[Federal Register Volume 81, Number 112 (Friday, June 10, 2016)]
[Proposed Rules]
[Pages 38020-38048]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-13583]
[[Page 38019]]
Vol. 81
Friday,
No. 112
June 10, 2016
Part VI
Department of the Treasury
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Internal Revenue Service
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26 CFR Parts 1, 46, et al.
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Department of Labor
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Employee Benefits Security Administration
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29 CFR Part 2590
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Department of Health and Human Services
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45 CFR Parts 144, 146, et al.
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Expatriate Health Plans, Expatriate Health Plan Issuers, and Qualified
Expatriates; Excepted Benefits; Lifetime and Annual Limits; and Short-
Term, Limited-Duration Insurance; Proposed Rule
Federal Register / Vol. 81 , No. 112 / Friday, June 10, 2016 /
Proposed Rules
[[Page 38020]]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1, 46, 54, 57, and 301
[REG-135702-15]
RIN 1545-BN44
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Part 2590
RIN 1210-AB75
DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Parts 144, 146, 147, 148, and 158
[CMS-9932-P]
RIN 0938-AS93
Expatriate Health Plans, Expatriate Health Plan Issuers, and
Qualified Expatriates; Excepted Benefits; Lifetime and Annual Limits;
and Short-Term, Limited-Duration Insurance
AGENCY: Internal Revenue Service, Department of the Treasury; Employee
Benefits Security Administration, Department of Labor; Centers for
Medicare & Medicaid Services, Department of Health and Human Services.
ACTION: Proposed rule.
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SUMMARY: This document contains 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). This document also includes proposed conforming
amendments to certain regulations to implement the provisions of the
EHCCA. Further, this document proposes standards for travel insurance
and supplemental health insurance coverage to be considered excepted
benefits and revisions to the definition of short-term, limited-
duration insurance for purposes of the exclusion from the definition of
individual health insurance coverage. These proposed regulations affect
expatriates with health coverage under expatriate health plans and
sponsors, issuers and administrators of expatriate health plans,
individuals with and plan sponsors of travel insurance and supplemental
health insurance coverage, and individuals with short-term, limited-
duration insurance. In addition, this document proposes to amend a
reference in the final regulations relating to prohibitions on lifetime
and annual dollar limits and proposes to require that a notice be
provided in connection with hospital indemnity and other fixed
indemnity insurance in the group health insurance market for it to be
considered excepted benefits.
DATES: Comments are due on or before August 9, 2016.
ADDRESSES: Comments, identified by ``Expatriate Health Plans and other
issues,'' may be submitted by one of the following methods:
Hand delivery or mail: Written comment submissions may be submitted
to CC:PA:LPD:PR (REG-135702-15), Internal Revenue Service, P.O. Box
7604, Ben Franklin Station, Washington, DC 20044. Comment submissions
may be hand-delivered Monday through Friday between the hours of 8 a.m.
and 4 p.m. to CC:PA:LPD:PR (REG-135702-15).
Federal eRulemaking Portal: http://www.regulations.gov. Follow the
instructions for submitting comments.
Comments received will be posted without change to
www.regulations.gov and available for public inspection. Any comment
that is submitted will be shared with the Department of Labor (DOL) and
Department of Health and Human Services (HHS). Warning: Do not include
any personally identifiable information (such as name, address, or
other contact information) or confidential business information that
you do not want publicly disclosed. All comments may be posted on the
Internet and can be retrieved by most Internet search engines. No
deletions, modifications, or redactions will be made to the comments
received, as they are public records.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
with respect to the treatment of expatriate health plan coverage as
minimum essential coverage under section 5000A of the Internal Revenue
Code, John Lovelace, at 202-317-7006; with respect to the provisions
relating to the health insurance providers fee imposed by section 9010
of the Affordable Care Act, Rachel Smith, at 202-317-6855; with respect
to the definition of expatriate health plans, expatriate health
insurance issuers, and qualified expatriates, and the provisions
relating to the market reforms (such as excepted benefits, and short-
term, limited-duration coverage), R. Lisa Mojiri-Azad of the IRS Office
of Chief Counsel, at 202-317-5500, Elizabeth Schumacher or Matthew
Litton of the Department of Labor, at 202-693-8335, Jacob Ackerman of
the Centers for Medicare & Medicaid Services, Department of Health and
Human Services, at 301-492-4179. Concerning the submission of comments
or to request a public hearing, Regina Johnson. (202) 317-6901 (not
toll-free numbers).
Customer Service Information: Individuals interested in obtaining
information from the Department of Labor concerning employment-based
health coverage laws may call the EBSA Toll-Free Hotline, at 1-866-444-
EBSA (3272) or visit the Department of Labor's Web site (http://www.dol.gov/ebsa). In addition, information from HHS on private health
insurance for consumers can be found on the Centers for Medicare &
Medicaid Services (CMS) Web site (www.cms.gov/cciio) and information on
health reform can be found at www.HealthCare.gov.
SUPPLEMENTARY INFORMATION:
I. Background
This document contains proposed amendments to Department of the
Treasury (Treasury Department) regulations at 26 CFR part 1 (Income
taxes), 26 CFR part 46 (Excise taxes, Health care, Health insurance,
Pensions, Reporting and recordkeeping requirements), 26 CFR part 54
(Pension and excise taxes), 26 CFR part 57 (Health insurance providers
fee), and 26 CFR part 301 (relating to procedure and administration) to
implement the rules for expatriate health plans, expatriate health plan
issuers, and qualified expatriates under the Expatriate Health Coverage
Clarification Act of 2014 (EHCCA), which was enacted as Division M of
the Consolidated and Further Continuing Appropriations Act, 2015,
Public Law 113-235 (128 Stat. 2130). This document also contains
proposed amendments to DOL regulations at 29 CFR part 2590 and HHS
regulations at 45 CFR part 147, which are substantively identical to
the amendments to 26 CFR part 54.
The EHCCA generally provides that the requirements of the
Affordable Care Act \1\ (ACA) do not apply with respect to expatriate
health plans, expatriate health insurance issuers for coverage under
expatriate health plans, and employers in their capacity as plan
sponsors of expatriate health plans, except that: (1) An expatriate
health plan shall be treated as minimum essential coverage under
section
[[Page 38021]]
5000A(f) of the Internal Revenue Code of 1986, as amended (the Code)
and any other section of the Code that incorporates the definition of
minimum essential coverage; (2) the employer shared responsibility
provisions of section 4980H of the Code continue to apply; (3) the
health care reporting provisions of sections 6055 and 6056 of the Code
continue to apply but with certain modifications relating to the use of
electronic media for required statements to enrollees; (4) the excise
tax provisions of section 4980I of the Code continue to apply with
respect to coverage of certain qualified expatriates who are assigned
(rather than transferred) to work in the United States; and (5) the
annual health insurance providers fee imposed by section 9010 of the
ACA takes into account expatriate health insurance issuers for certain
purposes for calendar years 2014 and 2015 only.
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\1\ The Patient Protection and Affordable Care Act, Public Law
111-148, was enacted on March 23, 2010, and the Health Care and
Education Reconciliation Act, Public Law 111-152, was enacted on
March 30, 2010. They are collectively known as the ``Affordable Care
Act.''
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This document also contains proposed amendments to 26 CFR part 54,
29 CFR part 2590, and 45 CFR parts 146 and 148, which would specify
conditions for travel insurance, supplemental health insurance
coverage, and hospital indemnity and other fixed indemnity insurance to
be considered excepted benefits. Excepted benefits are exempt from the
requirements that generally apply under title XXVII of the Public
Health Service Act (PHS Act), part 7 of the Employee Retirement Income
Security Act of 1974, as amended (ERISA), and Chapter 100 of the Code.
In addition, this document contains proposed amendments to (1) the
definition of ``short-term, limited-duration insurance,'' for purposes
of the exclusion from the definition of ``individual health insurance
coverage'' and (2) the definition of ``essential health benefits,'' for
purposes of the prohibition on annual and lifetime dollar limits in 26
CFR part 54, 29 CFR 2590, and 45 CFR parts 144 and 147.
This document clarifies an exemption set forth in 45 CFR
153.400(a)(1)(iii) related to the transitional reinsurance program.
Section 1341 of the Affordable Care Act provides for the establishment
of a transitional reinsurance program in each State to help pay the
cost of treating high-cost enrollees in the individual market in the
2014 through 2016 benefit years. Section 1341(b)(3)(B) of the ACA and
45 CFR 153.400(a)(1) require contributing entities to make reinsurance
contributions for major medical coverage that is considered to be part
of a commercial book of business.
This document also contains proposed conforming amendments to 45
CFR part 158 that address the separate medical loss ratio (MLR)
reporting requirements for expatriate policies that are not expatriate
health plans under the EHCCA.
General Statutory Background and Enactment of ACA
The Health Insurance Portability and Accountability Act of 1996
(HIPAA), Public Law 104-191 (110 Stat. 1936), added title XXVII of the
PHS Act, part 7 of ERISA, and Chapter 100 of the Code, which impose
portability and nondiscrimination rules with respect to health
coverage. These provisions of the PHS Act, ERISA, and the Code were
later augmented by other consumer protection laws, including the Mental
Health Parity Act of 1996, the Paul Wellstone and Pete Domenici Mental
Health Parity and Addiction Equity Act of 2008, the Newborns' and
Mothers' Health Protection Act, the Women's Health and Cancer Rights
Act, the Genetic Information Nondiscrimination Act of 2008, the
Children's Health Insurance Program Reauthorization Act of 2009,
Michelle's Law, and the ACA.
The ACA reorganizes, amends, and adds to the provisions of part A
of title XXVII of the PHS Act relating to group health plans and health
insurance issuers in the group and individual markets. For this
purpose, the term ``group health plan'' includes both insured and self-
insured group health plans.\2\ The ACA added section 715(a)(1) of ERISA
and section 9815(a)(1) of the Code to incorporate the provisions of
part A of title XXVII of the PHS Act (generally, sections 2701 through
2728 of the PHS Act) into ERISA and the Code to make them applicable to
group health plans and health insurance issuers providing health
insurance coverage in connection with group health plans.
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\2\ The term ``group health plan'' is used in title XXVII of the
PHS Act, part 7 of ERISA, and Chapter 100 of the Code, and is
distinct from the term ``health plan,'' as used in other provisions
of title I of the ACA. The term ``health plan'' does not include
self-insured group health plans.
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Expatriate Health Plans, Expatriate Health Plan Issuers and Qualified
Expatriates
Prior to the enactment of the EHCCA, employers, issuers and covered
individuals had expressed concerns about the application of the ACA
market reform rules to expatriate health plans and whether coverage
under expatriate health plans was minimum essential coverage for
purposes of section 5000A of the Code. To address these concerns on an
interim basis, on March 8, 2013, the Departments of Labor, HHS, and the
Treasury (collectively, the Departments \3\) issued Affordable Care Act
Implementation Frequently Asked Questions (FAQs) Part XIII, Q&A-1,
providing relief from the ACA market reform requirements for certain
expatriate group health insurance coverage.\4\ For plan years ending on
or before December 31, 2015, the FAQ provides that, with respect to
expatriate health plans, the Departments will consider the requirements
of subtitles A and C of title I of the ACA to be satisfied if the plan
and issuer comply with the pre-ACA version of title XXVII of the PHS
Act. For purposes of the relief, an expatriate health plan is an
insured group health plan with respect to which enrollment is limited
to primary insureds who reside outside of their home country for at
least six months of the plan year and any covered dependents, and its
associated group health insurance coverage. The FAQ also states that
coverage provided under an expatriate group health plan is a form of
minimum essential coverage under section 5000A of the Code. On January
9, 2014, the Departments issued Affordable Care Act Implementation FAQs
Part XVIII, Q&A-6 and Q&A-7, which extended the relief of Affordable
Care Act Implementation FAQs Part XIII, Q&A-1 for insured expatriate
health plans to subtitle D of title I of the ACA and also provided that
the relief from the requirements of subtitles A, C, and D of title I of
the ACA would apply for plan years ending on or before December 31,
2016.\5\
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\3\ Note, however, that in sections under headings listing only
two of the three Departments, the term ``Departments'' generally
refers only to the two Departments listed in the heading.
