1402 - Affordable Care Act (Historical View)

Status: Active

Change Notes

Resource updated: Updated SCO link to personnel letter.

Category

Benefits and Insurance

Audience List

• Administrative Chiefs
• Employee Relations Officers
• Personnel Officers
• Personnel Transactions Staff
• Personnel Transactions Supervisors

Synopsis

This policy:

• provides information about the employer-administered provisions of the federal Patient Protection and Affordable Care Act (ACA) that impact the State of California as a large employer;
• describes the state’s business policies and practices that were developed to conform to the ACA provisions; and
• describes the roles of departmental human resources (HR) staff in implementing the state’s ACA-related business policies and practices to ensure the state’s compliance.

Introduction

The ACA, known as the federal health care law, was enacted in March 2010 to ensure all Americans have access to quality and affordable health care.  It includes several employer-administered provisions that impact the State of California, such as:

• Employer Notification Requirements
  • Health Insurance Marketplace Coverage Options and Employee Health Coverage Notice
  • Summary of Benefits and Coverage Notice
  • Affordable Care Act Notification Checklist
• Employer Shared Responsibility Provisions
• Annual Information Reporting Requirements
  • Affordable Care Act System (ACAS) Database
  • ACA Training Modules
  • ACA Compliance Program

The state may be subject to penalties for failure to comply with the ACA’s employer-administered provisions.

Statement

Employer Notification Requirements

Health Insurance Marketplace Coverage Options and Employee Health Coverage Notice-

Beginning October 1, 2013, the state is required to issue a Health Insurance Marketplace Coverage Options and Employee Health Coverage Notice to new employees (new employees to the state, department, or agency), regardless of their health plan status or part-time or full-time employment status, within 14 days of the start of their employment.

The Notice provides information about the Health Insurance Marketplace created under the ACA to help individuals and small businesses shop for, select, and enroll in high-quality, affordable health plans and also assists eligible individuals in receiving premium tax credits or coverage through other federal or state health care programs.  The Marketplace in California is known as “Covered California,” operated by the California Health Benefit Exchange.

Departments may distribute the Notice to employees by interoffice mail, first-class mail, or electronically.  For electronic distribution, employees must use a computer as part of their daily, normal job function or have consented to electronic delivery in a manner that demonstrates that they can effectively receive the Notice via electronic delivery, per the Department of Labor electronic disclosure safe harbor (ref. 29 CFR 2520.104b-1(c)).

The Notice may also be included with new hire packets, health enrollment materials, or other existing communications, provided that the Notice and the other materials are delivered in the manner and timeframe required.

There are several sections within the Notice that need to be completed prior to distribution.  It is important that this information be accurate and complete, as it will be used by employees to complete applications for obtaining coverage through Covered California and for Covered California to validate information provided on applications.

Two editable versions of the Notice can be found in the HR Net section of the California Department of Human Resources’ (CalHR) website.

• Notice Version A is for departments that process payroll under the State Controller’s Office (SCO);
• Notice Version B is for departments that process their own payroll or have a third-party payroll processer.

Within the Notice, departments will need to:

1. Copy and paste their departmental letterhead into the empty header space provided in the Notice.  The Notice should not be copied and pasted into a blank copy of their departmental letterhead, as this may alter document formatting;
2. Complete “Part B - Information about Health Coverage Offered by Your Employer,” which includes information such as:

• Employer Name: Enter the name of the Department in box 3 of the Notice;
• Employer Identification Number (EIN):
  • Departments that process payroll with the SCO must use Notice Version A.  The EIN 94-6001347 is hard coded into box 4 in this version of the Notice;
  • Departments that process their own payroll or have a third-party payroll processer must use Notice Version B.  Enter the departmental EIN used for tax reporting purposes (e.g., W-2 forms) in box 4 of the Notice;
• Employer Address (including city, state, and zip code):  Enter the employer address in box 5 and the employer’s city, state and zip code in boxes 7-9 of the Notice.  If the department has employees that work in different locations beyond headquarters, enter the address, city, state, and zip code of the employee’s specific work location;
• Employer Phone Number:  Enter the employer phone number in box 6 of the Notice.  If the department has employees that work in different locations beyond headquarters, enter the phone number of the employee’s specific work location;
• Employer Contact Information:  Enter the departmental contact (e.g., Health Benefits Officer, Personnel Officer) that is qualified to verify employee employment and healthcare information, should Covered California or Internal Revenue Service (IRS) request it.  This includes entering the departmental contact’s name, phone number, and email address in boxes 10-12 of the Notice.

