IRS, DOL, HHS, issue expatriate health plan proposed regulations

The Departments the Treasury, Labor, and Health and Human Services have issued proposed regulations on the rules for expatriate health plans, expatriate health plan issuers, and qualified expatriates under the Expatriate Health Coverage Clarification Act of 2014 (EHCCA), (P.L. 113-235). The regulations are proposed to be applicable for plan years (or, in the individual market, policy years) beginning on or after January 1, 2017. Issuers, employers, administrators, and individuals are permitted to rely on these proposed regulations pending the applicability date of final regulations.

The EHCCA provides that the Affordable Care Act (ACA) generally does not apply to expatriate health plans, employers with respect to expatriate health plans (but solely in their capacity as plan sponsors of expatriate health plans), and expatriate health insurance issuers with respect to coverage offered by such issuers under expatriate health plans. The proposed regulations follow the EHCCA by providing that the ACA market reforms do not apply to an expatriate health plan, an employer solely in its capacity as plan sponsor of an expatriate health plan, and an expatriate health insurance issuer with respect to coverage under an expatriate health plan. The $500,000 limit under Code Sec. 162(m)(6) on the allowable deduction for remuneration attributable to services performed by certain individuals for a covered health insurance provider does not apply to an expatriate health insurance issuer with respect to premiums received for coverage under an expatriate health plan. Furthermore, the Patient-Centered Outcomes Research Trust Fund fee under Code Secs. 4375 and 4376 does not apply to expatriate health plans.

The proposed regulations define “expatriate health plan” as a plan offered to qualified expatriates and that satisfies certain requirements. Substantially all primary enrollees in the expatriate health plan must be qualified expatriates. A plan satisfies the “substantially all” enrollment requirement if, on the first day of the plan year, less than 5 percent of the primary enrollees (or less than 5 primary enrollees if greater) are not qualified expatriates (effectively a 95 percent threshold).

An expatriate health plan must provide coverage for inpatient hospital services, outpatient facility services, physician services, and emergency services. Coverage for such services must be available in certain countries depending on the type of qualified expatriates covered by the plan. Substantially all of the benefits provided under an expatriate health plan must be benefits that are not excepted benefits.

The plan sponsor must reasonably believe that benefits provided by the plan satisfy the minimum value requirements. A plan sponsor may rely on the reasonable representations of the issuer or administrator regarding whether benefits offered by the group health plan or issuer satisfy the minimum value requirements unless the plan sponsor knows or has reason to know that the benefits fail to satisfy the minimum value requirements.

In the case of an expatriate health plan that provides dependent coverage of children, the proposed regulations provide that such coverage must be available until the individual attains age 26, unless the individual is the child of a child receiving dependent coverage. Additionally, the plan or coverage must offer reimbursements for items or services in the local currency in eight or more countries.

The proposed regulations limit the ability of a group health plan or group health insurance issuer to impose preexisting condition exclusions, including a requirement that the period of any preexisting condition exclusion be reduced by the length of any period of creditable coverage the individual had without a 63-day break in coverage.

Comments Requested. The Departments request comments on the assumptions used to evaluate the economic impact of these proposed regulations, including specific data and information on the number of expatriate health plans. Comments are due on or before August 10, 2016. Written comments, identified by “Expatriate Health Plans and other issues,” may be submitted to CC:PA:LPD:PR (REG-135702-15), Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington D.C. 20044; or hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-135702-15) or vial the Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.

SOURCE: 81 FR 38020, June 10, 2016.

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