This article is intended to survey the law related to the manner in which the Patient Protection and Affordable Care Act (“PPACA” or “ACA,” also referred to as “Health Care Reform” or “HCR”) is applied to employees working outside of their home countries and the employer plans that provide health benefits to those employees. These employees are referred to in this article as either:
- expatriate employees—U.S. citizens working in countries outside the United States; or
- inpatriate employees—foreign nationals working in the United States.
As the use of the terms “expatriate” and “inpatriate” imply, the focus of this discussion is primarily on employees who are working regularly for extended periods away from their home countries. Business trips and limited short-term assignments (that is, generally less than three months in duration, based on the short coverage gap exception discussed below) should not involve any significant application of PPACA law, and instead the laws of the employee’s home country should prevail in those situations.
To most effectively address the evolving law on this topic, this article is divided into four parts:
- Background—summarizing the various PPACA health coverage mandates;
- Expatriate Compliance—addressing employer and employee obligations under PPACA law for expatriate status;
- Inpatriate Compliance—addressing employer and employee obligations under PPACA law for inpatriate status; and
- Expatriate Health Coverage Clarification Act—summarizing the manner in which this law regulates employer plans that qualify as Expatriate Health Plans under that law.
Application of Employee Retirement Income Security Act (ERISA) to Expatriate and Inpatriate Employees Generally
If a plan is established and maintained outside of the United States primarily for the benefit of persons substantially all of whom are nonresident aliens, the plan is exempt from application of ERISA (including the PPACA amendments to ERISA). ERISA § 4(b)(4). On the other hand, a plan covering nonresident aliens that is maintained in the United States is subject to ERISA.
ERISA § 3(7) defines the term “participant” as “any employee or former employee of an employer . . . who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer . . . or whose beneficiaries may be eligible to receive any such benefit.” Please note that this definition does not exclude non-U.S. citizens. Nor does it provide any exception based on where the employee works, whether within or outside the United States.
As a result, employers who are subject to U.S. laws are generally responsible for compliance with ERISA for their expatriate and inpatriate employees whether working outside the United States or within the United States, unless specific laws provide exceptions or exclusions from ERISA compliance. Health Care Reform includes a number of such exceptions and exclusions that are potentially applicable to expatriate and inpatriate employees.
What is clear from the guidance issued to date, however, is that there are far fewer exceptions and exclusions for inpatriate employees than for expatriate employees. This is consistent with the purpose and intent of Health Care Reform, which is to expand health coverage for U.S. residents as much as possible, including foreign nationals working in the United States as inpatriate employees.
Background on PPACA Requirements
PPACA amends ERISA, the Internal Revenue Code, and the Public Health Service Act (PHSA) to establish a broad set of requirements that apply to numerous aspects of employer-provided health coverage and the employees participating in that coverage. In analyzing how those requirements apply to expatriates, inpatriates, and the employer health plans in which they participate, those directives can be grouped into the following four categories: (1) Health Plan Market Reform Requirements, (2) Plan Fees, (3) Employer-Shared Responsibility, and (4) Employee-Shared Responsibility.
Set forth below is a brief summary of each of these four categories of health coverage directives that is intended to facilitate an understanding of how these requirements affect expatriate and inpatriate employees, their employers, and the health plans covering those employees. This summary is not intended to be comprehensive.
Health Plan Market Reform Requirements. The following summarizes the most significant requirements imposed by Health Care Reform law on employer group health plans.
- Coverage of Children Up to Age 26 (grandfathered and nongrandfathered plans)—To the extent a plan provides coverage of one of the designated categories of dependent children (birth children, adopted children, step children, and foster children), the plan must cover children in that category up to age 26.
- Prohibition of Lifetime and Annual Dollar Limits on Essential Health Benefits (grandfathered and nongrandfathered plans)—A plan cannot impose a lifetime or annual dollar limit on any of the ten categories of essential health benefits: (1) ambulatory patient services, (2) emergency services, (3) hospitalization, (4) maternity and newborn care, (5) mental health and substance use disorder services, (6) prescription drugs, (7) rehabilitative and habilitative services and devices, (8) laboratory services, (9) preventive and wellness services and chronic disease management, and (10) pediatric services, including oral and vision care.
- Coverage of Preventive Care Without Cost Sharing (nongrandfathered plans only)—Certain preventive health care services must be provided without deductibles, copayments, coinsurance, or other cost sharing.
- Cap on Out-of-Pocket Maximum for Covered Expenses (nongrandfathered plans only)—A plan’s out-of-pocket maximum for essential health benefits cannot exceed $7,350 for self-only coverage in 2018 or $14,700 for other/family-type coverage in 2018 (subject to adjustment based on the increase in the average per capita premium for health insurance coverage).
- Prohibition of Waiting Period Longer than 90 Days (grandfathered and nongrandfathered plans)—After an individual becomes eligible to participate in a plan, the plan cannot delay the start of the employee’s coverage for more than 90 days.
- Prohibition of Preexisting Condition Exclusions (grandfathered and nongrandfathered plans)—A plan cannot exclude an individual’s preexisting condition from coverage under the plan.
- Prohibition of Coverage Rescissions (grandfathered and nongrandfathered plans)—A plan cannot cancel or discontinue an individual’s coverage retroactively, except in connection with fraud or intentional misrepresentation of a material fact on 30 days advance written notice or for nonpayment of premiums.
- Prohibition of Certain Restrictions on Access to Health Care Providers (nongrandfathered plans only)—A plan must allow participants to designate a primary care provider, a pediatrician, and an obstetrics or gynecology specialist, as applicable. If the plan covers emergency services, it must cover those services without preauthorization and cover out-of-network emergency services on the same basis as network emergency services, including copayments and coinsurance.
- Coverage of Care in Connection with Clinical Trials (nongrandfathered plans only)—For individuals participating in a clinical trial (that is, a study testing new drugs, procedures, or devices on humans), a plan must provide coverage of routine patient care costs (but not experimental or investigational care) in connection with the clinical trial.
- Prohibition Against Health Care Provider Discrimination (nongrandfathered plans only)—A plan cannot discriminate against a health care provider acting within the scope of the provider’s license or certification under applicable state law.
- Medical Loss Ratio (insured plans only)—To the extent that the cost of claims (plus amounts spent on health care quality improvement) exceed the premiums charged to participants (85% in the large group market and 80% in the small group and individual markets), the excess must be rebated to participants.
- Reporting and Disclosure Requirements—PPACA imposes numerous reporting and disclosure obligations on plans, including, among others, distribution of a Grandfathered Plan Notice, a Patient Protection Notice (nongrandfathered plans only), a Public Exchange Notice (grandfathered and nongrandfathered plans), a Summary of Benefits and Coverage (SBC) (grandfathered and nongrandfathered plans) to participants, and W-2 reporting of the cost of health plan coverage, in addition to ACA reporting for Employer Mandate and Individual Mandate purposes, which is discussed below.
Plan Fees. PPACA imposes three different fees that apply directly or indirectly to employer-provided group health plan coverage.
