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As an employer considering health insurance for your employees, you have multiple options available to you. You can look for coverage on your own. Or, you can shop for coverage with assistance from an employee benefits broker. You may choose to go directly to an insurance company to purchase coverage. Alternatively, you can shop for health coverage via a public or private health insurance exchange.

So, you may be wondering, what’s a health insurance exchange? A health insurance exchange offers you and your employees access to multiple health insurance plans through a single program. There are both “public” health insurance exchanges and “private” health insurance exchanges. In California, the public health insurance exchange is known as Covered California, which was established as part of the Affordable Care Act (ACA) signed into law by President Barack Obama in 2010. One example of a private health insurance exchange is CaliforniaChoice, which has been serving small businesses in California since 1996.


What Are the Similarities?

Both the state exchange (Covered California) and a private exchange (like CaliforniaChoice) offer you the option to choose from multiple health insurers in a single program. Some of your employees may choose one type of coverage – like a Health Maintenance Organization (HMO) health plan – while others may want to be able to access a certain doctor, medical group, or hospital that is only available through a Preferred Provider Organization (PPO) health plan.

Other health plan options may also be available like an Exclusive Provider Organization (EPO) plan, Health Care Service Plan (HSP), and Health Savings Account (HSA) qualified plan.

Both a public exchange and a private exchange give you choices and allow you and your employees to shop and compare health plans – so you find the coverage that is right for your specific health care needs.


What Are the Differences?

As you might expect, a public health insurance exchange is one administered by the government – at either the state or national level. California was the first U.S. state to establish its own state health insurance marketplace as part of the ACA. Covered California offers medical and dental coverage to individuals and small businesses statewide.

As required by the ACA, Covered California also offers pediatric dental and vision benefits, but vision coverage for adults is not an option on the state exchange.

As of 2018, a dozen states and the District of Columbia operated their own public health insurance exchanges. All other states used the federal marketplace, HealthCare.gov, to offer ACA compliant health coverage to their residents.

A private health insurance exchange – like CaliforniaChoice – is an insurance marketplace established by a private organization such as a Third Party Administrator (TPA). CHOICE Administrators is the TPA that operates CaliforniaChoice, and all plans offered through CaliforniaChoice are ACA compliant. Through the CaliforniaChoice private exchange, small businesses in California can access dozens of health plan options from eight different health insurers that operate in the state. Businesses can also add options for employee and dependent dental and vision benefits as well as other coverage.

While a public exchange generally offers only medical and dental insurance, a private exchange may offer more. For example, CaliforniaChoice offers employers and their employees a variety of discounts (including dental, vision, and hearing services) as well as resources that could help you and your employees save time and money.

These include a free Premium Only Plan (POP), access to HRAnswerLink (human resources support), employee discounts through the Cal Perks program, a no-cost California Rx prescription-drug discount card, an online Health Savings Account (HSA) Resource Center, a free Flexible Spending Account (FSA) for groups of 15 or more employees, COBRA billing services, and other benefits.

Optional services, including payroll, 401(k) integration, and access to other types of insurance, are also often available through a private exchange.

Because Covered California was launched in connection with the ACA, it has been in operation for about 10 years. The CaliforniaChoice private exchange opened in 1996, so it has more than 22 years of experience and expertise in delivering employee choice and multi-carrier exchange services to small businesses in California.


What’s Right for You and Your Business?

If you are interested in learning more about what’s available from a public or private exchange, talk with your employee benefits broker. He or she can help you decide what might work best for your business and your employees’ individual or family health care needs. If you do not have a broker, we can help you find one who will meet with you and provide you with a custom quote for health and other coverage for your employees (and dependents, if you choose).

You might also want to read our posts on Health Insurance Can Help You Better Compete for Employees and 7 Reasons to Use a Broker and a Private Exchange for Your Small Business Employees’ Health Insurance in 2018.

Offering group health insurance to employees – no matter what size your organization – is important. That’s because, more than at any other time in recent history, current and potential employees are seeking a better work and benefits experience. That’s what MetLife reports in its 2018 U.S. Employee Benefit Trends Study. Even if your business is not “required” to offer health benefits, it might still be something to consider – as you compete for workers in an increasingly competitive talent marketplace.

How to Qualify for Group Health Insurance

Let’s start by discussing what group health insurance is, and the rules concerning who qualifies for coverage? A group health insurance policy is one issued to an employer to provide coverage for eligible full-time employees. At the discretion of the employer, it may also include benefits for part-time employees (those working fewer than 30 hours per week) and/or the qualified dependents of employees.

If an employer offers any full-time or part-time employees health coverage, it must offer insurance to all employees, regardless of any pre-existing medical conditions.

