Two new laws which took effect Jan. 1, 2025 will ease the ACA reporting burden on health plan sponsors.
In a bipartisan effort, Congress recently passed the Employer Reporting Improvement Act and the Paperwork Burden Reduction Act, both of which outgoing President Biden signed into law.
The laws are aimed at making it easier for sponsors to comply with ACA requirements on Forms 1095-B and 1095-C, which provide information about health insurance coverage to workers and the Internal Revenue Service.
Both laws take effect immediately.
Forms explainer
Form 1095-C is issued by “applicable large employers” (ALEs) — those with 50 full-time or full-time-equivalent workers — to report the offer of health coverage, while Form 1095-B is issued by insurance providers, self-insured employers or small employers to report actual coverage.
Prior to 2025, plan sponsors were required to send these forms to all of their employees covered by their health plan by March 2. The due dates for transmitting the forms to the IRS are Feb. 28 (if filing on paper) and March 31 (if filing electronically).
Both forms help workers prove they comply with the ACA’s mandate that they carry health insurance and that an employer is complying with its obligations to provide coverage under the law.
What’s changing
There are four changes that benefit employers under the two new laws:
1. Forms upon request — Plan sponsors are no longer required to send Forms 1095-B and 1095-C to all full-time and covered employees. Instead, they will only be required to furnish them upon request from an employee.
Importantly, plan sponsors who want to go this route are required to notify their staff about their right to ask for a form.
2. Electronic forms — Starting this year, employers may furnish the forms to their employees electronically rather than on paper. The new law also makes it easier for employers to use a worker’s birth date instead of their Social Security number if the number is missing.
3. Reponse times to IRS letters — Another provision expands the time employers have to respond to a “employer shared responsibility payment” letter (Letter 226J) from the IRS, to 90 days from 30.
These demand letters are sent to employers if one or more full-time employees listed on the company’s Form 1095-C received a premium tax credit on his or her federal income tax return, meaning they secured insurance on an ACA exchange like healthcare.gov.
Employers have found it challenging to provide a response and a defense to the IRS within such a short window of 30 days. An additonal challenge has been that these letters are sent by U.S. mail, and it may take some time to reach the appropriate person in an organization after being received. Filing a response late can result in the employer being assessed a penalty when one isn’t warranted, in addition to further penalties.
4. Statute of limitations — One of the new laws imposes a statute of limitations for how far back the IRS can go to try to collect assessments for 1095-B and 1095-C reporting failures and mistakes. Prior to this, there was no statute of limitations.
The takeaway
The above changes will benefit plan sponsors by reducing the reporting burden as well as give them more time to respond if the IRS thinks an ALE failed to provide coverage as required by law.
Your HR department should be aware of these changes in order to take advantage of the them.
As health insurance costs continue to rise at an uncomfortable pace, employers in 2025 plan to shake up the status quo with their health care vendors, particularly those focused on reducing pharmacy spend, a main cost driver, according to a new report.
To address spiraling costs, they will also focus on educating their staff about the importance of prevention and immunizations and guiding them to use specialized services that focus on managing chronic conditions, says the “2025 Trends to Watch” report by the Business Group on Health (BGH).
Companies will also demand more data from their health plans and other health care vendors and look to float requests for proposals if they aren’t seeing results.
Here’s a look at the main strategies employers told the BGH they were likely to pursue this year.
Pharmacy spend
According to the report, if employers want to control their overall health care costs, they will have to address growing pharmacy expenditures, which now account for more than 25% of their health care budgets.
That percentage is forecast to increase with the advent of GLP-1 weight-loss and diabetes drugs like Wegovy and Ozempic, as well as specialized costly medications that can bust a health plan’s budget.
One-third of employers surveyed said they planned to revisit and reassess their pharmacy benefit manager relations, potentially holding new contract bids to get better pricing from current vendors or from new ones that offer competitive pricing and more transparency in their contracts.
GLP-1s loom large. Some employers are only willing to cover these drugs for diabetes and other Federal Drug Administration-approved indications like heart disease. Few will cover them for weight loss unless the patient is obese and with diabetes. Even then, they may require step therapy before prescribing them, which includes:
Trying other established and proven anti-obesity medications.
Engaging in lifestyle management programs.
Chronic conditions
Besides rising pharmaceutical costs, chronic and serious conditions such as cancer, heart disease, diabetes and autoimmune diseases are major contributors to high health care costs.
The report recommends a two-pronged approach to helping employees with chronic conditions: taking advantage of specialized integrated care networks, and wellness programs.
