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.

Background

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.
Continue Reading Interim Guidance for Expatriate Health Plans

By now, employers who sponsor self-insured medical plans are familiar with the fees they must pay to fund Patient-Centered Outcomes Research (“PCORI”) and the Transitional Reinsurance Program. This post describes a detail that can have a significant effect on the amount that each sponsor must pay.

Both fees are calculated as a dollar amount per covered life.  The implementing regulations describe three ways to determine the number of covered lives:

  1. Actual count (averaging), where you count the number of covered lives on each day of a period (a year for the PCORI fee and 9 months for the Reinsurance fee), and then divide by the number of days;
  2. Snapshot, where you count the number of covered lives on one or more days per calendar quarter and then divide by the number of days; and
  3. Form 5500, where the number of covered lives is based on the number of participants reported on the plan’s Form 5500.

There are minor differences in the calculations for the PCORI fee and the Reinsurance fee.  Those differences and other details are not discussed in this post.

Whereas the actual count and snapshot methods require counting every person in the plan–including employees, spouses, and dependents–the Form 5500 method offers a shortcut that can produce significant savings for large employers.  Instead of actually counting covered lives, the plan sponsor simply deems the number of covered lives to be the number of participants at the beginning of the year plus the number of participants at the end of the year.

The reason for this shortcut is that a Form 5500 reports only the number of participants, and not spouses or dependents.  The shortcut assumes an average of one spouse or dependent per participant.  For plans that have an average of more than one spouse or dependent per participant, this shortcut will result in savings.
Continue Reading Potential Savings Opportunity for Sponsors of Self-Insured Medical Plans