Health insurers will write groups with as few as two covered persons (the business owner and an employee). However, some carriers will not write a policy for a husband and wife group if both are owners of the business, or if it is a sole proprietorship. Other business types such as an LLC, S-Corp, C-Corp, and Partnerships where the spouse is a W-2 employee are acceptable.

ACA Requirements for Small Businesses

The Affordable Care Act (ACA) employer mandate (still in force despite the House of Representatives’ effort to change it) requires employers with 50 or more full-time and full-time equivalent employees to offer health insurance. (Link here to the Healthcare.gov website for a calculator to determine your group size.)

Fifty-plus employers who do not offer eligible employees affordable coverage that includes what the ACA defines as “essential health benefits” are subject to a penalty. However, employers with fewer than 50 employees are not required to offer health benefits, and are not subject to a penalty – although many choose to offer benefits as part of their recruitment and retention strategy.

Group Health Coverage Costs

If you decide to purchase group health insurance for your employees, whether you pay the full cost of coverage or you share the cost with employees, what you pay is based on the ages of those individuals insured under your plan (including any dependents).

You will be able to choose from four ACA metal tiers: Bronze, Silver, Gold, and Platinum, each offering a different shared health care cost percentage, as shown in the graphic below:

ACA Metal Tier pricing

Some programs – including the CaliforniaChoice multi-carrier private exchange – allow you to choose more than one metal tier for your employees’ coverage. This gives you and your workers greater access to doctors, hospitals, and other providers offered by the eight plans available from CaliforniaChoice, so you can find the plan that’s right for your individual or family health care needs.

In addition, with CaliforniaChoice, you can more easily manage your employee benefits budget using Defined Contribution. You select your preferred plan and decide how much you want to spend on employees’ health insurance. You can choose a Fixed Percentage of the costs (from 50% to 100%) or a Fixed Dollar Amount. The choice is yours – and your cost per employee is locked-in for a year. At renewal, you can adjust your contribution (up or down) and lock it in for another 12 months.

Guaranteed Access

If you’re a small employer (with two to 50 full-time employees) and you want to offer health insurance to your employees, federal law guarantees your access to it. To learn more, contact your employee benefits broker. If you don’t already have a broker, we can help you find a CaliforniaChoice broker, who will work with you to build an affordable health plan quote that meets your employees’ needs.

Pro Tip: Broker services are typically available at no cost.



The California Assembly and State Senate both took action this month to ban the sale of short-term health insurance plans in 2019. The Senate approved S.B. 910, authored by State Sen. Ed Hernandez (D-West Covina), on August 21 after the Assembly approved the measure on August 16. The legislation now heads to the governor.

The Trump administration has been working to expand the availability – and the coverage period – for short-term health insurance plans. Recently released federal guidelines would expand short-term plans from 90 days to 12 months. Insurers would have the option to allow individuals covered by these plans to renew them for up to 36 months. States have the option to regulate the sale of such plans, which California is doing.

Under the Affordable Care Act (ACA), short-term health plans do not have to include all of the “essential health benefits” of ACA-compliant plans. For example, short-term plans can exclude maternity care and prescription drug coverage, among other benefits. They can also deny an applicant coverage if he or she has a pre-existing health condition.

For years California limited the length of time an individual can be covered by a short-term health plan to six months. The Obama administration reduced the coverage period to three months. Under S.B. 910, the sale of non-ACA compliant short-term health plans in California is no longer permitted effective January 1, 2019.

The impact of the change could be minimal, although it’s not known how many residents might have been attracted to the plans under the broader federal rules. According to the California Department of Insurance, fewer than 10,000 short-term health insurance policies were in force at the end of 2017.

If Governor Jerry Brown signs the bill, California would join a handful of other states, including Massachusetts, New Jersey, and New York, which have severely restricted or banned short-term health plans. Beginning in 2019, Californians could still purchase limited-term health policies; however, they would have to comply with the ACA’s consumer protections and essential health benefits.

Talk with your employee benefits broker about short-term coverage options for your employees if they leave your group health plan. If your group has 20 or more employees on more than 50 percent of your typical business days in the calendar year, you are subject to COBRA (the Consolidated Omnibus Budget Reconciliation Act), and you may be required to offer coverage continuation to employees, spouses, and dependent children who lose coverage due to certain events. These include death, employment termination, reduction of hours (and qualification for benefits), eligibility for Medicare, divorce, or legal separation.

Highlights/Key Takeaways

  • Higher revenue was reported by most of the country’s leading insurers in Q1.
  • Kaiser Permanente, California’s largest health plan by membership, continued to attract more members during the quarter – regionally and nationally.
  • Oscar Health, which will join CaliforniaChoice later this year, reported its first-ever profit in Q1 2018.


The country’s leading health insurers reported mixed financial results for the first quarter of 2018. Among the publicly traded insurers that offer coverage through the CaliforniaChoice small business, multi-carrier private exchange, it was a positive start to the year.

