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An argument regarding the District of Columbia’s ACA health exchange tax was decided late last month. The decision rules in favor of the tax, supporting state-run health exchanges.
The case, officially titled Unum Life Insurance Company vs. District of Columbia, Appellee, concerns a long-standing issue dating back to 2016 involving a group of insurers that did not participate in D.C.’s independent health exchange and felt they should not be subject to the region’s health carrier tax.
Specifically, the group of insurers stated, “the Council’s legislation was preempted by the ACA, which does not permit the District to levy such a tax on these insurers, and by allowing an executive agency to administer the tax, the Council impermissibly delegated its legislative power and violated the nondelegation doctrine as applied to the District’s government.”
The court ruled in support of the D.C. health carrier tax because it encourages states to be self-sustaining in administering their own health exchanges. When states elect to administer their own statewide health exchange, they receive initial federal funding, but the funding is discontinued after a period of time, at which point it is up to the health exchanges to sustain themselves. Each year, the health carrier tax is responsible for generating significant income for the D.C.-run health exchange.
The court’s move to uphold the independent healthcare exchange tax is a sign of expansion of the healthcare marketplace. By allowing states to generate their funding, individual health exchanges will be far more successful.
The implementation of an independent health exchange is just one of D.C.’s Affordable Care Act advancements. In addition to the health exchange, the District has its own Individual Mandate that requires residents to obtain adequate health coverage or face a potential penalty. The penalty is collected from the uninsured through their annual tax returns.
Like several other states, D.C. has also established a special enrollment period allowing individuals to obtain coverage as a result of the COVID-19 pandemic. Currently, the enrollment period is slated to run through January 31, 2021.
D.C. also requires employers to report on health coverage offered to employees each tax year. The law requires every “applicable entity that provides Minimum Essential Coverage to an individual during a calendar year” to submit an information return regarding such coverage to the Office of Tax and Revenue (OTR). It also requires the applicable entity to submit a statement about the individual’s type of coverage. All information returns are required by the OTR to be filed electronically through MyTaxDC, as paper filings will not be accepted.
These filing requirements, while similar to federal filing requirements under the ACA, are not the same and are to be conducted in addition to the ACA’s Employer Mandate, which requires Applicable Large Employers (ALEs), organizations with 50 or more full-time employees and full-time-equivalent employees, are required to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets Minimum Value (MV) and is affordable for the employee, or be subject to Internal Revenue Code (IRC) Section 4980H penalties.
D.C. is not the only region to have enacted ACA reporting requirements; several states will soon require statewide reporting. Employers should familiarize themselves with reporting deadlines in the states in which they have operations, in addition to the deadlines for reporting to the IRS for the 2020 tax year.
If your organization needs assistance in meeting all of the ACA reporting deadlines, contact us to learn about how ACA Complete can help your organization.
