Obamacare Repeal and Budget Reconciliation: Everything You Need To Know

SUMMARY:

  • Budget Reconciliation allows Senators to pass measures with 51 votes rather than 60
  • Provisions in the AHCA may be deemed extraneous under Senate Byrd Rule
  • ACA Reporting Requirement cannot be eliminated through reconciliation
  • The Recent CBO report spells difficulty for the Repeal effort moving forward

Recent headlines have been littered with phrases such as: “Budget Reconciliation”, “Byrd Rule”, “CBO Reports”, and “Filibuster” etc etc. What does it all mean? How does it tie together and most importantly how does this affect those working in the insurance industry?

Budget Reconciliation???

To start, let’s take a look at what budget reconciliation is. Simply put, Budget Reconciliation is a process that allows Congress to make changes more quickly than under regular rules (See Figure 1). Every year Congress is required to adopt an annual budget resolution. This serves as Congress’s statement on items such as: revenue, debt limits, and expenditures. Congress uses this to set federal spending goals for the next five years. When additional legislation that affects spending is needed beyond that which is normal, Congress can use the process known as Budget Reconciliation. Why are we talking about this? This is what Republicans in Congress are currently using in an attempt to pass new healthcare legislation in the Senate. Republican lawmakers are hoping that this can accelerate the process and lower the number of needed votes in order to pass the new law.

Budget Reconciliation

 

Why are Republicans using this to Pass Healthcare Reform???

Under normal Senate rules, there is no defined amount of time for debate on each bill. 60 Senate votes are required to end debate and move into an up or down vote on legislation. This means that any single Senator can speak on and on forever on a bill thus thwarting its ability to move forward into law. This is known as a filibuster.

Here’s the key to Budget Reconciliation. The Budget Act limits the Senate debate time on reconciliation measures to 20 hours. After 20 hours, the debate ends. This means that under budget reconciliation a total of only 51 votes are needed in order to pass measures as opposed to the standard 60 that would be needed to overcome a filibuster. If you’ve been paying attention you will know that Republicans in Congress do not currently hold 60 seats, so this is their best option for passing healthcare reform. Under Reconciliation, Republicans can pass legislation without the help of any Democrats. In addition to these limits the Senate also operates under rules that govern the subject matter of reconciliation. These limits are outlined in the Byrd Rule.

The Byrd Rule???

The Byrd Rule serves to set limits on the subject matter that can be considered under any reconciliation matter. A provision is considered extraneous if:

  • It does not produce a change in expenditures or revenues.
  • The net effect of the provisions reported by the committee fails to achieve the reconciliation instructions.
  • It is outside the instructed committee’s jurisdiction.
  • It produces changes in expenditures or revenues that are only incidental to the non-budgetary components of the provision.
  • It increases or decreases net expenditures or revenues during a fiscal year that is not covered by the reconciliation instructions.
  • It recommends changes to Social Security.

The Byrd Rule in the Media

The Byrd rule is being talked about so much in the media because some opponents of the AHCA claim that one of the key provisions of the AHCA should be considered “Extraneous” under the Byrd Rule and therefore cannot be contained in a Budget Reconciliation bill. This provision is the 30% penalty imposed on those individuals who do not maintain continuous coverage throughout the year.

Under the AHCA bill, insurance companies in certain states can charge a member 30% more for their premiums if coverage is not maintained in the previous year. Since this extra money would go to insurance companies rather than the federal government (as it does under the ACA’s individual mandate) the provision may be considered out of conformity with Senate regulations. Without the 30% provision, the AHCA falls apart as insurance risk pools become unbalanced and people wait to buy insurance until they are very sick.

Reconciliation Limits on Repealing Reporting Requirements

Additionally, a little known fact is that even though the proposed healthcare bill reduces the Individual and Employer penalties to $0, it cannot remove the requirement to report qualified offers of coverage. What this means is that budget reconciliation cannot be used to change the current reporting requirements under the ACA. Additionally, marketplace premium tax subsidies are proposed to stay in place until the year 2020 at which time they are to be replaced by less generous tax credits. Reporting will still be needed in order to track who is eligible for a subsidy and then eventually who is eligible for a tax credit.We first uncovered these details in a recent blog: House Passes AHCA Bill – What This Means for Employer Compliance.