The Notice specifies which employees are eligible for health benefits through the California Public Employees Retirement System (CalPERS).  Although not a required element of the Notice, it bears revisiting, for your information, that the following employees and dependents are not eligible for health benefits.

Employees not eligible for health benefits:

• Employees whose appointment tenure is Temporary (except for TAUs);
• Employees appointed to a Limited Term of 6 months or less;
• Part-Time employees appointed to a time-base of less than half-time;
• Employees appointed to an intermittent time-base, except for Permanent Intermittent employees who work the required hours during a Control Period.  Limited-Term and Temporary Intermittent employees are not eligible for health benefits, regardless of their hours of work.

Dependents not eligible for health benefits:

• Former spouses and former registered domestic partners are not eligible under any circumstances (even if the employee was court-ordered to provide the ex-spouse/former domestic partner with health coverage);
• Children age 26 and older;
• Children of former spouses/registered domestic partners;
• Disabled adult children age 26 or older who were not enrolled prior to age 26;
• Relatives such as grandchildren, grandparents, parents, aunts, uncles, nieces, nephews, etc.;
• Foster children;
• Spouses/domestic partners of adult children;
• Live-in boyfriend or girlfriend and his/her children; and
• Anyone already enrolled in a CalPERS health plan through another subscriber.

It is incumbent on departments to ensure that ineligible employees or dependents are not placed or maintained on the health benefits roll.

Summary of Benefits and Coverage Notice-

The state is required to issue a Summary of Benefits and Coverage Notice to employees newly eligible for health coverage with information on the health plan options available to them so they can make informed decisions about the health plan they choose.

The Notice is to be provided no later than the first day the employee is eligible to enroll in health coverage.  For example, if a health benefit-eligible employee is hired on August 12, departments must provide the Notice, along with the Health Benefits Enrollment Form (CalPERS HBD-12) to the employee no later than September 1 (the earliest effective date of coverage).

The Summary of Benefits and Coverage Notice can be found in the HR Net section of the CalHR website.  Departments should copy and paste their departmental letterhead into the empty header of the Notice before distributing to employees.

ACA Notification Checklist-

To ensure the timely distribution of the Health Insurance Marketplace Coverage Options and Summary of Benefits and Coverage notices, CalHR has developed the ACA Notification Checklist (CalHR Form 782).  Departments must use the Checklist to document the distribution of these notices.  The two-part Checklist includes the following:

• Part I documents the distribution of the legally required Health Insurance Marketplace Coverage Options Notice.  This section must be completed by the department representative responsible for providing the Notice to a newly hired employee (e.g., new employee to the state, department, or agency) within 14 days of the employee’s hire date.
• Part II documents the distribution of the Summary of Benefits and Coverage Notice along with the Health Benefits Enrollment Form (CalPERS HBD-12), if applicable, to employees newly eligible for health benefits.  This section must be completed by the department representative responsible for providing the Notice and health benefits enrollment form to the employee.

Departmental HR staff must review and sign the Checklist to certify that the notices were issued to employees within the specified time frames.  Departments shall retain this document in the employee’s Official Personnel File.

Employer Shared Responsibility Provisions

Beginning January 1, 2015, the state is subject to the ACA’s Employer Shared Responsibility provisions (also known as employer mandate) which requires large employers to offer minimum essential health coverage (MEC) to at least 95 percent (70 percent in 2015) of its full-time employees and their dependents to avoid a penalty assessment.  The health coverage offered must meet the ACA’s affordability and minimum value standards.

• Health coverage is deemed “affordable” if the employee’s share of premium for self-only coverage, for the lowest cost plan available to the employee that provides minimum value, does not exceed 9.5 percent (subject to annual inflation adjustment) of the employee’s monthly salary, wages, or the annual federal poverty level, divided by twelve for single-member household (for the applicable calendar year).
• Health coverage is deemed to provide “minimum value” if the plan covers 60 percent of the total allowed costs of benefits provided under the plan.  The health coverage provided by the state meets the ACA’s minimum value standards.

Failure to comply with the ACA’s Employer Shared Responsibility provisions could result in significant penalties to the state if at least one full-time employee receives a premium tax credit for purchasing individual coverage through Covered California.

• Penalty A: No Coverage Penalty-The state may be subject to an annual $2,000 penalty (subject to annual inflation adjustment) for each full-time state employee (minus the first 30 full-time employees) for failure to offer health coverage to at least 95 percent of its full-time employees;
• Penalty B: Inadequate Coverage Penalty-Even if the state offers health coverage to at least 95 percent of its full-time employees, it may be subject to an annual $3,000 penalty (subject to annual inflation adjustment) for each full-time employee that receives a premium tax credit for purchasing individual coverage through Covered California if the health coverage offered does not meet the law’s affordability or minimum value standards.