\4\ Frequently Asked Questions about Affordable Care Act
Implementation (Part XIII), available at http://www.dol.gov/ebsa/pdf/faq-aca13.pdf and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/ACA_implementation_faq13.html.
\5\ Frequently Asked Questions about Affordable Care Act
Implementation (Part XVIII), available at https://www.dol.gov/ebsa/faqs/faq-aca18.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs18.html.
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Subsequently, the EHCCA was enacted on December 16, 2014. Section
3(a) of the EHCCA provides that the 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 these plans, and
expatriate health insurance issuers with respect to coverage offered by
such issuers under expatriate health plans. Under section 3(b) of the
EHCCA, however, the ACA continues to apply to expatriate health plans
with respect to the employer shared responsibility provisions of
section 4980H of the Code, the reporting requirements of sections 6055
and 6056
[[Page 38022]]
of the Code, and the excise tax provisions of section 4980I of the
Code. Section 3(b) of the EHCCA further provides that an expatriate
health plan offered to primary enrollees described in sections
3(d)(3)(A) and (B) of the EHCCA shall be treated as an eligible
employer sponsored plan under section 5000A(f)(2) of the Code, and that
an expatriate health plan offered to primary enrollees described in
section 3(d)(3)(C) of the EHCCA shall be treated as a plan in the
individual market under section 5000A(f)(1)(C) of the Code. Section
3(c) of the EHCCA sets forth rules for expatriate health plans with
respect to the annual health insurance providers fee imposed by section
9010 of the ACA.
Sections 4375 and 4376 of the Code impose the Patient-Centered
Outcomes Research Trust Fund (PCORTF) fee only with respect to
individuals residing in the United States. Final regulations regarding
the PCORTF fee exempt any specified health insurance policy or
applicable self-insured group health plan designed and issued
specifically to cover employees who are working and residing outside
the United States from the fee. The exclusion from the ACA for
expatriate health plans, employers with respect to expatriate health
plans but solely in their capacity as plan sponsors of these plans, and
expatriate health insurance issuers with respect to coverage offered by
such issuers under expatriate health plans would apply to the PCORTF
fee to the extent an expatriate health plan was not already excluded
from the fee.
Section 1341 of the ACA establishes a transitional reinsurance
program to help stabilize premiums for non-grandfathered health
insurance coverage in the individual health insurance market from 2014
through 2016. Section 1341(b)(3)(B) of the ACA and the implementing
regulations at 45 CFR 153.400(a)(1) require health insurance issuers
and certain self-insured group health plans (``contributing entities'')
to make reinsurance contributions for major medical coverage that is
considered to be part of a commercial book of business. This language
has been interpreted to exclude ``expatriate health coverage.'' \6\ As
such, HHS regulation at 45 CFR 153.400(a)(1)(iii) provides that a
contributing entity must make reinsurance contributions for lives
covered by its self-insured group health plans and health insurance
coverage, except to the extent that such plan or coverage is expatriate
health coverage, as defined by the Secretary of HHS, or for the 2015
and 2016 benefit years only, is a self-insured group health plan with
respect to which enrollment is limited to participants who reside
outside of their home country for at least six months of the plan year
and any covered dependents of such participants. As noted in the March
8, 2013 Affordable Care Act Implementation FAQs Part XIII, Q&A-1, the
FAQ definition of ``expatriate health plan'' was extended to the
definition of ``expatriate health coverage'' under 45 CFR
153.400(a)(1)(iii).
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\6\ See HHS Notice of Benefit and Payment Parameters for 2014
(78 FR 15410) (March 11, 2013) and HHS Notice of Benefit and Payment
Parameters for 2016 (80 FR 10750) (February 27, 2015).
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Section 3(a) of the EHCCA provides that the 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. Accordingly, under the EHCCA, the transitional reinsurance
program contribution obligation under section 1341 of the ACA does not
apply to expatriate health plans.
Section 5000A of the Code, as added by section 1501 of the ACA,
provides that, for each month, taxpayers must have minimum essential
coverage, qualify for a health coverage exemption, or make an
individual shared responsibility payment when filing a federal income
tax return. Section 5000A(f)(1)(B) of the Code provides that minimum
essential coverage includes coverage under an eligible employer-
sponsored plan. Section 5000A(f)(2) of the Code and 26 CFR 1.5000A-2(c)
provide that an eligible employer-sponsored plan means, with respect to
an employee, group health insurance coverage that is a governmental
plan or any other plan or coverage offered in the small or large group
market within a State, or a self-insured group health plan. Under
section 5000A(f)(1)(C) of the Code, minimum essential coverage includes
coverage under a health plan offered in the individual market within a
State.
Section 3(b)(1)(A) of the EHCCA provides that an expatriate health
plan that is offered to primary enrollees who are qualified expatriates
described in sections 3(d)(3)(A) and 3(d)(3)(B) of the EHCCA is treated
as an eligible employer-sponsored plan within the meaning of section
5000A(f)(2) of the Code. Section 3(b)(1)(B) of the EHCCA provides that,
in the case of an expatriate health plan that is offered to primary
enrollees who are qualified expatriates described in section 3(d)(3)(C)
of the EHCCA, the coverage is treated as a plan in the individual
market within the meaning of section 5000A(f)(1)(C) of the Code, for
purposes of sections 36B, 5000A and 6055 of the Code.
Under section 6055 of the Code, as added by section 1502 of the
ACA, providers of minimum essential coverage must file an information
return with the Internal Revenue Service (IRS) and furnish a written
statement to covered individuals reporting the months that an
individual had minimum essential coverage. Under section 6056 of the
Code, as added by section 1514 of the ACA, an applicable large employer
(as defined in section 4980H(c)(2) of the Code and 26 CFR 54.4980H-
1(a)(4) and 54.4980H-2) must file an information return with the IRS
and furnish a written statement to its full-time employees reporting
details regarding the minimum essential coverage, if any, offered by
the employer. Under both sections 6055 and 6056 of the Code, reporting
entities may satisfy the requirement to furnish statements to covered
individuals and employees, respectively, by electronic means only if
the individual or employee affirmatively consents to receiving the
statements electronically.\7\
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\7\ See 26 CFR 1.6055-2(a)(2)(i) and 301.6056-2(a)(2)(i).
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Under section 4980H of the Code, as added by section 1513 of the
ACA, an applicable large employer that does not offer minimum essential
coverage to its full-time employees (and their dependents) or offers
minimum essential coverage that does not meet the standards for
affordability and minimum value will owe an assessable payment if a
full-time employee is certified as having enrolled in a qualified
health plan on an Exchange with respect to which a premium tax credit
is allowed with respect to the employee.
Section 3(b)(2) of the EHCCA provides that the reporting
requirements of sections 6055 and 6056 of the Code and the provisions
of section 4980H of the Code relating to the employer shared
responsibility provisions for applicable large employers continue to
apply with respect to expatriate health plans and qualified
expatriates. Section 3(b)(2) of the EHCCA provides a special rule for
the use of electronic media for statements required under sections 6055
and 6056 of the Code. Specifically, the required statements may be
provided to a primary insured for coverage under an expatriate health
plan using electronic media unless the primary insured has explicitly
refused to consent to receive the statement electronically.
[[Page 38023]]
Section 4980I of the Code, as added by section 9001 of the ACA,
imposes an excise tax if the aggregate cost of applicable employer-
sponsored coverage provided to an employee exceeds a statutory dollar
limit. Section 3(b)(2) of the EHCCA provides that section 4980I of the
Code continues to apply to applicable employer-sponsored coverage (as
defined in section 4980I(d)(1) of the Code) of a qualified expatriate
(as described in section 3(d)(3)(A)(i) of the EHCCA) who is assigned
(rather than transferred) to work in the United States.
Section 9010 of the ACA imposes a fee on covered entities engaged
in the business of providing health insurance for United States health
risks. Section 3(c)(1) of the EHCCA excludes expatriate health plans
from the health insurance providers fee imposed by section 9010 of the
ACA by providing that, for calendar years after 2015, a qualified
expatriate (and any spouse, dependent, or any other individual enrolled
in the plan) enrolled in an expatriate health plan is not considered a
United States health risk. Section 3(c)(2) of the EHCCA provides a
special rule solely for purposes of determining the health insurance
providers fee imposed by section 9010 of the ACA for the 2014 and 2015
fee years.
Section 162(m)(6) of the Code, as added by section 9014 of the ACA,
in general, limits to $500,000 the allowable deduction for remuneration
attributable to services performed by certain individuals for a covered
health insurance provider. For taxable years beginning after December
31, 2012, section 162(m)(6)(C)(i) of the Code and 26 CFR 1.162-
31(b)(4)(A) provide that a health insurance issuer is a covered health
insurance provider if not less than 25 percent of the gross premiums
that it receives from providing health insurance coverage during the
taxable year are from minimum essential coverage. Section 3(a)(3) of
the EHCCA provides that the provisions of the ACA (including section
162(m)(6) of the Code) do not apply to expatriate health insurance
issuers with respect to coverage offered by such issuers under
expatriate health plans.
Section 3(d)(2) of the EHCCA provides that an expatriate health
plan means a group health plan, health insurance coverage offered in
connection with a group health plan, or health insurance coverage
offered to certain groups of similarly situated individuals, provided
that the plan or coverage meets a number of specific requirements.
Section 3(d)(2)(A) of the EHCCA provides that substantially all of the
primary enrollees of an expatriate health plan must be qualified
expatriates. For this purpose, primary enrollees do not include
individuals who are not nationals of the United States and reside in
the country of their citizenship. Section 3(d)(2)(B) of the EHCCA
provides that substantially all of the benefits provided under a plan
or coverage must be benefits that are not excepted benefits. Section
3(d)(2)(C) of the EHCCA provides that the plan or coverage must provide
coverage for inpatient hospital services, outpatient facility services,
physician services, and emergency services that are comparable to the
emergency services coverage that was described in or offered under 5
U.S.C. 8903(1) for the 2009 plan year.\8\ Also, coverage for these
services must be provided in certain countries. For qualified
expatriates described in section 3(d)(3)(A) of the EHCCA (category A)
and qualified expatriates described in section 3(d)(3)(B) of the EHCCA
(category B), coverage for these services must be provided in the
country or countries where the individual is working, and such other
country or countries as the Secretary of HHS, in consultation with the
Secretary of the Treasury and the Secretary of Labor, may designate.
For qualified expatriates who are members of a group of similarly
situated individuals described in section 3(d)(3)(C) of the EHCCA
(category C), the coverage must be provided in the country or countries
that the Secretary of HHS, in consultation with the Secretary of the
Treasury and the Secretary of Labor, may designate.
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\8\ These are emergency services comparable to emergency
services offered under a government-wide comprehensive health plan
under the Federal Employees Health Benefits (FEHB) program prior to
the enactment of the ACA.
