Affordable Care Act

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Affordable Care Act

American Fidelity Assurance Company's goal is to be our customers' primary resource for managing challenges and changes resulting from the Patient Protection and Affordable Care Act (ACA) and rising health care costs. This website is a resource to help our customer groups focus on the steps you need to take today, find the answers you need, and plan for additional changes. We look forward to helping you during the months and years ahead.

Hot Topics

IRS Addresses Impact of Employer Flex Contributions and Opt-Out Payment on Affordability; Transition Relief Announced

Employers offering flex contributions under an arrangement that include the choice to receive contributions as taxable cash or to use contributions to pay for non-health benefits, as well as employers that offer opt-out payment to employees who decline major medical coverage will want to pay close attention to newly released IRS guidance. IRS Notice 2015-87, released December 17, 2015, disallows application of these types of payment arrangements towards an employee’s “required contribution” for purposes of assessing the affordability of employer sponsored coverage. Unless contributions meet specified guidelines, the employer may not receive credit when the IRS calculates affordability, which could impact an employer’s potential penalties under the ACA’s Employer Mandate. The Notice does include transition relief which will delay enforcement of the new rules for most plan years beginning prior to January 1, 2017. Employers are advised to review Notice 2015-87 to confirm their eligibility for transition relief, and to consult with tax or legal counsel as necessary.

Treatment of Employer Flex Contributions:

Under the new guidance, any of the following circumstances mean that the employer will not receive credit for the flex contribution when calculating affordability:

  • The employee can choose to receive cash instead of purchasing benefits OR 
  • The employee is not permitted to apply the contribution toward the cost of ACA qualifying employer sponsored coverage (“minimum essential coverage”) OR 
  • The employee can use the contribution to pay for non-health care benefits such as dependent care or life insurance

For plan years beginning before January 1, 2017, if the amount of the flex contribution is available to the employee to pay for health coverage, it will count toward reducing the employee’s required contribution as long as the employer qualifies for the transition relief. To qualify, the contribution arrangement has to have already been in place prior to the release of the Notice—relief is not available to a flex contribution arrangement offering non-health benefits that is adopted after December 16, 2015. Employers wishing to utilize transition relief should take care not to substantially increase the amount of the flex credit offered to employees, as a substantial increase to the amount of the flex contributions that occurs after December 16, 2015 will make the employer ineligible for the relief.

Treatment of Opt-Out Payment:

The following types of opt-out payment must be added to the premium paid by the employee when calculating the employee’s required contribution:

  • The amount cannot be used to pay for coverage under the employer’s plan AND 
  • The amount is available only if the employee declines coverage

Until future guidance is released, and at minimum for plan year beginning before January 1, 2017, employers are not required to increase the amount of an employee’s required contribution by the amount of an opt-out payment, and an opt-out payment will not be treated as increasing an employee’s required contribution for purposes of penalties under the Employer Mandate. The opt-out arrangement must have been adopted by December 16, 2015. Opt-out arrangements adopted after December 16, 2015 are not eligible for the transition relief.

A more detailed explanation of the recent Notice is available here.

  • IRS Issues Delay in Requirements to Furnish Forms 1094 and 1095 under ACA.

    On December 28, 2015, the IRS announced an extension of the due dates for 2015 Patient Protection and Affordable Care Act (ACA) information reporting by employers, insurers, and other reporting entities. The transition relief provided applies to the furnishing of Forms 1094-C and 1095-C to individuals, as well as filing applicable forms to the IRS, as required under Internal Revenue Code sections 6055 and 6056.

    The announcement provides for an automatic 60 day extension for employers to provide Forms 1095-B and 1095-C that must be distributed to employees from February 1, 2016 to March 31, 2016. The notice also automatically extends the due date for the submission of Forms 1094-B and 1094-C from March 31, 2016 to June 30, 2016 if filing electronically (the extension if not filing electronically is extended from February 28, 2016 to May 31, 2016).

    The notice also explains that some employees who enrolled in coverage through the Federal or State Marketplace (the Public Exchange) could be affected by the extension if they do not receive their Forms 1095-C before they file their income tax returns. However, the individuals who rely upon other information received from employers about their offers of coverage for purposes of determining eligibility for the premium tax credit when filing their income tax returns need not amend their returns once they receive their Forms 1095-C or any corrected Forms 1095-C from the employer. To learn more click here.