Annual Information Reporting to the IRS and Full-Time Employees

To demonstrate compliance with the ACA’s Employer Shared Responsibility provisions, the state is required to file annual reports with the IRS and furnish a statement, IRS Form 1095-C, to full-time employees with information about the health coverage offered, if any, to the employee, their spouse, and dependents for each month during the preceding calendar year.

IRS Form 1095-C: Employer-Provided Health Insurance Offer and Coverage-

Annually, by January 31, the state will issue a Form 1095-C statement (via the SCO) to all federally qualified full-time employees with information about the health coverage offered, if any, to the employee, their spouse, and dependents during the preceding calendar year.

The ACA defines a full-time employee as any employee who averages 130 or more hours of service per month or during an employer’s respective measurement period of between three to twelve months. The state is using a 6-month measurement period to average an employee’s hours of service to determine their full-time status for ACA reporting purposes.

Generally, a Form 1095-C will be issued to employees who, for any month during the preceding calendar year, were appointed to a time-base of 3/4 or more; and those who were appointed to an intermittent time base who averaged 130 or more hours of service per month during one of the state’s 6-month measurement periods, regardless of whether they were eligible for state-sponsored health coverage.  New employees appointed to a time base of 3/4 or more are treated as full-time for ACA reporting purposes beginning the first of the month following their appointment.

To see how the state applies the 6-month measurement periods to determine an employee’s full-time status for ACA reporting purposes, please refer to the Standard Measurement Periods for Ongoing Employees and Initial Measurement Period for “New” Intermittent and Part-Time Employees documents available in the HR Net section of CalHR’s website.

Form 1095-C will report the following information:

• Part I–Employee and Applicable Large Employer Member (Lines 1-13)—Information about the state’s full-time employees and the state employer contact information is reported in Part I of the form.
• Part II–Employee Offer and Coverage (Lines 14-16)—Information about the state employer’s offer of health coverage, if any, to full-time employees, their spouse, and dependents is reported for each month during the preceding calendar year in Part II of the form.  This information will help the IRS determine if the state is complying with the ACA’s Employer Shared Responsibility provisions or subject to a penalty.  Additionally, the IRS may use the information reported to determine if an individual is eligible for a premium tax credit if they purchase individual coverage through Covered California, if they were not offered state-sponsored health coverage or if the health coverage offered did not meet the ACA’s affordability or minimum value standards.

Note:  Employees who are offered MEC that is affordable and provides minimum value are not eligible to receive a premium tax credit for purchasing individual coverage through Covered California.

• Line 14—The codes reported on Line 14 reflect the type of health coverage offered, if any, to the employee, their spouse, and dependents for each month during the preceding calendar year.  The state will report the following codes on Line 14 of the form to reflect the period in which the employee was eligible for and offered state-sponsored health or continuation coverage through the Consolidated Omnibus Budget Reconciliation Act (COBRA), regardless of whether the employee enrolled in coverage.
  • 1B—Indicates that MEC providing minimum value was offered to an active employee only. (COBRA coverage only)
  • 1C—Indicates that MEC providing minimum value was offered to an active employee and their dependent(s) (not their spouse). (COBRA coverage only)
  • 1D—Indicates that MEC providing minimum value was offered to an active employee and their spouse (not their dependents). (COBRA coverage only)
  • 1E—Indicates that MEC providing minimum value was offered to an active employee, their spouse, and dependents. (State-sponsored health or COBRA coverage)
  • 1H—Indicates that the employee was not offered an opportunity to enroll in state-sponsored health or COBRA coverage because the employee was not appointed to a position eligible for health benefits (e.g., Temporary/Intermittent) or was not eligible for COBRA coverage.

• Line 15—The dollar amounts reported on Line 15 reflect the employee’s share of the lowest cost monthly premium for self-only coverage offered by the state (health premium minus the employee’s respective health or Consolidated Benefits (CoBen) contribution for self-only coverage).  This amount may not reflect the amount the employee paid for their health coverage if the employee chose to enroll in more expensive coverage, such as a different plan, 2-party or family coverage.

  Line 15 may also report the full premium for self-only COBRA coverage for the month(s) in which an active employee was offered/eligible for COBRA coverage, or the full premium for self-only coverage for the month(s) in which an employee was eligible for or enrolled in health coverage but was not receiving an employer contribution towards the cost of coverage (e.g., employee was on Direct Pay).

  The IRS will use the information reported on Lines 14 and 15 to determine if the health coverage offered by the state meets the ACA’s minimum value and affordability standards.

