Step-by-Step Explanation of the 1095-C Form: Meeting Healthcare Requirements

Step-by-Step Explanation of the 1095-C Form: Meeting Healthcare Requirements

The 1095-C form, “Employer-Provided Health Insurance Offer and Coverage,” is a crucial document for understanding your health insurance coverage under the Affordable Care Act (ACA). If you work for an Applicable Large Employer (ALE), generally a company with 50 or more full-time equivalent employees, you’ll receive this form each year. It details the health insurance your employer offered (or didn’t offer) you and your dependents. While it’s not filed with your taxes, you must keep it with your tax records. It helps you understand your coverage and avoid potential penalties under the ACA’s individual mandate (although the individual mandate penalty is currently $0 at the federal level, some states still have penalties).

This article provides a detailed, step-by-step explanation of each section of the 1095-C form, making it easier to understand.

Understanding the Basics:

• Who Gets It? Employees of ALEs who were full-time for any month of the year, and sometimes employees enrolled in self-insured plans offered by ALEs, even if they weren’t full-time.
• Who Sends It? Your employer (the ALE).
• When Do I Get It? Employers must furnish the 1095-C by January 31st of the year following the coverage year (e.g., January 31st, 2024, for the 2023 coverage year). The IRS allows an automatic 30-day extension, making the de facto deadline March 2nd in most years.
• What Do I Do with It? Keep it with your tax records. You don’t submit it with your tax return, but it contains information that might be relevant if you claimed the Premium Tax Credit. It also confirms whether your employer offered you coverage that met the ACA’s minimum value and affordability requirements.

Part I: Employee and Applicable Large Employer (ALE) Information

This section is fairly straightforward and provides identifying information.

• Lines 1-6: Employee Information:

  • Line 1: Employee’s name: Your legal name.
  • Line 2: Employee’s Social Security number (SSN): Your SSN.
  • Line 3: Employee’s address: Your address.
  • Line 4: Employee’s city: Your city.
  • Line 5: Employee’s state or province: Your state.
  • Line 6: Employee’s ZIP code: Your ZIP code.

• Lines 7-13: Applicable Large Employer (ALE) Information:

  • Line 7: Employer’s name: Your employer’s legal name.
  • Line 8: Employer’s Employer Identification Number (EIN): Your employer’s EIN (like a business’s SSN).
  • Line 9: Employer’s address: Your employer’s address.
  • Lines 10-13 Employer Contact information: Contact phone number, city, state, zip.

Part II: Employee Offer of Coverage

This is the most crucial section of the form, detailing the health insurance offer made to you by your employer. It uses codes to indicate the type of coverage offered and its affordability.

• Line 14: Offer of Coverage (Code Series 1): This line uses a code to describe the type of coverage offered to you, your spouse, and your dependents for each month of the year. There will be a code for each month (Jan-Dec). Here are some of the most common codes:

  • 1A: Qualifying Offer: Minimum Essential Coverage (MEC) providing Minimum Value (MV) offered to you, with at least MEC offered to your spouse and dependents, and the employee share of the lowest-cost, self-only coverage was at or below a certain percentage of the federal poverty line (making it “affordable”). This is generally the best code for an employee.
  • 1B: MEC providing MV offered to you only.
  • 1C: MEC providing MV offered to you and at least MEC offered to your dependents (but not your spouse).
  • 1D: MEC providing MV offered to you and at least MEC offered to your spouse (but not your dependents).
  • 1E: MEC providing MV offered to you, and at least MEC offered to your dependents and spouse. This is also a good code.
  • 1F: MEC not providing MV offered. This means the coverage didn’t meet the ACA’s minimum value standard.
  • 1G: Offer of coverage to an employee who was not a full-time employee for any month of the year, but who was enrolled in self-insured coverage.
  • 1H: No offer of coverage. This means you were not offered coverage for that month.
  • 1J: MEC providing MV conditionally offered to your spouse (e.g., spouse is eligible only if not eligible for Medicare). Offer to employee and dependent(s).
  • 1K: Same as 1J, but offer made to employee, spouse, and dependent(s).
  • Other Codes: There are other, less common codes. Consult the IRS instructions for Form 1095-C for a complete list and detailed explanations.

• Line 15: Employee Required Contribution: This line shows the employee’s share of the monthly premium for the lowest-cost, self-only coverage that provides minimum value. This is used to determine if the coverage was “affordable” under the ACA. This line is only filled in if code 1B, 1C, 1D, 1E, 1J, or 1K is used on line 14. It shows the cost for each month. If the offer of coverage (Line 14) was a Qualifying Offer (code 1A), Line 15 will be blank.

