IRS Issues Special Rule To Exclude Expatriate Health Plans From Annual Fee On Health Insurers

In Notice 2015-29, the IRS has provided a special rule to exclude expatriate health plans from the annual fee imposed on insurers of U.S. health risks for the 2014 and 2015 fee years. The fee is imposed by section 9010 of the Patient Protection and Affordable Care Act (ACA). Expatriate policies are defined by the Department of Health and Human Services (HHS) as group health insurance policies that provide coverage to employees, substantially all of whom are: (1) working outside their country of citizenship; (2) working outside their country of citizenship and outside the employer’s country of domicile; or (3) non-U.S. citizens working in their home country.

Congress’s enactment of the Expatriate Health Coverage Clarification Act of 2014 (EHCCA) led to the special rule provided by this Notice. The EHCCA specifically excludes expatriate health plans issued or renewed on or after July 1, 2015, from the section 9010 fee. In addition, section 3(c)(2) of the EHCCA provides a special rule only for fee years 2014 and 2015 under which the fee of a covered entity with expatriate health plans is proportionally reduced to account for its net premiums written for those plans.

The notice provides one procedure for covered entities that filed the Supplemental Health Care Exhibits (SHCEs) for 2014, 2015, or both with the National Association of Insurance Commissioners (NAIC) in which it reported direct premiums written for expatriate health plans and included some or all of those direct premiums on its Form 8963, Report of Health Insurance Provider Information. Such an entity must attach a statement to its 2015 Form 8963 certifying, with respect to 2014: (1) the aggregate dollar amount of direct premiums written for expatriate health plans reported on its SHCE(s); and (2) the amount of direct premiums written for expatriate health plans that the covered entity excluded under Notice 2014-24, which permitted an entity to exclude 50 percent of this aggregate amount. With respect to 2015, such covered entities must certify the aggregate dollar amount of direct premiums written for expatriate health plans reported on the SHCE(s) for 2015 and included in direct premiums written on its 2015 Form 8963.

A non-SHCE filer must attach a statement to its 2015 Form 8963 certifying: (1) the aggregate dollar amount of direct premiums written for expatriate health plans included on its 2014 Form 8963; (2) the aggregate dollar amount of direct premiums written for expatriate health plans that it included on its 2015 Form 8963; and (3) the source of information that the covered entity has available for determining direct premiums written for expatriate health plans for 2014 and 2015.

The IRS will apply the special rule for both the 2014 and 2015 fee years by adjusting the 2015 fee rather than by issuing refunds. Specifically, the IRS will subtract from the 2015 fee the amount attributable to premiums written for expatriate health plans for the 2014 and the 2015 fee years.

For more information, visit http://www.irs.gov/pub/irs-drop/n-15-29.pdf.

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