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Section 3(d)(2)(D) of the EHCCA provides that a plan qualifies as
an expatriate health plan under the EHCCA only if the plan sponsor
reasonably believes that benefits under the plan satisfy a standard at
least actuarially equivalent to the level provided for in section
36B(c)(2)(C)(ii) of the Code (that is, ``minimum value''). Section
3(d)(2)(E) of the EHCCA provides that dependent coverage of children,
if offered under the expatriate health plan, must continue to be
available until the individual attains age 26 (unless the individual is
the child of a child receiving dependent coverage). Section 3(d)(2)(G)
of the EHCCA provides that an expatriate health plan must satisfy the
provisions of title XXVII of the PHS Act, Chapter 100 of the Code, and
part 7 of subtitle B of title I of ERISA, that would otherwise apply if
the ACA had not been enacted. These provisions are sometimes referred
to as the HIPAA portability and nondiscrimination requirements.
Section 3(d)(1) of the EHCCA provides that an expatriate health
insurance issuer means a health insurance issuer that issues expatriate
health plans. Section 3(d)(2)(F)(i) of the EHCCA provides that an
expatriate health plan or coverage must be issued by an expatriate
health plan issuer, or administered by an administrator, that together
with any person in the issuer's or administrator's controlled group:
(1) Maintains network provider agreements that provide for direct
claims payments (directly or through third-party contracts), with
health care providers in eight or more countries; (2) maintains call
centers (directly or through third-party contracts) in three or more
countries and accepts calls in eight or more languages; (3) processes
at least $1 million in claims in foreign currency equivalents each
year; (4) makes global evacuation/repatriation coverage available; (5)
maintains legal and compliance resources in three or more countries;
and (6) has licenses to sell insurance in more than two countries. In
addition, section 3(d)(2)(F)(ii) of the EHCCA provides that the plan or
coverage must offer reimbursement for items or services under such plan
or coverage in the local currency in eight or more countries.
Section 3(d)(3) of the EHCCA describes three categories of
qualified expatriates. A category A qualified expatriate, under section
3(d)(3)(A) of the EHCCA, is an individual whose skills, qualifications,
job duties, or expertise has caused the individual's employer to
transfer or assign the individual to the United States for a specific
and temporary purpose or assignment tied to the individual's employment
and who the plan sponsor has reasonably determined requires access to
health insurance and other related services and support in multiple
countries, and is offered other multinational benefits on a periodic
basis (such as tax equalization, compensation for cross-border moving
expenses, or compensation to enable the expatriate to return to the
expatriate's home country). A category B qualified expatriate, under
section 3(d)(3)(B) of the EHCCA, is a primary insured who is working
outside the United States for at least 180 days during a consecutive
12-month period that overlaps with the plan year. A category C
qualified expatriate, under section 3(d)(3)(C) of the EHCCA, is an
individual who is a member of a group of similarly situated individuals
that is formed for the
[[Page 38024]]
purpose of traveling or relocating internationally in service of one or
more of the purposes listed in section 501(c)(3) or (4) of the Code, or
similarly situated organizations or groups, provided the group is not
formed primarily for the sale of health insurance coverage and the
Secretary of HHS, in consultation with the Secretary of the Treasury
and the Secretary of Labor, determines the group requires access to
health insurance and other related services and support in multiple
countries.
Section 3(d)(4) of the EHCCA defines the United States as the 50
States, the District of Columbia, and Puerto Rico.
Section 3(f) of the EHCCA provides that, unless otherwise
specified, the requirements of the EHCCA apply to expatriate health
plans issued or renewed on or after July 1, 2015.
IRS Notice 2015-43
On July 20, 2015, the Treasury Department and the IRS issued Notice
2015-43 (2015-29 IRB 73) to provide interim guidance on the
implementation of the EHCCA and the application of certain provisions
of the ACA to expatriate health insurance issuers, expatriate health
plans, and employers in their capacity as plan sponsors of expatriate
health plans. The Departments of Labor and HHS reviewed and concurred
with the interim guidance of Notice 2015-43. Comments were received in
response to Notice 2015-43, and these comments have been considered in
drafting these proposed regulations. The relevant portions of Notice
2015-43 and the related comments are discussed in the Overview of
Proposed Regulations section of this preamble.\9\
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\9\ See 26 CFR 601.601(d)(2)(ii)(B).
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IRS Notices 2015-29 and 2016-14
On March 30, 2015, the Treasury Department and the IRS issued
Notice 2015-29 (2015-15 IRB 873) to provide guidance implementing the
special rule of section 3(c)(2) of the EHCCA for fee years 2014 and
2015 with respect to the health insurance providers fee imposed by
section 9010 of the ACA. Notice 2015-29 defines expatriate health plan
by reference to the definition of expatriate policies in the MLR final
rule issued by HHS \10\ (MLR final rule definition) solely for the
purpose of applying the special rule for fee years 2014 and 2015. The
Treasury Department and the IRS determined that the MLR final rule
definition of expatriate policies was sufficiently broad to cover
potential expatriate health plans described in section 3(d)(2) of the
EHCCA. The MLR final rule defines expatriate policies as predominantly
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.
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\10\ 45 CFR 158.120(d)(4).
---------------------------------------------------------------------------
On January 29, 2016, the Treasury Department and the IRS issued
Notice 2016-14 (2016-7 IRB 315) to provide guidance implementing the
definition of expatriate health plan for fee year 2016 with respect to
the health insurance providers fee imposed by section 9010 of the ACA.
Like Notice 2015-29, Notice 2016-14 provides that the definition of
expatriate health plan will be the same as provided in the MLR final
rule definition, solely for the purpose of the health insurance
providers fee imposed by section 9010 of the ACA for fee year 2016.\11\
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\11\ See 26 CFR 601.601(d)(2)(ii)(B).
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The Consolidated Appropriations Act, 2016, Public Law 114-113,
Division P, Title II, Sec. 201, Moratorium on Annual Fee on Health
Insurance Providers (the Consolidated Appropriations Act), suspends
collection of the health insurance providers fee for the 2017 calendar
year. Thus, health insurance issuers are not required to pay the fee
for 2017.
Excepted Benefits
Sections 2722 and 2763 of the PHS Act, section 732 of ERISA, and
section 9831 of the Code provide that the respective requirements of
title XXVII of the PHS Act, part 7 of ERISA, and Chapter 100 of the
Code generally do not apply to the provision of certain types of
benefits, known as ``excepted benefits.'' These excepted benefits are
described in section 2791(c) of the PHS Act, section 733(c) of ERISA,
and section 9832(c) of the Code.
There are four statutorily enumerated categories of excepted
benefits. One category, under section 2791(c)(1) of the PHS Act,
section 733(c)(1) of ERISA, and section 9832(c)(1) of the Code,
identifies benefits that are excepted in all circumstances, including
automobile insurance, liability insurance, workers compensation, and
accidental death and dismemberment coverage. Under section
2791(c)(1)(H) of the PHS Act (and the parallel provisions of ERISA and
the Code), this category of excepted benefits also includes ``[o]ther
similar insurance coverage, specified in regulations, under which
benefits for medical care are secondary or incidental to other
insurance benefits.''
The second category of excepted benefits is limited excepted
benefits, which may include limited scope vision or dental benefits,
and benefits for long-term care, nursing home care, home health care,
or community-based care. Section 2791(c)(2)(C) of the PHS Act, section
733(c)(2)(C) of ERISA, and section 9832(c)(2)(C) of the Code authorize
the Secretaries of HHS, Labor, and the Treasury (collectively, the
Secretaries) to issue regulations establishing other, similar limited
benefits as excepted benefits. The Secretaries exercised this authority
previously with respect to certain health flexible spending
arrangements.\12\ To be an excepted benefit under this second category,
the statute provides that these limited benefits must either: (1) Be
provided under a separate policy, certificate, or contract of
insurance; or (2) otherwise not be an integral part of a group health
plan, whether insured or self-insured.\13\
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\12\ 26 CFR 54.9831-1(c)(3)(v), 29 CFR 2590.732(c)(3)(v), 45 CFR
146.145(b)(3)(v).
\13\ PHS Act section 2722(c)(1), ERISA section 732(c)(1), Code
section 9831(c)(1).
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The third category of excepted benefits, referred to as
``noncoordinated excepted benefits,'' includes both coverage for only a
specified disease or illness (such as cancer-only policies), and
hospital indemnity or other fixed indemnity insurance. These benefits
are excepted under section 2722(c)(2) of the PHS Act, section 732(c)(2)
of ERISA, and section 9831(c)(2) of the Code only if all of the
following conditions are met: (1) The benefits are provided under a
separate policy, certificate, or contract of insurance; (2) there is no
coordination between the provision of such benefits and any exclusion
of benefits under any group health plan maintained by the same plan
sponsor; and (3) the benefits are paid with respect to any event
without regard to whether benefits are provided under any group health
plan maintained by the same plan sponsor. In the group market, the
regulations further provide that to be hospital indemnity or other
fixed indemnity insurance, the insurance must pay a fixed dollar amount
per day (or per other time period) of hospitalization or illness (for
example, $100/day) regardless of the amount of expenses incurred.\14\
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\14\ 26 CFR 54.9831-1(c)(4)(i), 29 CFR 2590.732(c)(4)(i), 45 CFR
146.145(b)(4)(i).
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Since the issuance of these regulations, the Departments have
released FAQs to address various requests for clarification as to what
types of coverage meet the conditions
[[Page 38025]]
necessary to be hospital indemnity or other fixed indemnity insurance
that are excepted benefits. Affordable Care Act Implementation FAQs
Part XI, Q&A-7 clarified that group health insurance coverage in which
benefits are provided in varying amounts based on the type of procedure
or item, such as the type of surgery actually performed or prescription
drug provided is not a hospital indemnity or other fixed indemnity
insurance excepted benefit because it does not meet the condition that
benefits be provided on a per day (or per other time period, such as
per week) basis, regardless of the amount of expenses incurred.\15\
---------------------------------------------------------------------------
\15\ Frequently Asked Questions about Affordable Care Act
Implementation (Part XI), available at http://www.dol.gov/ebsa/faqs/faq-aca11.html and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs11.html.
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The fourth category, under section 2791(c)(4) of the PHS Act,
section 733(c)(4) of ERISA, and section 9832(c)(4) of the Code, is
supplemental excepted benefits. Benefits are supplemental excepted
benefits only if they are provided under a separate policy,
certificate, or contract of insurance and are Medicare supplemental
health insurance (also known as Medigap), TRICARE supplemental
programs, or ``similar supplemental coverage provided to coverage under
a group health plan.'' The phrase ``similar supplemental coverage
provided to coverage under a group health plan'' is not defined in the
statute or regulations. However, the Departments' regulations clarify
that one requirement to be similar supplemental coverage is that the
coverage ``must be specifically designed to fill gaps in primary
coverage, such as coinsurance or deductibles.'' \16\
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\16\ 26 CFR 54.9831-1(c)(5)(i)(C), 29 CFR 2590.732(c)(5)(i)(C),
and 45 CFR 146.145(b)(5)(i)(C).
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In 2007 and 2008, the Departments issued guidance on the
circumstances under which supplemental health insurance would be
considered excepted benefits under section 2791(c)(4) of the PHS Act
(and the parallel provisions of ERISA, and the Code).\17\ The guidance
identifies several factors the Departments will apply when evaluating
whether supplemental health insurance will be considered to be
``similar supplemental coverage provided to coverage under a group
health plan.'' Specifically the Departments' guidance provides that
supplemental health insurance will be considered an excepted benefit if
it is provided through a policy, certificate, or contract of insurance
separate from the primary coverage under the plan and meets all of the
following requirements: (1) The supplemental policy, certificate, or
contract of insurance is issued by an entity that does not provide the
primary coverage under the plan; (2) the supplemental policy,
certificate, or contract of insurance is specifically designed to fill
gaps in primary coverage, such as coinsurance or deductibles, but does
not include a policy, certificate, or contract of insurance that
becomes secondary or supplemental only under a coordination of benefits
provision; (3) the cost of the supplemental coverage is 15 percent or
less of the cost of primary coverage (determined in the same manner as
the applicable premium is calculated under a COBRA continuation
provision); and (4) the supplemental coverage sold in the group health
insurance market does not differentiate among individuals in
eligibility, benefits, or premiums based upon any health factor of the
individual (or any dependents of the individual).