The Congressional Budget Office and the AHCA

On May 25th, the CBO released its report on the amended AHCA bill that passed in the House. The report found that 23 million Americans could lose their health insurance by the year 2026. Before the Senate could even take a look at the bill, the CBO was required to report on it. Since there were actually budgetary savings implemented by the bill it is now free to move to the Senate, but from there it will not be an easy road.

Final Thoughts

The road ahead for healthcare repeal is a bumpy one at best. Congressional Republicans are faced with the daunting challenge of living up to their campaign promises of “Repealing and Replacing” the ACA while at the same time trying to preserve coverage rates and lower premiums. This is a challenge that may prove “undoable” and in the end lawmakers may have to compromise.

House Passes AHCA Bill – What This Means for Employer Compliance

Summary:

  • AHCA bill passed in the House of Representatives
  • Senate will now take up the bill, and many have said publicly that it will have significant changes and potential poison pills added that would keep it from ever becoming law.
  • Individual and Employer mandate penalties go to $0 as of 12/31/2015.
  • ACA Reporting stays in tact as is, with the addition of new additional reporting as of 1/1/2018.
  • Definition of what plan can receive a subsidy or tax credit has changed.
  • Subsidies will be replaced with tax subsidies in 2020.

On May 4, 2017 the US House passed the latest iteration of the American Healthcare Act (AHCA), a reconciliation bill aimed at repealing and replacing the ACA. The next step is for the bill to be sent to the Senate, where it is already facing harsh criticism.

The Senate is expected to take on an even slower pace as many members are saying that they need “plenty of time to look things over”. Thus far many Republican Senators have expressed concern over the substance of the new plan. Some noteworthy statements are as follows:

“We’re not under any deadline, so we are going to take our time” – Sen. John Cornyn (R-TX)

“I’m not so sure this is good civics here” – Sen. Lindsey Graham (R-SC)

“The Margin of error is a lot less over here” – Sen. John Thune (R-ND)

“Anything that makes it impossible for us to do under reconciliation we’ll have to either try to do it a different way or do it at a later time” – Sen. Roy Blunt (R-MO)

“It’s a skeleton, but it’d definitely still not the final product” – Sen James Lankford (R-OK)

Senators Lindsey Graham (R-SC), Shelley Moore-Capito (R-WV) and Johnny Isaakson (R-GA), are co-sponsoring an earlier bill that was authored by Sen. Susan Collins (R-ME) and Sen. Bill Cassidy (R-LA). This bill takes an entirely different approach than that of the house. It has language that allows states to either keep the current ACA law’s framework or opt into a new program that would enroll people into a catastrophic insurance plan that would be paid for through the use of tax credits.

The most important items that the House Freedom Caucus negotiated in order to pass the latest bill, such as the opting out of Essential Health Benefits, are possibly unallowable in Senate Reconciliation rules. This seems to be the case as all items must concern the budget and not regulation, something Dems are sure to bring up at large.

Senators Chuck Grassley (R-IA) and Roy Blunt (R-MO), think that the Senate might write its own bill from scratch and disregard the latest House bill. Additionally, unlike the house, the Senate must receive and review a score from the Congressional Budget Office (CBO) before a vote of any kind. It’s expected to take two weeks for this to occur.

At this point it is uncertain what the revised Senate bill will look like, but we do know that it will undergo an overhaul. New developments will surface on a daily basis which makes it difficult to determine exactly what this means for Employer Compliance and Reporting going forward. Assuming no changes occur to the bill (which we know they will) this is what we know so far………

  • Sec 205, 206Individual Mandate and Employer Mandate Penalties for offering health coverage will go to $0.00 after Dec 31, 2015. This does not address any penalties that may be incurred for the 2015 plan year prior to Dec 31, and from all accounts the IRS is planning on implementing penalties for the 2015 plan year. More on that here.
  • Sec 205, 206 – While taking the Mandate penalties to $0.00, the IRS reporting penalties associated with the filing of “Informational Returns” are assumed to stay the same. Changes to the reporting requirement for large employers are not mentioned in the bill and are also assumed to stay “as is”.
  • Sec 131Repeal of Subsidies. The cost sharing subsidies created by the ACA are not to be repealed until December 31, 2019 to allow for transition. The government will need to know who is eligible for a subsidy for 2017, 2018 and 2019. That means employers will need to report coverage offered. After this, ongoing reporting will still be needed to track Tax Credits.
  • Sec 202 Additional Modification to Premium Tax Credits under ACA. This would go into effect after Dec, 31 2017 (which excludes this reporting year) and would no longer be allowable for insurance that covers abortions. These would additionally now be indexed based on “age” and “income” which would substantially decrease credits available for younger tax payers.
  • Sec 202Change to the definition of “Qualified Health Plan”. Qualified health plans look to exclude both MV requirements as well as indexing.
  • Sec 202 – Reporting Under Section 6055(b). New reporting for information relating to Off-Exchange Premium Credit Eligible Coverage. New requirements will be effective as of Jan 1, 2018 with regard to newer Premium Credits.

