In a bipartisan effort, Congress recently passed the Employer Reporting Improvement Act and the Paperwork Burden Reduction Act, both of which outgoing President Biden signed into law.

The laws are aimed at making it easier for sponsors to comply with ACA requirements on Forms 1095-B and 1095-C, which provide information about health insurance coverage to workers and the Internal Revenue Service.

Both laws take effect immediately.

Forms explainer

Form 1095-C is issued by “applicable large employers” (ALEs) — those with 50 full-time or full-time-equivalent workers — to report the offer of health coverage, while Form 1095-B is issued by insurance providers, self-insured employers or small employers to report actual coverage.

Prior to 2025, plan sponsors were required to send these forms to all of their employees covered by their health plan by March 2. The due dates for transmitting the forms to the IRS are Feb. 28 (if filing on paper) and March 31 (if filing electronically).

Both forms help workers prove they comply with the ACA’s mandate that they carry health insurance and that an employer is complying with its obligations to provide coverage under the law.

What’s changing

There are four changes that benefit employers under the two new laws:

1. Forms upon request — Plan sponsors are no longer required to send Forms 1095-B and 1095-C to all full-time and covered employees. Instead, they will only be required to furnish them upon request from an employee.

Importantly, plan sponsors who want to go this route are required to notify their staff about their right to ask for a form.

2. Electronic forms — Starting this year, employers may furnish the forms to their employees electronically rather than on paper. The new law also makes it easier for employers to use a worker’s birth date instead of their Social Security number if the number is missing.

3. Reponse times to IRS letters — Another provision expands the time employers have to respond to a “employer shared responsibility payment” letter (Letter 226J) from the IRS, to 90 days from 30.

These demand letters are sent to employers if one or more full-time employees listed on the company’s Form 1095-C received a premium tax credit on his or her federal income tax return, meaning they secured insurance on an ACA exchange like healthcare.gov.

Employers have found it challenging to  provide a response and a defense to the IRS within such a short window of 30 days. An additonal challenge has been that these letters are sent by U.S. mail, and it may take some time to reach the appropriate person in an organization after being received. Filing a response late can result in the employer being assessed a penalty when one isn’t warranted, in addition to further penalties.

4. Statute of limitations — One of the new laws imposes a statute of limitations for how far back the IRS can go to try to collect assessments for 1095-B and 1095-C reporting failures and mistakes. Prior to this, there was no statute of limitations.

The takeaway

The above changes will benefit plan sponsors by reducing the reporting burden as well as give them more time to respond if the IRS thinks an ALE failed to provide coverage as required by law.

Your HR department should be aware of these changes in order to take advantage of the them.

The forms

• Form 1095-C — This is basically the W-2 reporting form for health insurance. The form tells the IRS which employers are providing coverage and which employees are getting coverage through their employers.
• Form 1094-C — This form provides information about health insurance coverage that the employer provides.

• Jan. 31, 2022 — Individual statements (Form 1094 C) for 2021 must be furnished to employees by this date.
• Feb. 28, 2022 — If filing paper returns, Forms 1094 C and 1095 C must be filed by this date.
• March 31, 2022 — If filing electronically, Forms 1094 C and 1095 C must be filed by this date.

Penalties

The ACA imposes annual out-of-pocket maximums on the amount that an enrollee in a non-grandfathered health plan, including self-insured and group health plans, must pay for essential health benefits through cost-sharing.

This means that health plans are not allowed to require their enrollees to pay more than the maximum in a given year for health services.

The proposed 2022 out-of-pocket maximums are $9,100 for self-only coverage and $18,200 for family coverage. This represents an approximate 6.4% increase over 2021 limits. For 2021, the out-of-pocket maximums are $8,550 and $17,100, respectively.

Penalties to rise

Applicable large employers (ALEs) — employers with 50 or more full-time or full-time-equivalent workers who are required to offer their employees health insurance under the ACA — can face large penalties known as “shared responsibility” assessments if they have at least one full-time employee who enrolls in public marketplace coverage and receives a premium tax credit. There are two types of infractions with different penalty amounts:

The “play or pay” penalty — This can be levied when an ALE fails to offer minimum essential coverage to at least 95% of its full-time employees and their dependent children during a month, and at least one of its full-time employees receives a premium tax credit through a public marketplace.

The per-employee penalty will rise to $2,880 in 2022 from the current $2,700.