---------------------------------------------------------------------------
\17\ See EBSA Field Assistance Bulletin No. 2007-04 (available
at http://www.dol.gov/ebsa/regs/fab2007-4.html); CMS Insurance
Standards Bulletin 08-01 (available at http://www.cms.gov/CCIIO/Resources/Files/Downloads/hipaa_08_01_508.pdf); and IRS Notice 2008-
23 (available at http://www.irs.gov/irb/2008-07_IRB/ar09.html).
---------------------------------------------------------------------------
On February 13, 2015, the Departments issued Affordable Care Act
Implementation FAQs Part XXIII, providing additional guidance on the
circumstances under which health insurance coverage that supplements
group health plan coverage may be considered supplemental excepted
benefits.\18\ The FAQ states that the Departments intend to propose
regulations clarifying the circumstances under which supplemental
insurance products that do not fill in cost-sharing under the primary
plan are considered to be specifically designed to fill gaps in primary
coverage. Specifically, the FAQ provides that health insurance coverage
that supplements group health coverage by providing coverage of
additional categories of benefits (as opposed to filling in cost-
sharing gaps under the primary plan) would be considered to be designed
to ``fill in the gaps'' of the primary coverage only if the benefits
covered by the supplemental insurance product are not essential health
benefits (EHB) in the State in which the product is being marketed. The
FAQ further states that, until regulations are issued and effective,
the Departments will not take enforcement action under certain
conditions for failure to comply with the applicable insurance market
reforms with respect to group or individual health insurance coverage
that provides coverage of additional categories of benefits that are
not EHBs in the applicable State. States were encouraged to exercise
similar enforcement discretion.
---------------------------------------------------------------------------
\18\ Frequently Asked Questions about Affordable Care Act
Implementation (Part XXIII), available at http://www.dol.gov/ebsa/pdf/faq-aca23.pdf and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/Supplmental-FAQ_2-13-15-final.pdf.
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Short-Term, Limited-Duration Insurance Coverage
Short-term limited duration insurance is a type of health insurance
coverage that is designed to fill in temporary gaps in coverage when an
individual is transitioning from one plan or coverage to another plan
or coverage. Although short-term, limited-duration insurance is not an
excepted benefit, it is similarly exempt from PHS Act requirements
because it is not individual health insurance coverage. Section
2791(b)(5) of the PHS Act provides that the term ``individual health
insurance coverage'' means health insurance coverage offered to
individuals in the individual market, but does not include short-term,
limited-duration insurance. The PHS Act does not define short-term,
limited-duration insurance. Under existing regulations, short-term,
limited-duration insurance means ``health insurance coverage provided
pursuant to a contract with an issuer that has an expiration date
specified in the contract (taking into account any extensions that may
be elected by the policyholder without the issuer's consent) that is
less than 12 months after the original effective date of the
contract.'' \19\
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\19\ 26 CFR 54.9801-2, 29 CFR 2590.701-2, 45 CFR 144.103.
---------------------------------------------------------------------------
Prohibition on Lifetime and Annual Limits
Section 2711 of the PHS Act, as added by the ACA, generally
prohibits group health plans and health insurance issuers offering
group or individual health insurance coverage from imposing lifetime
and annual dollar limits on EHB, as defined in section 1302(b) of the
ACA. These prohibitions apply to both grandfathered and non-
grandfathered health plans, except the annual limits prohibition does
not apply to grandfathered individual health insurance coverage.
Under the ACA, self-insured group health plans, large group market
health plans, and grandfathered health plans are not required to offer
EHB, but they generally cannot place lifetime or annual dollar limits
on covered services that are considered EHB. The Departments'
regulations provide that, for plan years (in the individual market,
policy years) beginning on or after January 1, 2017, a plan or issuer
that is
[[Page 38026]]
not required to provide EHB may select from among any of the 51 base-
benchmark plans selected by a State or applied by default pursuant to
45 CFR 156.100, or one of the three FEHBP options specified at 45 CFR
156.100(a)(3), for purposes of complying with the lifetime and annual
limits prohibition in section 2711 of the PHS Act.\20\
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\20\ 26 CFR 54.9815-2711(c), 29 CFR 2590.715-2711(c), 45 CFR
147.126(c).
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II. Overview of the Proposed Regulations
A. Expatriate Health Plans
In General
Section 3(a) of the EHCCA provides that the 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. Consistent with this provision, the proposed regulations provide
that the market reform provisions enacted or amended as part of the
ACA, included in sections 2701 through 2728 of the PHS Act and
incorporated into section 9815 of the Code and section 715 of ERISA, 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. Similarly, section 162(m)(6) of the Code does
not apply to an expatriate health insurance issuer with respect to
premiums received for coverage under an expatriate health plan. In
addition, under the EHCCA, the PCORTF fee under sections 4375 and 4376
of the Code and the transitional reinsurance program fee under section
1341 of the ACA do not apply to expatriate health plans. The EHCCA
excludes expatriate health plans from the health insurance providers
fee imposed by section 9010 except that the EHCCA provides a special
rule solely for purposes of determining the fee for the 2014 and 2015
fee years. The EHCCA also designates certain coverage by an expatriate
health plan as minimum essential coverage under section 5000A(f) of the
Code, and provides special rules for the application of the reporting
rules under sections 6055 and 6056 of the Code to expatriate health
plans.
Definition of Expatriate Health Insurance Issuer
Consistent with sections 3(d)(1) and (d)(2)(F) of the EHCCA, the
proposed regulations define ``expatriate health insurance issuer'' as a
health insurance issuer (as defined under 26 CFR 54.9801-2, 29 CFR
2590.701-2 and 45 CFR 144.103) that issues expatriate health plans and
satisfies certain requirements.\21\ The requirements for the issuer to
be an expatriate health insurance issuer include that, in the course of
its normal business operations, the issuer: (1) Maintains network
provider agreements that provide for direct claims payments with health
care providers in eight or more countries; (2) maintains call centers
in three or more countries, and accepts calls from customers in eight
or more languages; (3) processed at least $1 million in claims in
foreign currency equivalents during the preceding calendar year; (4)
makes global evacuation/repatriation coverage available; (5) maintains
legal and compliance resources in three or more countries; and (6) has
licenses or other authority to sell insurance in more than two
countries, including the United States. For purposes of meeting the $1
million threshold for claims processed in foreign currency equivalents,
the proposed regulations provide that the dollar value of claims
processed is determined using the Treasury Department's currency
exchange rate in effect on the last day of the preceding calendar
year.\22\ Comments are requested regarding whether use of the calendar
year as the basis for measuring the dollar amount of claims processed
presents administrative challenges, and how the resulting challenges,
if any, may be addressed. The proposed regulations provide that each of
the applicable requirements may be satisfied by two or more entities
(including one entity that is the health insurance issuer) that are
members of the health insurance issuer's controlled group or through
contracts between the expatriate health insurance issuer and third
parties.
---------------------------------------------------------------------------
\21\ Section 3(d)(1) of the EHCCA provides that the term
``expatriate health insurance issuer'' means a health insurance
issuer that issues expatriate health plans; section 3(d)(5)(A) of
the EHCCA provides that the term ``health insurance issuer'' has the
meaning given in section 2791 of the PHS Act. The definition of
health insurance issuer in section 9832(b)(2) of the Code and
section 733(b)(2) of ERISA and underlying regulations are
substantively identical to the definition under section 2791 of the
PHS Act and its underlying regulations.
As discussed in the section of this preamble entitled
``Definition of Expatriate Health Plan'' a health insurance issuer
as defined in section 2791 of the PHS Act is limited to an entity
licensed to engage in the business of insurance in a State and
subject to State law that regulates insurance.
\22\ The most recent Treasury Department currency exchange rate
can be found at https://www.fiscal.treasury.gov/fsreports/rpt/treasRptRateExch/currentRates.htm.
---------------------------------------------------------------------------
Definition of Expatriate Health Plan
Consistent with section 3(d)(2) of the EHCCA, the proposed
regulations define ``expatriate health plan'' as a plan offered to
qualified expatriates and that satisfies certain requirements. With
respect to qualified expatriates in categories A or B, the plan must be
a group health plan (whether or not insured). In contrast, with respect
to qualified expatriates in category C, the plan must be health
insurance coverage that is not a group health plan. In addition,
consistent with section 3(d)(2)(A) of the EHCCA, the proposed
regulations require that substantially all primary enrollees in the
expatriate health plan must be qualified expatriates. The proposed
regulations define a primary enrollee as the individual covered by the
plan or policy whose eligibility for coverage is not due to that
individual's status as the spouse, dependent, or other beneficiary of
another covered individual. However, notwithstanding this definition,
an individual is not a primary enrollee if the individual is not a
national of the United States and the individual resides in his or her
country of citizenship. Further, the proposed regulations provide that,
for this purpose, a ``national of the United States'' has the meaning
used in the Immigration and Nationality Act (8 U.S.C. 1101 et. seq.)
and 8 CFR parts 301 to 392, including U.S. citizens. Thus, for example,
an individual born in American Samoa is a national of the United States
at birth for purposes of the EHCCA and the proposed regulations.
Comments in response to Notice 2015-43 requested clarification of
the ``substantially all'' enrollment requirement, with one comment
suggesting that 93 percent of the enrollees would be an appropriate
threshold. In response to the request for clarification, the proposed
regulations provide that 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). Consistent with section 3(d)(2)(B) of the EHCCA, the
proposed regulations further provide that substantially all of the
benefits provided under an expatriate health plan must be benefits that
are not excepted benefits as described in 26
[[Page 38027]]
CFR 54.9831-1(c), 29 CFR 2590.732(c), 45 CFR 146.145(b) and 148.220, as
applicable. The Departments intend that the first day of the plan year
approach, which has been used in other contexts, will be simple to
administer.\23\ Moreover, the 95% threshold has been used in certain
other circumstances in applying a ``substantially all'' standard.\24\
The Departments solicit comment on this regulatory approach and whether
the current regulatory language is sufficient to protect against
potential abuses, or whether any further anti-abuse provision is
necessary.
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\23\ 26 CFR 54.9831-1(b), 29 CFR 2590.732(b), 45 CFR 146.145(b).
\24\ See e.g., 26 CFR 1.460-6(d)(4)(i)(D)(1).
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Consistent with section 3(d)(2)(C) of the EHCCA, the proposed
regulations also require that an expatriate health plan cover certain
types of services. Specifically, an expatriate health plan must provide
coverage for inpatient hospital services, outpatient facility services,
physician services, and emergency services (comparable to emergency
services coverage that was described in and offered under section
8903(1) of title 5, United States Code for plan year 2009). Coverage
for such services must be available in certain countries depending on
the type of qualified expatriates covered by the plan. The statute
authorizes the Secretary of HHS, in consultation with the Secretary of
the Treasury and Secretary of Labor, to designate other countries where
coverage for such services must be made available to the qualified
expatriate.
Consistent with section 3(d)(2)(D) of the EHCCA, the proposed
regulations provide that in the case of an expatriate health plan, the
plan sponsor must reasonably believe that benefits provided by the plan
satisfy the minimum value requirements of section 36B(c)(2)(C)(ii) of
the Code.\25\ For this purpose, the proposed regulations provide that
the plan sponsor is permitted to 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. Consistent with section
3(d)(2)(D) of the EHCCA, 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, consistent with section
3(d)(2)(F)(ii) of the EHCCA, the plan or coverage must offer
reimbursements for items or services in the local currency in eight or
more countries.