- Patient-Centered Outcomes Research (PCOR) Fee—The PCOR fee is a fee paid by employer sponsors of self-insured health plans and by insurers that issue policies that cover active and former employees (among others), which is earmarked to support clinical effectiveness research. The fee applies to policy and plan years ending after October 1, 2012, and before October 1, 2019 (that is, for seven full policy or plan years) and is payable as of July 31 each year. The fee is levied on the number of lives (employees, spouses, dependents, and so on) covered by a self-insured health plan or insurance policy at a rate that began at $1 per life and is adjusted by inflation, increased to $2.39 in 2018. Employer self-insured plan sponsors determine the number of covered lives from one of three methods (that is, actual count method, snapshot method, and Form 5500 method).
- Transitional Reinsurance Fee—Self-insured group health plans and health insurers are required to make contributions to the transitional reinsurance program established under PPACA to help stabilize increasing premiums caused by the expansion of coverage made available to anyone regardless of health status (that is, the elimination of preexisting conditions). The reinsurance fee applies to calendar years 2014, 2015, and 2016. Like the PCOR fee, the reinsurance fee is based on the number of covered lives and is payable at the rate of $63 per covered life for 2014, $44 per covered life for 2015, and $27 per covered life in 2016. Payment of the reinsurance fee is due either in one installment the following January or in two installments the following January and November (2015, 2016, and 2017, respectively), and for self-insured group health plans, payment is made either directly by the plan or through the plan third-party administrator. Covered lives are determined in generally the same manner as for the PCOR fee.
- Health Insurance Provider Fee—Health insurance companies that provide medical, dental, and vision insurance are subject to an annual tax, known as the health insurance provider fee, based on their market share of health insurance premiums. The fee does not apply to coverage provided under an accident insurance or disability income insurance policy (or any combination), coverage for a specified disease or illness, hospital or other fixed indemnity insurance, long-term care insurance, or Medicare supplemental insurance. In addition, self-insured group health plans are exempt from the fee. Although this fee does not apply directly to employer-sponsored group health plans or the employer plan sponsors, health insurers pass the added expense to employers in the form of increased premiums and fees. Assessment of this fee began in 2014, was suspended for 2017, and is again suspended for 2019.
Under the employer-shared responsibilities provisions of Health Care Reform (also referred to as the “Employer Mandate” and as “Pay-or-Play”), most large employers are required to provide minimum essential coverage to their full-time employees (working an average of at least 30 hours per week or 130 hours per month) and their child dependents (but not spouses) or pay an excise tax. A large employer is an employer who employs an average of 50 or more full-time employees and full-time employee equivalents on business days during the preceding calendar year (except that for 2015 only, employers with 100 or more full-time employees and full-time employee equivalents are required to comply with the Employer Mandate). Those large employers with 50 to 99 full-time employees were allowed to delay compliance until 2016 if they met certain workforce and health coverage maintenance requirements.
Status as a large employer (that is, “applicable large employer” or “ALE”) is determined by counting the number of employees who average at least 30 hours of service per week on business days or 130 hours per month during the preceding calendar year, plus the number of part-time employee 30-hour equivalents—part-time employees whose combined average weekly hours add up to one or more full-time/30-hour employees based on 120 hours per month. Special rules govern how hours of service are counted, including the use of equivalencies and other measures for employees who are not paid on an hourly basis.
Employees of all employers that are part of a single controlled group or affiliated service group are added together to determine whether the controlled group or affiliated service group is an “aggregated ALE group.” If the member companies of such a group have 50 or more full-time employees and full-time employee equivalents combined, each employer member of that group is considered an ALE and is subject to the Employer Mandate regardless of the number of employees employed by that employer.
If an employer is determined to be an ALE, the employer is required to offer minimum essential coverage to its full-time employees that is affordable and provides minimum value and to offer minimum essential coverage to each full-time employee’s birth and adopted dependent children. Minimum essential coverage includes any employer-sponsored plan, whether insured or self-funded, that pays for the cost of health care, other than excepted benefits (like dental-only or vision-only plans). For the coverage to be affordable based on the safe harbors established by Treasury Regulations, the employee cost for employee-only coverage cannot exceed a certain limit—9.5% (as adjusted annually, 9.56% in 2018) of one of the following safe harbors: (1) the employee’s W-2 reported wages, (2) the employee’s hourly rate of pay multiplied by 130, or (3) the federal poverty level for an individual. For a plan to provide minimum value, the plan must pay at least 60% of the cost of benefits provided under the plan and provide substantial coverage for inpatient hospitalization and physician services (although no guidance has been issued to date as to what constitutes “substantial” coverage).
A large employer that does not provide minimum essential coverage to substantially all of its full-time employees (95% or in a group under 100, all but five) is required to pay an excise tax/sledgehammer penalty of $193.33 per month for 2018 (as adjusted annually) per full-time employee, after deducting the first 30 full-time employees (as prorated among the members of a controlled group), provided at least one full-time employee enrolled in health coverage offered through one of the public exchanges and qualified for a premium tax credit or subsidy. For 2015 only, large employers were only required to provide coverage for only 70% of their full-time employees, and the first 80 full-time employees were deducted before the penalty applied—employers with 80 or fewer full-time employees incurred no penalty in 2015. The full-time employee coverage requirement returned to 95% and a 30-full-time employee exemption in 2016.
If the large employer provides minimum essential coverage to substantially all of its full-time employees that is either not affordable or does not provide minimum value, the excise tax/tack hammer penalty is the lesser of (1) the sledgehammer penalty that would apply if no coverage were offered and (2) $290 per month for 2018 (as adjusted annually), multiplied by the number of full-time employees that enrolled in health coverage through one of the public exchanges and received a premium tax credit subsidy.
An ALE’s compliance with the Employer Mandate is determined through the public exchange employee tax credit application process and through the annual ACA reporting process. Under the ACA reporting process, an ALE is required to prepare a Form 1095-C for each full-time employee indicating how the employer met its Pay-or-Play obligations for each month in a calendar year with regard to that employee. Copies of the Form 1095-C (i.e., “employee statements” are required to be sent to employees by the end of January following the calendar year being reported, although the IRS has repeatedly extended this deadline, including establishing March 2, 2018 as the deadline for 2017 employee statements. In addition, an employer is required to prepare a Form 1094-C that summarizes the employer’s overall compliance with the Employer Mandate, attach the Form 1095-Cs that the employer prepared for its full-time employees, and submit the Form 1094-C and Form 1095-Cs to the IRS by the end of February (if mailed) or the end of March (if filed electronically) following the calendar year being reported. Failure to send those forms to employees or submit those forms to the IRS, or being untimely or inaccurate in the preparation of those forms, could result in a penalty of $260 per form for 2017 reporting for both the employee and IRS failure (or $530 per form for 2017 reporting if the violation is due to intentional disregard) up to $3,218,000 for 2017 reporting (no maximum penalty for intentional disregard violations). All of these penalties are subject to adjustment for inflation. The IRS has applied a good faith compliance standard for the accuracy of forms due for 2015, 2016, and 2017, but that standard does not apply to late forms or forms that the employer fails to send or file.
