In response to the federal government’s repeal of the financial penalties of the Affordable Care Act’s (ACA’s) Individual Mandate, several states have enacted their own individual mandates. Without the federal penalty in place, many states feared that there would be a exodus of healthy individuals from the plans offered in their respective healthcare marketplaces. In order to avoid market destabilization, California, the District of Columbia, New Jersey, Rhode Island, and Vermont have joined Massachusetts in establishing tax penalties for individuals failing to meet minimum coverage requirements. More states are expected to follow.
Most state mandates come with state reporting requirements for employers. While employer reporting procedures vary slightly between states, all but Massachusetts are accepting the distribution of Form 1095-B or Form 1095-C to employees as fulfillment of their respective individual reporting requirements. In most cases, reporting to the states can be fulfilled by submitting copies of the federal forms or the electronic file(s) submitted to the IRS. Below you will find a brief summary of the state requirements and deadlines.
CALIFORNIA (SB-78, 2019-2020)
The California individual mandate requiring residents to have qualifying coverage went into effect on January 1, 2020. Employers will be required to report coverage information for their employees residing in California annually by March 30, beginning March 30, 2021. Copies of the federal forms will be accepted. Detailed instructions for filing have not been released at this time, but are expected to be posted to the ca.gov website soon.
DISTRICT OF COLUMBIA (B 22-753, 2017-2018)
The District of Columbia individual mandate requiring residents to have qualifying coverage went into effect January 1, 2019. Employers will be required to annually report coverage information for their employees residing in DC within 30 days after the IRS deadline for reporting. Since reporting instructions were not released until late in 2019, the deadline for 2019 tax year reporting was extended to June 30, 2020. The Office of Tax and Revenue has indicated the information required is the same as that which is provided to the IRS; however, not all data elements of the IRS reporting are required, and only the information required by DC can be included in the file. Filing will be done electronically through the mytax.dc.gov website.
MASSACHUSETTS (H 4479, 2006)
The State of Massachusetts enacted an individual mandate in 2006, several years before ACA came into existence. The Massachusetts mandate requires employers to issue a Form 1099-HC to employees residing in Massachusetts and report this information to the State Department of Revenue by January 31 each year. A creditable coverage attestation is also required. Most insurance companies and TPAs issue the individual forms and submit the required information to the state for their customers. Contact your carrier or TPA to confirm they are handling the State of Massachusetts reporting on your behalf. For more information on the Massachusetts minimum creditable coverage requirements, please visit MAhealthconnector.org.
NEW JERSEY (A3380, 2018-2019)
The New Jersey individual mandate requiring residents to have qualifying coverage went into effect on January 1, 2019. Employers are required to report coverage information for their employees residing in New Jersey annually by March 31, beginning March 31, 2020. The IRS file format for Form 1094-C and 1095-C reporting will be accepted. Guidance for reporting is continually being updated. Please go to the NJ Shared Responsibility Requirement website for the latest information and instructions.
RHODE ISLAND (H 5151, 2018-2019)
The Rhode Island individual mandate requiring residents to have qualifying coverage went into effect January 1, 2020. Employers will be required to report coverage information for their employees residing in Rhode Island annually beginning in 2021. However, the state has not issued reporting guidance other than to note that the federal forms will be sufficient to meet the Rhode Island reporting requirement. For more information, visit the State of Rhode Island Division of Taxation website.
VERMONT (HB 524, 2019)
The Vermont individual mandate requiring residents to have qualifying coverage went into effect January 1, 2020. Vermont, like most other states with individual mandates, has chosen to mirror the federal penalty exemptions for religious reasons, tribal healthcare, and certain financial hardships. However, in a departure from the federal exemption rules, Vermont is not allowing an exemption for individuals covered by health care sharing ministries. At this time, Vermont does not require employer reporting. If the federal requirement for employer reporting of covered individuals is eliminated or suspended, we expect the state to issue guidance requiring individual reporting.
If you are currently using a payroll company or tax professional for assistance with the ACA-required reporting, it is advisable to contact them to ensure they are positioned to ensure compliance with state-level reporting as well. If your organization handles its own reporting, be sure to determine a method of reporting and an electronic interface if necessary, with each state well in advance of the applicable deadline. More and more states are considering enacting individual coverage mandates: Hawaii, Washington, Connecticut, Minnesota, and Maryland to name a few. Foster & Foster will continue to monitor developments and keep you updated as they occur.