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\25\ For this purpose, generally ``minimum value'' takes into
account the provision of ``essential health benefits'' as defined in
section 1302(b)(1) of the Affordable Care Act.
---------------------------------------------------------------------------
Consistent with section 3(d)(2)(F) of the EHCCA, the proposed
regulations also provide that the policy or coverage under an
expatriate health plan must be issued by an expatriate health insurance
issuer or administered by an expatriate health plan administrator. With
respect to qualified expatriates in categories A or B (generally,
individuals whose travel or relocation is related to their employment
with an employer), the coverage must be under a group health plan
(whether insured or self-insured). With respect to qualified
expatriates in category C (generally, groups of similarly situated
individuals travelling for certain tax-exempt purposes), the coverage
must be under a policy issued by an expatriate health insurance issuer.
Finally, consistent with section 3(d)(2)(G) of the EHCCA, the
proposed regulations provide that an expatriate health plan must
satisfy the provisions of Chapter 100 of the Code, part 7 of subtitle B
of title I of ERISA and title XXVII of the PHS Act that would otherwise
apply if the ACA had not been enacted. Among other requirements, those
provisions limited the ability of a group health plan or group health
insurance issuer to impose preexisting condition exclusions (which are
now prohibited for grandfathered and non-grandfathered group health
plans and health insurance coverage offered in connection with such
plans, and non-grandfathered individual health insurance coverage under
the ACA), 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.
Prior to the enactment of the ACA, HIPAA and underlying regulations
also generally required that plans and issuers provide certificates of
creditable coverage when an individual ceased to be covered by a plan
or policy and upon request. Following the enactment of the ACA, the
regulations under these provisions have eliminated the requirement for
providing certificates of creditable coverage beginning December 31,
2014, because the requirement is generally no longer relevant to plans
and participants as a result of the prohibition on preexisting
condition exclusions. The Departments recognize that reimposing the
requirement to provide certificates of creditable coverage on
expatriate health plans would only be useful in situations in which an
individual transferred from one expatriate health plan to another and
that reimposing the requirement on all health plans would require
certificates that would be unnecessary except in limited cases, such as
for an individual who ceased coverage with a health plan or policy and
began coverage under an expatriate health plan that imposed a
preexisting condition exclusion. Because reimposing the requirement to
provide certificates of creditable coverage would be inefficient and
overly broad, and relevant in only limited circumstances, the proposed
regulations do not require expatriate health plans to provide
certificates of creditable coverage. However, expatriate health plans
imposing a preexisting condition exclusion must still comply with
certain limitations on preexisting condition exclusions that would
otherwise apply if the ACA had not been enacted. Therefore, the
proposed regulations require expatriate health plans to ensure that
individuals who enroll in the expatriate health plan are provided an
opportunity to demonstrate creditable coverage to offset any
preexisting condition exclusion. For example, an email from the prior
issuer (or former plan administrator or plan sponsor) providing
information about past coverage could be sufficient confirmation of
prior creditable coverage.
Comments in response to Notice 2015-43 requested clarification of
the treatment of health coverage provided by a foreign government.
Specifically, comments requested that health coverage provided by a
foreign government be treated as minimum essential coverage under
section 5000A of the Code, and that, for purposes of the employer
shared responsibility provision of section 4980H of the Code, an offer
of such coverage be treated as an offer of minimum essential coverage
for certain foreign employees working in the United States. These
issues are generally beyond the scope of these proposed regulations.
Under the existing regulations under section 5000A(f)(1)(E) of the
Code, there are procedures for health benefits coverage not otherwise
designated under section 5000A(f)(1) of the Code as minimum essential
coverage to be recognized by the Secretary of HHS, in coordination with
the Secretary of the Treasury, as minimum essential coverage. The
Secretary of HHS has provided that coverage under a group health plan
[[Page 38028]]
provided through insurance regulated by a foreign government is minimum
essential coverage for expatriates who meet specified conditions.\26\
Furthermore, plan sponsors of health coverage that is not recognized as
minimum essential coverage through statute, regulation, or guidance may
submit an application to CMS for minimum essential coverage recognition
pursuant to 45 CFR 156.604.\27\ For a complete list of coverage
recognized by CMS as minimum essential coverage under section
5000A(f)(1)(E) of the Code, see https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/minimum-essential-coverage.html.
---------------------------------------------------------------------------
\26\ See CMS Insurance Standards Bulletin Series. CCIIO Sub-
Regulatory Guidance: Process for Obtaining Recognition as Minimum
Essential Coverage (Oct. 31, 2013), available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/mec-guidance-10-31-2013.pdf.
\27\ See CMS Insurance Standards Bulletin Series. CCIIO Sub-
Regulatory Guidance: Process for Obtaining Recognition as Minimum
Essential Coverage (Oct. 31, 2013), available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/mec-guidance-10-31-2013.pdf. See also CMS Insurance Standards Bulletin
Series. CCIIIO Sub-Regulatory Guidance: Minimum Essential Coverage.
---------------------------------------------------------------------------
Comments also requested that policies sold by non-United States
health insurance issuers be treated as minimum essential coverage under
section 5000A of the Code, or as expatriate health plans. Section
3(d)(5)(A) of the EHCCA specifies that the terms ``health insurance
issuer'' and ``health insurance coverage'' have the meanings given
those terms by section 2791 of the PHS Act. Section 2791 of the PHS Act
(and parallel provisions in section 9832(b) of the Code and section
733(b) of ERISA) define those terms by reference to an entity licensed
to engage in the business of insurance in a State and subject to State
law that regulates insurance. Under section 2791 of the PHS Act, the
term ``State'' means each of the several States, the District of
Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and
the Northern Mariana Islands. Consistent with those provisions, these
proposed regulations limit an expatriate health insurance issuer to a
health insurance issuer within the meaning of those sections (and that
meets the other requirements set forth in the proposed regulations). As
such, a non-United States health insurance issuer does not qualify as
an expatriate health insurance issuer within the meaning of the EHCCA,
and coverage issued by a non-United States issuer that is not otherwise
minimum essential coverage is not minimum essential coverage pursuant
to the EHCCA.
Definition of Expatriate Health Plan Administrator
The proposed regulations define ``expatriate health plan
administrator,'' with respect to self-insured coverage, as an
administrator of self-insured coverage that generally satisfies the
same requirements as an ``expatriate health insurance issuer.''
Definition of Qualified Expatriate
Consistent with section 3(d)(3) of the EHCCA, the proposed
regulations define ``qualified expatriate'' as one of three types of
individuals. The first type of qualified expatriate, a category A
expatriate, is an individual who has the skills, qualifications, job
duties, or expertise that has caused the individual's employer to
transfer or assign the individual to the United States for a specific
and temporary purpose or assignment that is tied to the individual's
employment with the employer. A category A expatriate may only be an
individual who: (1) The plan sponsor has reasonably determined requires
access to health coverage and other related services and support in
multiple countries, (2) is offered other multinational benefits on a
periodic basis (such as tax equalization, compensation for cross-border
moving expenses, or compensation to enable the individual to return to
the individual's home country), and (3) is not a national of the United
States. The proposed regulations provide that an individual who is not
expected to travel outside the United States at least one time per year
during the coverage period would not reasonably ``require access'' to
health coverage and other related services and support in multiple
countries. Furthermore, under the proposed regulations, the offer of a
one-time de minimis benefit would not meet the standard for the
``periodic'' offer of ``other multinational benefits.''
Section 3(d)(3)(B) of the EHCCA provides that a second type of
qualified expatriate, a category B expatriate, is an individual who
works outside the United States for a period of at least 180 days in a
consecutive 12-month period that overlaps with the plan year. A comment
requested that the regulations clarify that the 12-month period could
either be within a single plan year, or across two consecutive plan
years. Consistent with the statutory language, the proposed regulations
provide that a category B expatriate is an individual who is a national
of the United States and who works outside the United States for at
least 180 days in a consecutive 12-month period that is within a single
plan year, or across two consecutive plan years. Section 3(d)(2)(C)(ii)
of the EHCCA requires an expatriate health plan provided to category B
expatriates to cover certain specified services, such as inpatient and
outpatient services, in the country in which the individual is
``present in connection'' with his employment. The Departments request
comments on whether it would be helpful to provide further
administrative clarification of this statutory language regarding the
country or countries in which the services must be provided, and, if
so, whether there are facts or circumstances that will present
particular challenges in applying this rule.
Finally, consistent with section 3(d)(3)(C) of the EHCCA, the
proposed regulations provide that a third type of qualified expatriate,
a category C expatriate, is an individual who is a member of a group of
similarly situated individuals that is formed for the purpose of
traveling or relocating internationally in service of one or more of
the purposes listed in section 501(c)(3) or (4) of the Code, or
similarly situated organizations or groups, and meets certain other
conditions.\28\ A category C expatriate does not include an individual
in a group that is formed primarily for the sale or purchase of health
insurance coverage. To qualify as this type of qualified expatriate,
the Secretary of HHS, in consultation with the Secretary of the
Treasury and the Secretary of Labor, must determine that the group
requires access to health coverage and other related services and
support in multiple countries. The proposed regulations clarify that a
category C expatriate does not include an individual whose
international travel or relocation is related to employment. Thus, an
individual whose travel is employment-related may be a qualified
expatriate only in category A or B. The proposed regulations also
provide that, in the case of a group organized to travel or relocate
outside the United States, the individual must be expected to travel or
reside outside the United States for at least 180 days in a consecutive
12-month period that overlaps with the policy year (or in the case of a
policy year that is less than 12 months, at least
[[Page 38029]]
half of the policy year), and in the case of a group organized to
travel or relocate within the United States, the individual must be
expected to travel or reside in the United States for not more than 12
months. The proposed regulations provide that a group of category C
expatriates must also meet the test for having associational ties under
section 2791(d)(3)(B) through (F) of the PHS Act (42 U.S.C. 300gg-
91(d)(3)(B) through (F)).
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\28\ Code section 501(c)(3) describes an organization formed for
religious, charitable, scientific, public safety, literary, or
educational purposes, or to foster national or international amateur
sports competition, or for the prevention of cruelty to children or
animals, and not for political candidate campaign or legislative
purposes or propaganda. Code section 501(c)(4) describes an
organization operated exclusively for the promotion of social
welfare.
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For purposes of section 3(d)(3)(C)(iii) of the EHCCA, the proposed
regulations provide that the Secretary of HHS, in consultation with the
Secretary of the Treasury and the Secretary of Labor, has determined
that, in the case of a group of similarly situated individuals that
meets all of the criteria in the proposed regulations, the group
requires access to health coverage and other related services and
support in multiple countries.
Comments in response to Notice 2015-43 requested that category C
expatriates not be limited to individuals expected to travel or reside
in the United States for 12 or fewer months. While the EHCCA does not
include a time limit for category C expatriates, section 3(e) of the
EHCCA provides that the Departments ``may promulgate regulations
necessary to carry out this Act, including such rules as may be
necessary to prevent inappropriate expansion of the exclusions under
the Act from applicable laws and regulations.'' In the group market,
the EHCCA and the proposed regulations define a category A expatriate
with respect to a ``specific and temporary purpose or assignment'' tied
to the individual's employment in the United States. It is the view of
HHS, in consultation with the Departments of Labor and the Treasury,
that similar safeguards are necessary in the individual market to
prevent inappropriate expansion of the exception for category C
expatriates.
