By Christy Abend
While the Affordable Care Act (ACA) is a federal law, various states have implemented their own individual healthcare mandates as well. It can be challenging for human resource professionals to stay on top of ACA and state level reporting requirements – it’s complicated and time consuming. And, if your company has locations or employees in multiple states, that only increases the complexity.
On January 1, 2019, Congress eliminated the individual mandate penalty of the ACA at the federal level. While the federal law changed and no longer required individuals to pay a tax penalty for failure to enroll in health coverage, it was during this time that several states enacted their own state-based individual health coverage mandates. Employers are required to adhere to each state-based mandate where their employees reside, or in some cases, where they physically work. Not adhering to this rule can lead to potentially costly tax penalties, reporting errors, and misconceptions, so it’s vital that organizations not only stay current, but stay ahead of updates and requirements.
Additionally, recent litigation around the ACA's preventive care mandates raises the possibility that individual states could step in to enact their own preventive care requirements. As of May 2023, the ACA’s preventive care requirements for Minimum Essential Coverage are still being enforced federally while the 5th Circuit Court of Appeals considers the constitutional challenges raised in Braidwood Management v. Becerra. However, if the federal mandates are eventually struck down and potential preventive care regulations newly enacted at the state level, this could further complicate benefit administration for employers.
Typically, states have a different definition of who is considered a resident and who needs to be reported for purposes of their state individual mandates. Additionally, states can have their own unique reporting deadlines, acceptable data formats and methods for submitting data. This makes managing the reporting of health coverage offers even more fragmented and complex.
When employers operate across multiple states that require state individual mandate reporting, not only must they report on offers of health care coverage to the Internal Revenue Service (IRS) using Forms 1095 and 1094, they must also report this information to the various state reporting entities.
As of September 2023, the states with their own mandates include Massachusetts, California, New Jersey, Rhode Island, Vermont and Washington, D.C.. Here’s a look at the current mandates:
Massachusetts is unique in that its health care mandate law preceded the ACA and therefore has specialized compliance needs and its own distinctive form (MA 1099-HC) that must be submitted to MA residents. The Massachusetts mandate was implemented in 2006 and served as a model for the ACA in its formation.
The Massachusetts penalty applies only to adults, has affordability exemptions dependent on income, and exceptions from minimum creditable coverage (MCC) are allowed for certain designated plans. The MCC standards are separate from the federal minimum essential coverage (MEC) requirement.
To maintain state requirements in Massachusetts, all applicable adults must be enrolled in a plan that meets minimum requirements regardless of the source of the coverage. The plan must also provide some level of coverage for services including emergency, prescription drugs, mental health, maternity and newborn care, and more.
Reporting Responsibilities in Massachusetts
For employers with fully insured plans, most insurance carriers will submit forms MA 1099-HC to report minimum creditable coverage to the state and distribute copies to the employees on behalf of the employers. If their insurance carrier fails to file, employers are responsible for fulfilling these obligations to avoid penalties.
For employers with self-insured plans, the employer is responsible for submitting Form MA 1099-HC to report their minimum creditable coverage to the state and distributing copies of the form to their employees.
Massachusetts considers 15 or more days of coverage a month for reporting on the MA 1099-HC.
The deadline for employers and insurers to distribute forms 1099-HC to employees and file to the MA Department of Revenue is January 31st each year.
NOTE: The penalty in Massachusetts is $50 per individual with an annual maximum of $50,000 for failure to issue MA 1099-HC. State law also requires every employer in Massachusetts with six or more employees to annually submit a MA Health Insurance Responsibility Disclosure (HIRD) form. The opportunity to submit HIRD forms is between November 15 and December 15 each year.
California is the largest state with an individual mandate, which first took effect on January 1, 2020. There is an individual penalty that follows the model of the federal mandate assessed on residents for not having insurance coverage. Additionally, the legislation allows for many low-income residents of California to receive a subsidy to help pay health insurance premiums. Residents may apply for exemptions for a variety of reasons.
California’s definition of “minimal essential coverage,” necessary to meet requirements and avoid penalties, is the same as the federal requirement.
Reporting Responsibilities in California
Employers and insurers subject to federal ACA reporting requirements are also required to distribute Forms 1095-C and 1095-B to California residents by January 31st each year. The official deadline to file these forms to the state of California is March 31st each year, however filings received by May 31st are not subject to a penalty.
California affirms that certain parts of Form 1094-C are not required, specifically Parts II, III and IV, however the same Federal Form 1094-C that is submitted to the IRS may also be submitted to California.
NOTE: California’s mandate carries a penalty for employers and insurers who fall out of compliance equal to $50 per covered individual not reported to the state. The reporting requirements apply when covered individuals reside in California. The state requires employers to file on behalf of self-insured, full-time, and part-time enrollees along with covered dependents. For fully-insured plans, the carrier is responsible for filing to the state. There is no penalty for late furnishment of forms to covered individuals.
