Agencies Release Guidance on Application of ACA Rules to Expatriate Health Plans
IRS, DOL, and HHS have issued proposed regulations on expatriate health plans, expatriate health issuers and qualified expatriates under the Expatriate Health Coverage Clarification Act of 2014 ("EHCCA").
Background. The ACA made various changes to federal health care laws, including implementing certain market reforms and information reporting requirements. Prior to the enactment of EHCCA, there were many questions about how ACA's rules applied to expatriate health plans, U.S. assignees working abroad, and foreign nationals working in the U.S.
Under the EHCCA, the ACA generally does not apply to: (i) expatriate health plans; (ii) employers, as plan sponsors of expatriate health plans; and (iii) expatriate health insurance issuers. Despite this general exception, EHCCA does subject expatriate health plans to certain ACA requirements, including the employer mandate and information reporting requirements.
Proposed Regulations. Highlights from the proposed regulations are as follows:
ACA market reforms. The proposed regulations confirm that the ACA's market reforms generally do not apply to expatriate health plans.
Coverage requirements. Expatriate health plans must provide coverage for inpatient hospital services, outpatient facility services, physician services and emergency services.
Excepted Benefits. Substantially all of the benefits provided under an expatriate health plan must be benefits that are not excepted benefits. The proposed regulations consider group or individual supplemental health insurance benefits and travel insurance to be excepted benefits.
Expatriate health plan defined. An expatriate health plan is a plan where "substantially all" (i.e., at least 95%) of the primary enrollees are qualified expatriates.
Minimum value. An expatriate health plan sponsor must reasonably believe that benefits provided under the plan satisfy the ACA's minimum value requirements.
Dependent coverage. Where an expatriate health plan provides coverage for dependent children, such coverage must be available until the dependent attains age 26, unless the dependent is a dependent of a dependent who is receiving coverage.
Preexisting condition exclusion. Expatriate plan sponsors are significantly restricted from imposing preexisting condition exclusions. In fact, the proposed regulations require that the period of any preexisting condition exclusion be reduced by the length of any period of creditable coverage the individual had without a 63-day break in coverage.
ACA Information Reporting. Information reporting provisions under Code sections 6056 and 6055 continue to apply to expatriate plans under the proposed regulations.
Non-US insurers. The proposed regulations specify that a non-U.S. insurer does not qualify as an expatriate health insurer under EHCCA.
Hospital Indemnity Insurance. The proposed regulations add new requirements for hospital and other indemnity insurance to comply with in order to be considered an excepted benefit. For instance, enrollment materials provided to enrollees must indicate that the coverage is a supplement to major medical coverage and that a failure to have MEC may result in additional taxes.
Short-Term Limited Duration Insurance. The proposed regulations change the definition of short-term, limited-duration insurance requiring that coverage must be less than three months in duration with or without an insurer's consent. A notice of the three-month term would also be required in application materials.
Individual Mandate. The ACA's individual mandate requires most individuals to either obtain minimum essential coverage or pay a penalty. The proposed regulations clarify that expatriate coverage will qualify as minimum essential coverage.
Takeaway for Employers. The proposed regulations clarify the application of many ACA and EHCCA rules and alter definitions applicable to expatriate health plans and insurance issuers. Employers should review their expatriate plans, work with their insurance issuers, and speak with legal counsel to confirm that expatriate health plan requirements are still being met under the proposed regulations.
The proposed regulations are available at: https://www.federalregister.gov/articles/2016/06/10/2016-13583/expatriate-health-plans-expatriate-health-plan-issuers-and-qualified-expatriates-excepted-benefits.