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 January 14, 2008
DEADLINE FOR MEETING MASSACHUSETTS HEALTH CARE REFORM ACT’S REPORTING REQUIREMENTS APPROACHING FAST The Massachusetts Health Care Reform Act1 has two reporting requirements that plan sponsors must fulfill by January 31, 2008 if they provide health coverage to adult residents of Massachusetts. If the health plan is insured, the insurance carrier is generally responsible for these reports. If the health plan is self-funded, including multiemployer plans, plan sponsors should discuss with counsel whether these state reporting requirements are applicable to the plan, including whether the requirements are preempted by the Employee Retirement Income Security Act (ERISA). The reporting requirements include:
The deadline for fulfilling these reporting requirements each year is January 31. The first reports are due January 31, 2008. Carriers subject to Massachusetts insurance law must submit these reports for insured group health plans. The Segal Company has learned that several large insurance carriers doing business in Massachusetts are sending out Forms MA 1099-HC and filing the corresponding DOR Commissioner’s reports for all their participants, whether their clients’ plan is insured or self-funded. These insurers are also third party administrators (TPA) for several self-funded plans. This Capital Checkup discusses these Massachusetts Health Care Reform Act reporting requirements in more detail and notes their implications for plan sponsors.
Form MA 1099-HC To fulfill this obligation, plan sponsors should identify the participants enrolled in their health plans as of December 31, 2007 that have a mailing address in Massachusetts and forward a completed statement (Form MA 1099-HC) to those individuals. This applies to active participants, COBRA beneficiaries and retired participants who are not enrolled in Medicare. Statements do not appear to need to be sent to each individual in the family. The statement must reflect these participants’ coverage during the 2007 calendar year. If coverage was not in effect on December 31, 2007, the participant does not have to receive a statement during this reporting cycle. The statement should be issued to the plan’s participant and list spouse and dependent information, if applicable. There is no standard format for this form, but a model Form MA 1099-HC, issued by the DOR, is available.2 The statements must identify the plan, the covered individual and covered dependents, the insurance policy or similar numbers and the dates of coverage during the year, and any other information required by the Commissioner of Revenue. A plan’s statement may not include Social Security numbers.
DOR Commissioner’s Report Sponsors of self-funded plans also have to file a report with the DOR Commissioner that essentially electronically files the information on multiple Forms MA 1099-HC regarding their health plan. The Commissioner’s Report must be submitted online. The DOR’s Web site includes technical instructions on how to file the DOR Commissioner’s Report.3 Plan sponsors required to submit the reports may wish to provide the instructions to their IT staff, as additional programming may be necessary to comply.
Penalties for Noncompliance Plan sponsors and insurance carriers that fail to provide a Form MA 1099-HC to Massachusetts residents or to file a DOR Commissioner’s Report are subject to a penalty of $50 per individual to which the failure relates, to a maximum of $50,000. Penalties can be abated for reasonable cause, but inadvertent oversight does not meet the reasonable cause standard. ERISA preemption issues regarding whether plan sponsors with self-insured plans must comply with the Massachusetts requirements have not been addressed by either the regulators or the courts. As with all legal and regulatory rules, plan sponsors should consult with legal counsel prior to preparing the Forms and filing disclosure reports with the DOR. Plan sponsors should also be aware that if a participant who is a Massachusetts resident does not receive a 1099-HC, that participant may be subject to Massachusetts state income tax penalties as a result.
Implications for Health Plan Sponsors Sponsors of insured plans with participants who live in Massachusetts should confirm with their carrier that it is sending the Forms MA 1099-HC and filing the DOR Commissioner’s Report regarding their health plan. Before taking any action, sponsors of self-funded plans that use the services of a TPA should first check with the TPA to see whether it already intends to send the Forms MA 1099-HC to their plan’s participants and file their plan’s DOR Commissioner’s report. As noted previously, plan sponsors should consult with legal counsel regarding compliance with these new Massachusetts reporting requirements.
As with all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their attorneys for authoritative advice on the Massachusetts Health Care Reform Act. Segal can be retained to work with plan sponsors and their attorneys to comply.
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