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In late 2014, Congress enacted a law intended to clarify how the requirements of the Affordable Care Act (ACA) applied to health insurance provided to US expatriates—both US nationals abroad and foreign nationals in the US. The Expatriate Health Coverage Clarification Act of 2014, known as EHCCA, exempts some expat coverage from several thorny ACA-related requirements, and treats the coverage as adequate for both the individual and employer mandates (i.e., “minimum essential coverage” or MEC). For more information on EHCCA generally, please see an earlier blog post.

As you can imagine, several specific and potentially difficult requirements must be met for an expatriate plan to qualify for such special treatment.

Until now, the federal agencies responsible for enforcing the ACA have offered only vague guidance on these qualification requirements. It’s easy enough to say that the special treatment applies to “expatriate health plans”  issued by an “expatriate health insurance issuer or administered by an expatriate health plan administrator,” if substantially all of the “primary enrollees” are “qualified expatriates” . . . but what do those phrases mean?

At long last, the federal agencies issued proposed regulations that will apply for plan and policy years beginning on or after Jan. 1, 2017.

We won’t regurgitate the numerous requirements of EHCCA and how they apply to expatriate insurance. Instead, we’ll concentrate on how the regulations address some of the unresolved issues under the law.

  • “Substantially All” Means at Least 95 percent. To qualify as an expatriate health plan under EHCAA, substantially all of the plan’s enrollees must be qualified expatriates. The proposed rules define “substantially all” to mean that less than 5 percent of the primary enrollees (or less than five primary enrollees, if greater) are not qualified expatriates, as determined on the first day of the plan or policy year (effectively, a 95 percent threshold).
  • Individual Coverage and Coverage Issued by Non-U.S. Insurers.  In order to be considered minimum essential coverage (MEC) under EHCCA, individual coverage must either be obtained through a state exchange or must receive specific approval from HHS. Coverage provided directly by a foreign government and foreign individual insured coverage must also receive specific HHS approval. The proposed rules do not change the current interim guidance regarding foreign group health plans provided by insurance regulated by a foreign government.  While foreign group coverage is considered MEC for expatriates who meet specific qualifications, it remains unclear whether the insurer or the employer (or either of the two) is responsible for complying with applicable IRS tax reporting rules and which version of Forms 1095 should be submitted.
  • Actuarial Value. To qualify under EHCAA, the expat plan must have an actuarial value of at least 60 percent (often referred to as minimum value under the ACA). The proposed rules allow the employer/plan sponsor to rely on reasonable representations made by the insurer that the program provides minimum value.
  • Required Benefits. Plans will qualify under EHCAA must still meet certain benefit offering requirements. Important for this discussion, substantially all of the plan’s benefits cannot be excepted benefits (dental, vision, accident, critical illness, etc.). Here the regulators also used a 95 percent threshold as the definition of substantially all (i.e., less than 5% of the plan’s benefits must be excepted benefits).
  • Travel Insurance. The proposed rules would treat travel insurance (defined below) as an excepted benefit that is outside the scope of the ACA and EHCAA. To qualify as such, the coverage cannot provide only health insurance benefits, but must include a suite of services such as trip interruption insurance, coverage for lost luggage, rental car damage, and so on. The covered planned travel must also be less than six months.
  • Electronic Delivery of ACA Tax Forms. EHCAA allows the IRS tax forms (1095-B or 1095-C) to be supplied electronically to the enrollee (expat) without consent, unless the enrollee explicitly refuses electronic delivery. The proposed rules require the enrollee be notified 30 days prior to the forms’ due date that the form will be provided electronically unless the enrollee opts out.

The agencies will accept comments on the proposed rules through August 9, 2016. Written comment submissions may be submitted to CC:PA:LPD:PR (REG-135702-15), Internal Revenue Service, PO Box 7604, Ben Franklin 3 Station, Washington DC 20044.