Anthem: Increased Income on Similar Revenue

Anthem, Inc., the parent of Blue Cross and Blue Shield plans across the country (including Anthem Blue Cross in California) had high net income for Q1. The company earned $1.3 billion in the quarter on revenue of $22 billion. That compares to $1 billion in income in Q1 2017 on similar revenue. Membership was 2.5 percent lower – 37 million nationwide – during the quarter as compared to 2017. Medicare plan growth increased 16 percent, while other enrollment was lower. Individual major medical coverage fell to 755,000 members nationally as compared to 1.9 million in 2017.

Centene: Dramatic 12-Month Growth

Centene, the parent organization of California-based Health Net and managed care Medicaid plans across the country, reported $338 million in net income on $13 billion in revenue. That is up significantly from $139 million in net income, on revenue of $12 billion, in 2017. At the quarter’s end, the St. Louis-based insurer was providing or managing health care for 13 million people.

UnitedHealth: Greater Earnings, Increased Cash

UnitedHealth Group, Inc., the parent of UnitedHealthcare, had a Q1 2018 profit of $2.84 billion, an increase from $2.17 billion a year earlier. Earnings per share were up sharply to $3.04 a share, from $2.37 per share last year. Revenue for the quarter was up 13 percent, much of it attributable to the health insurance and health services businesses (operating under the Optum brand). Cash flow and earnings were also positively affected by the company’s reduced income tax under the reform signed by President Trump in late 2017.

Other Results

Although not a publicly traded insurer, the non-profit health plan Kaiser Permanente also released information on its results for the first quarter. The company reported increased Q1 revenue and operating income for its nonprofit hospital and health plan businesses. Operating revenue was up about 12 percent to $20.3 billion, as compared to $18.1 billion during Q1 2017. Kaiser Permanente, California’s largest health plan, saw its membership grow to 12.2 million members nationwide, up 472,000 from the end of 2017.

Oscar Health, which operates in California and five other states nationwide, announced its first-ever profit. Oscar had Q1 2018 premium revenue of $300 million, three times that in the same quarter last year. Net profit was $7.4 million for the quarter. Oscar, which launched in 2012 and entered the California group market this year, will be offering small group coverage through CaliforniaChoice this fall.


Key Takeaways:

  • Going beyond medical benefits can help you differentiate your company from others when competing for new talent and retaining employees.
  • The Choice Builder exchange – which offers Dental, Vision, Chiropractic & Acupuncture, and Life Insurance – gives your employees access to coverage from some of the country’s top insurers.
  • Coverage can be fully or partially paid for by your company, or paid for entirely by employees.
  • You may be surprised to learn candidates will sometimes take a lower-paying job if it offers outstanding employee benefits.

Meet Choice Builder: The Only Private Exchange for Optional Employee Insurance Benefits

The Affordable Care Act (ACA) introduced the concept of an insurance exchange to many Americans, but the fact of the matter is that private health insurance exchanges have operated in the U.S. for years. One of the country’s most successful private exchanges, CaliforniaChoice, began operations in 1996. Today, it serves 18k small businesses and more than 320k members across California.

Exchange marketplaces – whether they are public or private – are designed to give consumers easier access to a broad range of Employee Insurance Benefits. With an exchange, you and your employees have a variety of carriers and plan options from which to choose, so you can select the coverage that best matches your individual or family health insurance needs and budget.

If you’re a business owner or mid-career manager, you may have dependents you want to include in your coverage. Maybe you take a prescription drug for an ongoing medical condition, such as diabetes or high cholesterol. You may have a preferred doctor, who is only available through a local PPO. Your 20-something administrative assistant or 30-something supervisor may be single or divorced (without children) and not inclined to visit the doctor, other than for a routine annual check-up. The options available in an exchange allow all three of you to find the PPO, HMO, or other coverage that works best for you.

The same holds true for added benefits, like Dental, Vision, Chiropractic & Acupuncture, and Life Insurance. The Choice Builder insurance benefits exchange, created by the same company that operates the CaliforniaChoice health exchange, has just what you need. Choice Builder can help you expand your employee benefits beyond health care. You can contribute to your employees’ added benefits or you can offer these benefits on a completely voluntary basis. You can even “mix and match” coverage, so your company shares in the cost of some coverage (like one of several Dental plans), while the employee pays the full cost for other coverage (say, perhaps, Vision or Life Insurance). The choice is yours.

Why consider added benefits? There are many reasons. As mentioned above, you can choose whether you share the cost, or your employees pay the full cost. Added benefits are a good way to keep your employees happy, too – and happier employees are up to 20 percent more productive. That affects your bottom line.