• Line 16: Section 4980H Safe Harbor Codes (Code Series 2): This line uses codes to explain why your employer might not have offered you coverage, or why the coverage offered might not have met certain ACA requirements. This is relevant to the employer, as it helps them avoid potential penalties. There will be a code for each month (Jan-Dec). Here are some common codes:

  • 2A: Employee not employed during the month.
  • 2B: Employee not a full-time employee.
  • 2C: Employee enrolled in coverage offered. This is a key code – it means you were enrolled in the coverage.
  • 2D: Employee in a Limited Non-Assessment Period (e.g., a waiting period before coverage starts).
  • 2E: Multiemployer interim rule relief.
  • 2F: Section 4980H affordability Form W-2 safe harbor. The employer used the W-2 method to determine affordability.
  • 2G: Section 4980H affordability federal poverty line safe harbor. The employer used the federal poverty line to determine affordability.
  • 2H: Section 4980H affordability rate of pay safe harbor. The employer used your rate of pay to determine affordability.
  • 2I: Non-calendar year transition relief applies to this employee.
  • Other Codes: Again, consult the IRS instructions for a complete list.

Part III: Covered Individuals

This section is only completed if your employer offers a self-insured health plan. This means the employer, rather than an insurance company, takes on the financial risk of paying for healthcare claims.

• If your plan is fully insured (most plans are), Part III will be blank. Fully insured plans are reported on Form 1095-B.
• If Part III is completed, it lists the names, SSNs (or dates of birth if SSNs are unavailable), and coverage information for all individuals covered under the self-insured plan, including you, your spouse, and your dependents.
  • Column (a): Name of covered individual.
  • Column (b): SSN or, for a covered individual without an SSN who is not the employee, the individual’s date of birth.
  • Column (c): Covered all 12 months: Checked if the individual was covered for all 12 months of the year.
  • Column (d) – (o): One box is checked for each month the individual was covered. If column (c) is checked, these columns will be blank.

Example Scenarios:

• Scenario 1: Full-Time Employee, Affordable Coverage Offered and Enrolled: Line 14 will likely show “1E” for all months. Line 15 will show the employee’s share of the premium. Line 16 will likely show “2C” for all months, indicating enrollment. Part III may be blank (if fully insured) or completed (if self-insured).

• Scenario 2: Full-Time Employee, No Coverage Offered: Line 14 will show “1H” for all months. Line 15 will be blank. Line 16 might show “2B” (not full-time, if there was a mistake) or another code explaining the lack of coverage. Part III will be blank.

• Scenario 3: Full-Time Employee, Coverage Offered but Not Affordable: Line 14 might show “1E,” but Line 15’s amount, when compared to your income, might indicate the coverage was not affordable. Line 16 might show “2F,” “2G,” or “2H,” indicating which affordability safe harbor the employer used. Part III may be blank or completed.

• Scenario 4: Part-Time Employee, Self-Insured Plan: Even if not full-time, if you were enrolled in your employer’s self-insured plan, you will receive a 1095-C. Line 14 will likely show “1G.” Part III will be completed, listing you and any covered dependents.

Key Takeaways and What to Do:

1. Review Carefully: Examine each section of the 1095-C to understand the codes and what they mean about your health insurance coverage.
2. Check for Errors: Ensure your personal information and the coverage information are accurate. If you find any errors, contact your employer’s HR department immediately to request a corrected form.
3. Keep for Your Records: Store the 1095-C with your other tax documents. You don’t submit it with your return, but it may be needed if you claim the Premium Tax Credit or if you are audited.
4. Understand Affordability: Use the information on Line 15 to assess whether the coverage offered was affordable according to the ACA’s guidelines.
5. Don’t Panic About 1H: Seeing “1H” (no offer of coverage) on Line 14 doesn’t automatically mean you’ll owe a penalty. The individual mandate penalty is currently $0 at the federal level. However, check your state laws, as some states have their own mandates.
6. Consult the IRS Instructions: The official IRS instructions for Form 1095-C provide comprehensive explanations of all the codes and requirements. This is your best resource for detailed information. You can find them on the IRS website (irs.gov).
7. Seek Professional Help: If you’re still confused or have specific questions about your situation, consult a tax professional or a qualified healthcare advisor. They can help you interpret the form and understand its implications for your taxes and healthcare coverage.

The 1095-C form can seem complex, but understanding its components is essential for verifying your health insurance coverage and meeting the requirements of the Affordable Care Act. By carefully reviewing the form and using this guide, you can navigate its complexities and ensure you have the information you need.