The “play and pay” penalty — An ALE can be hit by this penalty if it offers minimum essential coverage to at least 95% of its full-time employees but a full-time employee receives a premium tax credit because: (1) the employer-offered coverage is unaffordable or fails to provide minimum value, or (2) the employee was not offered employer-sponsored coverage.

For 2022, the maximum annual assessment for each full-time employee receiving a premium tax credit will be an estimated $4,320, up from the current $4,060.

Far-reaching costs

Addicted workers have been found to have:

• Lower or lack of workplace productivity;
• Higher health care costs;
• Increased absenteeism and presenteeism;
• Diminished quality control;
• More disability claims;
• Increased workplace injuries;
• Lower morale;
• Higher job turnover; and
• Employee theft.

Some employers have tried to help employees tackle their addictions or abuse problems by implementing workplace prevention, wellness and disease-management strategies. These programs improve health, which lowers health care costs and insurance premiums and produces a healthier, more productive workforce. Under the ACA, anybody covered by a health plan has access to substance-abuse treatment. That’s because the law makes such treatment one of 10 benefits insurance plans must offer. The ACA requires health plans to pay for prevention and early intervention. Health care plans also have to comply with a “parity” law, which requires them to treat mental health issues the same way they do physical diseases.

What else can you do?

• You can start by adding addiction to your prevention, intervention, treatment and disease-management strategies.
• Use confidential screenings and assessments. There are a number of screening, brief-intervention and referral-to-treatment modules available to help people confront their drinking or drug use and get the help they need.
• Review your policy for coverage. If you have coverage for substance-abuse treatment, employees with addictions will be more apt to seek out help knowing the cost is at least partially covered.

And, importantly, make sure your substance-abuse benefit is robust, and that it covers a full continuum of care. A strong benefit would include:

• Inpatient care;
• Residential treatment programs;
• Outpatient care; and
• Continuing care for those in need of treatment.

• Any individual covered by the HRA must be enrolled in health insurance coverage purchased in the individual market, and must substantiate and verify that they have such coverage;
• The employer may not offer the same class of individuals both an HRA and a “traditional group health plan”;
• The employer must offer the HRA on the same terms to all employees in a “class”;
• Employees must have the ability to opt out of receiving the HRA;
• Employers must provide a detailed notice to employees on how the HRAs work;
• Employers may not create a class of employees younger than age 25, whom they might want to keep in their group plan because they’re healthier.
• For employers with one to 100 employees, a class cannot have less than 10 employees; for employers with 100 to 200 employees, the minimum class size is 10% of the workforce; and for employers with 200 or more employees, the minimum class size is 20 employees.

In a surprise move, the Department of Justice announced that it would not further pursue an appeal of a ruling by U.S. District Court Judge Reed O’Connor, and instead asked the 5th U.S. Circuit Court of Appeals to affirm the decision he made in December 2018.

O’Connor had ruled that Congress eliminating the penalty for not complying with the law’s individual mandate had in fact made the entire law invalid.

But, even though the DOJ won’t be pursuing defense of the law and challenging the ruling on appeal, a number of states’ attorneys general have stepped up to fight the ruling.

What this means for the future of the employer mandate is unclear, as the court process still has a long way to go. The ruling could be overturned on appeal and invariably whatever the 5^th Circuit decides, the case will likely be appealed to the U.S. Supreme Court.

Already there has been fallout in the private health insurance market since the individual mandate penalty was eliminated, but the employer mandate, which requires that organizations with 50 or more full-time or full-time-equivalent workers offer health coverage to their employees, remains intact.

As the case winds on, it will be some time before anything changes. The 5th Circuit has not yet scheduled arguments. The DOJ has asked for a hearing date for July 8, and Democratic states’ attorneys general agreed.

Despite the DOJ’s announcement, the law stands and applicable large employers must continue complying with its requirements.

Analysis

The move was surprising because in the past President Trump had signaled that he wanted to keep parts of the ACA, particularly the barring of insurers from denying coverage based on pre-existing conditions. If the entire law is scrapped, so will that facet – as well as other popular provisions, like allowing adult children to stay on their parents’ policy until the age of 26.

Trump said his administration has a plan for something much better to replace the ACA.

