The IRS has provided interim guidance in Notice 2015-43 on the application of certain provisions of the Affordable Care Act to expatriate health insurance issuers, expatriate health plans, and employers in their capacity as sponsors of expatriate health plans. The interim guidance is effective for policies that are issued or renewed on or after July 1, 2015, and for plan years that start on or after July 1, 2015. We discussed ACA issues for U.S. expatriates and expatriate health plans in an earlier post.
As background, the regulatory agencies issued temporary relief in FAQs XIII and FAQs XVIII that exempted certain expatriate health plans from some of ACA’s market reforms if they complied with a number of pre-ACA mandates. The FAQs applied only to insured plans with enrollment limited to primary insureds who live outside their home country or outside the U.S. for at least 6 months during a 12-month period and their dependents. The FAQs provided no relief for self-insured plans.
The Expatriate Health Coverage Clarification Act of 2014 (“EHCCA”), enacted at the end of last year and effective for expatriate health plans issued or renewed on or after July 1, 2015, modified the FAQs. It expanded the definition of expatriate health plans to include self-insured plans and made the temporary relief permanent. However, the EHCCA also modified the requirements that a group health plan must meet in order to qualify as an “expatriate health plan” eligible for this relief. For example, unlike the FAQs, the EHCCA requires a group health plan to comply with certain ACA requirements–such as the requirement to provide minimum-value coverage and the requirement to cover dependents until age 26.
The regulatory agencies have determined that issuers, employers, and plan sponsors need additional time and guidance to modify their current arrangements to comply with the EHCCA’s requirements. The IRS’s interim guidance (with which the DOL and HHS have agreed) says that until further guidance is issued, taxpayers are generally permitted to apply the requirements of the EHCCA using a “reasonable good faith interpretation of the EHCCA.” In particular, the guidance states that it is a reasonable good faith interpretation to treat an expatriate health plan, as defined in the prior FAQs, as an expatriate health plan for purposes of the EHCCA. The interim guidance explicitly states, however, that the good faith rules do not apply with respect to the PCORI fee (see below).
Plans Covered by the Interim Guidance
If an employer sponsors an insured expatriate health plan, and the plan satisfies the pre-EHCCA FAQs, no changes are necessary to comply with the EHCCA until the agencies release further guidance.
For self-insured plans, the interim guidance is less clear. As explained above, the FAQs apply only to insured plans: because the interim guidance incorporates the definition of “expatriate health plans” that appears in the FAQs, it is not clear that the guidance extends to self-insured plans. Based on our informal conversations with IRS staff, however, we think the IRS intended to extend the same interim relief to insured and self-insured plans. If the FAQs are a reasonable interpretation of the EHCCA for insured plans, the FAQs might also be a reasonable interpretation of the EHCCA for self-insured plans.
Scope of Interim Relief
Until further guidance is issued, the following rules generally apply:
- ACA’s Market Reforms. Under the FAQs, expatriate health plans do not have to comply with ACA’s market reforms as long as they continue to comply with the pre-ACA mandates, such as the mental health parity provisions, the HIPAA nondiscrimination requirements, the ERISA claims procedures, and ERISA reporting and disclosure obligations.
- Minimum Essential Coverage and Reporting. Under both the FAQs and the EHCCA, coverage provided under an expatriate health plan is minimum essential coverage. Providers of minimum essential coverage and applicable large employers must comply with ACA’s reporting requirements in Code sections 6055 and 6056. However, for expatriate health plans, statements to individuals reporting minimum essential coverage under Code section 6055 or offers of employer coverage under Code section 6056 may be furnished electronically unless the recipient refuses to consent to that format.
- PCORI Fees. The good faith rules do not apply to PCORI fees (paid by insurers and plan sponsors of self-insured plans) or payment of fees by insurers under Code section 9010. Previously issued special rules, which may exempt designated expatriate arrangements, apply to the payment of these fees.
Plan sponsors have the opportunity to shape the forthcoming guidance and any transition relief provided by the agencies. The regulatory agencies have solicited comments regarding the statute and the interaction of the EHCCA with existing relief for expatriate plans. Comments are due by October 19, 2015.