Near the end of 2017, the IRS began sending employer-shared responsibility assessment notices to employers it has determined may not be in compliance with the 70% standard in 2015 and potentially subject to the sledgehammer penalty. To date it appears that a substantial number of these notices are based on misinformation resulting from reporting errors. It does not appear that the IRS has begun issuing employer-shared responsibility assessment notices to employers for potential tack hammer penalties incurred in 2015.
Beginning January 1, 2014, U.S. citizens and legal residents (including children) are required to maintain minimum essential health coverage—essentially all individuals other than persons who qualify for a religious exemption, individuals who are incarcerated, aliens unlawfully present in the United States, and certain low-income individuals. This is often referred to as the “Individual Mandate.” Minimum essential health coverage includes, among other things, employer-sponsored plans, government-sponsored programs (Medicare, Medicaid, Tricare, and so on), and insurance coverage purchased through one of the public exchanges or any other insurance market.
In general, for each month that individuals fail to maintain minimum essential coverage for themselves or their dependents, they are required to pay a penalty equal to one-twelfth of the greater of (1) or (2) below:
- A flat dollar amount equal to the lesser of the sum of the “Applicable Dollar Amounts” for all individuals who did not have coverage for the month; or 300% of the “Applicable Dollar Amount” for the year. The “Applicable Dollar Amount” is $95 for 2014, $325 for 2015, and $695 thereafter, subject to indexing after 2016. For children 18 and under, the “Applicable Dollar Amount” is half of each of these amounts.
- An applicable portion of the taxpayer’s income that equals an “Applicable Percentage” of the taxpayer’s household/family income that exceeds the gross income cutoff for being required to file a tax return for the year (in 2017, $20,800 if married filing jointly tax status and both spouses are under age 65). The “Applicable Percentage” of the taxpayer’s household/family income is 1% in 2014, 2% in 2015, and 2.5% in 2016 and later.
The penalty is paid on the taxpayer’s income tax return for the year or otherwise payable on notice and demand from the IRS. There is no additional penalty for failure to timely pay the penalty, nor is the penalty subject to any criminal prosecution. The IRS cannot use a tax lien or levy on a taxpayer’s property to enforce the penalty.
In the tax reform law signed by President Trump on December 22, 2017, the Individual Mandate penalty is reduced to $0 for months after December 31, 2018. While technically the law will continue to require individuals to secure minimum essential coverage, because the Individual Mandate penalty has been removed, that legal obligation is no longer enforceable. That law did not address the Employer Mandate, nor did it address ACA reporting for either the Employer Mandate or the Individual Mandate.
As previously indicated, this section discusses the application of PPACA requirements to U.S. citizens while working abroad.
Employer Mandate. In general, the Health Care Reform’s Pay-or-Play provisions apply to U.S. employers with full-time employees working abroad as well as their full-time employees working within the United States. Certain exceptions and limited exemptions substantially mitigate the application of that law to expatriate employees.
Foreign Source Income Exclusion of Expatriate Hours. For purposes of determining full-time employee status under the Employer Mandate, hours of service do not include hours for which the employee receives income from sources outside the United States—compensation for labor or personal services performed outside the United States under IRC § 862(a)(3). Treas. Reg. § 54.4980H-1(a)(24)(ii)(C). As a result, hours of service generally do not include hours worked outside the United States, regardless of the residency or citizenship status of the employee. February 10, 2014, Preamble to Pay-or-Play Final Regulations, 79 Fed. Reg. 8569.
This rule was further reinforced by IRS Q&As that were published in connection with the release of the final Pay-or-Play regulations. Q&A-17 of that IRS guidance states that “employees (U.S. citizens or non-citizens) working only abroad generally are not taken into account for purposes of determining whether an employer is an ALE or for purposes of determining whether the employer owes an employer shared responsibility payment or the amount of any such payment.” Q&A-17 of the Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act issued February 10, 2014.
Although employers of expatriate employees are not exempt from the Pay-or-Play rules for those employees, the foreign source income exclusion significantly mitigates the Employer Mandate risk, at least for the extended periods that the expatriate employee is working outside the United States. In light of this exclusion it is unlikely that an employer will incur a penalty for any employee working outside the United States.
Special Foreign Assignment Transfer Rule. In a guidance that is somewhat related to the foreign source income exclusion of expatriate hours discussed above, under the final Pay-or-Play regulations if an employer transfers an employee to another position within the employer’s controlled group and substantially all of the compensation for that position constitutes income from sources outside the United States (per IRC § 862(a)(3) as discussed above), the employer can treat that employee as a new hire for purposes of compliance with the Employer Mandate, provided that treatment is consistent with the new hire rules generally. To qualify for this special treatment, it must be anticipated that the employee will continue in that position either indefinitely or for at least 12 months. Treas. Reg. § 54.4980H-3(c)(4)(vi).
Foreign Self-Insured Expatriate Group Health Plan Coverage. In Treas. Reg. § 1.5000A-2(c)(1)(ii), the IRS states that “[a] self-insured group health plan under which coverage is offered by, or on behalf of, an employer to the employee” qualifies as minimum essential coverage. Consistent with that definition, HHS stated in Center for Consumer Information and Insurance Oversight (CCIIO) sub-regulatory guidance, issued on October 31, 2013, that employer-provided self-insured group health plans are generally considered to be minimum essential coverage “without regard to where the plan is located.”
Foreign Insured Expatriate Group Health Plan Coverage.
Temporary Transitional Relief. Under Q&A-1 of Part XIII of the Affordable Care Act Implementation FAQs issued March 8, 2013, and Q&As-6 and 7 of Part XVIII of the Affordable Care Act Implementation FAQs issued January 9, 2014, insured expatriate group health plan coverage is considered to be minimum essential coverage for purposes of meeting the Employer Mandate—at least until the end of plan years ending on or before December 31, 2016.
To receive the FAQ relief, an expatriate group health plan must be insured and limit enrollment “to primary insureds for whom there is a good faith expectation that such individuals will reside outside of their home country or outside of the United States for at least six months of a 12-month period and any covered dependents.” “The 12-month period can fall within a single plan year or across two consecutive plan years.” Q&A-6 of Part XVIII of the FAQs about Affordable Care Act Implementation dated January 9, 2014. As a condition for this temporary exemption, the expatriate health plan must comply with applicable law under the PHSA, ERISA, and the Code as those laws existed before PPACA.
Please note that this transitional relief applies not only to U.S. expatriates working abroad but also expatriates from other countries working in the United States, but its protection is limited to insured plans. In addition, the FAQ does not distinguish between coverage provided by a U.S. or a foreign insurance company—the FAQ appears to apply to group health plans covered by insurance policies issued either in the United States or abroad. This last point is somewhat uncertain, however, because of the comments made by the IRS regarding foreign insurance policy compliance with PPACA in the August 30, 2013, Preamble to the final Individual Mandate regulations and the Health and Human Services (HHS) sub-regulatory guidance on foreign insured plans issued October 31, 2013. In light of that uncertainty, an employer sponsoring a foreign insured expatriate group health plan will want to also comply with the guidelines provided in the HHS guidance discussed below.