Specialty care — Many workers with chronic conditions are often not aware of the specialty care available to them through their health plan and as a result, don’t take advantage of these valuable services. The problem is that both employees and employers are often not aware of these specialty solutions that can improve staff health through care that provides valuable clinical support.
Employers surveyed by BGH said they would be focused on holding health plans, specialty insurance products and navigation partners accountable for helping their employees access this care.
“The first and most critical step is to address the lack of awareness of these new network-based solutions among employers as well as employees,” the report states.
Wellness plans — Chronic conditions are also prompting employers to revisit and evaluate their current wellness initiatives to ensure they are helping their employees manage these conditions and make lifestyle changes that can improve their illness.
Employers may start requiring vendors to agree to outcomes-based contracts that set expectations for results. “These agreements should require that vendors demonstrate improvement in health outcomes and deliver promised returns,” the report states.
The most popular wellness programs focus on helping employees lose weight and lead a healthier lifestyle through more exercise and healthy eating and habits.
To be successful, weight-management programs should use best practices and integrate treatments like anti-obesity medications and mental health services in their care models, the report says.
Getting control of plan costs
Employers will look to hold their health plans’ and benefits vendors’ feet to the fire for producing better health results at lower prices.
The key to this is employers having access to data from their health plans and other vendors that provides insights into cost and outcomes. This will be an evolving trend and some plans will be better than others in providing the desired information.
“Transparency of cost, quality and outcomes data is critical to both employer and employee decision-making; vendors will need to show how they enable access to this information in 2025,” BGH says in its report.
Additionally, employers that have sway with their insurers will push their health plans to get control on unit prices they pay for services, and press them to accept value-based contracts that reward for positive outcomes and quality of care.
Businesses that can afford it may contract directly with centers of excellence that provide very high quality or low-cost care, oftentimes for a particular service.
The takeaway
We know that the high cost of health care is weighing heavily and we are here to help you keep your health plan costs under control. It requires an integrated approach of pushing wellness and chronic condition management among your staff and evaluating your current vendors’ results.
The percentage of employers who are covering new and trendy weight-loss drugs has risen in 2024, continuing a trend of increasing coverage despite the costs, according to a new survey.
The study, by Mercer, also found that employers are increasingly offering to cover in vitro fertilization for employees who may be having trouble getting pregnant. And, as costs continue rising on average 5.25% in 2024, employers are taking a number of steps to manage costs.
The fastest-growing component of costs is pharmacy benefit costs, which were up 7.7% after rising 8.3% the year prior. One of the main drivers is diabetes and weight-loss drugs like Wegovy and Ozempic (both made by Novo Nordisk) and Zepbound (made by Eli Lilly).
But, while health plans will generally cover these medications for diabetes, not as many do for weight loss.
The survey found that 44% of employers with 500 or more workers cover weight-loss drugs like Wegovy and Zepbound, as well as older medications in the same class like Saxenda (made by Novo Nordisk). That’s compared with 41% in 2023.
Weight-loss drugs are covered by 64% of employers with more than 20,000 employees, up from 56% in 2023.
These drugs, known as GLP-1s, are contributing to a significant spike in pharmaceutical costs and adding to overall health care outlays. The full list price for Ozempic was $969 in the fall, down 9.7% from 2023. The list price for Wegovy was $1,349, down 2.5% from 2023, but still about 20% higher than it was in 2022.
Most commercial health plans and Medicare pay about $290 for Ozempic and $649 for Wegovy, according to an anti-obesity medication cost report prepared by the Department of Health and Human Services.
It should be noted that health plans that cover anti-obesity medications saw a 4.8 percentage-point higher increase in their pharmacy spend in 2023 than plans that don’t cover the drugs, according to a report by Segal Group.
As a result of costs, employers are requiring pre-authorization and trying to ensure that workers are first prescribed other effective and less expensive treatments. That requires clinical coordination between clinicians, pharmacy benefit managers and insurers.
Employers are also increasingly covering in vitro fertilization. The treatment was covered by:
47% of firms with more than 500 workers in 2024, up from 45% the year prior.
70% of organizations with more than 20,000 employees, up from 47%.