  • 2-Year Delay of Cadillac Tax

    Congress has passed a year end budget deal that will affect three tax provisions of the Patient Protection and Affordable Care Act (ACA). The Excise Tax on High Cost Plans (Cadillac Tax) will be delayed by two years until 2020. The Cadillac Tax is a 40% tax imposed on the cost of employer-sponsored health coverage exceeding certain limits: originally for 2018, generally $10,200 for self-only coverage and $27,500 for family coverage. Many reports show that the majority of employer sponsored health plans would be affected by the tax within the first 5 years, and employers have expressed concern over the effect the tax would have on the cost of health benefits. The legislation also makes the tax deductible for employers, further reducing the cost burden of the tax.

    The medical device tax, which has already gone into effect, will also be suspended for two years in 2016 and 2017, and the health insurance providers fee imposed on insurers will be lifted for one year in 2017.

    For additional information on the “Cadillac Tax” click here.

  • Employer Notice Program

    The Department of Health and Human Services recently released an update with FAQs regarding Federally Facilitated Marketplace's (FFM) 2016 Employer Notice Program. This program will require each FFM to notify any employer whose employee was deemed eligible for an advance premium tax credit (APTC) or cost sharing reduction because the employee attested that he or she was not eligible for employer sponsored coverage that is affordable and meets the minimum value standard.

    Beginning in 2016, the FFM will notify employers whose employees enrolled in Public Exchange (Marketplace) coverage who qualify for APTC but the FFM will not notify employers when the employee terminates Marketplace coverage. Notices will be sent to employers if an employee received APTC for at least one month in 2016 and the FFM has an address for the employer. The first batch of notices will be sent in spring of 2016 with additional batches of notices throughout the remainder of 2016. The employer may file an appeal within 90 days of the notice and assert that it provides the employee access to affordable coverage that meets the minimum value standard or that the employee has enrolled in employer sponsored coverage. States that manage their own Marketplaces have flexibility to phase in the employer notices process and will continue to have the option to refer employer appeals to the HHS appeals entity.

    In 2015, the FFM has focused on the education of the public about the employer notice program to ensure effective implementation of the program in 2016. Employers will still be liable for the Employer Mandate penalty for 2015 if an employee received a premium tax credit for coverage received through the Marketplace for 2015 without regard to whether the Marketplace issued a notice to the employer.

  • Need Assistance with the ACA Employer Reporting?

    The Patient Protection and Affordable Care Act (ACA) requires large employers and employers that sponsor self-funded medical plans to report extensive and detailed data for the calendar that began January 1, 2015. A large employer for this purpose must have 50 or more full time equivalent employees across the control group.

    If you have not already done so, now is the time to make a plan for how to complete the IRS Forms 1094/1095 that must be distributed to employees by January 31st each year except in 2016, it is due February 1, 2016 since the 31st is a Sunday. Note that customers who signed up for our WorxTime reporting service do not need to participate in this webinar. The webinar would be helpful for customers who use the WorxTime tracking, but not reporting, service.

    Please click here to register.

  • 2015 ACA Forms

    The Internal Revenue Service (IRS) has released final 2015 Patient Protection and Affordable Care Act (ACA) Forms 1094-C and 1095-C. The 1094-C and 1095-C forms are mandatory filings by employers with 50 or more full-time equivalent employees to enforce section 4980H of the Internal Revenue Code (IRC) Employer Mandate. Employers are required to report 2015 tax year information to both employees and the IRS. The 1095-C form is due to employees by February 1, 2016, and the 1094-C e-filing is due to the IRS by March 31, 2016 (February 29, 2016 for paper filing). Failure to comply with the reporting requirements could result in a fine of $250 for each return for which such failure occurs (up to $3,000,000).

    The final forms are generally consistent with the drafts released earlier this year. However, there are some modifications to the instructions in completing the forms to reflect various scenarios.

  • ACA Reporting Penalties to Increase

    Congress recently passed the Trade Preferences Extension Act of 2015. The Act significantly increases penalties for reporting failures under several sections of the Internal Revenue Code, including the Patient Protection and Affordable Care Act (ACA) reporting using Internal Revenue Service Forms 1094 and 1095.

    As employers are well aware, the ACA requires all large employers to report detailed information concerning their workforce and group health plan coverage offerings. These reports are due in early 2016, and cover the 2015 calendar year. Penalties may be imposed for incomplete, incorrect or failed reporting.

    Penalties for ACA reporting failures (such as failing to file by the deadline, failing to provide required information, or failing to provide correct information) will increase from $100 to $250 per return. The yearly cap on total penalties will also increase, from $1.5 million to $3 million. "Intentional disregard" of the filing requirement may result in a penalty of $500 per return, and the cap on total penalties will not apply.

    AFAS and WorxTime Can Help!