HHS Sub-Regulatory Guidance. In the August 30, 2013, Preamble to the Final Treasury Regulations on the Individual Mandate penalty, the IRS was asked to exempt U.S. citizens residing outside of the United States from application of the Individual Mandate if the individual has health care coverage provided by a foreign health insurance company. The IRS rejected this request, stating that under section 1304(d) of the PPACA (42 U.S.C. § 18024(d)) and the final regulations, for health insurance to qualify as minimum essential coverage under the PPACA it must be an insurance policy offered within one “of the 50 states and the District of Columbia” and that coverage provided by an insurer “that is not offered within a state is neither an eligible employer-sponsored plan nor a plan in the individual market.” 78 Fed. Reg. 53651. In lieu of that exception, the IRS stated that HHS was providing a process by which a sponsor of an insured health plan, including a foreign insured health plan, could apply for recognition as minimum essential coverage under PPACA law.
After releasing conflicting rules in February, July, and August 2013, HHS issued CCIIO sub-regulatory guidance on October 31, 2013, addressing how foreign insurance can qualify as minimum essential coverage. That guidance established two sets of guidelines—one for foreign government regulated insurance and the other an application process for HHS approval of insured coverage as minimum essential coverage that does not fit within a policy or other plan that has already been designated by statute or by regulation as minimum essential coverage. Those two sets of guidelines are discussed below.
Foreign Government Regulated Group Health Insurance. According to the HHS October 31, 2013, guidance, an employee’s coverage under a group health plan provided through insurance regulated by a foreign government will be recognized as minimum essential coverage during a given month, if it can be shown that the employee
- was physically absent from the United States for at least one day during that month; or
- if the employee is physically present in the United States for that entire month, the foreign insurance policy provides health benefits within the United States while the employee is on expatriate status.
For the foreign insured group health plan to qualify as minimum essential coverage, the plan sponsor must provide a notice to all participants who are U.S. citizens that the coverage has been recognized as minimum essential coverage. Also, the plan sponsor must comply with the PPACA insurance coverage reporting requirements under IRC § 6055 for those U.S. citizen participants.
This HHS guidance appears to address expatriates working outside the United States as well as “individuals on expatriate status” working in the United States, thereby making it applicable to both expatriates and inpatriates covered by a foreign health insurance policy.
Individual Foreign Health Insurance Policy. To the extent an employer wishes to provide health coverage to an expatriate employee (or any other employee) through a foreign government regulated individual insurance policy or any other plan that has not been designated by statute or by regulation as minimum essential coverage, in July 1, 2013, regulations by HHS directed that such a policy or plan must be submitted to HHS for review and approval for that policy/plan to qualify as minimum essential coverage. 45 C.F.R. § 156.600 through 606. The HHS October 31, 2013, guidance supplements those regulations with procedures for determining minimum essential coverage status of such a policy or plan, including a form for certifying that the foreign insurance coverage complies with PPACA law. Under the HHS October 31, 2013, guidelines the employer, plan sponsor, foreign insurance company, or other interested applicant must submit the following information to have the policy/plan recognized as minimum essential coverage:
- the name of the policy/plan sponsor;
- the name of the organization sponsoring the policy/plan, and the title, address, and phone number of the individuals submitting the application;
- the number of enrollees in the plan;
- a description of the eligibility criteria;
- the cost-sharing requirements, including deductible and out-of-pocket maximum limits;
- the essential health benefits covered by the policy/plan; and
- a certification by the appropriate individual that the policy/plan sponsor complies with substantially all of the PPACA requirements applicable to nongrandfathered plans in the individual market, along with policy/plan documentation (insurance contract or summary of benefits) that demonstrates substantial compliance.
Under the HHS October 31, 2013, guidelines, to meet the substantial compliance requirement, the applicant must certify that the policy/plan complies with the following PHSA provisions as well as PPACA policy/plan documentation requirements (for example, summary of benefits and coverage):
- Section 2701—fair health insurance premiums, limited to the prohibition on rating based on gender;
- Section 2704—prohibition against preexisting condition exclusions;
- Section 2705—prohibition against discrimination based on health status and compliance with the Genetic Information Nondiscrimination Act;
- Section 2707(a)—provision of essential health benefits;
- Section 2711—prohibition against lifetime and annual benefit limits;
- Section 2712—prohibition against rescission of coverage;
- Section 2713—coverage of preventive health services;
- Section 2714—extension of dependent coverage to age 26;
- Section 2715—provision of summary of benefits and coverage, beginning no later than January 1, 2015;
- Section 2719—expanded appeals process, including use of an independent review organization;
- Section 2719A—patient protections for use of primary care physician, gynecologist, pediatrician, and emergency room care;
- Section 2725—Newborns’ and Mothers’ Health Protection Act (governing hospital stays after newborn delivery);
- Section 2726—Mental Health Parity and Addiction Equity Act (governing parity between plan medical and mental and substance abuse benefits);
- Section 2727—Women’s Health and Cancer Rights Act (governing benefits for post-mastectomy reconstructive surgery); and
- PPACA § 1302(d)(1)—no less than 60% of actuarial value of benefits paid by the plan.
In addition, the policy/plan is evaluated to determine if it complies with the guarantee availability requirement (PHSA § 2702), guaranteed renewability requirement (PHSA § 2703), nondiscrimination against health care providers requirement (PHSA § 2706), and coverage for individuals participating in clinical trials requirement (PHSA § 2709).
After certification of minimum essential coverage status is granted, the policy/plan must provide notice of that status to all policy/plan enrollees as well as comply with IRC § 6055 reporting requirements. HHS will publish a list of the types of coverage that the agency has recognized as minimum essential coverage.
Other Employer Plan PPACA Requirements
Market Reform, Quality Health Insurance Coverage, and Available Coverage Choice Provisions. In Part XIII of the Affordable Care Act Implementation FAQs issued March 8, 2013, the federal agencies stated that they recognized the challenges that expatriate group health insurance plans face in “reconciling and coordinating the multiple regulatory regimes that apply to expatriate health plans.” As a result, the DOL, IRS, and HHS jointly issued temporary transitional relief on March 8, 2013, and on January 9, 2014, for insured expatriate group health plans through the end of plan years ending on or before December 31, 2016, from most provisions of the PPACA law, including the following:
Individual and Group Market Reforms (PHSA provisions):
Section 2711—prohibition against lifetime and annual benefit limits;
Section 2712—prohibition against rescission of coverage;
Section 2713—coverage of preventive health services;
Section 2714—extension of dependent coverage to age 26;
Section 2715—provision of summary of benefits and coverage, beginning no later than January 1, 2015;
Section 2719—expanded appeals process, including use of an independent review organization;
Quality Health Insurance Coverage changes (PHSA provisions):
Section 2701—fair health insurance premiums;
Section 2702—guaranteed availability of coverage;
Section 2703—guaranteed renewability of coverage;
Section 2704—prohibition against preexisting condition exclusions;
Section 2705—prohibition against discrimination based on health status;
Section 2706—nondiscrimination in health care;
Section 2707—comprehensive health insurance coverage, including essential health benefit requirements;
Section 2708—prohibition against excessive waiting periods.