Comments are requested on all aspects of the proposed definition of
a category C expatriate. Comments are also requested on the time limit
for category C expatriates being expected to travel or reside in the
United States, and what standards, if any, may be adopted in lieu of
the 12-month maximum that would ensure that the definition does not
permit inappropriate expansion of the exception. For example, comments
are requested on whether a ``specific and temporary purpose'' standard
should be adopted for category C expatriates, consistent with the
standard for category A expatriates, or whether category C expatriates
should be expected to seek medical care outside the United States at
least one time per year in order to be considered to reasonably require
access to health coverage and other related services and support in
multiple countries. Comments are also requested on the proposed
standard with respect to category C expatriates being expected to
travel or reside outside the United States for at least 180 days in a
consecutive 12-month period that overlaps with the policy year, and
whether there are fact patterns in which the 12-month period could
either be within a single policy year, or across two consecutive policy
years.
Definitions of Group Health Plan and United States
Consistent with section 3(d)(5)(A) of the EHCCA, for purposes of
applying the definition of expatriate health plan, ``group health
plan'' means a group health plan as defined under 26 CFR 54.9831-
1(a)(1), 29 CFR 2590.732(a)(1) or 45 CFR 146.145(a)(1), as applicable.
Consistent with section 3(d)(4) of the EHCCA, the proposed regulations
define ``United States'' to mean the 50 States, the District of
Columbia and Puerto Rico.
Section 9010 of the ACA
Section 3(c)(1) of the EHCCA provides that, for purposes of the
health insurance providers fee imposed by section 9010 of the ACA, a
qualified expatriate enrolled in an expatriate health plan is not a
United States health risk for calendar years after 2015. Section
3(c)(2) of the EHCCA provides a special rule applicable to calendar
years 2014 and 2015. The Treasury Department and the IRS issued Notices
2015-29 and 2016-14 to address the definition of expatriate health plan
for purposes of the health insurance providers fee imposed by section
9010 for the 2014, 2015, and 2016 fee years. No fee is due in the 2017
fee year because the Consolidated Appropriations Act suspends
collection of the health insurance providers fee imposed by section
9010 of ACA for 2017.
These proposed regulations provide that, for any fee that is due on
or after the date final regulations are published in the Federal
Register, a qualified expatriate enrolled in an expatriate health plan
as defined in these proposed regulations is not a United States health
risk. These proposed regulations also authorize the IRS to specify in
guidance in the Internal Revenue Bulletin the manner of determining
excluded premiums for qualified expatriates in expatriate health plans.
Until the date the final regulations are published in the Federal
Register, taxpayers may rely on these proposed regulations with respect
to any fee that is due beginning with the 2018 fee year.
Federal Tax Provision: Section 162(m)(6) of the Code
Section 162(m)(6) of the Code, as added by section 9014 of the ACA,
in general, limits to $500,000 the allowable deduction for remuneration
attributable to services performed by certain individuals for a covered
health insurance provider. For taxable years beginning after December
31, 2012, section 162(m)(6)(C)(i) of the Code and 26 CFR 1.162-
31(b)(4)(A) provide that a health insurance issuer is a covered health
insurance provider if not less than 25 percent of the gross premiums
that it receives from providing health insurance coverage during the
taxable year are from minimum essential coverage. Section 3(a)(3) of
the EHCCA provides that the provisions of the ACA (which include
section 162(m)(6) of the Code) do not apply to expatriate health
insurance issuers with respect to coverage offered by such issuers
under expatriate health plans. Consistent with this rule, the proposed
regulations exclude from the definition of the term ``premium'' for
purposes of section 162(m)(6) of the Code amounts received in payment
for coverage under an expatriate health plan. As a result, those
amounts received are included in neither the numerator nor the
denominator for purposes of determining whether the 25 percent standard
under section 162(m)(6)(C)(i) of the Code and 26 CFR 1.162-31(b)(4)(A)
is met, and they have no impact on whether a particular issuer is a
covered health insurance provider.
Federal Tax Provision: Section 4980I of the Code
Section 3(b)(2) of the EHCCA provides that section 4980I of the
Code applies to employer-sponsored coverage of a qualified expatriate
who is assigned, rather than transferred, to work in the United States.
As amended by section 101 of Division P of the Consolidated
Appropriations Act, section 4980I of the Code first applies to coverage
provided in taxable years beginning after December 31, 2019. Comments
in response to Notice 2015-43 requested additional guidance on what it
means for an employer to assign rather than transfer an employee. These
proposed regulations do not address the interaction of the EHCCA and
section 4980I of the Code because the Treasury Department and the IRS
anticipate that this issue will be addressed in future
[[Page 38030]]
guidance promulgated under section 4980I of the Code.
Federal Tax Provision: Section 5000A of the Code and Minimum Essential
Coverage
The proposed regulations provide that, beginning January 1, 2017,
coverage under an expatriate health plan that provides coverage for a
qualified expatriate qualifies as minimum essential coverage for all
participants in the plan. If the expatriate health plan provides
coverage to category A or category B expatriates, the coverage of any
participant in the plan is treated as an eligible employer-sponsored
plan under section 5000A(f)(2) of the Code. If the expatriate health
plan provides coverage to category C expatriates, the coverage of any
enrollee in the plan is treated as a plan in the individual market
under section 5000A(f)(1)(C) of the Code.
Federal Tax Provision: Sections 6055 and 6056 of the Code
Section 3(b)(2) of the EHCCA permits the use of electronic media to
provide the statements required under sections 6055 and 6056 of the
Code to individuals for coverage under an expatriate health plan unless
the primary insured has explicitly refused to receive the statement
electronically. The proposed regulations provide that, for an
expatriate health plan, the recipient is treated as having consented to
receive the required statement electronically unless the recipient has
explicitly refused to receive the statement in an electronic format. In
addition, the proposed regulations provide that the recipient may
explicitly refuse either electronically or in a paper document. For a
recipient to be treated as having consented under this special rule,
the furnisher must provide a notice in compliance with the general
disclosure requirements under sections 6055 and 6056 that informs the
recipient that the statement will be furnished electronically unless
the recipient explicitly refuses to consent to receive the statement in
electronic form. The notice must be provided to the recipient at least
30 days prior to the due date for furnishing of the first statement the
furnisher intends to furnish electronically to the recipient. Absent
receipt of this notice, a recipient will not be treated as having
consented to electronic furnishing of statements. Treasury and IRS
request comments on further guidance that will assist issuers and plan
sponsors in providing this notice in the least burdensome manner while
still ensuring that the recipient has sufficient information and
opportunity to opt out of the electronic reporting if the recipient
desires. For example, Treasury and the IRS specifically request
comments on whether the ability to provide this notice as part of the
enrollment materials for the coverage would meet these goals.
Federal Tax Provision: PCORTF Fee
The proposed regulations provide that the excise tax under sections
4375 and 4376 of the Code (the PCORTF fee) does not apply to an
expatriate health plan as defined at 26 CFR 54.9831-1(f)(3). Section
4375 of the Code limits the application of the fee to policies issued
to individuals residing in the United States. Existing regulations
under sections 4375, 4376, and 4377 of the Code exclude coverage under
a plan from the fee if the plan is designed specifically to cover
primarily employees who are working and residing outside the United
States. A comment requested clarification about the existing PCORTF fee
exemption for plans that primarily cover employees working and residing
outside the United States. Consistent with the provisions of the EHCCA,
the proposed regulations expand the exclusion from the PCORTF fee to
also exclude an expatriate health plan regardless of whether the plan
provides coverage for qualified expatriates residing or working in or
outside the United States if the plan is an expatriate health plan.
Section 1341 of the ACA: Transitional Reinsurance Program
A comment also requested that the current exclusion under the
PCORTF fee regulations for individuals working and residing outside the
United States be applied to the transitional reinsurance fee under
section 1341 of the ACA. Existing regulations relating to section 1341
of the ACA include an exception for certain expatriate health
plans,\29\ including expatriate group health coverage as defined by the
Secretary of HHS and, for the 2015 and 2016 benefit years, self-insured
group health plans with respect to which enrollment is limited to
participants who reside outside their home country for at least six
months of the plan year, and any covered dependents. HHS solicits
comment on whether amendments are needed to 45 CFR 153.400(a)(1)(iii)
to clarify the alignment with the EHCCA and exempt all expatriate plans
from the requirement to make reinsurance contributions.
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\29\ 45 CFR 153.400(a)(1)(iii).
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Section 2718 of the PHS Act: MLR Program
Section 2718 of the PHS Act, as added by sections 1001 and 10101 of
the ACA, generally requires health insurance issuers to provide rebates
to consumers if issuers do not achieve specified MLRs, as well as to
submit an annual MLR report to HHS. The proposed regulations provide
that expatriate policies described in 45 CFR 158.120(d)(4) continue to
be subject to the reporting and rebate requirements of 45 CFR part 158,
but update the description of expatriate policies in 45 CFR
158.120(d)(4) to exclude policies that are expatriate health plans
under the EHCCA. Given this modification, issuers may find that the
number of expatriate policies that remain subject to MLR requirements
is low, and that it is administratively burdensome and there is no
longer a qualitative justification for continuing separate reporting of
such policies. Therefore, comments are requested on whether the
treatment of expatriate policies for purposes of the MLR regulations
should be amended so that expatriate policies that do not meet the
definition of expatriate health plan under the EHCCA would not be
required to be reported separately from other health insurance
policies.
Section 833(c)(5) of the Code, as added by section 9016 of the ACA,
and amended by section 102 of Division N of the Consolidated and
Further Continuing Appropriations Act, 2015 (Pub. L. 113-235, 128 Stat.
2130), provides that section 833(a)(2) and (3) do not apply to any
organization unless the organization's MLR for the taxable year was at
least 85 percent. In describing the MLR computation under section
833(c)(5), the statute and implementing regulations provide that the
elements in the MLR computation are to be ``as reported under section
2718 of the Public Service Health Act.'' Accordingly, the proposed
regulations under section 2718 of the PHS Act would effectively apply
the EHCCA exemption to section 833(c)(5) of the Code by carving out
expatriate health plans under the EHCCA from the section 833(c)(5)
requirements as well.
Excepted Benefits
Supplemental Health Insurance Coverage
The proposed regulations incorporate the guidance from the
Affordable Care Act Implementation FAQs Part XXIII addressing
supplemental health insurance products that provide categories of
benefits in addition to those in the primary coverage. Under the
proposed regulations, if group or
[[Page 38031]]
individual supplemental health insurance coverage provides benefits for
items and services not covered by the primary coverage (referred to as
providing ``additional categories of benefits''), the coverage would be
considered to be designed ``to fill gaps in primary coverage,'' for
purposes of being supplemental excepted benefits if none of the
benefits provided by the supplemental policy are an EHB, as defined for
purposes of section 1302(b) of the ACA, in the State in which the
coverage is issued. Conversely, if any benefit provided by the
supplemental policy is an EHB in the State where the coverage is
issued, the insurance coverage would not be supplemental excepted
benefits under the proposed regulations. This standard is proposed to
apply only to the extent that the supplemental health insurance
provides coverage of additional categories of benefits. Supplemental
health insurance products that both fill in cost sharing in the primary
coverage, such as coinsurance or deductibles, and cover additional
categories of benefits that are not EHB, also would be considered
supplemental excepted benefits under these proposed regulations
provided all other criteria are met.
Travel Insurance
The Departments are aware that certain travel insurance products
may include limited health benefits. However, these products typically
are not designed as major medical coverage. Instead, the risks being
insured relate primarily to: (1) The interruption or cancellation of a
trip (2) the loss of baggage or personal effects; (3) damages to
accommodations or rental vehicles; or (4) sickness, accident,
disability, or death occurring during travel, with any health benefits
usually incidental to other coverage.
