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.
Inpatriate Compliance
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 Obligations
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.
Definitions
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.
Overview
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.