Delivering for Best-in-Class Wholesaler-Distributors
July 6, 2020

Advocating for employer-sponsored coverage and protecting health care access for businesses of all sizes is a top priority for NAW.

NAW serves on the Management and/or Steering Committees of several health care coalitions dealing with the broad spectrum of health care issues, including the Employer’s Health Care Clearinghouse, the National Coalition on Benefits, the Partnership for Employer Sponsored Coverage, and the Stop the HIT (Health Insurance Tax) Coalition. These coalitions are actively engaged in advocating for employers of all sizes and the millions of hardworking Americans and their families who rely on employer-sponsored coverage every day.

Below are several key healthcare issues that NAW is actively advocating for:

Opposing Medicare for All & Medicare/Medicaid Buy-in Proposals

Issue: When considering legislative and regulatory policy development and implementation, federal lawmakers and regulators must understand and appreciate the societal and economic commitments employers make to our nation’s workforce through the employer-sponsored coverage system. There is no one-size-fits-all employer plan.

  • Self-insured (ERISA): employer can tailor coverage to meet their workforce’s specific needs across state lines, employer pays all health claims and bears the financial risk, employer utilizes a third-party administrator (insurance carrier) for daily plan management.
  • Fully-insured (state regulated): prescribed benefit insurance product sold in a state, coverage purchased from an insurance carrier, employer does not bear the full financial risk of claims.

Solution: Employer-sponsored coverage has been the backbone of our nation’s health system for nearly eight decades. Over 181 million American workers and their families rely on employer-sponsored coverage every day. Benefits offerings and coverage plans in the employer-sponsored system are as diverse as employers and employees themselves.

The foundation of the employer-sponsored coverage system is rooted in workforce policy and business operations. Employers of all sizes offer coverage for employee recruitment and retention, and the functionality of a business is centered around a productive, thriving, and healthy workforce.

The ability to offer coverage to employees and the capacity to operate a business for its core purpose are not mutually exclusive functions. An employer offer of coverage is not merely a transaction in which an employee fills out paperwork, enrolls in coverage, and receives an insurance card – it is a multifaceted fiscal and operational commitment at the core of any business. As employers are making the decision to offer coverage and determine which type of coverage to offer their employees, a critical aspect of this deliberation is the administrative compliance costs and complexities associated with coverage.

Full-Time Definition for Offer of Employer-Sponsored Coverage

Issue: Traditionally, our nation has used the Fair Labor Standards Act (FLSA) as the standard of defining full-time employment as 40 hours per week. The FLSA 40-hour work week threshold was enacted in 1938 to require employers to pay time and a half to employees working over 40 hours per week.

In 2010, the Affordable Care Act (ACA) enacted a full-time threshold for the purposes of requiring employers to offer employees health coverage at 30 hours per week. This threshold was based on the delineation of an individual’s eligibility for Medicaid expansion and eligibility for employer-sponsored coverage, not on workforce policy or the FLSA.

This 30-hour threshold fundamentally changed workforce policy and business operations. Prior to the enactment of the 30-hour threshold, many industries did not designate employees as full- time or part-time but rather would use a salaried or hourly designation and allow employees to pick-up and trade shifts with their colleagues. Since the implementation of the 30-hour threshold, variable-hour and part-time employees have lost the flexibility to add or trade shifts to earn extra money.

Solution: H.R. 2782/S. 1510, the Employee Flexibility Act restores an employee’s ability to pick-up and trade shifts by aligning the ACA offer of health coverage requirement with the FLSA overtime standard at 40 hours per week. The legislation provides employees with the flexibility to gain hours and increase their paychecks and provides businesses with compliance relief by having a standard consistent with the FLSA requirement.

The 30-hour health coverage standard does not make sense to the millions of hardworking Americans wanting to earn more money. Even the Bureau of Labor Statistics states that the average weekly hours worked is 34.5 hours.

Reforming the IRS Employer Reporting System Tax Form 1095, Tax Letter 226-J

Issue: Tax Code sections 6055 and 6056 created under the Affordable Care Act require employers, insurance carriers, and Exchanges to report numerous pieces of data annually to the Internal Revenue Service (IRS) and to individuals (1094/1095 forms). This data is used to verify compliance with the individual and employer mandates and administer advanced premium tax credits and cost sharing subsidies in the state and federally facilitated insurance exchanges.

  • Section 6055 requires employers who offer self-funded plans and insurers administering fully-insured plans to file a return with the IRS and provide a statement to each individual who is covered by a plan that constitutes minimum essential coverage.
  • Section 6056 requires applicable large employers subject to the ACA’s employer mandate to file a return with the IRS and provide a statement to each full-time employee with information regarding the offer of employer-sponsored health care coverage.

The data is transmitted to the IRS and employers and insurers mail 1095 forms to individuals after a coverage year has ended (i.e., data for the prior calendar year is sent to the IRS and individuals between January and March of the next year). The current IRS system issues a Letter 226-J to inform an employer of a tax penalty if the data is not matched to an individual’s tax return, regardless of the employer’s offer of coverage to a full-time employee. An employer has only 30 days to appeal.

  • Because this data is reported after a coverage year has ended, it is not used by state and federal exchanges to make individual eligibility determinations for a tax credit and cost sharing subsidy during open enrollment season.
  • Under the ACA, an individual is not eligible for a tax credit or subsidy in an exchange if he or she is a full-time employee and has an offer of coverage from the employer that meets the employer mandate.
  • If the IRS determines, during post-enrollment data reconciliation process, that an individual exchange enrollee who is a full-time employee with an offer of employer coverage was ineligible for a tax credit or subsidy, the individual must pay back the full value of the Exchange coverage tax credit or subsidy to the IRS.
  • Additionally, the current retrospective IRS system is issuing 226-J tax penalty letters to employers who complied with the law’s employer mandate requirements, leaving the employer vulnerable to tax penalties or requiring additional administrative costs and compliance burdens to appeal the letters.

Solution: 2366/H.R. 4070, the Commonsense Reporting Act creates a voluntary prospective reporting system.

Permits employers to voluntarily report upfront to the IRS general information about their health plan for the current plan year which will help increase the accuracy of eligibility determinations for exchange tax credits; state and federally-facilitated exchanges will access information securely through the Data Services Hub in determining individual eligibility for tax credits; the IRS will use the information to more accurately issue 226-J tax penalty letters.

Streamlines the reporting process: Eases reporting burdens for employers who use the voluntary prospective reporting system by requiring 6056 reporting statements only for those employees for whom the employer has received notification that the employee or their dependents purchased coverage through an Exchange rather than issuing reporting statements for the entire workforce.

Protects privacy: Provides clarification that the IRS can accept full names and dates of birth in lieu of dependents’ and spouses’ Social Security numbers and requires the Social Security Administration assist in the data-matching process.

Modernizes transmission of information to individuals: Allows for electronic transmission of employee and enrollee statements rather than requiring this information be provided only by paper statement sent through the mail, thus reducing administrative costs and compliance burdens.

Establishes oversight of reporting verification: Requires the Government Accountability Office (GAO) to study the functionality of the prospective reporting system, including the accuracy of information collected, the number of employers electing to report under such system, and any changes that have arisen.