What IRS final regs say about self-insured health plans and ACA forms

As Finance pros know, self-insured group health plans may be more cost-effective than fully insured plans – more financially risky, too.

Whether you already sponsor such a plan or are weighing pros and cons, you should know IRS has released final regs under the Affordable Care Act (ACA), and there’s some good news for employers.

The changes are in effect now. Here’s what the regs say.

More time to distribute forms

Under the ACA, the deadline for furnishing information returns to individuals is January 31 annually.

But for years, IRS granted extra time for self-insured employers – as well as health insurance issuers and government agencies – to distribute Forms 1095-B, Health Coverage, to individuals.

IRS granted the same automatic, 30-day extension to applicable large employers (ALEs), working to get Forms 1095-C, Employer-Provided Health Insurance Offer and Coverage, out to full-time employees.

It’s worth noting that if employers sponsoring self-insured group health plans happen to be ALEs, these employers wouldn’t use Forms 1095-B. Instead, such employers would complete Forms 1095-C, Part III – in addition to filling out Part I and Part II.

Now, thanks to the IRS final regs released December 15, 2022, you’re not left wondering each year whether IRS will issue the extension. The automatic, 30-day extension is permanent for furnishing both Forms 1095-B and Forms 1095-C.

With that in mind, you can mark your calendar for the upcoming deadline: March 2, 2023.

Alternative method you can use

The final regs did more than just address deadlines.

IRS is also now offering self-insured employers, and other MEC providers, an alternative method for furnishing Forms 1095-B.

Important: ALEs that sponsor self-insured group health plans (and so, instead use Forms 1095-C, Part III, to inform individuals of coverage) can utilize the alternative method only for non-FT employees and non-employees enrolled in their plans.

In a nutshell, the alternative method is that you can notify individuals that statements regarding MEC are available upon request – but you must follow strict standards, as laid out in the final regs.

As a prerequisite, the individual shared responsibility payment amount must be zero to use the alternative method.

If you decide to roll forward with the alternative method for making Forms 1095-B (or if applicable, Forms 1095-C, Part III) available to individuals, here are the requirements:

First, provide a clear and conspicuous notice on your website that the statements are available upon request.

The IRS final regs explain what constitutes a “clear and conspicuous notice.” The information should be written in plain, non-technical terms. Plus, the font size should be large enough to alert the reader that tax statements regarding health coverage are available.

The regs provide an example: A website’s main page might say “Tax Information,” providing a link that takes readers to a secondary page that reads “IMPORTANT HEALTH COVERAGE TAX DOCUMENTS.” An explanation about how to get the statements should follow.

Plus, the notice must include:

• an email address
• a physical address responsible individuals could use to make requests, and
• a telephone number in case they have any questions.

The second requirement for using the alternative method? The notice must be posted on your website by the deadline.

What’s more, the notice must remain there in the same location through October 15 of the year following the calendar year to which the statements relate. If October 15 falls on a Saturday, Sunday or legal holiday, you’ll need to leave the notice in place until the first business day after that.

The third and final requirement is that if someone requests a statement, you must provide that to that responsible individual within 30 days of receiving the request.

It’s okay to furnish the statements electronically, assuming the requirements for doing that are met, the regs indicate.

About self-insured group health plans

One obvious draw to being a self-insured employer is the opportunity to save on healthcare costs.

As for the financial risk, stop-loss insurance may mitigate that for Finance pros. The Health Care Administrators Association (HCAA) explains that this type of coverage can help protect employers that sponsor self-insured health plans against catastrophic or unpredictable losses.

There are other advantages to self-insured group health plans, says the HCAA. They include:

• flexibility with designing health plans, and
• increased data availability – which leads to greater transparency and allows Finance pros to comprehensively manage the costs associated with the health plans offered to employees.