As part of healthcare reform, the Internal Revenue Service (IRS) added sections 6055 and 6056 to the Internal Revenue Code. Starting in 2016, the IRS requires insurance companies to collect any missing Social Security numbers for members and dependents covered by fully insured health plans.
“Typically, insurance carriers have only needed employees’ Social Security numbers, not those of spouses or dependent children,” says Patricia Decensi, General Counsel at Medical Mutual. “However, the IRS will soon require that information to verify that everyone in the United States is covered.”
The information will be used to enforce the part of healthcare reform that says everyone in the United States has to have health insurance—or qualify for an exemption. In addition, it will allow the IRS to verify whether certain employers offer “minimum essential coverage” for their employees.
The requirements are based on two key factors.
First is the funding structure of the health plan. Some employers are self-funded and pay their own claims, while others are fully insured through their carrier. The funding structure determines whether employers have to do their own reporting under Section 6055, the individual mandate.
Second is the number of full-time employees. Section 6056, the employer pay or play rule, only applies to employers with 50 or more full-time employees. That includes full-time equivalents. Those employers will have to report to the IRS in early 2016 to prove they offer health coverage that complies with healthcare reform. And that applies even if they were exempt this year.
“Fully insured employers can rely on their insurance carrier to report for them for 6055, and they will only need to report for 6056 if they are subject to pay or play,” Decensi says. “Self-funded employers, on the other hand, are responsible for all reporting to the IRS, regardless of pay or play.”
All fully insured employers should work with their carrier to understand their responsibilities, according to Decensi. Insurance companies are obligated by law to reach out directly to employees if the required information is still missing. Plus, those employees or dependents could end up seeing money come out of their next year’s tax return if their coverage isn’t verified.
Medical Mutual is planning to reach out to its fully insured customers, including those enrolled in COSE plans, to let them know who is missing Social Security numbers. Self-funded customers are encouraged to consult with their tax advisor or legal counsel.
“Our goal is to comply with the new rules while keeping the impact on our members to a minimum,” says Decensi.
COSE members with questions about the new requirements should contact their broker or call the COSE Benefits Group at (440) 878-5930. They should also watch for webinars from Medical Mutual later this fall about the actual forms and steps to take for reporting.