    American Fidelity Administrative Services, LLC (AFAS), an American Fidelity Corporation affiliate, offers a WorxTime service to assist with this reporting. WorxTime will capture the necessary information, create the required forms, and distribute the information directly to each employee and to the IRS. Note: The deadline to request a statement of work is August 31, 2015 in order for us to assist with the reporting due in early 2016.

    Some products and services may be provided by third party contractors or affiliated companies.

    Neither AFA or AFAS provide tax or legal advice and, given the complexity of federal health and welfare plan rules, we always recommend working with your own legal counsel to discuss how your plans could be affected and to review any guidance provided by us.

  • Important Patient Protection and Affordable Care Act (ACA) Update

    On June 25, 2015, the Supreme Court decided King v. Burwell in a 6-3 decision. This ruling upheld financial assistance to individuals who obtain coverage from a federally facilitated exchange (marketplace), and means that tax credits and subsidies for health insurance coverage will extend to individuals in states without a state-sponsored marketplace.

    This means that the premium tax credit/cost-sharing system already in place for individuals and small businesses operating in states without a state-sponsored marketplace will continue to operate as before, without any change.

    American Fidelity Assurance Company has been monitoring developments in the law from the beginning and will continue to do so. We are decicated to helping you understand and implement ACA requirements as needed.

  • Multiple Agencies Release Guidance on Wellness Programs

    Workplace wellness programs must comply with a complex set of rules including the Patient Protection and Affordable Care Act (ACA), the Americans with Disabilities Act (ADA), the Genetic Information Nondiscrimination Act (GINA), and the Health Insurance Portability and Accountability Act of 1996 (HIPAA). On April 16, 2015, the Equal Employment Opportunity Commission (EEOC) released proposed regulations addressing application of the ADA to workplace wellness programs. Additionally, the Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury (the Departments) released three sets of FAQs regarding wellness programs, HIPAA privacy/security, and the ACA's market reforms, as well as a research report on workplace wellness programs.

    The proposed EEOC guidance makes it clear that the ADA is applicable to employer-sponsored wellness programs if the program includes disability-related inquiries or medical examinations. One example would be requiring employees to complete a health risk assessment or biometric test in order to earn a wellness incentive. Under the proposed EEOC rules, wellness programs must be voluntary. It is not permissible to require employees to participate or to take any adverse action for failure to participate. Wellness programs must also be reasonably designed to promote health or prevent disease, and incentives for participation in the wellness program may not exceed 30 percent of the total cost of employee-only coverage. The proposed regulations clarify that the 30 percent maximum applies to both health contingent wellness programs and participatory wellness programs that include disability-related inquiries or medical examinations.

    The Departments of HHS, Labor, and Treasury FAQs reinforce previously released wellness program guidance. Additionally, the HHS Office for Civil Rights (OCR) issued guidance on HIPAA privacy and security rules applicable to workplace wellness programs.

    All of these regulations suggest that wellness programs should be designed carefully and with these new regulations in mind.

  • HHS Notice Addresses Out-of-Pocket Limits and Minimum Value Requirements

    The U.S. Department of Health and Human Services (HHS) and the centers for Medicare & Medicaid Services (CMS) recently released a notice addressing, among other topics, annual limitations on cost sharing for self-only coverage and clarifying the application of the minimum value standard to employer-sponsored health plans.

    Annual Out-of-Pocket Limits

    For 2016, out-of-pocket costs are limited to $13,700 for a family and $6,850 for self-only coverage. The notice specifies that the annual limitation on cost sharing for self-only health coverage applies to all individuals regardless of whether the individual is covered by a self-only health plan or is covered by a health plan that is other than self-only. High deductible health plans may continue to offer plans that count the family's cost sharing to the deductible limit. However, a high deductible health plan may not require an individual in the family plan to exceed the annual limitation on cost sharing for self-only coverage, effectively embedding the individual out-of-pocket limit within all family high deductible health plans. Furthermore, any annual limit on cost sharing must apply for an entire year regardless of whether a health plan is a calendar year plan or not. The notice also states that plans are not required to count out-of-network charges toward cost-sharing limits.

    Coverage of Hospital and Physician Services Required to Meet
    Minimum Value

    Under the Patient Protection and Affordable Care Act (ACA), an employer's share of the total allowed costs of benefits provided under the health plan must equal or exceed 60% to satisfy the ACA's minimum value requirement. The new notice clarifies that, in order to meet minimum value standards, a health plan must provide a benefit package that includes substantial coverage of both inpatient hospital services and physician services. If an employer offers health coverage that fails to meet the minimum value requirement, and any employee goes to the marketplace and qualifies for the financial assistance, that employer could be subject to a $3,000 penalty under Internal Revenue Code section 4980H(b).