Available Coverage Choices for All Americans changes:
Sections 1301 through 1343—individual and small group market insured plan (under 101 or 51 employees depending on the state) obligation to cover essential health benefits.
Reinsurance Contribution. A contributing entity (that is, an insurer or a third-party administrator on behalf of a self-funded group health plan) is not required to make reinsurance contributions under the PPACA for “expatriate health coverage,” as defined by the Secretary of HHS. 45 C.F.R. § 153.400(a)(1)(iii). Unfortunately, no guidance has been issued to date on what constitutes “expatriate health coverage” within the meaning of this exemption. In the March 11, 2013, Preamble to the final HHS regulations on this subject, HHS indicated that the exception was intended to address coverage for individuals overseas and, therefore, it is most likely that the HHS Secretary’s definition will interpret “expatriate health coverage” to include coverage of U.S. citizens while working outside the United States.
Patient-Centered Outcomes Research Fee. The PCOR fee does not apply to insured and self-funded plans that are designed specifically to cover employees primarily working and residing outside of the United States. Treas. Reg. §§ 46.4375-1(b)(1)(ii)(C) and 46.4376-1(b)(1)(ii)(C).
Summary of Benefits and Coverage. An employer-sponsored group health plan is required to distribute a uniform four-page summary of the plan’s benefits and coverage provisions or SBC. Because of the “additional administrative costs and barriers in filling out SBCs, including benefit and claims systems that are distinct from those for domestic coverage, which makes compliance more difficult,” expatriate insured and self-funded plans are temporarily exempt from the SBC requirement. Part IX of the Affordable Care Act Implementation FAQs dated May 11, 2012. That exemption applies to self-funded expatriate plans through the end of the second year of applicability of the SBC requirement (December 31, 2014). Q&A-5 of Part XIV of the Affordable Care Act Implementation FAQs dated April 23, 2013. For insured expatriate plans, the exemption extends through the end of plan years ending on or before December 31, 2016. Q&A-7 of Part XVIII of the Affordable Care Act Implementation FAQs dated January 9, 2014.
Final SBC regulations state that in lieu of summarizing coverage for items and services provided outside the United States, a plan or insurer can provide an Internet address (or similar contact information) for obtaining information about benefits and coverage provided outside the United States. Treas. Reg. § 54.9815-2715(a)(2)(iii).
Employee Obligations—Individual Mandate
Like other U.S. citizens, an expatriate employee is subject to the Individual Mandate and the obligation to secure minimum essential coverage through the employee’s employer or otherwise, unless the expatriate employee qualifies for one of the exceptions discussed below.
Bona Fide Foreign Resident Exception. An individual is automatically treated as having minimum essential coverage for each month that the individual is a U.S. citizen living abroad or is a resident of one of the U.S. possessions for purposes of meeting the Individual Mandate requirement. IRC § 5000A(f)(4)(B); Treas. Reg. § 1.5000A-1(b)(2). To qualify for this exemption, the individual must comply with one of the following sets of requirements:
U.S. Citizen or Resident Living Abroad. The individual has a tax home in a foreign country (a home that would qualify the individual to receive a deduction for travel expenses while away from home in pursuit of a trade or business under IRC § 162(a)(2)) and is either:
- a U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire taxable year; or
- a U.S. citizen or resident who is present in a foreign country or countries for at least 330 full days in a 12-consecutive-month period.
IRC § 911(d)(1).
Please note that this exception is not met unless and until the individual has resided in a foreign country for one year. Also, the IRS has the final say on whether the residency requirement has been met.
Resident of U.S. Territory. The individual is a bona fide resident of a U.S. possession, including Guam, American Samoa, the Northern Mariana Islands, Puerto Rico, or the Virgin Islands. To establish bona fide residence, the individual must:
- be present in the territory for at least 183 days during the taxable year; and
- not have a tax home (per above) outside of the territory nor have a closer connection to the United States or a foreign country than to that territory. A “closer connection” exists if the individual has a “substantial presence” in the United States or a foreign country—in general, present for at least 31 days during the calendar year and present for a combined period of at least 183 days during the current year and the two preceding calendar years.
IRC §§ 937(a) and 7701(b)(3).
As previously noted, this exemption is not fulfilled until the 183-day requirement is met, and the IRS has final approval on presence in the territory and a lack of tax home elsewhere.
Short Coverage Gap Exception. If an individual has a gap in minimum essential coverage that is less than a continuous three-month period, the person is exempt from the Individual Mandate for the period of that gap. IRC § 5000A(e)(4)(A). This exception could apply, for example, to an expatriate employee on a temporary limited period assignment abroad and covered during that period by a foreign insurance policy that has not been approved by HHS, as discussed above.
An individual is limited to one such gap period in a calendar year, and if the individual has multiple gap periods, only the first gap period is exempted. In the event the gap period straddles two taxable years, the gap period months in the second taxable year are disregarded, and the individual starts over in that second taxable year for purposes of determining whether the individual qualifies for the gap period exemption in that second taxable year. IRC § 5000A(e)(4)(B); Treas. Reg. § 1.5000A-3(j).
Foreign Self-Insured Plan Coverage. As previously discussed, the IRS and HHS both indicate that employer-provided self-insured group health plans are automatically considered to be minimum essential coverage for purposes of applying the Individual Mandate requirement, regardless of whether the plan is U.S. or foreign-based.
Insured Expatriate Group Health Plan Coverage. Under the March 8, 2013, and January 9, 2014, joint agency FAQ guidance discussed above, an expatriate employee can establish minimum essential coverage for the Individual Mandate requirement if the individual participates in an insured expatriate group health plan that limits enrollment to primary insureds and their dependents and the primary insureds are expected to reside outside of their home country (whether the United States or a foreign country) for at least six months out of a 12-month period. This temporary exemption is conditioned on the expatriate health plan complying with applicable law under the PHSA, ERISA, and the Code as those laws existed before PPACA.
In light of the IRS comments in the August 30, 2013, Preamble to the final Individual Mandate regulations and the guidance provided in the October 31, 2013, HHS CCIIO sub-regulatory guidance, an employer providing health coverage to an expatriate through an individual foreign insurance policy or other health coverage that does not fit within the statute-approved or regulation-approved forms of minimum essential coverage (like employer-provided group health plans, and so on) should consider having that coverage reviewed by HHS under the minimum essential coverage procedures that HHS has established, as discussed below.
Foreign Government Regulated Group Health Insurance. Per the October 31, 2013, HHS guidance discussed above, an expatriate employee’s coverage under an employer-sponsored foreign insured group health plan will be recognized as minimum essential coverage during a given month and fulfill the Individual Mandate requirement for that month, if the expatriate employee can show either of the following:
- that the expatriate employee was physically absent from the United States for at least one day during that month; or
- if the expatriate employee is physically present in the United States for that entire month, the foreign insurance policy provides health benefits within the United States while the individual is on expatriate status.
For the foreign insured group health plan to qualify as minimum essential coverage, the plan sponsor must provide a notice to all participants who are U.S. citizens or nationals that the coverage has been recognized as minimum essential coverage. Also, the plan sponsor must comply with the PPACA insurance coverage reporting requirements under IRC § 6055 for those individuals.
