefore, while the individual mandate is technically still in effect, the IRS is no longer enforcing it.

Employer Mandate
Under the ACA, applicable large employers could be subject to a penalty if they do not offer minimum essential coverage to their full-time employees and those employees’ dependents, or if they offer unaffordable coverage or coverage that does not provide minimum value. The so-called “employer mandate,” as well we the related required reporting, remains in effect.

ACA Reporting Deadline Extended
Under Notice 2019-63, the IRS has extended the due date for furnishing individuals the 2019 Form 1095-B, Health Coverage, and the 2019 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, from January 31, 2020 to March 2, 2020. No additional extensions are allowed. The Notice did not extend the due dates for filing 1094-B, 1095-B, 1094-C and 1095-C, which are February 28, 2020, if not filing electronically, and March 31, 2020, if filing electronically. However, a 30-day extension for filing these forms with the IRS is still available by filing Form 8809, Application for Extension of Time to File Information Returns.

In addition, the Notice includes some relief from certain penalties for reporting entities who can show they have made good faith efforts to comply with the information reporting requirements for 2019—for both furnishing to individuals and filing with the IRS. The relief applies to missing or inaccurate information on the return or statement, including taxpayer identification numbers and dates of birth. No relief is provided to reporting entities that do not make a good faith effort to comply with the regulations, or that fail to file an information return or furnish a statement by the due dates. Employers and providers who do not meet the deadlines should file the overdue forms as soon as possible, because the IRS will take the late forms into account in determining whether to abate the late-filing penalties.

Repeal of Certain ACA Taxes
On December 20, 2019, President Trump signed into law the Further Consolidated Appropriations Act, 2020 (Act). The Act repeals several ACA excise taxes, including the medical device excise tax, the health insurance provider’s fee, and the high-cost employer-sponsored health coverage tax.

Under the ACA, the sale of a taxable medical device by the manufacturer, producer, or importer was subject to a tax of 2.3 percent of the price for which it is sold. The Act repeals the medical device excise tax for sales occurring after December 31, 2019.

The ACA imposed an annual flat fee, effective January 1, 2014, on covered entities engaged in the business of providing health insurance with respect to U.S. health risks. The Act repeals this fee, effective as of 2021.

The ACA also imposed a nondeductible excise tax on insurers when the aggregate value of employer-sponsored health insurance coverage for an employee, former employee, surviving spouse, or other primary insured individual exceeded a threshold amount—commonly referred to as “Cadillac” plans. The Act repeals the Cadillac tax for tax years beginning 2020.

Health Reimbursement Arrangements
An HRA is an arrangement that is paid for solely by the employer—that is, not provided through a salary reduction election or otherwise under a cafeteria plan—that reimburses the employee for qualified medical expenses up to a maximum dollar amount for a coverage period. Currently, there are three types of allowed Health Reimbursement Arrangements (HRAs) under the ACA:

HRA Integrated with Employer-Sponsored Health Coverage
An HRA is “integrated” if an employer offers the HRA in conjunction with other group health insurance in which the employee must be enrolled and that on its own is in compliance with the market reform requirements of the ACA. Typically, this type of HRA is integrated with a high deductible health plan.

HRA Integrated with Individual Health Insurance Coverage
In June 2019, the IRS, Department of Labor (DOL) and Department of Health and Human Services (HHS) issued regulations that allow employers of any size to offer HRAs that can be integrated with individual health insurance coverage and Medicare for plan years beginning January 1, 2020. Previously, these types of arrangements were prohibited by the ACA for applicable large employers and exposed employers to penalties under the market reform provisions of the law. To qualify as an individual coverage HRA, the arrangement must meet several requirements:

  • All individuals covered by the HRA must be enrolled in individual health insurance coverage or Medicare for each month they are covered by the HRA, and reasonable procedures must be in place to verify that employees are enrolled in the individual coverage.
  • The employer cannot offer a traditional group health plan to any class of employees who are also offered the HRA.
  • The HRA must be offered to all employees within the same class on the same terms and conditions.
  • Employees must have the opportunity to opt out of and waive future reimbursements from the HRA at least annually.
  • Certain notice requirements must be met.

Qualified Small Employer HRAs
Since January 1, 2017, small employers—and non-applicable large employers—have been allowed to offer a Qualified Small Employer HRA (QSEHRA) provided they do not offer a group health plan to any of their employees. The requirements of a QSEHRA are similar to those of the individual coverage HRA:

  • The HRA must be funded solely by the employer.
  • It must be provided on the same terms to all eligible employees.
  • The employee must provide proof of individual health coverage before the plan can reimburse medical costs incurred by the employee or employee’s family members.
  • For 2020, the statutory dollar limits of permitted benefits are $5,150 for self-only coverage and $10,450 for family coverage.

Contact a member of HBK at (800) 733-8613 for more information.

About the Author(s)

Mike Walston is a Principal in HBK's Youngstown office. He has been with HBK since 2013 and has led HBK's Affordable Care Act group since 2015. He focuses on tax compliance and consulting as well as financial statement compilation and review engagements and is a member of the firm's Tax Advisory Group. Before joining HBK, Mike spent eight years with Deloitte Tax LLP in Cleveland, Ohio. His tax experience includes compliance and consultation for both public and private companies, Estate and Gift tax matters, Trust taxation, and state and local tax compliance. He has extensive experience working with partnerships, S corporations, and consolidated corporations.

Mike is a member of the AICPA and a Certified Public Accountant for both the State of Ohio and State of Pennsylvania.

Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

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