    This is true even if the health plan "passes" under the minimum value calculator available on the HHS website, which is one of several options for calculating minimum value. Employers who have already enrolled employees in plans that do not cover hospital care, or who signed contracts to provide such plans by November 4, 2014, will not face a penalty for plan years beginning on or before March 1, 2015. Such employers are advised to re-evaluate their plan offerings because they will be subject to a penalty for future plan years.

  • IRS Releases Fact Sheet on Employer Mandate Procedures

    The IRS recently released a new fact sheet explaining the process the agency plans to use to administer the employer mandate under the Patient Protection and Affordable Care Act (ACA).

    Beginning January 1, 2015, the ACA imposes two potential penalties-(1) a penalty imposed on employers that choose not to offer healthcare coverage to substantially all of their full-time employees, and (2) a penalty imposed on employers that offer coverage, but the coverage offered is not adequate or affordable under the law. Both penalties are triggered when any one full-time employee obtains health insurance through the Public Exchange Marketplace (Marketplace) and receives a premium tax credit.

    The new IRS fact sheet details these two types of penalties and how they will be calculated. It sets forth how the penalties will be imposed month-by-month, and gives examples of how the penalties might be assessed in various scenarios.

    The fact sheet also explains that employers will not self-report or calculate these employer shared responsibility payments. Rather, the IRS will calculate the potential penalty due and contact the employer. The IRS' determination will occur after employees have filed their individual tax returns for the year claiming any premium tax credits. After the IRS sends the calculation to the employer, the employer will have an opportunity to respond to the IRS before any assessment or notice/demand for payment will be made. The IRS will adopt procedures to ensure that employers are notified when an employee receives the premium tax credit for purchasing coverage through the Marketplace.

    Employers should begin to think about the ACA and to prepare now, before an assessment or collection notice arrives from the IRS. Applicable transition relief, ACA safe harbors, and careful workforce planning can minimize or prevent employer mandate penalties. Thorough documentation will be an employer's best defense against an IRS claim that an employer mandate penalty is due.

  • Frequently Asked Questions about Cafeteria Plan Flex Credits and the ACA

    On November 26, 2014, the Internal Revenue Service (IRS) and Treasury Department published final regulations addresing how different types of employer payment arrangements are factored into affordability calculations under the Individual Mandate.

    A number of customers have contacted us to ask about this recent guidance and how it might affect their benefit offerings. In particular, some customers are concerned about the situation in which an employer offers a section 125 cafeteria plan with the option of taking so-called "cashable" flex credits as a taxable benefit. Such credits can either be cashed out after-tax, or used to select from a menu of pre-tax benefit offerings. Below are a few key questions customers have asked, along with American Fidelity Administrative Services (AFAS's) responses.

    As always, AFAS reminds its customers that we do not provide tax or legal advice. Employers are urged to work with their own legal counsel to determine how the IRS regulations migh apply to their specific facts and circumstances.

    1. What is the Individual Mandate?
    The Individual Mandate (or individual shared responsibility provision) went into effect January 1, 2014 and requires individual taxpayers to maintain minimum essential coverage for themselves and their dependents, or potentially pay a penalty when they file their annual tax returns.

    2. How Do Individuals Who Cannot Afford Coverage Qualify for an Exemption from the Individual Mandate?
    Certain individuals may qualify for an exemption from the individual shared responsibility penalties. If an exemption applies, then even if that individual fails to obtain minimum essential coverage he or she will not owe an Individual Mandate penalty.

    One such exemption is available if the individual declines employer-sponsored coverage that is considered unaffordable. The final IRS regulations published on November 26, 2014 explain how to qualify for this type of exemption. The exemption is available to an individual employee who fails to obtain minimum essential coverage when the plan offered to that employee is not affordable because the individual's required contribution to the employer's lowest cost self-only coverage exceeds 8 percent of his or her total household income.

    The final regulations include provisions designed to help an employee calculate whether his or her available employer coverage is considered affordable or unaffordable for purposes of claiming this exemption.

    3. For Purposes Of The Individual Mandate, How Do Employer Flex Credits Count Toward An Employee's Required Contribution To The Cost Of Coverage?
    The final regulations state that, for purposes of determining the affordability of coverage, the employee's required contribution is reduced by any contributions made by an employer under a section 125 cafeteria plan that (1) may not be taken as a taxable cash benefit, (2) may be used to pay for minimum essential coverage, and (3) may be used only to pay for medical care within the meaning of Internal Revenue Code section 213.

    The effect of this guidance is that cashable credits that can be taken by the employee as additional taxable compensation, or that can be used to pay for something other than medical care, will be treated as a contribution of the employee rather than the employer for the purpose of determining affordability under the Individual Mandate.