The HHS foreign insurance policy guidelines substantially overlap the joint agency FAQ expatriate plan relief guidance. The specific circumstances of the employer’s foreign insured group health plan may determine the application of one over the other.
Individual Foreign Health Insurance Policy. For an individual governmentregulated foreign health insurance policy or any other policy/plan that has not been designated by statute or by regulation as minimum essential coverage, for such a policy/plan to qualify under the Individual Mandate as minimum essential coverage, the policy must be submitted to HHS for review and approval under the process described in the October 31, 2013, HHS CCIIO sub-regulatory guidance.
This section will discuss the application of PPACA requirements to foreign nationals while working within the United States. As previously noted, U.S. laws like Health Care Reform apply to foreign nationals working or otherwise residing within the United States in the same manner as they do to U.S. citizens, unless the law provides for a special exception or exemption.
Employer Mandate. Foreign and domestic companies that send their non-U.S. employees to the United States for periods of employment are required generally by PPACA law to provide minimum essential coverage for those employees while working in the United States in the same manner as for those employers’ U.S.-based employees. As previously noted, expanding health coverage for U.S. residents is a primary focus of Health Care Reform law, so there is very little in the way of exceptions or exemptions for inpatriate employees as compared with expatriate employees.
Inclusion of Inpatriate Hours. Similar to expatriate employees, in determining full-time status of an inpatriate employee under the Pay-or-Play rules an employer is not required to include hours for which the employee receives income from sources outside the United States. To qualify for this exemption, however, the compensation cannot be for labor or personal services performed within the United States. IRC § 862(a)(3). As a result, this exemption does not appear to apply to foreign nationals working in the United States, even though their income may originate from a source outside the United States, and the hours of such inpatriates are included in evaluating the employer’s compliance with the Employer Mandate.
Self-Insured Inpatriate Group Health Plan Coverage. As discussed above, the directions provided in Treas. Reg. § 1.5000A-2(c)(1)(ii) and in the October 31, 2013, HHS CCIIO sub-regulatory guidance regarding self-insured group health plans qualifying as minimum essential coverage appear to apply to inpatriates working in the United States as well as expatriates working abroad.
Insured Inpatriate Group Health Plan Coverage. The joint agency FAQ guidance from March 8, 2013, and January 9, 2014, discussed above, indicates that it applies to insured group health plans providing coverage limited to primary insureds who “reside outside of their home country” as well as primary insureds residing outside of the United States for at least six months of a 12-month period, provided that the employer has a good faith expectation that this requirement will be met and the plan complies with pre-PPACA applicable law under the PHSA, ERISA, and the Code. Accordingly, an employer who provides a separate insured group health plan for its inpatriates while working in the United States would automatically meet PPACA minimum essential coverage, at least through the end of plan years ending on or before December 31, 2016. Please note that the IRS comments in the August 30, 2013, Preamble to the final Individual Mandate regulations and the October 31, 2013, HHS sub-regulatory guidance discussed above again create enough uncertainty about using a foreign insurance carrier for this purpose that the employer will want to follow the HHS guidance as well.
For purposes of meeting the minimum essential coverage requirement, employers that provide non-U.S. health insurance coverage for their inpatriate employees sent to work in the United States are subject to the same HHS foreign government regulated health insurance policy guidance that applies to U.S. companies that cover their expatriate employees with such insurance policies while working abroad. Those guidelines are discussed in the October 31, 2013, HHS CCIIO sub-regulatory guidance and authorize foreign insured employer group health plans to be considered minimum essential coverage for each month that the inpatriate employee is either (1) physically absent from the United States for at least one day of the month or (2) physically present in the United States for an entire month if the coverage provides health benefits within the United States while the individual is on inpatriate status.
To the extent that the above criteria do not apply because the employer is providing health coverage to an inpatriate employee through an individual foreign insurance policy or other health coverage that does not fit within the statute or regulation approved forms of minimum essential coverage (like employer-provided group health plans, and so on), the employer should consider having that coverage reviewed by HHS under the minimum essential coverage procedures that HHS has established, as discussed above.
Likelihood of Application of Pay-or-Play Penalty. As a practical matter, it appears unlikely that an employer who brings a foreign national employee to the United States would become subject to the Pay-or-Play penalty, simply because it is unlikely that a foreign national would enroll for coverage through a public exchange and become eligible for a premium tax credit. An employer who incurs the expense of sending an employee to work in the United States most likely will provide good health coverage for the employee (as well as compensation) regardless of whether that coverage has been approved by HHS or otherwise meets minimum essential coverage requirements, and therefore, the employee will have no incentive to apply for exchange coverage and the tax credit.
Other Employer Plan PPACA Requirements.
Market Reform, Quality Health Insurance Coverage, and Available Coverage Choice Provisions. The March 8, 2013, Part XIII and the January 9, 2014, Part XVIII joint agency FAQs appear to apply to an insured group health plan with enrollment limited to primary insureds that are inpatriate employees, as well as an insured group health plan with enrollment limited to primary insureds that are expatriate employees, provided that by living in the United States there is a good faith expectation that the inpatriates will be residing outside of their home country for at least six months of a 12-month period. As a result, group health plans providing insured coverage exclusively to foreign nationals working in the United States are exempt from the PPACA requirements described in that guidance in the same manner as insured group health plans covering U.S. citizens outside the United States at least through the plan years ending on or before December 31, 2016.
Reinsurance Contribution. The reinsurance contribution is payable for inpatriate employees covered by a U.S.-insured or self-funded plan, unless the plan coverage constitutes “expatriate health coverage.” 45 C.F.R. § 153.400(a)(1)(iii). The Secretary of HHS has not yet issued guidance on what is considered “expatriate health coverage,” and therefore, it is unclear whether this exclusion could apply to foreign citizens covered by a non-U.S. plan while working in the United States.
PCOR Fee. Like the reinsurance contribution, inpatriate employees are subject to the PCOR fee based on their residence in the United States. Employers are required to pay the PCOR fee for inpatriate employees (and their dependents) who are covered by the employer’s group health plan while temporarily residing in the United States. December 6, 2012, Preamble to Final Treasury Regulations, 77 Fed. Reg. 72725.
Summary of Benefits and Coverage. To the extent a plan provides health coverage available within the United States, the plan or insurer is required to provide an SBC for the coverage made available within the United States. Treas. Reg. § 54.9815-2715(a)(2)(iii). Although, as previously discussed, insured and self-funded expatriate health plans have received a temporary exemption from the SBC requirements, that exemption does not apply to inpatriate employees receiving health coverage within the United States. Like any other U.S. resident, an inpatriate employee is entitled to receive an SBC from the employer’s group health plan.
Employee Obligations—Individual Mandate
No Foreign Resident Exception. Whereas U.S. citizens working abroad for extended periods are automatically treated as having minimum essential coverage for purposes of meeting the Individual Mandate requirement under the bona fide foreign resident exception, there is no such exception for foreign nationals working in the United States. This is not surprising because, as previously noted, the purpose and intent of Health Care Reform is to promote and secure health coverage for all individuals residing in the United States regardless of their country of origin or reason for being present in the United States, and waiving the minimum essential coverage requirement for an inpatriate employee residing in the United States for the periods that apply under the exception for expatriate employees working abroad would be inconsistent with that purpose and intent.