• Line 16—The codes reported on Line 16, if any, provide information to the IRS to administer the ACA’s Employer Shared Responsibility provisions and determine if the state is in compliance with this provision or subject to a penalty.  The state will report any one of the following codes on Line 16 of the form:
  • 2A—Indicates that the employee was not employed during the month.
  • 2B—Indicates that the employee was not a full-time employee and was not enrolled in state-sponsored health coverage during the month.
  • 2C—Indicates that the employee was enrolled in state-sponsored health coverage during the month.
  • 2D—Indicates that the employee was in a limited non-assessment period for the month.  This code will be used to indicate when an employee was in an initial measurement period or related administrative period.
  • 2F–2H—Indicates that the health coverage offered to the employee met one of the ACA’s affordability standards.

The IRS will use the information reported on Line 16 to determine if the state is subject to a penalty assessment.

• Part III-Covered Individuals (Lines 17-22)—Employers that provide self-insured health coverage will use Form 1095-C to report information to the IRS and employees about the individuals who are covered by MEC.  This section of the form will be blank because the state does not provide self-insured health coverage.  Instead, employees may receive a Form 1095-B from their health coverage provider, if applicable, with information about the individuals who were enrolled in MEC for at least one day during the preceding calendar year.

Frequently Asked Questions (FAQs) regarding IRS Forms 1095-C and 1095-B were developed for employees and departmental HR staff.  The FAQs for employees are available on CalHR’s website (under the “State Employees” tab) and FAQs for departmental HR staff can be found in the HR Net section of CalHR’ s website.

Affordable Care Act System (ACAS) Database for Tracking Employee Health Benefit Status Information-

To capture the necessary data the state is required to report to the IRS to demonstrate compliance under the ACA’s Employer Shared Responsibility provisions, the SCO has developed the ACAS database that departmental HR staff must use to capture the necessary health benefit status information on employees (e.g., offer of health coverage, whether health coverage was accepted, declined, etc.).

The SCO will use the data that departments enter in the ACAS database to report information to the IRS and employees (via the IRS 1095-C statement) about the health coverage offered, if any, to the employee and whether the employee was enrolled in health coverage.

Accurate and timely entry of an employee’s health benefit status information in the ACAS database is critical to the state’s ability to verify compliance. As such, departments are responsible for entering relative health benefit status information for employees in the ACAS database in the pay period in which they are effective.

Failure to file correct information returns with the IRS or statements to employees could result in penalties to the state:

• $250 penalty for failure to file a correct information return with the IRS; and
• $250 penalty for failure to furnish a correct employee statement (1095-C)

These penalties are subject to annual inflation adjustment.

Refer to SCO Personnel Letters #14-021, #15-001, #16-005, #17-015, 17-027, and #18-017 for more information on the ACAS database and health benefit status information.

ACA Training Modules-

Two web-based training modules on the ACA’s Employer Shared Responsibility provisions and the ACAS database and a training toolkit are available on CalHR’s website (Affordable Care Act Training under “State HR Professionals” tab) to departmental HR staff responsible for entering employees’ health benefit status information in the ACAS database:

• ACA Overview Video–Provides an overview of the ACA’s Employer Shared Responsibility provisions and the impact to the state.
• ACAS Database Training Module–Provides instructions to departmental HR staff on how to document the health benefit status information for employees in the ACAS database.

Departmental HR staff that have “update” or “inquiry” access to the ACAS database are required to complete these two web-based training modules prior to obtaining access.  Departments are also required to maintain a current list of staff that have completed the mandatory ACA training modules on file for audit purposes.

Affordable Care Act Compliance Program-

Monthly Departmental ACA Compliance Review

To ensure accurate and timely entry of data in the ACAS database, CalHR, with the help of SCO, has mandated training for departmental HR staff responsible for entering employees’ health benefit status information into the ACAS database and developed the ACA Compliance Program which requires departments to self-monitor their ACA compliance.

Although the ACAS database has some audits, edits and error messages built-in to the system to prevent many types of data entry errors, it does not capture all possible errors, such as no ACAS transaction code entered.  To identify these errors, the SCO has created a series of ACAS Compliance Reports that departments can use to proactively monitor their compliance.

The ACAS Compliance Reports are accessible via the SCO’s Personnel/Payroll Services Division’s ViewDirect database and are updated monthly.  Departments are expected to review their monthly ACAS Compliance Reports and take appropriate action to correct all errors identified within 30 days of receipt of the reports and before the state reports information to the IRS.

Refer to SCO’s Personnel Letters #15-009, #15-013, #17-031, #18-016, #18-017, and #19-006 for more information about the monthly departmental compliance reports.