    4. Will Employer Plans Offering Flex Credits Be Considered "Affordable" Under The Employer Mandate?
    Because employers usually do not know an employee's household income, the ACA provides three affordability safe harbors for employers, based on the employee's 1) box 1 Form W-2 wages; 2) rate of pay, or 3) the federal poverty line. Employers will not pay an unaffordability penalty if the coverage they offer to employees is affordable under one of the three safe harbors.

    The November 26, 2014 regulations address the Individual Mandate only, and are silent on the issue of whether similar rules will apply to determining employer affordability safe harbors under Section 4980H. There has been speculation that the IRS could apply similar flex credit guidance to the Employer Mandate affordability rules via future rulemaking. However, as the rules stand today, the language about the flex credits from the November 26, 2014 guidance does not seem to be directly applicable to the determination of affordability safe harbors under the Employer Mandate.

    AFAS will continue to monitor regulatory developments in this area and update its customer accordingly.

  • IRS Releases Final Forms and Instructions for Employer Reporting Under the Affordable Care Act

    The Internal Revenue Service (IRS) has released final versions of the forms that will be used to meet the Patient Protection and Affordable Care Act's (ACA) information reporting requirements under Internal Revenue Code sections 6055 and 6056. Sections 6055 and 6056 require insurers, including employers that sponsor self-insured plans, and large employers to file information returns with the IRS and also provide statements to employees. Reporting is mandatory for the 2015 calendar year regardless of an employer's plan year effective date in 2015. Information for 2015, including the actual months of coverage and dependent social security numbers, is required to be reported in early 2016.

    Insurers and employers that sponsor self-insured health plans will use IRS Forms 1094-B and 1095-B to report under section 6055 on individuals enrolled in minimum essential coverage. Large employers (as defined by the ACA, those employing 50 or more full-time equivalents) will use IRS Forms 1094-C and 1095-C to report under section 6056 on offers of health coverage and enrollment in employer-provided plans. Employers that sponsor self-insured plans and that are also applicable large employers will use IRS Forms 1094-C and 1095-C to file a combined report under both section 6055 and section 6056.

  • "Culturally and Linguistically Appropriate" County List Updated

    On December 16, 2014, the Department of Health and Human Services released the updated “Culturally and Linguistically Appropriate Services (CLAS)” county data list, which is used to comply with certain disclosure requirements under the Public Health Service Act (PHSA, as added by PPACA). Non-grandfathered group health plans and health insurance issuers offering non-grandfathered health insurance coverage are required to provide certain notices in a “culturally and linguistically appropriate” manner, if at least 10% of a county’s population is literate only in the same non-English language, as defined under Section 2719 of the PHSA.

    Notices related to internal claims and appeals, external review processes, and the Summary of Benefits and Coverage (SBC) are required to be in compliance. In these instances, the employer must provide the notices upon request in the non-English language, and include in all English versions of the notices a statement in the non-English language clearly indicating how to access non-English language services from the plan or insurance issuer.

    The CLAS county data list is updated annually and includes all counties which meet or exceed the 10% threshold. The 2014 edition included a note stating that the only change from the prior list is the addition of Sullivan County in Missouri, which now meets the 10% threshold of Spanish speaking households. This is the first county in Missouri to be added to the CLAS county data list.

  • Stop Loss Insurance Regulations Issued

    On November 6, 2014, the U.S. Department of Labor (DOL) issued guidance on state regulation of stop-loss insurance for self-insured group health plans.

    The guidance provides that unless prohibited by state insurance law, a stop-loss insurer could offer insurance policies with attachment points set so low that the insurer assumes nearly all of the employer's claim's risk.

    Some states have considered measures to prohibit insurers from issuing stop-loss contracts with attachment points below a specified level, but have been unsure that they may regulate stop-loss coverage due to ERISA preemption of state regulation of private sector employee benefit plans.

    The guidance clarifies the role of states to regulate stop-loss insurance for employee benefit plans while maintaining an employer’s flexibility in stop loss design based on what is allowable in its state of residence.

    This effectively provides the employer with the advantage of not being required to meet state insurance laws with a self-funded major medical plan and the ability to shift the risk of the self-funded plan through stop-loss insurance.


The information provided here is only a brief summary that reflects our current understanding of select provisions of the law, often in the absence of regulations. All interpretations are subject to change as the appropriate agencies publish additional guidance. American Fidelity does not provide legal advice – as such, we suggest that employers and individuals consult with their legal counsel and/or tax advisors about how the ACA may impact them.


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