State-based individual mandates should be on the radar of potentially affected employers.

The Tax Cut and Jobs Act eliminated the individual mandate penalty under the Affordable Care Act (ACA) starting in 2019. But nothing has changed about the employer mandate or ACA compliance reporting, and several states are considering their own versions of the ACA's individual mandate.

There are currently 10 states that are planning to retain an individual mandate requiring people to have health insurance or pay a penalty. Three states and the District of Columbia have already enacted such laws that are effective between now and 2020. Generally, some type of employer reporting may be required in these states to help them enforce the law. Depending on how these state-based individual mandates are implemented, they could add an extra layer of health care compliance for employers in certain states.

What are States Considering?

Seven states (California, Connecticut, Hawaii, Maryland, Minnesota, Rhode Island, and Washington) are considering state-based individual mandates, but the details vary from one state to another.

Most of those states have introduced legislation in 2018 that would create a penalty similar to the ACA's individual mandate penalty, although one of the bills that was under consideration in Connecticut would have imposed a much larger penalty ($10,000 or 9.66 percent of household income, whichever is smaller) on people who remain uninsured. And Washington's legislation, which initially called for an individual mandate, was revised to simply create a task force that would study the feasibility of a state-based mechanism for ensuring that people maintain coverage. It would also recommend options for enforcement of an individual mandate in the state.

The District of Columbia, New Jersey and Vermont have already enacted individual mandates and Massachusetts has had one in place for years.

Employer Compliance With State-Based Individual Mandates

The new state-based individual mandates are still being developed in many cases, but some states have given hints in terms of what might be expected of employers.

New Jersey's legislation calls for employers and insurers to report coverage information to the state, but notes that in order to "minimize the reporting burden," the reporting can be in the same format used for federal informational reporting. Clearly, there is a cost associated with that, but it would be fairly minimal, particularly if electronic submission is available.

In Vermont, the bill that passed calls for the formation of a working group that would be tasked with sorting out the details of how the state's individual mandate would be implemented and enforced.

But firms with employees in states where individual mandates are being considered should be prepared for, at a minimum, the possibility of having to file duplicate ACA informational reporting with the state. Some states may implement their own additional reporting, while others will likely attempt to utilize the current informational reporting whenever possible.

Massachusetts: Updated Rules Already in Effect

Massachusetts, which has had an individual mandate in place for more than a decade, passed a supplemental budget bill in November 2017 that once again requires most employers to submit an annual Health Insurance Responsibility Disclosure (HIRD) form to the state by November 30th each year. This form requires information on the plans an employer offers including carrier name, premium amount and deductible as well as various other details. There is no employee level information requested on the HIRD form unlike the ACA's Form 1095-C, Employer Provided Health Insurance Offer and Coverage. The reporting applies to all employers with six or more employees and is similar to the reporting the state used before the ACA was implemented.

It's also noteworthy that Massachusetts has implemented a new "Employer Medical Assistance Contribution Supplement" (EMAC) as of 2018, which applies to organizations with six or more employees and is being assessed as a new line item on quarterly unemployment insurance contributions. If a non-disabled employee is enrolled in Medicaid (MassHealth) or state-subsidized private health insurance (ConnectorCare) for more than eight weeks in a quarter, the employer will be assessed 5 percent of the employee's wages, with a penalty cap of $750 per employee, per year.

Note that ConnectorCare subsidies are not the same thing as federal ACA subsidies; employees who receive only federal ACA subsidies in the Massachusetts exchange will not trigger the EMAC penalty. And employees are not eligible for ConnectorCare if they have an offer of affordable, minimum value coverage from an employer, so employees who decline employer-sponsored coverage will generally only trigger an EMAC penalty if they're eligible for MassHealth. The state of Massachusetts has provided guidance for employers.

The Bottom Line for Employers

The details are still generally vague in terms of exactly what employers will have to do in order to comply with state-based reporting requirements. But the ACA's employer mandate and all associated informational reporting are still in effect nationwide, so employers should already have the data necessary for any separate state-based informational reporting. Employers should continue to track developments in this area.

States that implement their own mandates may require less comprehensive informational reporting than the IRS, since states will not need to use employer reporting in order to determine premium subsidy eligibility. That will continue to be handled at the federal level. But finance leaders will need to prepare for the possibility of having to generate separate forms and submit them to the state.

ACA compliance can be both difficult and expensive, so if you are confused about what you should be doing, you are not alone. Take the ACA compliance quiz and see how your knowledge compares to other HR and Benefits pros. After taking the quiz, you'll have the opportunity to see your results and get a copy of the ADP report: ACA Compliance: Confidence, Confusion, and Change.

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