Democrats have introduced some legislation to try to stabilize markets and improve on some ACA shortfalls. Their legislation aims to cut premiums for individuals buying on exchanges by expanding premium tax credits. Another bill would reaffirm the pre-existing condition protections, and restore enrollment outreach resources, which have been cut back under the Trump administration.

But with a divided Congress, the likelihood of anything reaching Trump’s desk are slim to none.

Meanwhile, the success of the ACA has been spotty. In some parts of the country, usually in areas with high population density, competition among plans ensures lower prices for people shopping on exchanges. But in smaller regions, cost increases are rampant.

A new analysis by the Urban Institute, a liberal-leaning think-tank, finds that more than half (271) of the country’s 498 rating regions have only one or two insurers participating in the ACA marketplace. Those regions are disproportionately in sparsely populated areas.

Regions with little competition tend to have much higher premiums. In a region with only one insurer, the median benchmark plan for a 40-year-old nonsmoker is $592 a month. That compares to $376 for the same consumer in a region with at least five plans.

• In October 2017, the Trump administration ceased payments for cost-sharing subsidies, which led some insurers to exit the market or request larger premium increases than they would have otherwise.
• The administration reduced funding for advertising and outreach.
• Congress repealed the individual mandate penalty, effective for 2019.
• The administration introduced regulations extending the time people could be on short-term plans, and also introduced association health plans as an alternative for the small group market.

How to disburse rebates

The rules set forth procedures and time frames for reporting and processing whistleblower complaints by employees against their employers and expand the instances in which an employee can sue their employer for retaliation under the ACA.

The rules are of utmost importance for employers, considering OSHA’s low bar for what it considers retaliation in the regs.

They’re also important in that more employees may be compelled to lodge complaints if they feel slighted after their employers change their health plans or greatly increase the cost-sharing burden on them.

It is critical to train your human resources staff and managers, as well as decision makers, in the rules.

The rules

The ACA whistleblower regulations prohibit employers from retaliating against employees for, among other things:

• Receiving a subsidy for a marketplace plan;
• Raising concerns regarding employer practices that the employee believes violate the ACA;
• Reporting ACA violations;
• Cooperating with a federal investigation;
• Participating and/or cooperating in a proceeding associated with an alleged or actual violation;
• Refusing to participate in a policy or practice that would violate the ACA; and
• Receiving a premium tax credit or a cost-sharing reduction for enrolling in a qualified health plan.

An employee who believes that he or she has been retaliated against in violation of Title I of the ACA has 180 days after the alleged retaliation to file a complaint with OSHA.

What constitutes retaliation?

Retaliation can include several types of action, such as:

• Firing or laying off
• Reducing pay or hours
• Blacklisting
• Demoting
• Denying overtime or promotion
• Disciplining
• Denying benefits
• Failing to hire or rehire
• Intimidating
• Making threats
• Job reassignment that affects prospects for promotion

OSHA has published the “Filing Whistleblower Complaints under the Affordable Care Act” factsheet on the complaint process. As an employer, you should read it to understand the rules. You can find them here: https://www.osha.gov/Publications/whistleblower/OSHAFS-3641.pdf

Employer best practices

Make sure that managers and HR personnel ensure strict confidentiality for employees’ ACA-related information and do not share it with other managers and supervisors.

Cover the regulations in your training and meetings for HR personnel, who in turn should train managers to ensure they understand the consequences of taking actions that may be construed as retaliatory.

Train managers on how to respond if an employee complains about their health insurance in light of the ACA. In such cases, the manager should refer the complaint to the HR or benefits personnel responsible for the company’s health insurance plan.

Retaliation scenario

Your HR department is notified by the Department of Health and Human Services that an employee has purchased coverage on a public insurance exchange and received tax subsidies to help pay for it.

An HR manager goes to the employee’s manager to complain, saying that it could cost the company a $2,000 penalty. The manager finds an excuse to reduce the employee’s hours and reassign him to a lesser position.

For those employers that were offering health coverage to their employees before the ACA and have continued since, the marketplace dynamics would likely not change much if the ruling were not overturned on appeal.

Additionally, since there has been some success in the employer-sponsored health care space in keeping cost inflation relatively tame, there would likely be no incentive for health insurers and providers to abandon those efforts.

The more likely outcome is that a higher court (and eventually likely the U.S. Supreme Court) overturns U.S. District Judge Reed O’Connor’s ruling that because Congress eliminated the individual mandate portion of the ACA, the rest of the law is also invalid and cannot stand. That means all aspects of the law, including health care exchanges, the employer mandate, and the requirement that policies cover 10 essential benefits, and much more. The individual mandate was repealed at the end of 2017.

