ACA reporting: Challenges that lie ahead for insurance companies

Sovos
May 9, 2014

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.

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Author

Sovos

Sovos is a global provider of tax, compliance and trust solutions and services that enable businesses to navigate an increasingly regulated world with true confidence. Purpose-built for always-on compliance capabilities, our scalable IT-driven solutions meet the demands of an evolving and complex global regulatory landscape. Sovos’ cloud-based software platform provides an unparalleled level of integration with business applications and government compliance processes. More than 100,000 customers in 100+ countries – including half the Fortune 500 – trust Sovos for their compliance needs. Sovos annually processes more than three billion transactions across 19,000 global tax jurisdictions. Bolstered by a robust partner program more than 400 strong, Sovos brings to bear an unrivaled global network for companies across industries and geographies. Founded in 1979, Sovos has operations across the Americas and Europe, and is owned by Hg and TA Associates.
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