No-one yet knows when the senate will enact a new law or even what that law will look like. It may be late Summer to early Fall before we know anything. At that point changing the reporting requirement for the tax year 2017 will not be possible. So it is expected that 2017 reporting requirements will stay as they currently are. If the law passes in its current form, the mandate penalties will be eliminated, but that does not affect the penalties associated with failure to file informational returns. This affects the exchanges, the Insurance Carriers and Applicable Large Employers (ALEs).

Newly Released Report States That IRS Reporting Penalties are Coming

 

By now it should come as no surprise that the IRS has been stretched thin when it comes to their ability to implement penalties associated with the Employer Shared Responsibility Provision of the Affordable Care Act (Obamacare). Over the past couple of years, the IRS has been tasked with creating new tools that will allow them to identify Applicable Large Employers and then determine their Compliance within the Employer Mandate guidelines. Now we know that they are serious.

On April 7th the Treasury Inspector General for Tax Administration (TIGTA) released their recent audit report of the IRS’s efforts to implement employer penalties. This report outlines both the agency’s findings and their recommendations. A full copy of the report can be found here. A summary of the report is located on page 3 of the document.

Perhaps the most important take away for employers can be found in Recommendation 7 of the assessment. This recommendation (which was agreed upon by the IRS) states, “ensure that forms 1094-C and forms 1095-C management reports correctly report errors statistics”. What this means is that the IRS is working on an “ACA Compliance Validation” system which will identify all non-compliant Applicable Large Employers (ALEs). These employers will then be subject to penalties under section 4980H for the tax year 2015.

This system was initially scheduled to come online in January of 2017. This date was pushed back and is now scheduled to be operational in May of 2017.

So what is the Take away for Large Employers?

  • The Internal Revenue Service fully intends on implementing systems to allow them to accurately identify 1094-C filings by May of this year.
  • The purpose of these systems is to collect penalties from all employers who did not comply with the Employer Shared Responsibly Provisions and filings.
  • Other IRS systems outlined in the assessment are also undergoing improvements, all of which are aimed at collecting money for non-compliance.

Many have taken the stance of, “let’s see what happens to the ACA”. Employers who are taking that stance, may be playing a dangerous game.

If you have not yet filed your forms 1094-C and 1095-C for 2015 or 2016, we can help. Please give us a call at 888-978-8310 or email us at support@acareportingservice.com.

President Trump’s ACA Executive Order

Anyone keeping up with the news recently has probably seen headlines mentioning new Executive Orders executed by President Trump. Very shortly after being sworn into office on January 20th, newly elected President Trump signed an Executive Order beginning to outline his Administrations intent to repeal the Affordable Care Act (ACA).

No-one yet knows how long the law will remain in effect. However it was made clear in the Executive Order that it is “Imperative for the executive branch to ensure that the law is being efficiently implemented”. It also stated that all executive departments should “take all actions consistent with the law to minimize the unwarranted economic and regulatory burdens of the ACA”. The order then mentions that there should be an effort to afford states more flexibility and control in order to create a more open healthcare market.

After the release of the Executive Order, many are still trying to determine what this all means. What will happen to the individual mandate? What does this mean for insurers? Will employers still have to comply with IRC section 6056? What about the exchanges? Before addressing these things it is imperative to first review some key language from the Executive Order itself.

Sec. 2. To the maximum extent permitted by law, the Secretary of Health and Human Services (Secretary) and the heads of all other executive departments and agencies (agencies) with authorities and responsibilities under the Act shall exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.

Sec. 3. To the maximum extent permitted by law, the Secretary and the heads of all other executive departments and agencies with authorities and responsibilities under the Act, shall exercise all authority and discretion available to them to provide greater flexibility to States and cooperate with them in implementing healthcare programs.