Section 2791(c)(1)(H) of the PHS Act, section 733(c)(1)(H) of
ERISA, and section 9832(c)(1)(H) of the Code provide that the
Departments may, in regulations, designate as excepted benefits
``benefits for medical care that are secondary or incidental to other
insurance benefits.'' Pursuant to this authority, and to clarify which
types of travel-related insurance products are excepted benefits under
the PHS Act, ERISA, and the Code, the proposed regulations provide that
certain travel-related products that provide only incidental health
benefits are excepted benefits. The proposed regulations define the
term ``travel insurance'' as insurance coverage for personal risks
incident to planned travel, which may include, but is not limited to,
interruption or cancellation of a trip or event, loss of baggage or
personal effects, damages to accommodations or rental vehicles, and
sickness, accident, disability, or death occurring during travel,
provided that the health benefits are not offered on a stand-alone
basis and are incidental to other coverage. For this purpose, travel
insurance does not include major medical plans that provide
comprehensive medical protection for travelers with trips lasting 6
months or longer, including, for example, those working overseas as an
expatriate or military personnel being deployed. This definition is
consistent with the definition of travel insurance under final
regulations for the health insurance providers fee imposed by section
9010 of the ACA issued by the Treasury Department and the IRS,\30\
which uses a modified version of the National Association of Insurance
Commissioners (NAIC) definition of travel insurance.
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\30\ 26 CFR 57.2(h)(4).
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Hospital Indemnity and Other Fixed Indemnity Insurance
These proposed regulations also include an amendment to the
``noncoordinated excepted benefits'' category as it relates to hospital
indemnity and other fixed indemnity insurance in the group market.
Since the issuance of final regulations defining excepted benefits, the
Departments have become aware of some hospital indemnity and other
fixed indemnity insurance policies that provide comprehensive benefits
related to health care costs. In addition, although hospital indemnity
and other fixed indemnity insurance under section 2791 of the PHS Act,
section 733 of ERISA, and section 9832 of the Code is not intended to
be major medical coverage, the Departments are aware that some group
health plans that provide coverage through hospital indemnity or other
fixed indemnity insurance policies that meet the conditions necessary
to be an excepted benefit have made representations to participants
that the coverage is minimum essential coverage under section 5000A of
the Code. The Departments are concerned that some individuals may
incorrectly understand these policies to be comprehensive major medical
coverage that would be considered minimum essential coverage.
To avoid confusion among group health plan enrollees and potential
enrollees, the proposed regulations revise the conditions necessary for
hospital indemnity and other fixed indemnity insurance in the group
market to be excepted benefits so that any application or enrollment
materials provided to enrollees and potential enrollees at or before
the time enrollees and potential enrollees are given the opportunity to
enroll in the coverage must include a statement that the coverage is a
supplement to, rather than a substitute for, major medical coverage and
that a lack of minimum essential coverage may result in an additional
tax payment. The proposed regulations include specific language that
must be used by group health plans and issuers of group health
insurance coverage to satisfy this notice requirement, which is
consistent with the notice requirement for individual market fixed
indemnity coverage under regulations issued by HHS.\31\ The Departments
request comments on this proposed notice requirement as well as whether
any additional requirements should be added to prevent confusion among
enrollees and potential enrollees regarding the limited coverage
provided by hospital indemnity and other fixed indemnity insurance. The
Departments anticipate that conforming changes will be made in the
final regulations to ensure the notice language in the individual
market is consistent with the notice language in the group market, and
solicit comments on this approach.
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\31\ 45 CFR 148.220(b)(4)(iv).
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Additionally, the Departments have become aware of hospital
indemnity or other fixed indemnity insurance policies that provide
benefits for doctors' visits at a fixed amount per visit, for
prescription drugs at a fixed amount per drug, or for certain services
at a fixed amount per day but in amounts that vary by the type of
service. These types of policies do not meet the condition that
benefits be provided on a per day (or per other time period, such as
per week) basis. Accordingly, the proposed regulations clarify this
standard by stating that the amount of benefits provided must be
determined without regard to the type of items or services received.
The proposed regulations add two examples demonstrating that group
health plans and issuers of group health insurance coverage that
provide coverage through hospital indemnity or fixed indemnity
insurance policies that provide benefits based on the type of item or
services received do not meet the conditions necessary to be an
excepted benefit. The first example would incorporate into regulations
guidance previously provided by the Departments in Affordable Care Act
Implementation FAQs Part XI, which clarified that if a policy provides
benefits in varying amounts based on the type of procedure
[[Page 38032]]
or item received, the policy does not satisfy the condition that
benefits be provided on a per day (or per other time period, such as
per week) basis. The second example demonstrates that a hospital
indemnity or other fixed indemnity insurance policy that provides
benefits for certain services at a fixed amount per day, but in varying
amounts depending on the type of service, does not meet the condition
that benefits be provided on a per day (or per other time period, such
as per week) basis. The Departments request comments on these examples
specifically, as well as on the requirement that hospital indemnity and
other fixed indemnity insurance in the group market that are excepted
benefits must provide benefits on a per day (or per other time period,
such as per week) basis in an amount that does not vary based on the
type of items or services received. The Departments also request
comments on whether the conditions for hospital indemnity or other
fixed indemnity insurance to be considered excepted benefits should be
more substantively aligned between the group and individual markets.
For example, the requirements for hospital indemnity or other fixed
indemnity insurance in the individual market could be modified to be
consistent with the group market provisions of these proposed
regulations by limiting payment strictly on a per-period basis and not
on a per-service basis.
Specified Disease Coverage
The Departments have been asked whether a policy covering multiple
specified diseases or illnesses may be considered to be excepted
benefits. The statute provides that the noncoordinated excepted
benefits category includes ``coverage of a specified disease or
illness'' if the coverage meets the conditions for being offered as
independent, noncoordinated benefits, and the Departments' implementing
regulations identify cancer-only policies as one example of specified
disease coverage.\32\ The Departments are concerned that individuals
who purchase a specified disease policy covering multiple diseases or
illnesses (including policies that cover one overarching medical
condition such as ``mental illness'' as opposed to a specific condition
such as depression) may incorrectly believe they are purchasing
comprehensive medical coverage when, in fact, these polices may not
include many of the important consumer protections under the PHS Act,
ERISA, and the Code. The Departments solicit comments on this issue and
on whether, if such policies are permitted to be considered excepted
benefits, protections are needed to ensure such policies are not
mistaken for comprehensive medical coverage. For example, the
Departments solicit comments on whether to limit the number of diseases
or illnesses that may be covered in a specified disease policy that is
considered to be excepted benefits or whether issuers should be
required to disclose that such policies are not minimum essential
coverage under section 5000A(f) of the Code.
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\32\ 26 CFR 54.9831-1(c)(4), 29 CFR 2590.732(c)(4), 45 CFR
146.145(b)(4) and 148.220(b)(3).
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Short-Term, Limited-Duration Insurance
Under existing regulations, short-term, limited-duration insurance
means ``health insurance coverage provided pursuant to a contract with
an issuer that has an expiration date specified in the contract (taking
into account any extensions that may be elected by the policyholder
without the issuer's consent) that is less than 12 months after the
original effective date of the contract.'' \33\ Before enactment of the
ACA, short-term, limited-duration insurance was an important means for
individuals to obtain health coverage when transitioning from one job
to another (and from one group health plan to another) or in a similar
situation. But with the guaranteed availability of coverage and special
enrollment period requirements in the individual health insurance
market under the ACA, short-term, limited-duration insurance is no
longer the only means to obtain transitional coverage.
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\33\ 26 CFR 54.9801-2, 29 CFR 2590.702-2, 45 CFR 144.103.
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The Departments recently have become aware that short-term,
limited-duration insurance is being sold to address situations other
than the situations that the exception was initially intended to
address.\34\ In some instances individuals are purchasing this coverage
as their primary form of health coverage and, contrary to the intent of
the 12-month coverage limitation in the current definition of short-
term, limited-duration insurance, some issuers are providing renewals
of the coverage that extend the duration beyond 12 months. The
Departments are concerned that these policies, because they are exempt
from market reforms, may have significant limitations, such as lifetime
and annual dollar limits on EHBs and pre-existing condition exclusions,
and therefore may not provide meaningful health coverage. Further,
because these policies can be medically underwritten based on health
status, healthier individuals may be targeted for this type of
coverage, thus adversely impacting the risk pool for ACA-compliant
coverage.
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\34\ See e.g., Mathews, Anna W. ``Sales of Short-Term Health
Policies Surge,'' The Wall Street Journal April 10, 2016, available
at http://www.wsj.com/articles/sales-of-short-term-health-policies-surge-1460328539.
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To address the issue of short-term, limited-duration insurance
being sold as a type of primary coverage, the proposed regulations
revise the definition of short-term, limited-duration insurance so that
the coverage must be less than three months in duration, including any
period for which the policyholder renews or has an option to renew with
or without the issuer's consent. The proposed regulations also provide
that a notice must be prominently displayed in the contract and in any
application materials provided in connection with enrollment in such
coverage with the following language: THIS IS NOT QUALIFYING HEALTH
COVERAGE (``MINIMUM ESSENTIAL COVERAGE'') THAT SATISFIES THE HEALTH
COVERAGE REQUIREMENT OF THE AFFORDABLE CARE ACT. IF YOU DON'T HAVE
MINIMUM ESSENTIAL COVERAGE, YOU MAY OWE AN ADDITIONAL PAYMENT WITH YOUR
TAXES.
This change would align the definition more closely with the
initial intent of the regulation: To refer to coverage intended to fill
temporary coverage gaps when an individual transitions between primary
coverage. Further, limiting the coverage to less than three months
improves coordination with the exemption from the individual shared
responsibility provision of section 5000A of the Code for gaps in
coverage of less than three months (the short coverage gap exemption),
26 CFR 1.5000A-3. Under current law, individuals who are enrolled in
short-term, limited-duration coverage instead of minimum essential
coverage for three months or more are generally not eligible for the
short coverage gap exemption. The proposed regulations help ensure that
individuals who purchase short-term, limited-duration coverage will
still be eligible for the short coverage gap exemption (assuming other
requirements are met) during the temporary coverage period.
In addition to proposing to reduce the length of short-term,
limited-duration insurance to less than three months, the proposed
regulations add the words ``with or'' in front of ``without the
issuer's consent'' to address the Departments' concern that some
issuers are taking liberty with the current
[[Page 38033]]
definition of short-term, limited-duration insurance either by
automatically renewing such policies or having a simplified
reapplication process with the result being that such coverage lasts
much longer than 12 months and serves as an individual's primary
coverage but does not contain the important protections of the ACA. As
indicated above, this type of coverage should only be sold for the
purpose of providing coverage on a short-term basis such as filling in
coverage gaps as a result of transitioning from one group health plan
to another. The addition of the words ``with or'' clarifies that short-
term, limited-duration insurance must be less than 3 months in total
taking into account any option to renew or to reapply for the same or
similar coverage.
The Departments seek comment on this proposal, including
information and data on the number of short-term, limited-duration
insurance policies offered for sale in the market, the types of
individuals who typically purchase this coverage, and the reasons for
which they purchase it.
Definition of EHB for Purposes of the Prohibition on Lifetime and
Annual Limits
On November 18, 2015, the Departments issued final regulations
implementing section 2711 of the PHS Act.\35\ The final regulations
provide that, for plan years beginning on or after January 1, 2017, a
plan or issuer that is not required to provide EHBs must define EHB,
for purposes of the prohibition on lifetime and annual dollar limits,
in a manner consistent with any of the 51 EHB base-benchmark plans
applicable in a State or the District of Columbia, or one of the three
FEHBP base-benchmarks, as specified under 45 CFR 156.100.
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\35\ 80 FR 72192.