Quarterly ACA Compliance Review

CalHR, as the state employer, has primary responsibility to ensure that the state’s human resources practices and processes align with provisions of the ACA and that the state fulfills its reporting obligations under the Employer Shared Responsibility provisions.  CalHR, in conjunction with the SCO, is responsible for providing oversight of departmental ACA compliance monitoring activities to ensure accurate and timely entry of the health benefit status information on employees in the ACAS database.

Beginning in May 2015, the SCO produced quarterly reports for CalHR to monitor departments’ ACA compliance efforts.  These reports reflect transaction errors and discrepancies in the ACAS database that are over 90 days old.  CalHR will review these reports and notice departments, via the Quarterly ACA Compliance Review Notification document of their outstanding transaction errors and discrepancies.

Departments are required to take action to correct all outstanding transaction errors and discrepancies in the ACAS database within 30 days of receipt of the Quarterly ACA Compliance Review Notification document from CalHR.  Additionally, departmental Personnel Officers are required to complete and return the Quarterly ACA Compliance Review Notification document to CalHR at ACA.Policy@calhr.ca.gov certifying that all transaction errors and discrepancies have been corrected.

For departments that do not take action to correct the outstanding errors and discrepancies in the ACAS database, CalHR will contact their Administrative Chief for resolution.

Application

Authorities

• 29 U.S. Code section 2520.104b-1(c)
• Department of Labor Technical Release No. 2013-02
• Internal Revenue Code section 4980H
• Internal Revenue Code section 6055
• Internal Revenue Code section 6056
• Public Health Service Act section 2715
• Public Law 111-1488

Resources

FAQs

• Forms 1095-B and C: Frequently Asked Questions
• IRS Form 1095-B and 1095-C: Frequently Asked Questions

Forms

• CalHR 782: Affordable Care Act Notification Checklist
• CalPERS HBD-12: Health Benefit Plan Enrollment Form
• IRS 1095-B : Health Coverage
• IRS 1095-C : Employer Provided Health Insurance Offer and Coverage Statement
• Notice about Health Insurance Marketplace Coverage Options, Version A: Notice about Health Insurance Marketplace Coverage Options, Version A
• Notice about Health Insurance Marketplace Coverage Options, Version B: Notice about Health Insurance Marketplace Coverage Options, Version B
• Summary of Benefits and Coverage Template: Summary of Benefits and Coverage Template

PML

• PML 2013-030: PML 2013-030 - 9/4/2013 - Notice about the New Health Insurance Marketplace Coverage Options and Employee Health Coverage
• PML 2014-038: PML 2014-038 - 10/31/2014 - Employer Responsibilities Under the Affordable Care Act
• PML 2015-013: PML 2015-013 - 4/23/2015 - Affordable Care Act Compliance Program
• PML 2015-037: PML 2015-037 - 12/22/2015 - Annual Health Care Coverage Statements Required Under the Affordable Care Act

Web Pages

• ACA Overview Video: ACA Overview Video
• ACA Training Toolkit: ACA Training Toolkit
• ACAS Database Training Module: ACAS Database Training Module
• ACAS Database User Guide: ACAS Database User Guide
• ACAS: A Scenario Specific Job Aid: ACAS: A Scenario Specific Job Aid
• Initial Measurement Period for “New” Intermittent and Part-Time Employees: Initial Measurement Period for “New” Intermittent and Part-Time Employees
• SCO Personnel Letter #14-021 : Introduction of the New ACAS Database
• SCO Personnel Letter #15-001: ACAS Initial Load
• SCO Personnel Letter #15-009: ACAS Compliance Reports
• SCO Personnel Letter #15-013: ACAS Compliance Reports
• SCO Personnel Letter #16-005: ACAS: New Status Code for COBRA Offers
• SCO Personnel Letter #17-015: New Date Edits for ACAS
• SCO Personnel Letter #17-027: Affordable Care Act System Updates and Changes
• SCO Personnel Letter #17-031: Affordable Care Act System Year-End and Clean-Up
• SCO Personnel Letter #18-016: Affordable Care Act Compliance Report and System Updates
• SCO Personnel Letter #18-017: Affordable Care Act System Updates and Changes
• SCO Personnel Letter #19-006: Affordable Care Act Compliance Report Additions
• Standard Measurement Periods for Ongoing Employees: Standard Measurement Periods for Ongoing Employees

Authorized By

Machelle Martin
Chief, Benefits Division

Contact Person

Elaine Smith
Affordable Care Act Program Coordinator, , Health Policy
Phone: 916-445-9801
Fax: 916-322-3769
Email: elaine.smith@calhr.ca.gov

Superseded Policies