Dental, Vision, and other benefits can also help you attract and retain employees. You may be surprised to learn a 2017 study by Aflac found a majority (58 percent) of employees would a take a job with lower pay if it offered better insurance benefits. In fact, 16 percent of those surveyed two years ago by Aflac said they have left a job – or turned down a job offer – due to the available benefits.

Choice Builder offers convenience and a variety of coverage options for you and your employees:

  • Dental: You get access to an assortment of Dental plans – from Ameritas, Anthem Blue Cross, Delta Dental, and MetLife.
  • Vision: You can choose Vision coverage from EyeMed and VSP.
  • Chiropractic & Acupuncture: Backed by Landmark Healthplan, a California leader in integrated care, Chiro & Acupuncture is available as an employer-sponsored benefit.
  • Life: Program Life Insurance is offered by Assurity Life.

    Pick one, or pick them all; the choice is yours. And you’ll receive just one monthly bill for all of your employees’ added Choice Builder benefits. Plus, you can easily manage those benefits through one website.

    The additional advantage offered by Choice Builder is convenience. You don’t have to go to different insurance companies to offer the coverage your employees want; it’s all available through the Choice Builder program. You get access to a wide variety of Dental options – from Ameritas, Anthem Blue Cross, Delta Dental, and MetLife plus Vision coverage from EyeMed and VSP. Life Insurance is offered by Assurity Life. And Chiropractic & Acupuncture treatments, available as an employer-sponsored benefit, are backed by Landmark Healthplan, a California leader in integrated care since 1985. Best of all, you get one monthly bill for all of your employees’ added benefits – and you can easily manage their benefits through one website. There’s just one toll-free number for assistance, too.

    To learn more about Choice Builder – and how the added benefits it offers can help you attract and retain employees and, potentially, increase productivity, too – talk with your employee benefits broker. If you don’t have a current broker, we can help you find one.

    4 Things to Remember: 

    • Health care-related mergers are up significantly since the Affordable Care Act was enacted in 2010.
    • Two big mergers involving retailers and insurers are currently under review.
    • A proposed measure in the California legislation would give the state a greater say in mergers.
    • A separate bill proposes an independent commission to set pricing for medical care.


    Proposed Legislation Could Shake Up Health Insurance Mergers

    Since President Barrack Obama signed the Affordable Care Act (ACA) into law in March 2010, the health insurance industry has seen a lot of changes. Among them have been mergers and proposed mergers of some major players in the health care and insurance industries. However, some of that could change under proposed legislation making its way through the California legislature.


    Not since the 1990s have so many health care management and hospitals initiated talks to discuss a possible consolidation. In fact, as reported by Managed Care magazine in 2016, an analysis by the consulting firm Kaufman Hall found health care-related mergers, acquisitions, joint ventures, and joint operating agreements almost doubled from 2010 to 2015. A 2017 post by Health Standards reported more than 560 hospital mergers since 2010, and there are more affiliations being discussed today by some of the country’s largest medical center and hospital operators.


    On the insurance side of the health care industry, several major deals have been proposed, but some have not been completed because of government opposition. Those include the proposed consolidation of Anthem and Cigna, which terminated talks in 2017, and an Aetna-Humana marriage called off last year after 19 months of planning and growing opposition.


    Deals – or proposed deals – announced in the past six months include Cigna’s acquisition of pharmacy benefit manager Express Scripts, a hookup of the retailer CVS with insurer Aetna, and discussions between the world’s largest company, Walmart, and America’s fourth-largest health insurer, Humana.


    Some of these proposed consolidations could face an uphill battle if legislation now in the California State Senate is approved. Assembly Bill 595, authored by Assembly member Jim Wood (D-Healdsburg), would require health plans that would like to merge with or acquire other health plans to receive approval from the California Department of Managed Health Care (DMHC).


    State regulators say they want to consider the impact on cost and quality of care that could result from any proposed merger or acquisition. Under current law, health plans must provide the DMHC with notice of a planned merger; however, the state has limited authority to review any proposed consolidation. Insurers oppose the proposed legislation saying it is too broad and approvals could be unreasonably high. As of mid-March, A.B. 595 is under review by two committees: the State Senate Committee on Health and the State Senate Judiciary Committee.


    Another proposed legislative bill that could impact Californians’ health care – and health care costs – is Assembly Bill 3087. The bill would put an independent commission in charge of pricing for hospital stays, doctor visits, and many other medical services covered by commercial health plans. Costs would be based on rates approved for Medicare plans.  A similar measure was enacted for Maryland’s all-payer program in 2014.


    Proponents of A.B. 3087 – including labor unions and consumer groups – say it is designed to reduce escalating health care costs in the Golden State. According to the California Health Care Foundation, premiums for Californians who get their health insurance through their employer grew by more than 240% from 2002 to 2016. Inflation during the same period was about 40%.