Sec. 4. To the maximum extent permitted by law, the head of each department or agency with responsibilities relating to healthcare or health insurance shall encourage the development of a free and open market in interstate commerce for the offering of healthcare services and health insurance, with the goal of achieving and preserving maximum options for patients and consumers.

Sec. 5. To the extent that carrying out the directives in this order would require revision of regulations issued through notice-and-comment rulemaking, the heads of agencies shall comply with the Administrative Procedure Act and other applicable statutes in considering or promulgating such regulatory revisions.

The executive order may in fact first and foremost be a political play. President Trump ran an entire campaign on the promise of dismantling the healthcare law and replacing it with “Something Fantastic”!  Obviously this lays out the ground work for Tom Prince, Andrew Puzder and Steven Mnuchin, incoming HHS, Labor and treasury secretaries (Respectively).

Currently, none of these gentlemen have been confirmed by the Senate and therefor there will be some time elapse before they can take any action.

When they are in a place to take action there are still many steps that have to be taken first.  For instance if any action is to be taken regarding loosening any rules this will most likely require new proposed regulations. This in turn is followed by a review and implementation period. On top of this the Democratic Party is not planning on “playing nice”. To sum it all up any changes will inevitably take some time. These things typically take a while (possibly years) even way they are noncontroversial.

Another widely mentioned impact of the Executive order would be the issuing of blanket hardship exemptions to all who enroll in coverage. This could be another way of “loosening” the impact of the individual mandate. However while this can be done in theory it is not practical at all. Granting hardship exemptions to all would essentially implode the current healthcare exchanges as carriers must have the individual mandate in order to offset the risk taken on when enrolling those with pre-existing conditions. Again, possible but not likely.

Lastly, many are wondering what this means for the employer mandate and therefore employer reporting. So far there has been no word specifically on this. One thing is for sure, until the Treasury Department announces something different the current law of the land still stands. This means that all employers should be prepared to furnish 1095Cs to employees by early March and also plan to have these filed with the IRS by the March 31st deadline.

 

 

We Can Help With 2015 (Prior Year) ACA Reporting


If you are in this position and need help, contact our support team.  We can help.


Recently some employers have began to receive IRS notices for not filing their 2015 ACA Forms (1094-B, 1095-B, 1094-C & 1095-C).

Recently the Internal Revenue Service (IRS) has begun to mail out Notice letters to large employers all over the country who have not yet filed their 2015 Affordable Care Act Reporting. These letters are serving as a final effort to inform large employers of their need to file informational returns or face a steep penalty.

VIEW THE NOTICE HERE

Internal Revenue Code (IRC) Section 6056 requires employers that are ALE’s (50 or more FTEs) to file information returns with the IRS and provide statements to their full-time employees relating to the health insurance coverage. ALEs meet these requirements by using form 1094-C and form 1095-C.

Any employer who receives these notice letters from the IRS is required to fill out associated documents and return them to the IRS within 30 days. These documents indicate whether or not the employer has received the notice in error.

The IRS is requiring large employers to provide applicable reporting under Section 6056 no less than 90 days from the date of notice. If employers fail to provide the appropriate informational returns within 90 days they will be assessed penalties under IRC Section 6721. These penalties include:

  • Penalty of $250 for each informational return not filed on time.
  • Penalty of $500 per for each informational return “intentionally” not filed.
  • Maximum Penalty charge of $3,000,000.00 per year for failure to file.

In addition to the penalties above, employers may also face both 4980H(a) and 4980H(b) penalties for failure to provide the right type of health coverage at the right type of cost.

If you are a large employer and received this notice ACAReportingService can help. As a full service provider, we are able to assist with all of your reporting needs, even for the 2015 tax reporting year.

IRS Begins Releasing Requests for Employer reporting for the 2015 tax year

Applicable Large Employers (ALEs) are beginning to receive request letters from the IRS from the IRS regarding their 2015 Affordable Care Act Reporting. Failure to supply correct informational returns will result in applicable penalties.

Recently the Internal Revenue Service (IRS) has begun to mail out Notice letters to large employers all over the country who have not yet filed their 2015 Affordable Care Act Reporting. These letters are serving as a final effort to inform large employers of their need to file informational returns or face a steep penalty.