Employer strategies
Respondents in the Mercer survey were also asked to list their most important benefits strategies for the next three to five years. They ranked the following as either important or very important:
Managing high-cost claimants: 86%
Managing the cost of specialty drugs: 76%
Enhancing benefits to improve attraction and retention: 71%
Improving health care affordability: 66%
Expanding behavioral healthcare access: 64%
Enhancing benefits/resources to support women’s reproductive health: 48%
Offering high-performance networks or steering to high-value care: 45%
Increasing use of virtual care throughout the health care journey: 42%
Addressing health inequities/social determinants: 36%
The takeaway
An earlier survey by Mercer, released in September 2024, found that employers had expected a 5.8% increase in health insurance costs, even after implementing cost-reduction measures.
One way employers are trying to address both their and employees’ costs is by offering their employees more plans to choose from. In 2024, two in three large employers offered three or more plan choices, up from six in 10 in 2023.
As well, the country’s largest employers offer an average of five options, compared to four in the year prior.
The Mercer survey concluded that employers would have to balance two priorities:
Focusing on health care affordability and ensuring that their staff can afford their copays, coinsurance and deductibles.
Managing their plan costs to keep employees’ share of premium reasonable and ensure that the benefits package is within the organization’s budget.
New guidance issued by the IRS expands the types of preventive care benefits that high-deductible health plans are required to cover with no out-of-pocket costs on the part of plan enrollees.
The changes are aimed at reducing out-of-pocket costs for diabetes-related expenses, certain cancer screenings and contraceptives. The guidance, released in two notices — N-2024-71 and N-2024-75, — can result in real savings for Americans.
Benefits under HDHPs typically do not kick in until the enrollee has met their deductible. However, these plans are required to cover a number of preventive care services, as outlined by the Affordable Care Act, without any cost-sharing on the part of the health plan enrollee.
Under notice 2024-75, the following are considered “preventive care,” meaning that HDHPs will be required to cover them at no cost to their enrollees and even before they’ve reached their deductible:
Breast cancer screenings for individuals who have not been diagnosed with this type of cancer.
Continuous glucose monitors for individuals diagnosed with diabetes. Covered monitors must measure glucose levels using a similar detection method or mechanism as other glucometers.
Insulin products, whether they are prescribed to treat an individual diagnosed with diabetes, or prescribed for the purpose of preventing the exacerbation of diabetes or the development of a secondary condition.
Oral contraceptives (including emergency contraceptives) and condoms.
The above will be added to the other preventive care expenditures that health plans are required to cover under the ACA.
Under notice 2024-71, flexible spending arrangements, health reimbursement accounts and health savings accounts will be required to reimburse for the cost of condoms.
The takeaway
If you offer HDHPs, HSAs, HRAs or FSAs, consider sending out a memo informing your employees of the changes, which are designed to help reduce their out-of-pocket medical expenses.
You should also add the changes to your benefits manual so that your staff know what they are entitled to.
If you are a self-insured employer, you should ensure that your third party administrator is aware of the changes to coverages by HDHPs. As well, plan materials for employers who choose to reimburse the cost of male condoms should ask their administrator to update the plan materials for FSAs, HRAs and HSAs.
When Donald J. Trump was president during his first term, he tried but failed to repeal the Affordable Care Act, but succeeded in efforts to expand short-term health plans.
His administration also attempted to make it easier to form an association for the purposes of purchasing health insurance that was exempt from many of the ACA’s requirements for health plans, an effort that was beaten back by the courts.
Now that he’s on his way back to the White House, what can we expect for health insurance coverage and regulations during his second term? For certain, there will be a focus on deregulation and efforts to lower costs.
Pundits from various trade publications have weighed in on what areas could be ripe for changes under a Trump presidency.
The ACA
While Trump previously tried but failed to get the ACA repealed, he has indicated that he doesn’t want to repeal it but make changes to it this time around.
Absolute repeal is likely a non-starter considering that residents in a number of Republican-led states are heavy users of ACA marketplace plans, including Florida, Texas and Idaho, the latter of which runs its own ACA exchange. Florida and Texas residents purchase coverage on HealthCare.gov.
The Biden administration has focused on boosting enrollment in marketplace plans and the president signed legislation in 2022 that extended until the end of 2025 enhanced federal subsidies from the COVID era to help individuals purchase plans.
Thanks to those subsidies, people at the lower end of the income spectrum are often paying no or very low premiums for plans with generous coverage, such as low deductibles and copays, but even middle-income individuals see significant benefits.
With Trump in the White House, and the GOP in a majority in both the House and Senate, those subsidies may not be extended again.
Will alternative plans rise again?
The Biden administration repealed Trump-era regulations that significantly eased restrictions on short-term health plans, multi-state association health plans and hospital indemnity insurance.