Short Coverage Gap Exception. The short coverage gap exception discussed above appears to be applicable to foreign nationals working in the United States, U.S. citizens working abroad, and anyone else who is subject to the Individual Mandate and incurs a limited period of noncoverage. This exception provides the same advantages for inpatriates as it does for expatriates, allowing a foreign national to travel to the United States to work on an assignment for up to three continuous months without having to secure minimum essential coverage in connection with the trip and instead relying on a foreign health insurance policy or national health care from that individual’s home country during the period of that assignment.
Self-Insured Inpatriate Group Plan Coverage. Like their expatriate counterparts, inpatriates covered by an employer-provided self-insured group health plan are viewed under the previously noted IRS and HHS guidance as having minimum essential coverage for purposes of applying the Individual Mandate requirement regardless of whether the plan is U.S. or foreign-based.
Insured Inpatriate Group Health Plan Coverage. As previously discussed, under the March 8, 2013, and January 9, 2014, joint agency FAQ guidance, an employee expatriating from the employee’s home country to an employment position in the United States (as well as an employee expatriating from the United States to an employment position abroad) is viewed as having minimum essential coverage and complying with the Individual Mandate if the employee is covered by an insured group health plan that is limited to primary insureds for whom there is a good faith expectation that they will reside outside of their home country for at least six months of a 12-month period. That 12-month period can fall within a single plan year or across two consecutive plan years.
Again, to the extent a group health plan is using foreign health insurance to cover inpatriate employees, the plan sponsor will want to comply with the October 31, 2013, HHS CCIIO sub-regulatory guidance, previously discussed.
Foreign Health Insurance Coverage
Foreign Insured Group Health Plan. Per the October 31, 2013, HHS CCIIO sub-regulatory guidance, an inpatriate employee’s coverage under a foreign insurance policy will be recognized as minimum essential coverage during a given month and fulfill the Individual Mandate requirement for that month, if the inpatriate employee can show either of the following:
- that the inpatriate employee was physically absent from the United States for at least one day during that month; or
- if the inpatriate employee is physically present in the United States for that entire month, the foreign insurance policy provides health benefits within the United States while the individual is on expatriate status (that is, as an expatriate from the individual’s country of origin).
For the foreign insured plan to qualify as minimum essential coverage, the plan sponsor must provide a notice to all participants who are U.S. citizens or nationals that the coverage has been recognized as minimum essential coverage. Also, the plan sponsor must comply with the PPACA coverage reporting requirements under IRC § 6055 for those individuals.
Individual Foreign Health Insurance Policy. The same review and approval procedures outlined above for expatriate health coverage under the October 31, 2013, HHS CCIIO sub-regulatory guidance also apply for purposes of obtaining a minimum essential coverage determination from HHS for an inpatriate employee’s foreign government regulated health insurance policy or any other policy/plan that has not been designated by statute or by regulation as minimum essential coverage.
Foreign National Health Plan Coverage. Because an inpatriate employee’s country of origin often provides national health plan coverage (for example, Great Britain, Canada, Japan, and France, among others), an employee (or the employee’s employer on the employee’s behalf) may want to rely on that foreign country national health plan to demonstrate that the employee has minimum essential coverage and thereby complies with the individual mandate requirement. As the federal agency primarily responsible for establishing standards for minimum essential coverage under the individual mandate requirement, HHS originally favored this viewpoint, and in proposed regulations issued on February 1, 2013, HHS indicated that coverage for non-citizens residing in the United States that is provided by their home country would be designated per se as minimum essential coverage for purposes of the minimum essential coverage requirement. Proposed HHS Reg. § 156.602(b); February 1, 2013, Preamble to HHS Proposed Regulations, 78 Fed. Reg. 7361.
Unfortunately, HHS received comments during the proposed regulations review process that raised concerns about how foreign government provided coverage varies “from country to country and may create a barrier to care if health care providers in the United States do not accept payment from such coverage.” Because of concerns that a country’s national health insurance may not provide coverage to foreign nationals while receiving health care in the United States, HHS reversed itself and in final regulations stated that such foreign government national health plan coverage would not automatically be viewed as minimum essential coverage. Instead such health coverage would need to be submitted to HHS and obtain HHS approval through a special certification process before it could be recognized as minimum essential coverage and meet the Individual Mandate requirement for an inpatriate employee. July 1, 2013, Preamble to HHS Final Regulations, 78 Fed. Reg. 39515. That HHS certification process is the same process that applies to a foreign government regulated health insurance policy or any other policy/plan that does not fit within the categories of minimum essential coverage designated by statute or regulation as minimum essential coverage (for example, such categories as eligible employer-sponsored plans, government-sponsored programs (like Medicare and Medicaid), and individual market plans. IRC § 5000A(f).
To obtain HHS minimum essential coverage certification for a foreign national health plan, the plan must be submitted to HHS for review and approval in accordance with the standards and procedures outlined in the October 31, 2013, CMS CCIIO sub-regulatory guidance. Presumably the foreign government sponsor of that national health plan is best informed and therefore, in the best position to make that submission, although there is no restriction in the guidance on who may present to HHS regarding a country’s national health coverage.
Expatriate Health Coverage Clarification Act
As indicated by the preceding discussion, a vast array of varied types of guidance has been developed to address the application of Health Care Reform law to expatriate and inpatriate employees. The reason for this is that there are no specific provisions within the PPACA statute that address expatriate or inpatriate employees. This created numerous challenges to providing health coverage to such employees that complies with Health Care Reform law. Such challenges, because of the employee’s unique employment circumstances, were acknowledged in the guidance that has been issued to date. In light of the temporary and provisional nature of much of that guidance, it became apparent that there was a need to provide clarity and establish certainty in the way that expatriate employee and inpatriate employee health coverage complies with Health Care Reform law.
That need for clarity and certainty was addressed when Congress passed the Expatriate Health Coverage Clarification Act (EHCCA) on December 16, 2014, as part of the Consolidated and Further Continuing Appropriations Act of 2015 (H.R. 83). The EHCCA provides significant relief from PPACA for certain health plans that cover expatriate and inpatriate employees by making permanent some of the temporary relief from PPACA requirements that the DOL and HHS provided to such plans. That law continues the exemption of “Expatriate Health Plans” (as that term is defined below) from complying with many of PPACA’s market reform requirements, as well as fees and taxes, provided such plans satisfy several coverage and administration requirements.
On June 10, 2016, the Departments of Treasury, Labor, and HHS issued proposed regulations on rules governing how the PPACA applies to Expatriate Health Plans, insurers, and qualified expatriates under the EHCCA. 81 Fed. Reg. 38020. Generally, the EHCCA provides that a substantial portion of the PPACA requirements do not apply to Expatriate Health Plans and employers who are plan sponsors of Expatriate Health Plans.