VIEW THE NOTICE HERE

Internal Revenue Code (IRC) Section 6056 requires employers that are ALE’s (50 or more FTEs) to file information returns with the IRS and provide statements to their full-time employees relating to the health insurance coverage. ALEs meet these requirements by using form 1094-C and form 1095-C.

Any employer who receives these notice letters from the IRS is required to fill out associated documents and return them to the IRS within 30 days. These documents indicate whether or not the employer has received the notice in error.

The IRS is requiring large employers to provide applicable reporting under Section 6056 no less than 90 days from the date of notice. If employers fail to provide the appropriate informational returns within 90 days they will be assessed penalties under IRC Section 6721. These penalties include:

  • Penalty of $250 for each informational return not filed on time.
  • Penalty of $500 per for each informational return “intentionally” not filed.
  • Maximum Penalty charge of $3,000,000.00 per year for failure to file.

In addition to the penalties above, employers may also face both 4980H(a) and 4980H(b) penalties for failure to provide the right type of health coverage at the right type of cost.

If you are a large employer and received this notice ACAReportingService can help. As a full service provider, we are able to assist with all of your reporting needs, even for the 2015 tax reporting year.

IRS Extends Due Date

IRS Extends Due Date for Employers and Providers to Issue Health Coverage Forms to Individuals

On November 18, 2016, the IRS extended the 2017 due date for providing 2016 health coverage information forms to individuals. Insurers, self-insuring employers, other coverage providers, and applicable large employers now have until March 2, 2017 to provide Forms 1095-B or 1095-C to individuals, which is a 30-day extension from the original due date of January 31.

Notice 2016-70, also extends transition relief from certain penalties (IRC Sections 6721 and 6722) to providers and employers that can show that they have made good-faith efforts to comply with the information-reporting requirements for 2016 for incorrect or incomplete information reported on the return or statement.  This Notice also provides guidance to individuals who, as a result of these extensions, might not receive a Form 1095-B or Form 1095-C by the time they file their 2016 tax returns.is also abating penalties for inadvertent errors and omissions where there was a good-faith effort to comply with the reporting requirements.

The due dates for filing 2016 information returns with the IRS remain unchanged for 2017. The 2017 due dates are February 28 for paper filers and March 31 for electronic filers.

Due to these extensions, individuals may not receive Forms 1095-B or 1095-C by the time they are ready to file their 2016 individual income tax return. While information on these forms may assist in preparing a return, the forms are not required to file. Taxpayers can prepare and file their returns using other information about their health insurance and do not have to wait for Forms 1095-B or 1095-C to file.

Post Election Results, ACA Reporting and Compliance

Well, regardless of the outcome, at least as of Tuesday its over!  For that alone we can all be thankful …

But now what?

Employers still have looming deadlines to provide forms 1095 to their employees by the last day in January 2017 and complete their E-File of ACA Forms to the IRS by the last day in March 2017.  The marketplace has been essentially on hold waiting on the results of the election, and now it is time to figure out what steps are necessary to stay compliant.

We will be holding a number of webinars to help employers get back on track.

Learn more here and register for an upcoming event.


Quick Facts We Will Cover:

  • Employees must receive their forms 1095 by January 31st, 2017
  • The IRS must receive your E-File of ACA forms by March 31st, 2017
  • It IS NOT NECESSARY for you to code each 1095-C form on your own, by hand
  • You do still have plenty of time to stay compliant, affordably.

Correcting Aggregated Group ACA Reporting

One of the most common errors employers make while completing their ACA reporting is the incorrect combining of aggregated group filings.  The instructions for ACA reporting requires each ALE member to complete their own separate ACA reporting for their employees.  This can be very confusing to some employers and consultants simply because they might have employees from numerous different EIN entities all covered under the same medical plan.  To help you understand this, lets take an example employer.

Example Employer

Common ownership group of 10 separate EIN companies, each having 100 employees each.  This same group has all 1,000 total employees covered under one medical plan.

The error occurs when the combined ‘control group’, known as an Aggregated Group under ACA rules, files (1) form 1094-C with (1,000) forms 1095-C to complete their reporting.  Filing this way causes a number of problems:

  • The one entity filed 900 forms 1095-C on people who were not their actual employees
  • Nine additional entities did not file anything to the IRS
  • Both instances will trigger penalties

Unwinding this error is quite complex.  If you are unfortunate enough to be reading this blog and need assistance, contact customer support for assistance.