How to Fill Out IRS Forms 1094/1095

By MedCost General Counsel Brad Roehrenbeck, JD

1094-C tax form

Employers heard some good news when the Internal Revenue Service (IRS) extended deadlines for reporting 2015 forms 1094/1095 (see “IRS Extends Deadline for 2015 ACA Reporting”).

Concerned about meeting this first year of Affordable Care Act (ACA) reporting requirements? MedCost General Counsel Brad Roehrenbeck gives step-by-step instructions about how to fill out IRS forms 1094 and 1095 in a free webinar offered here.

Small self-funded employers (those with less than 50 full-time equivalent employees) are only required to meet one of the two ACA-mandated reporting obligations. Specifically, small self-funded employers must meet the Minimum Essential Coverage (MEC) reporting obligation, by reporting on individuals to whom they have provided health coverage during 2015 using Forms 1094-B and 1095-B.

On the other hand, Applicable Large Employers (ALE)—those with more than 50 full-time (equivalent) employees—must report additional information beyond that included in the MEC reporting required of small employers. The IRS has developed a single set of forms (Forms 1094-C and 1095-C) that can be used by Applicable Large Employers to meet all of their reporting requirements.

These ACA-mandated reporting obligations are designed to document compliance with the Affordable Care Act’s two flagship mandates – the individual and employer mandates.

DeWebinar buttonadlines are soon approaching to file these forms. For more information, watch this webinar on 1094/1095 reporting.

 

 

Facing Life’s Biggest Challenges

Margaret Nunez image

Three and a half years ago, Margaret Nunez first experienced MedCost’s Complex Case Management program when she was diagnosed with Multiple Myeloma, a type of cancer that causes abnormal plasma cells to accumulate in bone marrow and interfere with the production of normal blood cells. The disease is considered incurable but treatable.

Margaret received radiation and chemotherapy and responded well to the treatment. She also underwent a successful auto stem cell transplant. Several months later, with her condition stable, Margaret’s case management file was closed.

When later tests indicated an increase in Myeloma markers, her case management file was re-opened. While participating in the program this second time, Margaret was diagnosed with breast cancer and underwent surgery, followed by radiation. During breast cancer treatment, her Myeloma maintenance therapy was discontinued. Once the breast cancer treatments were over, she restarted maintenance therapy. Since her condition was stable, her case management file was closed once again.

Several months later, Margaret re-joined the program after a brief hospital admission for neutropenic fever. Neutropenia is an abnormally low count of white blood cells and makes an individual vulnerable to infection. Margaret’s next bone marrow biopsy showed persistent Myeloma.

“Having the same person follow my case from before my stem cell transplant and then periodically since then has been so important. I’ve been through so many changes and my case manager is always there for me.”*

The goal of our Complex Case Management is to ensure the best use of available health plan resources, while enhancing quality of life. For more information, visit our Case Management page or contact Jason at MedCost.

*Margaret Nunez gave MedCost permission to share her story to help others realize the benefits of the Complex Care Management program.

Self-Funding: 10 Terms You Need to Know

Confused by all the “insurance-speak” in the health care industry? Here’s a quick reference guide for common phrases in health plans:


1 Self-Funding: Also called self-insurance. Employers choose this model of funding to pay for health claims from company assets and employee premiums. Self-funding allows employers to pay only for actual claims, instead of the fixed premiums of fully-insured plans. A 2013 study by the Kaiser Family Foundation noted three of five covered employees are in self-funded health plans.[1]

2 ERISA: Employee Retirement Income Security Act of 1974, passed by Congress to establish federal regulations for self-funded benefit plans. Self-funded employers avoid fees such as the Health Insurance Provider Fee,[2] Risk Adjustment Fee[3] and Federally Facilitated Exchange User Fee. Self-funded employers also avoid certain state premium taxes.

3 SPD: Summary Plan Description that lists health plan terms and conditions, written for a particular employer or organization. The SPD defines the benefit coverage and exclusions. MedCost ensures that coverage and exclusions mirror the stop loss contract. If the stop loss contract does not mirror benefits offered, the employer may have to pay claims that were not covered by the stop loss carrier.

4 Fixed Cost: Predetermined fees that are paid as part of a health plan, regardless of actual expenses. Fully-insured plans are 100% fixed cost, paid out in set premium rates to the carrier. Self-funded fixed costs range from 18%—21% of total plan costs for administrative fees and stop loss insurance.

5 Variable Cost: Also called soft dollars, which may translate into potential savings for a self-funded employer. Prudent employers deposit funds for the total estimated employee claims into a reserve account in the company’s name. These dedicated funds remain in the employer’s account for future medical expenses if not spent during a plan year. MedCost provides professional underwriting services to help employers ensure that they are adequately covered for both expected and unexpected claims.

6 Corridor: Also known as claims or risk corridor, or margin. Underwriters include this as a cushion to cover unexpected claims. Generally this amount is around 25% for self-funded plans and 20% for fully-insured plans. Expected claims plus risk corridor (for variable expenses) determine the maximum liability (or attachment point).