Several states such as Massachusetts, New York and California have since intervened to defend the law. They argue that, if Congress wanted to repeal it, it would have done so. The Congressional record makes it clear Congress was voting only to eliminate the individual mandate penalty in 2019; it indicates that they did not intend to strike down the entire ACA.

The original lawsuit against the ACA was brought by 20 attorneys general from Republican states, and now 17 attorneys general led by California’s Xavier Becerra have filed a notice of appeal with the 5th U.S. Circuit Court of Appeals in New Orleans.

Interestingly, the Trump administration filed a brief early in 2018 encouraging the court to uphold the ACA but strike down the provisions relating to guaranteed issue and community rating.

There have been more than 70 attempts to invalidate the ACA in courts across the country, and two of those cases made it to the Supreme Court. The last time the ACA was upheld was in 2012 and all five justices who voted at that time to uphold the law are still on the bench today.

Additionally, the ACA is an extremely expansive piece of legislation, which has been on the books since 2010. Legal pundits say it’s unlikely the Supreme Court would want to strike down a law that affects millions of people in the country. In fact, because of this the court may decide not even to take up the case if the 5th Circuit has overturned O’Connor’s ruling.

Employer effects

While this case is under appeal the law will stand, meaning that all parts of it, except the individual mandate, will remain. That means all employers who are considered “applicable large employers” under the ACA, will be required to continue offering health insurance to their workers.

If you are one of them, you need to continue complying with the law of the land as it stands. And remember, while Congress eliminated the penalties associated with not complying with the individual mandate, the penalties for not complying with the employer mandate are still very much in place. Fines can be severe for non-compliance.

This ruling is not expected to affect those penalties, reporting requirements, or any other applicable ACA requirement at this time.

For those employers that were offering health coverage to their employees before the ACA and have continued since, the marketplace dynamics would likely not change much if the ruling were not overturned on appeal.

Additionally, since there has been some success in the employer-sponsored health care space in keeping cost inflation relatively tame, there would likely be no incentive for health insurers and providers to abandon those efforts.

The more likely outcome is that a higher court (and eventually likely the U.S. Supreme Court) overturns U.S. District Judge Reed O’Connor’s ruling that because Congress eliminated the individual mandate portion of the ACA, the rest of the law is also invalid and cannot stand. That means all aspects of the law, including health care exchanges, the employer mandate, and the requirement that policies cover 10 essential benefits, and much more. The individual mandate was repealed at the end of 2017.

Several states such as Massachusetts, New York and California have since intervened to defend the law. They argue that, if Congress wanted to repeal it, it would have done so. The Congressional record makes it clear Congress was voting only to eliminate the individual mandate penalty in 2019; it indicates that they did not intend to strike down the entire ACA.

The original lawsuit against the ACA was brought by 20 attorneys general from Republican states, and now 17 attorneys general led by California’s Xavier Becerra have filed a notice of appeal with the 5th U.S. Circuit Court of Appeals in New Orleans.

Interestingly, the Trump administration filed a brief early in 2018 encouraging the court to uphold the ACA but strike down the provisions relating to guaranteed issue and community rating.

There have been more than 70 attempts to invalidate the ACA in courts across the country, and two of those cases made it to the Supreme Court. The last time the ACA was upheld was in 2012 and all five justices who voted at that time to uphold the law are still on the bench today.

Additionally, the ACA is an extremely expansive piece of legislation, which has been on the books since 2010. Legal pundits say it’s unlikely the Supreme Court would want to strike down a law that affects millions of people in the country. In fact, because of this the court may decide not even to take up the case if the 5th Circuit has overturned O’Connor’s ruling.

Employer effects

While this case is under appeal the law will stand, meaning that all parts of it, except the individual mandate, will remain. That means all employers who are considered “applicable large employers” under the ACA, will be required to continue offering health insurance to their workers.

If you are one of them, you need to continue complying with the law of the land as it stands. And remember, while Congress eliminated the penalties associated with not complying with the individual mandate, the penalties for not complying with the employer mandate are still very much in place. Fines can be severe for non-compliance.

This ruling is not expected to affect those penalties, reporting requirements, or any other applicable ACA requirement at this time.