    The California Association of Health Plans says it is reviewing the cost control proposal; however, it has opposed previous efforts to regulate pricing. That includes a 2014 ballot initiative that would have empowered the state insurance commissioner to block rate increases considered excessive. Proposition 45, as it was known, was rejected by Californians in a 59 to 41 percent vote during the November 2014 election.


    Passage chances for these two bills are not yet known. We will continue to monitor proposed legislation in Sacramento and will share updates.



    Highlights/Key Takeaways

    • Affordable Care Act (ACA) individual mandate still applies in 2018; it won’t go away until 2019.
    • ACA employer mandate remains in force, unless Congress decides to take further action.
    • End of individual mandate won’t affect most Americans since a majority of people get their health coverage through their employer, Medicare, Medicaid, or the military.
    • Association health plans could reappear – and shake up the marketplace – in late 2018 or 2019.
    • Single-payer health care in California is still being discussed.

    The White House said within hours of President Donald Trump signing the tax reform bill in December that ObamaCare was “essentially” repealed. The reality is something different.

    While the recently approved tax law did include a provision to eliminate the Affordable Care Act (ACA) individual mandate, the ACA remains the law of the land for 2018 and other provision of ObamaCare are still in force. (The individual mandate, which requires most individuals to have insurance or pay a penalty, remains in force for 2018 and is eliminated in 2019.)

    So, you may be asking, what is – and what is not – changing this year? Here’s a quick overview:

    Federal and State Exchanges

    The online marketplaces established under the ACA will continue to operate. The Covered California exchange continues to accept enrollment for 2018 through the end of January, and all exchanges will continue to accept applications from those experiencing a qualifying event during the year. Subsidies for coverage will remain available to those individuals making less than 400 percent of the federal poverty level (about $98,000 for a family of four).

    Employer Mandate

    The back-door elimination of the ACA individual mandate (through tax legislation) does not eliminate the employer mandate; it remains in force for 2018 – and the foreseeable future unless there’s further action by Congress. That means, most employers with 50 or more full-time or full-time equivalent employees will continue to be required to offer health plans that comply with the ACA to their employees. Link here to read more on the Employer Shared Responsibility provisions on the Internal Revenue Service (IRS) website.

    Association Plans

    Association health plans (AHPs) are likely to make a big splash later this year (or early next year). The 60-day comment period on the Trump administration proposal to update the rules for these plans is now underway. As proposed, AHPs would allow small business owners, their employees, sole proprietorships, and other self-employed individuals to band together as a single group to purchase health insurance in the large group market. (As larger employers, the consolidated group would be exempt from some of the current requirements of the ACA. For example, AHPs would not have to include the ACA’s “essential health benefits” such as mental health, emergency services, maternity and newborn benefits, and prescription drugs.

    Critics of association health plans, including consumer groups, public health advocates, and many insurers (including Blue Cross and Blue Shield plans) say new association plans will drive up health care costs for older Americans and those with pre-existing health conditions as younger, healthier workers leave their current health plans and move to less comprehensive, less expensive plans developed as a result of the AHP proposal.

    “Those with serious health conditions like cancer would be left paying ever-increasing premiums for comprehensive coverage,” said Chris Hansen, the president of the American Cancer Society Cancer Action Network told the New York Times. “The rule proposed today will almost certainly result in more people facing financial distress when an unexpected health crisis happens.”

    State “Single Payer” Proposal

    While the White House and GOP members of Congress continue their efforts in Washington, DC, to undermine the ACA, California lawmakers are continuing to explore the expansion of health care through a single payer measure. As outlined, Senate Bill 562 would establish a program to deliver health care to all Californians.

    However, Assembly Speaker Anthony Rendon (D-Paramount) said last year the bill was “woefully incomplete” and he shelved it. The measure is likely to come back into view this year, as some of the leading candidates for governor support single payer. Costs remains a big issue, though, as it’s estimated single payer could run a $400 billion tab over a decade. Stay tuned for further updates.

    If you’re considering health insurance for your employees for the first time, or you’re considering a change to your current employee benefits, you’ll want to talk with your broker about CaliforniaChoice. It is the only place where you and your employees can select coverage from seven of California’s leading health plans in one program. If you don’t already have an employee benefits brokers, we can help you find a CaliforniaChoice broker to answer all of your questions and provide you with a custom quote.


    Among your responsibilities as an employer is ensuring the reporting of employee and independent contractor income information to the Internal Revenue Service (IRS) each year.

    In addition to IRS reporting, employers are required to provide employees and independent contractors with a summary of their earned income for the previous year. (They use the supplied information when filing their individual annual tax returns.)

    Employee information is reported using IRS Form W-2, while Form 1099-MISC is used to report contract worker income. Although the reporting of contractor earnings is required only for those who earn more than $600 annually, some employers choose to report income for all 1099 employees. Be sure to ask each of your contractors (whether you call them a freelancer, independent contractor, or consultant) to fill out a W-9, Request for Taxpayer Identification Number and Certification , so you have the information needed to complete their 1099-MISC forms.