7 Stop Loss Insurance: Coverage designed to protect self-funded employers from the risk of catastrophic claims beyond a predetermined liability. MedCost underwriters recommend policies with consistency between the stop loss policy and the employer’s SPD, to avoid any gaps in coverage when claims are submitted.[4]

8 Specific Stop Loss Deductible: The limit of liability under stop loss coverage on an individual employee covered under an employer’s heath care plan. The employer chooses this amount based on total group size and selected risk tolerance.

Stop Loss Coverage Specific Example


Jane Smith suffers from renal failure and undergoes kidney dialysis. Her claims total $300,000. Jane’s employer is self-funded and has purchased specific stop loss with a $75,000 deductible.

Total Claim $300,000
Employer Deductible $75,000
Amount Reimbursed by Stop Loss Carrier $225,000

9 Aggregate Stop Loss Deductible: This amount is the self-funded employer’s overall or group liability under a stop loss policy. Underwriters typically project expected claims plus a 25% margin to determine an employer’s maximum liability (or attachment point).

Stop Loss Coverage Aggregate Example

insurance

  • Includes claims paid that do not exceed the specific deductible
  • When underwritten appropriately, expenses should approach the amount of expected claims ($4 million), rather than the maximum liability ($5 million)
Expected claims $4,000,000
25% Margin $1,000,000
Maximum Claims Liability $5,000,000

10 Benefits Administrator: Also called a third party administrator (TPA) or administrative services organization (ASO). Employers typically contract with an administrator to handle benefits plan documents, claims payments and provide other services. Experienced administrative companies like MedCost can preserve significant savings for employers through careful management of resources, with customized benefits and targeted products to meet employer needs.

We’ve spent over 30 years in the industry. We know health care choices are complicated and not getting any simpler.

Have questions? Contact your health care consultant or Laura at MedCost for more resources.


 

[1] “2013 Employer Health Benefits Survey,” Kaiser Family Foundation, August 20, 2013, http://kff.org/report-section/ehbs-2013-section-10/

[2] “Affordable Care Act Provision 9010, Health Insurance Providers Fee,” http://www.irs.gov/Businesses/Corporations/Affordable-Care-Act-Provision-9010

[3] “Explaining Health Care Reform: Risk Adjustment, Reinsurance, and Risk Corridors,” Kaiser Family Foundation, January 22, 2014, http://kff.org/health-reform/issue-brief/explaining-health-care-reform-risk-adjustment-reinsurance-and-risk-corridors/

[4] For more information, download Stop Loss Coverage White Paper: Maximizing Benefits, Limiting Risk

How to Manage Health Costs

Self-Funding Is a Growing Option

Employers fight a constant battle between income and expenses. As health care regulations grow more complex, employee benefits become a more critical cost. Continued increases in medical premiums have motivated many employers to examine self-funding as a viable alternative to fully-insured plans.

Self-funding, or self-insurance for employee health benefits, is funded with employer assets and employee contributions. This model of funding gives employers the ability to choose an appropriate level of coverage to fit their employees’ risk and benefits selections.

In 2011, 58.5% of employers who offered health coverage chose self-funded plans—an increase from 40.0% in 1998 (Employee Benefit Research Institute).1

insurance1selffunded

What about catastrophic claims? An employer’s liability for large, unexpected claims is lessened by purchasing stop loss insurance, which limits financial risk from catastrophic claims.2 MedCost highly recommends stop loss coverage be included in all self-funded arrangements.

Self-funded employers capture the opportunity to save money by only paying for actual claims. MedCost partners with consultants and employers to realize potential savings, build customized benefit packages and manage risk.

Fully-Insured or Self-Funded?

Let’s compare fully-insured health plans with a self-funded plan:

Fully-Insured Self-Funded
*All costs are fixed *80% variable cost (representing potential employer savings)
*Premiums cover all risk & claims *Stop loss insurance covers catastrophic claims
*Federal insurer taxes are required (2%–3% of premium) *Exempt from federal insurer taxes (employer savings)
*State premium taxes are required (2%–3% of premium) *Exempt from most state premium taxes (employer savings)
*Fewer plan choices & less flexible designs *Custom benefit design & risk selection

 

Reward vs. Risk

Potential employer savings with a self-funded plan can be substantial. Savings from exempted federal and state taxes can total 4%–6%, a significant amount year-over-year. Plus, the margin of funds not spent each year can be reserved in the employer’s account for future claims.

The chart below compares fully-insured and self-funded plans for a hypothetical company with 347 employees. With self-funding, even after paying fixed costs and expected claims, the employer would still keep $619,500 in a company account for future claims.

self funded vs fully insured 17238_MC_blog graphicsRGB-02

 

Through years of experience, MedCost has streamlined financial benefits for consultants and employers in self-funded health plans. Our flexible, integrated choices and cost controls can present a stable alternative to fixed cost insurance plans. For more resources on self-funding, contact your benefits consultant or Laura at MedCost

 

1”Self-Insured Health Plans: State Variation and Recent Trends by Firm Size,” Paul Fronstin, Ph.D., Employee Benefit Research Institute, November 2012

2In North Carolina, stop loss coverage is permitted for groups with at least 26 eligible employees.

3Based on employer’s net paid claims.

4Per employee per year.