July 1, 2015
IRS Issues Interim Guidance on Expatriate Plans under PPACA
The Internal Revenue Service (IRS) released interim guidance on the application of certain provisions of the Patient Protection and Affordable Care Act (PPACA) to expatriate health insurers, expatriate health plans and plan sponsors of expatriate health plans under the Expatriate Health Coverage Clarification Act (EHCCA) in IRS Notice 2015-43, published on June 30.
Under an expatriate health plan, substantially all of the primary enrollees must be “qualified expatriates,” which means (1) certain foreign employees transferred or assigned to the U.S. for a specific and temporary employment purpose or assignment, (2) individuals working outside the U.S. for at least 180 days in a 12-month period, and (3) individuals who are members of certain groups, such as students or religious missionaries.
In Frequently Asked Questions (FAQs) guidance, the U.S. departments of Treasury, Labor (DOL) and Health and Human Services (HHS) previously provided a temporary delay for insured expatriate health plans to comply with the requirements of PPACA in FAQ (Part XIII), published in March 2013 (see the March 11, 2013, Benefits Byte). Later FAQ guidance (Part XVIII), issued in January 2014, extended the temporary transition relief for plan years ending on or before December 31, 2016 (see the January 9, 2014, Benefits Byte).
EHCCA was enacted in December 2014 as part of the Consolidated and Further Continuing Appropriations Act. The statute provides relief from specific PPACA requirements, fees and taxes for multi-national employers, globally mobile individuals and U.S. providers of expatriate insurance coverage, with the aim of ensuring that U.S. providers of this type of coverage are not at a competitive disadvantage against non-U.S. carriers who are not subject to PPACA. The provisions of the law that apply to expatriate health insurance issuers of fully insured expatriate health plans only apply to health insurers that are licensed in the U.S. and generally apply to plans issued or renewed on or after July 1, 2015 (see the December 18, 2014, Benefits Byte).
Notice 2015-43 states that the departments have determined that issuers, employers and plan sponsors need additional time and guidance to modify their current arrangements to comply with EHCCA’s requirements. It provides that until the issuance of further guidance, taxpayers are generally permitted to apply the requirements of EHCCA “using a reasonable good faith interpretation of the EHCCA.”
Notice 2015-43 notes that the good faith rules do not apply to the Patient Centered Outcomes Research Institute funding fee (PCORI fee) under Internal Revenue Code Sections 4375 and 4376, as well as the health insurance provider fee under Section 9010 of PPACA. Treasury and IRS recently released Notice 2015-29 providing guidance addressing the application of the health insurance provider fee to expatriate plans (see the March 31 Benefits Byte). Notice 2015-43 includes a special rule for the PCORI fee which states that issuers and plan sponsors can determine the PCORI fee by excluding lives covered under a specified plan “if the facts and circumstances demonstrate that the policy or plan (1) was designed and issued specifically to cover primarily employees (a) who are working and residing outside the United States, or (b) who are not citizens or residents of the United States but who are assigned to work in the United States for a specific and temporary purpose or who work in the United States for no more than six months of the policy year or plan year” or if it was designed to cover individuals who are members of a group of “similarly situated individuals” (see the Notice for more information).
The Notice indicates that the departments anticipate issuing proposed regulations in the future to implement EHCCA. The Notice also requests comments on needed clarifications for the statutory definitions of the terms “expatriate health plan” and “qualified expatriate,” as well as the interaction of EHCCA with the previous transition relief for expatriate health plans. Comments are due by September 28.
The Notice is applicable to plans that are issued or renewed on or after July 1, 2015, and plan years that start on or after July 1, 2015. For more information on expatriate coverage, contact Kathryn Wilber, senior counsel, health policy, or Katy Spangler, senior vice president, health policy, at (202) 289-6700.