    Due Dates

    W-2s for employees’ 2017 income are due to the IRS along with a summary report by January 31, 2018; the same deadline applies for 1099-MISC forms (and Form 1096 , the Annual Summary and Transmittal of Information Returns ).

    The January 31, 2018, deadline also applies to providing employees and contractors with income information for 2017.

    For verification purposes, employers must file copies with the Social Security Administration (using Form W-3) by the end of January.

    If you have more than 250 employee and/or contractor forms to submit, you must submit them electronically.

    If you’re using QuickBooks® (or other tax software) for your firm’s book-keeping, you can likely access the required forms online. Otherwise, you can get forms at most office supply stores and online, at the IRS website.


    Penalties for Non-Compliance

    California employers must provide employees with a federal W-2, Wage and Tax Statement , by January 31, as required under Section 13050 of the California Unemployment Insurance Code (CUIC). Failure to do so (or for furnishing false or fraudulent statements) is subject to a state penalty of $50 for each such failure under Section 13052 of the CUIC.

    California State Senate Bill 542 requires businesses and government entities (defined as a “service-recipient”) to report specified information to the Employment Development Department on independent contractors (defined as a “service-provider”).

    If you hire an independent contractor and he or she is an individual or sole proprietor earning or entering into a service contract for $600 or more, you are required to report independent contractor information using Form 1099-MISC.

    Employers are subject to a penalty of $24 for each failure to report a 1099-MISC worker’s income within the required timeframes, unless the failure is due to good cause. If the failure to report is an intentional agreement between the service-recipient and service-provider to not supply the required information to the state or to supply a false or incomplete report, a penalty of $490 may apply.

    Federal penalties start at $50 per return, up to a maximum of $536,000, if forms are not more than 30 days late. The “per return penalty” increases to $100 (and a maximum of $1,609,000) if the form is 31 or more days late but filed by August 1. If the form is filed after August 1 or not at all, the penalty increases to $260 per return (up to a maximum of $3,218,500). Employers who intentionally disregard the filing deadlines are subject to a penalty of $530 for each return (with no maximum limitation).

    Small businesses (which are defined as those with gross annual receipts of $5 million or less) are subject to the same per return penalties noted above, although the maximum penalty amounts are different – $187,500 if forms are not more than 30 days late, $536,000 if 31 or more days late (but filed by August 1), and $1,072,500 if not filed by August 1 or not filed at all.

    The same penalty structure applies to W-2 and 1099-MISC income reporting and filing.

    For additional information on W-2 reporting requirements or instructions, visit the IRS website and refer to the IRS Employer’s Tax Guide (Publication 15, Circular E) and Instructions for Forms W-2 and W-3 , respectively.

    For additional guidance on completing state information on Form W-2, refer to the California Employer’s Guide, DE 44. For information on state reporting of independent contractor income, refer to Report of Independent Contractor(s), DE 542. If an employee or contractor performs services in more than one state, contact the other state(s) for guidance.


    Employees vs. Contractors

    Be sure you pay people based on the work they do and how they are categorized – as an employee or a contractor. Then make sure you file the correct income information (using Form W-2 or 1099-MISC) with federal and state authorities.

    Filing is required by law – and your failure to comply could result in substantial penalties for each late return. Don’t risk a fine – at both the state and federal level; comply with the guidelines and make sure you act by the January 31 due date.

    For information on the IRS extension of the filing deadline for employers to provide health coverage forms to individuals (using Forms 1095-B and 1095-C), link here. The paper-filer deadline, which was January 31, 2018, has been extended to February 28th, while electronic filers have until April 2, 2018.


    It’s been a busy year for health care – and there are still a few weeks left in 2017. Below is a summary of some of the events that have impacted individuals and small businesses this year (or could affect them next year) when it comes to health care and health insurance.


    March 7, 2017

    AHCA Introduced in House of Representatives

    Republicans introduced the American Health Care Act (AHCA), H.R. 1628, in the U.S. House of Representatives.


    March 12, 2017

    CBO Releases Analysis

    The Congressional Budget Office projects 52 million Americans would be left uninsured under the AHCA. The agency also forecasts higher insurance premiums through 2020, with rates expected to fall thereafter.

    Committee Votes Bill to the Floor

    The House Budget Committee votes 19 to 17 to send the AHCA to the Floor of the House of Representatives.  


    March 24, 2017

    House Fails to Hold Vote

    After considerable debate and multiple postponements, the AHCA is pulled from the House floor. Moderate Republicans refused to support the bill after introduction of a Manager’s Amendment.