Under the EHCCA rules, an Expatriate Health Plan (1) will be treated as minimum essential coverage under IRC § 5000A(f) and related sections of the Code; (2) employer-shared responsibility provisions under IRC § 4980H continue to apply; (3) reporting under IRC §§ 6055 and 6056 continue to apply but contain a modification for electronic media use for statements to enrollees; (4) IRC § 4980I excise tax provisions apply to certain qualified expatriates who are assigned (rather than transferred) to work in the United States; and (5) the annual health insurance provider fee applies for certain purposes for calendar years 2014 and 2015. 81 Fed. Reg. 38020-38021.
Expatriate Health Plans and insurers and administrators of Expatriate Health Plans must meet certain specific definitions and requirements to avail themselves of the relief provided by the EHCCA.
Expatriate Health Insurance Issuer. The proposed regulations define “Expatriate Health Insurance Issuer” as an insurance company that issues Expatriate Health Plan insurance policies and satisfies certain requirements. Those requirements include:
- maintaining network provider agreements that provide for direct claims payments with health care providers in eight or more countries;
- maintaining call centers in three or more countries and accepting calls from customers in eight or more languages;
- processing at least $1 million in claims in foreign currency equivalents during the preceding calendar year (determined using the Treasury Department’s currency exchange rate in effect on the last day of the preceding calendar year);
- making global evacuation/repatriation coverage available;
- maintaining legal and compliance resources in three or more countries; and
- having licenses or other authority to sell insurance in more than two countries, including the United States.
- 81 Fed. Reg. 38039.
In addition, the proposed regulations provide that each of the above requirements may be satisfied by two or more entities that are members of the health insurance issuer’s controlled group or through contracts between the Expatriate Health Insurance Issuer and third parties.
Expatriate Health Plan Administrator. An “Expatriate Health Plan Administrator” is defined as an administrator of a self-insured Expatriate Health Plan who meets the same requirements as an Expatriate Health Insurance Issuer (as described above). 81 Fed. Reg. 38040.
Expatriate Health Plan. An “Expatriate Health Plan” is defined as a plan satisfying the following requirements:
- at least 95% of the primary enrollees must be Qualified Expatriates as determined on the first day of the plan year (a primary enrollee is an individual whose eligibility for coverage is not based on being a spouse, dependent, or other beneficiary, except that a primary enrollee does not include an individual who is not a U.S. citizen or national and who resides in the individual’s country of citizenship);
- issued by an Expatriate Health Insurance Issuer or, if self-insured, administered by an Expatriate Health Plan Administrator;
- covers inpatient hospital, outpatient facility services, physician services, and emergency services;
- meets minimum value requirements (according to the reasonable belief of the plan sponsor, who may rely on representations of the Expatriate Health Insurance Issuer or Expatriate Health Plan Administrator);
- covers dependents up to age 26, if the plan provides dependent coverage;
- offers reimbursements for items or services in the local currency in eight or more countries; and
- complies with pre-PPACA requirements under ERISA and PHSA, which include, but are not limited to, the Women’s Health and Cancer Rights Act, the Mental Health Parity and Addiction Equity Act, HIPAA portability and nondiscrimination rules, and reporting, disclosure, and claims procedure requirements under ERISA Part I.
- 81 Fed. Reg. 38039-38040.
The pre-PPACA law requirements would include, for example, HIPAA portability rules that mandate reduction of a preexisting condition exclusion period by any creditable coverage period without a 63-day break in coverage. The proposed regulations do not require an Expatriate Health Plan to issue certificates of creditable coverage, although an Expatriate Health Plan must give enrollees other ways to demonstrate creditable coverage, such as by providing an e-mail from the prior issuer, administrator, or sponsor with information about past coverage.
Qualified Expatriate. A “Qualified Expatriate” is defined as one of two types of individuals for purposes of employer plans. These two types include:
- Category A: an individual (who is not a U.S. national) transferred or assigned by an employer to the United States for a specific and temporary purpose because of that person’s skills or job duties (essentially an inpatriate employee), who requires health coverage in multiple countries because the individual is expected to travel outside the United States at least once per year, and who is periodically offered other multinational benefits; and
- Category B: a U.S. national working outside the United States for at least 180 days in a consecutive 12-month period that overlaps with a single plan year or across two consecutive plan years (essentially an expatriate employee), and for whom the expatriate health plan must offer certain specified services in the country in which the individual is present in connection with the individual’s employment.
- 81 Fed. Reg. 38040.
Applicability of Certain PPACA Provisions to Expatriate Health Plans
If the plan meets the definition of an Expatriate Health Plan, the plan will be exempt from complying with the following market reform requirements, among others:
- prohibition against annual and lifetime dollar limits on essential health benefits;
- coverage of preventive care without cost sharing;
- cap on out-of-pocket maximum for covered expenses;
- prohibition against waiting period longer than 90 days;
- prohibition against preexisting condition exclusions (subject to the adoption of the pre-PPACA pre-existing condition requirements discussed above);
- prohibition against coverage rescissions;
- prohibition against certain restrictions on access to health care providers;
- coverage of care in connection with clinical trials;
- prohibition against health care provider discrimination; and
- provision of SBC.
In addition, an Expatriate Health Plan is relieved from the following PPACA fees and monetary restrictions:
- health insurance providers fee;
- PCOR fee;
- transitional reinsurance fee;
- medical loss ratio; and
- limitation on insurer remuneration deduction under IRC § 162(m)(6).
Certain PPACA provisions will continue to apply to Expatriate Health Plans, including:
- ACA excise/Cadillac tax (40% excise tax on high-cost employee health coverage, which the statute indicates is applied to the health coverage of a qualified expatriate who is assigned, rather than transferred, to work in the United States, although not addressed in the proposed regulations);
- Employer Mandate requirements;
- Individual Mandate requirements (until 2019); and
- ACA reporting.
For reporting requirements under IRC §§ 6055 and 6056, the EHCCA permits the use of electronic media as the default method to provide the required statement, unless the primary insured has explicitly refused to receive the statement electronically. The recipient must be provided with a notice that the required statement will be furnished electronically unless the individual explicitly refuses to consent to receive the statement in electronic form, and the notice must be provided at least 30 days before furnishing the required statement.
As previously indicated, Expatriate Health Plan coverage for a qualified expatriate is generally treated as an eligible employer-sponsored health plan and, as a result, constitutes minimum essential coverage for purposes of the Employer Mandate, the Individual Mandate, and ACA reporting requirements.
The PPACA expatriate and inpatriate employee health coverage guidance leading up to the adoption of the EHCCA is, at best, a patchwork of scattered rules applicable under different circumstances. To maintain compliance with the law, an employer must carefully analyze each situation in which an employee is assigned to work outside of the individual’s home country and determine which of the rules or exceptions outlined in this article best fit that situation. Adoption of the EHCCA is certainly a step in the right direction to bring clarity and certainty in the application of Health Care Reform law to expatriate and inpatriate employees. As a result, employers and their affected employees will want to carefully consider meeting the requirements of that statute and its regulations. If the circumstances of the expatriate employee or inpatriate employee do not allow that employee to fit within the requirements of the EHCCA, the employer and affected employee will need to continue to rely on the patchwork nature of the expatriate and inpatriate guidance issued to date to the extent such guidance remains in effect.