IRS Proposes Revised Regulations on Reporting of Minimum Essential Coverage That Would Reduce Duplicative Reporting

The IRS has issued Notice 2015-68 that outlines some clarifications the IRS plans to make to information reporting for minimum essential coverage (MEC).  

The notice covers a number of special situations including as described in its first paragraph:

This notice advises taxpayers that the Treasury Department and the Internal Revenue Service intend to propose regulations under § 6055 of the Internal Revenue Code (1) providing that health insurance issuers must report coverage in catastrophic health insurance plans described in § 1302(e) of the Affordable Care Act enrolled in through an Affordable Insurance Exchange (Exchange, also known as a Health Insurance Marketplace), (2) allowing electronic delivery of statements reporting coverage under expatriate health plans unless the recipient explicitly refuses consent or requests a paper statement, (3) allowing filers reporting on insured group health plans to use a truncated taxpayer identification number (TTIN) to identify the employer on the statement furnished to a taxpayer, and (4) specifying when a provider of minimum essential coverage is not required to report coverage of an individual who has other minimum essential coverage. This notice also invites comments on issues relating to solicitation of taxpayer identification numbers (TINs) of covered individuals; advises that the governments of United States possessions or territories, namely American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands, are not required to report coverage under Medicaid and the Children’s Health Insurance Program (CHIP); and provides that the state government agency sponsoring coverage under the Basic Health Program is required to report Basic Health Program coverage.

An item of key interest to many employers is the fourth requirement that is meant to reduce duplicative reporting of coverage under many employer sponsored plans.  Concerns had been raised over the summer of 2015 regarding the potential need for employers who provide a health reimbursement arrangement that the employer pays for along with an insured program.  

Under § 1.6055-1(d)(2) many concluded that a small employer (that is, one not generally subject to large employer reporting) who had a group plan provided by an outsider insurer but also provided a health reimbursement arrangement that paid for certain items (such as paying a portion of the plan deductible) would be required to report as a coverage provider and provide a Form 1095-B to indicate that employee had minimum essential coverage under that program.  That would be true even though the insurer would be reporting the same for the employees, as the group program would also provide minimum essential coverage on it own.

The Form 1095-B will be used by the IRS to determine if an individual has minimum essential coverage for each month of the year.  Thus it’s clear that if a small employer offered only an expense reimbursement arrangement under an HRA that gave minimum essential coverage the IRS would not be aware that the employee was covered unless a Form 1095-B was issued.  

However that’s not a case that’s likely seen often in the real world of small employers who employee more than a single person (who also happens to be the owner).

The notice provides that the IRS plans to modify the regulations in two cases that the agency has determined would eliminate duplicative reporting.  The rules must be applied month by month and individual by individual.

The first exception will clarify when a person is provided with MEC under multiple plans of the same provider.  In that case the IRS indicated:

Thus, under the first rule (that is, the rule for reporting multiple minimum essential coverage plans or programs of the same provider), if for a month an individual is enrolled in a self-insured group health plan and also has a self-insured health reimbursement arrangement (HRA) from the same employer, the provider (the employer) is required to report only one type of coverage for that individual. If an employee is covered under both arrangements for some months of the year but retires or otherwise drops coverage under the non-HRA group health plan and is covered only under the HRA, the employer must report coverage under the HRA for the months after the employee retires or drops the non-HRA coverage. The employer must report the coverage in an arrangement of any individual who is covered by only one arrangement.

The second option deals with the employer that offers both an HRA paying certain expenses but also provides insured coverage that provides MEC on its own.  That exception is described below:

Under the second rule (that is, the rule for reporting minimum essential coverage for which an individual is eligible only if the individual is covered by other minimum essential coverage), reporting would not be required for Medicare or TRICARE supplements and Medicaid coverage providing benefits only to an individual enrolled in other coverage for which reporting is required, such as employer coverage or a qualified health plan.  Reporting also would not be required under the second rule for an HRA that is available only to employees and other individuals who enroll in an employer’s insured group health plan for months that the individual is enrolled in the insured group health plan. It is anticipated that, for employer coverage, this rule will apply only if the two types of coverage are eligible employer-sponsored coverage of the same employer. For example, if an employee is enrolled in both his employer’s HRA and insured group health plan, the employer is not required to report the employee’s coverage under the HRA.  However, if an employee is enrolled in an employer’s HRA and in a spouse’s non-HRA group health plan, the employee’s employer would be required to report for the HRA, and the employee’s spouse’s employer (or the health insurance issuer or carrier, if the plan is insured) would be required to report for the non-HRA group health plan coverage.

The notice also provides temporary relief from penalties for failure to provide a taxpayer identification number (TIN) on a required report.  This relief will apply in the interim as the IRS considers more specific guidance in this area.

Pending the issuance of additional guidance, reporting entities will not be subject to penalties for failure to report a TIN if they comply with the requirements of § 301.6724-1(e) with the following modifications: (1) the initial solicitation is made at an individual’s first enrollment or, if already enrolled on September 17, 2015, the next open season, (2) the second solicitation is made at a reasonable time thereafter, and (3) the third solicitation is made by December 31 of the year following the initial solicitation. Additionally, a reporting entity is not required to solicit a TIN from an individual whose coverage is terminated.