    April 20, 2017

    New Bill Leaked

    The Huffington Post publishes an article about a new, unreleased version of the AHCA designed to appeal to the House Freedom Caucus. Politico later publishes a leaked version of the bill. The latter version includes state waivers for some ACA key provisions.


    April 24, 2017

    MacArthur Amendment

    Representative Tom MacArthur (R-N.J.) offers an amendment aimed at House Freedom Caucus, which was holding out for more extensive repeal of the ACA. The amendment allows states to charge consumers more based on age or pre-existing conditions, or to eliminate essential health benefits requirements.

    House Passes AHCA

    In a narrow 217 to 213 vote, the House passes the AHCA with all new amendments incorporated.


    May 4, 2017

    Senate Writes Its Own Bill

    Within hours after the House passes the AHCA, Republican Senators stated they would draft their own version of an ACA repeal and replace bill.


    June 2017

    Senate Bill Sent to CBO

    The Senate’s Better Care Reconciliation Act (BRCA) is sent to the Congressional Budget Office. Reportedly some of the 13-members of the working group had not seen the draft, and both Republicans and Democrats expressed displeasure at being left out of the process.

    BCRA Released

    After working on a Senate bill for weeks, Republicans released the BRCA on June 22nd; within hours, several prominent Republican Senators speak out against the bill.


    CBO Analysis Released

    The Congressional Budget Office releases its scoring of the Senate bill. It estimates 15 million more people will be left uninsured by 2018 (as compared to the ACA). By 2026, the uninsured number is projected to increase to 22 million.

    Senate Delays BCRA Vote

    The Senate postpones a vote on the BRCA until after the July 4th recess.


    July 13, 2017

    BRCA Amendment

    The Senate revises its proposed legislation to incorporate the Cruz Amendment, which would allow insurers to offer minimal coverage that does not comply with the ACA, so long as the insurer also makes available at least one ACA Gold plan, one Silver plan, and one Bronze plan.


    July 17, 2017

    Vote Postponed on BCRA

    With four Republican Senators [Susan Collins (R-Maine), Mike Lee (R-Utah), Jerry Moran (R-Kansas), and Rand Paul (R-Kentucky)] voicing their opposition to the BCRA, Republicans postpone the BCRA vote.


    July 18, 2017

    “Repeal Only” Collapses

    Senate introduces a “repeal only” bill, which Senators Susan Collins, Shelley Moore Capito (R-West Virginia), and Lisa Murkowski (R-Alaska) oppose, effectively killing the plan.


    July 20, 2017

    Updated BCRA Sent to CBO

    An updated BCRA is sent to the Congressional Budget Office. It incorporates the July 13th Amendment without the Cruz provisions and minor changes in the Medicaid section.

    CBO projects BRCA will reduce cumulative federal deficit, but the number of uninsured Americans will increase by 15 million by 2018 and 19 million by 2020. The CBO forecasts 21 million more people would be left uninsured by 2026, as compared to ACA.


    July 26-27, 2017

    Series of Senate Votes Begins

    Senators introduce and vote down a number of amendments and bills, including the Obamacare Repeal Reconciliation Act (ORRA), which would repeal most provisions of the ACA without replacement.

    Republican leadership announces the Health Care Freedom Act (HCFA), a so-called “skinny bill” that would repeal the individual mandate retroactive to 2016. It would also repeal the employer mandate through 2025.

    The HCFA fails to pass in the Senate. Senators Susan Collins, John McCain, and Lisa Murkowski are the only Republicans voting against the bill alongside all Democrat Senators.


    August 2, 2017

    Bipartisan Efforts Regain Steam

    Senator Lamar Alexander (R-Tennessee) releases a statement saying the Senate Health Committee will hold bipartisan hearings related to stabilizing the individual market.


    September 22, 2017

    Senators Lindsey Graham (R-S.C.) and Bill Cassidy (R-Louisiana) introduce a new measure to overhaul the ACA. Soon after the association representing state Medicaid directors nationwide issues a statement opposing the measure. On Sept. 25, Susan Collins announces her opposition, joining three other Republican senators (McCain, Paul, and Cruz). The Senate delays action on a vote.


    October 2017

    Trump Executive Orders

    President Trump takes action to undermine the ACA through Executive Order. The first order signed on October 6 expands employer and insurer rights to avoid the ACA requirement to cover birth control as part of the ACA’s preventive care benefits.

    The October 12 executive order asks government agencies to implement rules to permit new association health plans and expand the coverage period for short-term health plans – both with reduced benefit requirements than current ACA plans.

    CSR Funding

    Sen. Lamar Alexander and Sen. Patty Murray (D-Washington) announce a mid-October deal to fund cost-sharing reduction payments for two years, following President Trump’s announcement the payments to insurers will be cut.

    Public Support Increases

    A Reuters/Ipsos opinion poll taken October 14-23 finds 62 percent of Americans want the Affordable Care Act to be maintained – up from 54 percent in a January poll.