For example, the first Trump administration rules allowed individuals to purchase short-term health plans and keep them in place for up to 364 days, which could be renewed or extended for roughly three years. The Centers for Medicare and Medicaid Services in September 2024 issued new final rules that limit short-term health insurance to up four months at most, without the possibility of renewal.
When originally floated about 10 years ago, short-term health plans were intended to provide temporary coverage for people in between group health plans.
Also, the Trump administration introduced a rule in 2018 that lowered the barriers to entry to association health plans that would be considered single employer plans (and exempt from individual and small-group market rules).
The U.S. District Court for the District of Columbia in 2019 overturned the regulation and in 2023, the CMS repealed the regulation altogether.
Trump might attempt to rewrite the regulation in a way that may pass legal muster. Sen. Rand Paul (R-Kentucky) recently reintroduced legislation that would let any membership organization provide a self-insured, multi-state health plan.
Drug costs
Trump in the past has supported plans to negotiate for lower pharmaceutical prices and make it easier to import drugs from lower-cost countries. He also advocated during his first term for pharmacy benefit manager reform.
Under the Biden administration, the CMS has started negotiating with drug makers for price reductions of commonly prescribed drugs for Medicare beneficiaries. The first round of negotiations took place earlier this year, helping reduce the prices that Medicare pays for 10 high-cost drugs.
The CMS under Trump 2.0 may end up floating new regulations changing the parameters of the negotiations, and he may push again for government programs to import drugs from lower-cost countries, like Canada.
The takeaway
Trump is entering office on the back of his populist policies, and that means making the working class happy.
He will have to work with two types of Republicans in Congress: traditional, establishment members and the ones who are not skeptical of the traditional GOP pro-big business and small-government ideology.
The president-elect will have the power to implement certain regulations that can change the health insurance marketplace, but they have to be written within the parameters of existing law and many changes can, and will, be challenged in court.
There are typically two approaches to securing health coverage for your staff — group health insurance or self-funding.
Self-funding, however, can be costly and risky and is usually only done by larger organizations with thousands of employees. But there is a hybrid model that can help small and mid-sized employers provide their staff with affordable health coverage: partial self-insuring.
To understand how partial self-insuring works, we should start with the basics of what a self-insured plan is. In a fully self-insured plan, the employer bears the risk of all costs incurred under the plan for claims and administration.
In essence, the employer acts as the insurer and pays claims from a fund that it pays into along with employees, who pay their share of premiums into the fund.
Also, the employer will usually contract with a third party administrator or an insurance company to process claims and provide access to a network of physicians and other health care providers.
How partial self-insuring works
Partially self-insured arrangements provide some of the benefits of being self-funded but without all the risks, while plans will have the same employee benefits as insured plans have. Here’s how they work:
Employers and their employees still pay premiums, a portion of which goes into an account that will be tapped to pay the first portion of claims that are filed. That means that the employer is acting as the insurer for those claims.
The other portion of the premium is paid to an insurance company. This is sometimes known as a stop-loss policy.
Plans have an aggregate deductible for all claims filed by employees, meaning that once that deductible is reached an insurer starts paying the claims instead.
Premiums are calculated to fund the claims to the aggregate deductible amount. In other words, the employer and employees are paying for the worst-cast scenario in each policy year.
The employer can get a refund at the end of the policy year if the total claims come in at a level that is less than expected. The employer can either be reimbursed for this amount or use those funds for the next policy year.
Lower risk than fully self-insured plans
Typically, an employer should have at least 25 workers if it is considering a partial self-funded arrangement, but we’ve seen plans with fewer enrollees.
Many employers will opt for a partially self-insured plan to save money, but these types of plans also allow a business to design a more useful and valuable plan for its workers.
The key to making this work is cost control, without which claims can spiral and drive up premiums at renewal.
Knowing exactly how much to set aside for reserves and how much you should set your employees’ premiums, deductibles and other cost-sharing, can be complicated.
But with the right mixture of benefits, plan design and education, you can control behavior, which drives claims, in order to keep renewal rates from increasing too much each year.
The fine print
That said, there are some reasons partial self-insuring isn’t for all companies:
There is additional responsibility, as the employer basically becomes an insurer of
There is additional paperwork, since the employer also becomes a payer.
There are compliance issues that the employer needs to consider (ERISA and the Affordable Care Act, for example).
There is some additional risk to the business, as it is paying claims.
If you have too many claims, you could face a non-renewal by your stop-loss insurer. If you are cancelled, it may be difficult to seamlessly enter the insured market.
