This blog was last updated on June 27, 2021
Among the businesses to have new tax information reporting responsibilities under the Affordable Care Act (ACA), insurers could be faced with a broad range of new challenges. Given their status as both insurers and employers, their reporting obligations are two-fold.
Internal Revenue Code (IRC) 6055 and 6056 establish the new information reporting responsibilities for ACA. The former designates the insurer reporting mandate, which requires insurers to report to the IRS on the individuals receiving coverage and the entity providing it. The latter requires that large employers – having 50 or more full-time employees – annually report to the IRS on their employees (and the employees’ dependents if applicable) who are covered under an employer-sponsored health care plan.
Given that insurance companies are both an employer and an insurer, they’ll need to complete both the top and bottom sections of Form 1095-C to comply with IRC 6055 and 6056. Although the consolidated form is meant to ease the new tax reporting responsibilities of insurers and self-insured businesses, the information still needs to be compiled, representing a new time commitment for internal departments.
Internal preparation is required
Determining what staff or department will be responsible for completing ACA reporting will be a sizeable task. Insurers who have millions of members will see noticeably broader operational demands as they process data for each enrolled individual. Given that these businesses play an integral role in enforcing the ACA‘s individual mandate, efficient reporting is necessary.
In addition to reallocating resources for the reporting side of operations, insurance companies are expected to see increased customer service demands. As members attempt to work through their own new reporting responsibilities, they’ll likely turn to their insurers for assistance.
Not only will insurance companies have individual members asking for aid, but they could also have requests from their self-insured and direct-insured clients. Prior to the start of ACA reporting, insurance providers might consider offering tax compliance assistance to those clients, and, if so, need to determine the logistic hurdles to cross before such a service can be available. There is a potential for both new expenses and additional revenue as a result of these services.
Information security risk to increase
Recent widespread cyberattacks have made it clear that protecting personal information is even more important than ever before. In addition to deciding who will be responsible for ACA reporting, insurers will likely need to update their information security and risk mitigation strategies. With the possibility of transmitting millions of pieces of member and client information, there could be more avenues for security breaches to occur.
Check out our education section for more about ACA reporting requirements for insurance providers.