    Medicare AEP

    Medicare’s Annual Election Period (AEP) began October 15 and continues through December 7 for individuals who want to enroll in a Medicare Advantage (Part C) or standalone Medicare Prescription Drug (Part D) plan.


    November 1, 2017

    ACA Open Enrollment

    Open enrollment for 2018 begins (and continues through mid-December nationally; in California, it continues through 1/31/2018). With reduced funding for outreach, it’s expected 2018 enrollment will be lower – perhaps as much as 25% lower than 2017.


    November 14, 2017

    GOP introduces amendment to tax reform legislation to repeal the ACA individual mandate. Congress takes Thanksgiving recess without a full vote on the tax bill.


    Watch our site for more news about efforts to repeal or replace the Affordable Care Act in the waning days of 2017 and throughout 2018.



    Highlights/Key Takeaways

    • Individual mandate still applies in 2018; it goes away in 2019.
    • End of individual mandate won’t affect majority of Americans since more people get health coverage through their employer, Medicare, and Medicaid than individual health plans.
    • Greater enforcement of the employer mandate began by the IRS in the fourth quarter of 2017.
    • Congress could still act to end employer mandate – but a timeline is uncertain.


    Actions by Congress and the White House during the final weeks of 2017 to repeal the individual mandate provision of the Affordable Care Act (ACA) through the GOP’s tax bill drew a lot of press coverage in December. However, something being overlooked is that the repeal does not take effect until 2019.

    Also, it’s important to recognize, most working Americans get their health insurance through their employer (or through a public health program like Medicare, Medicaid, or the military), so getting rid of the individual mandate won’t affect employers or the majority of U.S. residents.

    In contrast to comments from President Trump that the individual mandate elimination amounts to a repeal of ObamaCare, the reality is that the health care law, the individual mandate, and the employer mandate remain in force for 2018. Americans who don’t have minimal health care coverage (and who don’t qualify for a hardship exemption) and employers who don’t offer employees health coverage (where required) are still subject to a fine.

    The 2018 individual mandate fines (which are payable with an individual’s 2019 tax filing) are hefty – the greater of $695 per adult or 2.5 percent of household income, up to a maximum equal to the total annual premium for the national average price of a Bronze tier plan sold through the HealthCare.gov Marketplace. The penalty for not having health insurance is $347.50 per child (under age 18), up to a maximum of $2,085 per family (including all adults).

    In calculating and paying the penalty, only the part of a person’s household income that is above the yearly tax-filing requirement is counted. In addition, the penalty applies only to those in the household without health insurance coverage, so if one member of a family has coverage (on his or her own or through an employer), he or she is excluded from the penalty calculation.

    If a person has coverage for a part of the year, the penalty is one-twelfth the annual amount for each month in which he or she doesn’t have health insurance. If a family lacks health coverage for only one or two months during the year, there’s no penalty at all.

    Before passage of the tax bill, the New York Times reported in November that the Internal Revenue Service (IRS) had quietly begun to enforce the employer mandate of the ACA. The newspaper said many businesses were expected to begin receiving letters from the IRS that they owe the government money for failing to offer qualifying health coverage to eligible employees.

    The first round of letters was sent in October to companies with at least 100 full-time employees who defied the employer mandate in the first year it took effect, 2015. Larger firms, defined in the ACA as those with 50 or more full-time or full-time equivalent employees, are required to offer “affordable” coverage or face penalties of around $2,000 for each employee working 30 or more hours per week (excluding the first 30 workers). These penalties are forecast to bring in more than $200 billion over the next decade, according to the Congressional Budget Office.

    In his first executive order after taking office in 2017, President Trump asked government agencies to waive, defer, or delay carrying out as much of the ACA as possible. However, the U.S. Treasury Department said in November it was compelled to implement the employer mandate. For most of the past four years, the IRS has received little funding to execute the ACA, and a recent audit by the inspector general for tax administration found the agency has “delayed, not initiated, or cancelled” many of the crucial systems necessary to fully enforce the employer mandate.

    While the employer mandate could be eliminated by Congress in the future, many businesses may still want to offer employee benefits (and options for dependents) as a recruiting tool in a tightening job market. In its report, 2016 Strategic Benefits—Leveraging Benefits to Retain and Recruit Employees, the Society for Human Resource Management (SHRM) said organizations need to present themselves as an “employer of choice” to appeal to a wide range of employee demographics. And 95 percent of employees rank health care benefits as among the most important.

    If you want to learn more about how a multi-carrier, health insurance program like CaliforniaChoice can help you attract and retain employees, deliver more choice, and still help you control your benefits costs, contact your broker. If you don’t already have a broker, we can help you find a CaliforniaChoice broker to speak with about employee benefits options for your company.