New Jersey implemented its individual mandate in 2019 with legislation that also includes a penalty that follows the ACA’s model – assigning fines based on household income, not to exceed the average cost of a bronze plan in the state. Penalty revenue collected is allocated to a reinsurance fund to provide payments back to insurers to lower overall healthcare costs.
Reporting Responsibilities in New Jersey
Employers and insurers who utilize Forms 1095-B and 1095-C to report coverage under the federal ACA are required to also report these forms to New Jersey for any full or part-time residents of the state. Part-time residents include anyone that lived in New Jersey for at least 15 days in any month. New Jersey requires reporting for both self-funded and fully insured populations. Employers typically file on behalf of self-funded groups for New Jersey, while insurers typically file for fully-insured plans.
New Jersey follows the same deadlines as the IRS. Employee delivery of Form 1095 is due by March 2nd each year and filings to the state of New Jersey are due by March 31st.
Rhode Island initiated its state individual mandate in 2020 with a two-pronged approach: the actual individual mandate and a reinsurance program. Rhode Island’s mandate still includes an individual penalty for not having coverage and the revenue collected from these penalties is utilized to fund the reinsurance program to help keep healthcare affordable.
Reporting Responsibilities in Rhode Island
Employee delivery of Form 1095 is due by March 2nd each year, and state filing of the form to the Rhode Island Division of Taxation is due March 31st. Employer reporting requirements apply when employees reside in Rhode Island.
The individual mandate in Vermont carries no associated individual penalty. Vermont does not currently require employer reporting, as long as federal reporting requirements remain.
The District’s measure carries an individual penalty assessed on residents of D.C. for non-compliance equal to the federal penalty defined in Section 5000A of IRC 1986.
Reporting Responsibilities in Washington, D.C.
Employers providing health coverage to residents or individuals that work in D.C. are required to submit Forms 1094 and 1095-B and C by May 1st each year, to the D.C. Office of Tax and Revenue (OTR). Employers must also provide applicable D.C. residents with written statements of their coverage. This requirement can be considered satisfied if the employer is already providing, through Federal requirements, individuals with a Form 1095-B or 1095-C by March 2nd each year.
If a company is headquartered outside of the United States, but has operations within the U.S., Federal ACA obligations remain the same. Where the business operates is largely irrelevant. Where employees reside and, in some cases – such as the District of Columbia – where they work, dictates who must be reported to each state.
Employers who have a remote workforce even within the United States have a particularly unique challenge in ensuring they have accurate residential home address information on file for remote employees as this is typically the determining factor on who needs to be reported on.
When states can make changes to ACA requirements with little to no notice or communication to employer groups, it can feel nearly impossible to keep informed, stay ahead, and avoid penalties. It’s important to find an ACA solution that offers individual state mandated reporting and has the expertise to understand and address changes in the regulations, the willingness to invest in technology that supports state changes, and has relationships within state governments to learn about upcoming changes and expectations.
Managing state reporting requirements for CA, DC, NJ, RI, and now MA
Providing input and insights to states as they build out and amend their individual mandate reporting requirements
Continually monitoring for changes and investing in technology to address changes as they happen
Offering deep expertise on state rules and regulations
Working with you to help you not only meet your individual mandate requirements, but also privacy laws
Supporting you with personalized service and support
You read that right. We are expanding our ACA State Mandate Reporting service capabilities to include Massachusetts state form fulfillment and filing.
Learn more by downloading our ebook, Six Misconceptions Employers Have Around State-Based Reporting. Unfortunately for some companies, big decisions are made based on information that includes misconceptions. There are several falsehoods surrounding your state individual health insurance mandate reporting requirements, but some of the most common misconceptions are outlined in this ebook.
When your organization needs a better way to manage the complexities of healthcare reform, we’re here to help. Learn how we can help you solve your ACA management challenges.
The information provided is intended as general guidance and is not intended to convey any tax, benefits, or legal advice. For information pertaining to your company and its specific facts and needs, please consult your own tax advisor or legal counsel. Links to sources may be to third party sites. We have no control over and assume no responsibility for the content, privacy policies or practices of any third party sites or services.
About the Author
Job Title: Director, Product Management
Christy Abend has more than two decades working in the human resources and product management space, with a concentration in health and welfare benefits and a focus on employer regulatory alignment. Her background and interests facilitate her work on the ACA products offered by Equifax Workforce Solutions. She has a Bachelor of Science degree with a concentration in Human Resource Management from the State University of New York, Empire State College and also holds a SHRM-SCP certification as well as a Group Benefits Associate designation awarded by the International Foundation of Employee Benefit Plans and the Wharton School of the University of Pennsylvania.