The U.S. Department of Health and Human Services (HHS) has indicated that it will not require insurers in the U.S. territories to comply with some of the Affordable Care Act’s (ACA’s) insurance market reforms. The U.S. territories include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa and the Northern Mariana Islands.
In a letter to the Commissioner of Insurance of Puerto Rico, HHS indicated that it won’t enforce against insurers a number of ACA provisions that would otherwise apply to health insurance issued in the U.S. territories, due to the concerns about “undermining the stability of the territories’ health insurance markets.” The market reforms that won’t apply include medical loss ratio (MLR) rebates, guaranteed issue and other rating requirements that apply to individual and small group coverage. Other ACA-imposed insurance mandates will continue to apply in the U.S. territories, however, including coverage of adult children to age 26, a ban on preexisting condition exclusions, and a maximum 90-day waiting period.
What does this mean for employers in the U.S. territories? Not much, as the HHS’s exemption only applies to health insurance coverage issued in the U.S. territories. Because the ERISA law applies in the U.S. territories, employers who are subject to ERISA and who offer coverage there must continue to comply with the ACA mandates that are included in ERISA (e.g., the ban on preexisting condition exclusions, prohibitions on annual or lifetime dollar limits on essential health benefits, etc.).
However, the employer and individual mandates are moot in the U.S. territories because U.S. tax law does not apply. For example, Puerto Rico operates under its own tax law that does not currently include the employer or individual mandate. In addition, residents of the U.S. territories are deemed to satisfy the individual mandate, even if they do not have health insurance coverage.