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The final regulations under section 2711 of the PHS Act include a
reference to selecting a ``base-benchmark'' plan, as specified under 45
CFR 156.100, for purposes of determining which benefits cannot be
subject to lifetime or annual dollar limits. The base-benchmark plan
selected by a State or applied by default under 45 CFR 156.100,
however, may not reflect the complete definition of EHB in the
applicable State. For that reason, the Departments propose to amend the
regulations at 26 CFR 54.9815-2711(c), 29 CFR 2590.715-2711(c), and 45
CFR 147.126(c) to refer to the provisions that capture the complete
definition of EHB in a State. Specifically, the Departments propose to
replace the phrase ``in a manner consistent with one of the three
Federal Employees Health Benefit Program (FEHBP) options as defined by
45 CFR 156.100(a)(3) or one of the base-benchmark plans selected by a
State or applied by default pursuant to 45 CFR 156.100'' in each of the
regulations with the following: ``In a manner that is consistent with
(1) one of the EHB-benchmark plans applicable in a State under 45 CFR
156.110, and includes coverage of any additional required benefits that
are considered essential health benefits consistent with 45 CFR
155.170(a)(2); or (2) one of the three Federal Employees Health Benefit
Program (FEHBP) options as defined by 45 CFR 156.100(a)(3),
supplemented, as necessary, to meet the standards in 45 CFR 156.110.''
This change reflects the possibility that base-benchmark plans,
including the FEHBP plan options, could require supplementation under
45 CFR 156.110, and ensures the inclusion of State-required benefit
mandates enacted on or before December 31, 2011 in accordance with 45
CFR 155.170, which when coupled with a State's EHB-benchmark plan,
establish the definition of EHB in that State under regulations
implementing section 1302(b) of the ACA.\36\ The Departments seek
comment on the requirement that, when one of the FEHBP plan options is
selected as the benchmark, it would be supplemented, as needed, to
ensure coverage in all ten statutory EHB categories, and the benchmark
plan options that should be available for this purpose.
---------------------------------------------------------------------------
\36\ In the HHS Notice of Benefit and Payment Parameters for
2016 published February 27, 2015 (80 FR 10750), HHS instructed
States to select a new base-benchmark plan to take effect beginning
with plan or policy years beginning in 2017. The new final EHB base-
benchmark plans selected as a result of this process are publicly
available at downloads.cms.gov/cciio/Final%20List%20of%20BMPs_15_10_21.pdf. Additional information about
the new base-benchmark plans, including plan documents and summaries
of benefits, is available at www.cms.gov/CCIIO/Resources/Data-Resources/ehb.html. The definition of EHB in each of the 50 states
and the District of Columbia is based on the base-benchmark plan,
and takes into account any additions to the base-benchmark plan,
such as supplementation under 45 CFR 156.110, and State-required
benefit mandates in accordance with 45 CFR 155.170.
---------------------------------------------------------------------------
Proposed Applicability Date and Reliance
Except as otherwise provided herein, these proposed 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 in the Federal Register. To the extent final regulations or
other guidance is more restrictive on issuers, employers,
administrators, and individuals than these proposed regulations, the
final regulations or other guidance will be applied without retroactive
effect and issuers, employers, administrators, and individuals will be
provided sufficient time to come into compliance with the final
regulations.
III. Economic Impact and Paperwork Burden
A. Summary--Department of Labor and Department of Health and Human
Services
As stated above, the proposed regulations would provide guidance on
the rules for expatriate health plans, expatriate health plan issuers,
and qualified expatriates under the EHCCA. The EHCCA generally provides
that the requirements of the ACA do not apply with respect to
expatriate health plans, expatriate health insurance issuers for
coverage under expatriate health plans, and employers in their capacity
as plan sponsors of expatriate health plans.
The proposed regulations address how certain requirements relating
to minimum essential coverage under section 5000A of the Code, the
health care reporting provisions of sections 6055 and 6056 of the Code,
and the health insurance providers fee imposed by section 9010 of the
ACA continue to apply subject to certain provisions while providing
that the excise tax under sections 4375 and 4376 of the Code do not
apply to expatriate health plans.
The proposed regulations also propose amendments to the
Departments' regulations concerning excepted benefits, which would
specify the conditions for supplemental health insurance products that
are designed ``to fill gaps in primary coverage'' by providing
additional categories of benefits (as opposed to filling in gaps in
cost sharing) to constitute supplemental excepted benefits, and clarify
that certain travel-related insurance products that provide only
incidental health benefits constitute excepted benefits. The proposed
regulations also require that, to be considered hospital indemnity or
other fixed indemnity insurance in the group market, any application or
enrollment materials provided to participants at or before the time
participants are given the opportunity to enroll in the coverage must
include a statement that the coverage is a supplement to, rather than a
substitute for, major medical coverage and that a lack of minimum
essential
[[Page 38034]]
coverage may result in an additional tax payment. Further, the
regulations clarify that hospital indemnity and other fixed indemnity
insurance must pay a fixed dollar amount per day (or per other time
period, such as per week) regardless of the type of items or services
received.
The regulations also propose revisions to the definition of short-
term, limited-duration insurance so that the coverage has to be less
than 3 months in duration (as opposed to the current definition of less
than 12 months in duration), and that a notice must be prominently
displayed in the contract and in any application materials provided in
connection with the coverage that provides that such coverage is not
minimum essential coverage.
The proposed regulations also include amendments to 45 CFR part 158
to clarify that the MLR reporting requirements do not apply to
expatriate health plans under the EHCCA.
Finally, the proposed regulations propose to amend the definition
of ``essential health benefits'' for purposes of the prohibition of
annual and lifetime dollar limits for group health plans and health
insurance issuers that are not required to provide essential health
benefits.
The Departments are publishing these proposed regulations to
implement the protections intended by the Congress in the most
economically efficient manner possible. The Departments have examined
the effects of this rule as required by Executive Order 13563 (76 FR
3821, January 21, 2011), Executive Order 12866 (58 FR 51735, September
1993, Regulatory Planning and Review), the Regulatory Flexibility Act
(RFA) (September 19, 1980, Pub. L. 96-354), the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on
Federalism, and the Congressional Review Act (5 U.S.C. 804(2)).
B. Executive Orders 12866 and 13563--Department of Labor and Department
of Health and Human Services
Executive Order 12866 (58 FR 51735) directs agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects; distributive impacts; and equity). Executive
Order 13563 (76 FR 3821, January 21, 2011) is supplemental to and
reaffirms the principles, structures, and definitions governing
regulatory review as established in Executive Order 12866.
Section 3(f) of Executive Order 12866 defines a ``significant
regulatory action'' as an action that is likely to result in a final
rule--(1) having an annual effect on the economy of $100 million or
more in any one year, or adversely and materially affecting a sector of
the economy, productivity, competition, jobs, the environment, public
health or safety, or state, local or tribal governments or communities
(also referred to as ``economically significant''); (2) creating a
serious inconsistency or otherwise interfering with an action taken or
planned by another agency; (3) materially altering the budgetary
impacts of entitlement grants, user fees, or loan programs or the
rights and obligations of recipients thereof; or (4) raising novel
legal or policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in the Executive Order.
A regulatory impact analysis (RIA) must be prepared for rules with
economically significant effects (for example, $100 million or more in
any 1 year), and a ``significant'' regulatory action is subject to
review by the OMB. The Departments have determined that this regulatory
action is not likely to have economic impacts of $100 million or more
in any one year, and therefore is not significant within the meaning of
Executive Order 12866. The Departments expect the impact of these
proposed regulations to be limited because they do not require any
additional action or impose any requirements on issuers, employers and
plan sponsors.
1. Need for Regulatory Action
Consistent with the EHCCA, enacted as Division M of the
Consolidated Clarification Continuing Appropriations Act, 2015 Public
Law 113-235 (128 Stat. 2130), these proposed regulations provide that
the market reform provisions enacted as part of the ACA generally do
not apply to expatriate health plans, any employer solely in its
capacity as a plan sponsor of an expatriate health plan, and any
expatriate health insurance issuer with respect to coverage under an
expatriate health plan. Further, the proposed regulations define the
benefit and administrative requirements for expatriate health issuers,
expatriate health plans, and qualified expatriates and provide
clarification regarding the applicability of certain fee and reporting
requirements under the Code.
Consistent with section 2 of the EHCCA, these proposed regulations
are necessary to carry out the intent of Congress that (1) American
expatriate health insurance issuers should be permitted to compete on a
level playing field in the global marketplace; (2) the global
competitiveness of American companies should be encouraged; and (3) in
implementing the health insurance providers fee imposed by section 9010
of the ACA and other provisions of the ACA, the unique and
multinational features of expatriate health plans and the United States
companies that operate such plans and the competitive pressures of such
plans and companies should continue to be recognized.
In response to feedback the Departments have received from
stakeholders, the proposed regulations would also clarify the
conditions for supplemental health insurance and travel insurance to be
considered excepted benefits. These clarifications will provide health
insurance issuers offering supplemental insurance coverage and travel
insurance products with a clearer understanding of whether these types
of coverage are subject to the market reforms under title XXVII of the
PHS Act, part 7 of ERISA, and Chapter 100 of the Code. The proposed
regulations also would amend the definition of short-term, limited-
duration insurance and impose a new notice requirement in response to
recent reports that this type of coverage is being sold for purposes
other than for which the exclusion for short-term, limited-duration
insurance was initially intended to cover.
2. Summary of Impacts
These proposed regulations would implement the rules for expatriate
health plans, expatriate health insurance issuers, and qualified
expatriates under the EHCCA. The proposed regulations also outline the
conditions for travel insurance and supplemental insurance coverage to
be considered excepted benefits, and revise the definition of short-
term, limited-duration insurance.
Based on the NAIC 2014 Supplemental Health Care Exhibit Report,\37\
which generally uses the definition of expatriate coverage in the MLR
final rule at 45 CFR 158.120(d)(4),\38\ there are an estimated
[[Page 38035]]
eight issuers (one issuer in the small group market and seven issuers
in the large group market) domiciled in the United States that provide
expatriate health plans for approximately 270,349 enrollees. While the
Departments acknowledge that some expatriate health insurance issuers
and employers in their capacity as plan sponsor of an expatriate health
plan may incur costs in order to comply with certain provisions of the
EHCCA and these proposed regulations, as discussed below, the
Departments believe that these costs will be relatively insignificant
and limited.
---------------------------------------------------------------------------
\37\ NAIC, 2014 Supplemental Health Care Exhibit Report, Volume
1 (2015), available at http://www.naic.org/documents/prod_serv_statistical_hcs_zb.pdf.
\38\ Section 45 CFR 158.120(d)(4) defines expatriate policies as
predominantly 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.
---------------------------------------------------------------------------
The vast majority of expatriate health plans described in the EHCCA
would qualify as expatriate health plans under the transitional relief
provided in the Departments' Affordable Care Act Implementation FAQs
Part XVIII, Q&A-6 and Q&A-7. The FAQs provide that expatriate health
plans with plan years ending on or before December 31, 2016 are exempt
from the ACA market reforms and provide that coverage provided under an
expatriate group health plan is a form of minimum essential coverage
under section 5000A of the Code. The EHCCA permanently exempts
expatriate health plans with plan or policy years beginning on or after
July 1, 2015 from the ACA market reform requirements and provides that
coverage provided under an expatriate health plan is a form of minimum
essential coverage under section 5000A of the Code.
Because the Departments believe that most, if not all, expatriate
health plans described in the EHCCA would qualify as expatriate health
plans under the Departments' previous guidance, and the proposed
regulations codify the provisions of the EHCCA by making the temporary
relief in the Departments' Affordable Care Act Implementation FAQs Part
XVIII, Q&A-6 and Q&A-7 permanent for specified expatriate health plans,
the Departments believe that the proposed regulations will result in
only marginal, if any, impact on these plans. Furthermore, the
Departments believe the proposed regulations outlining the conditions
for travel insurance and supplemental insurance coverage to be
considered excepted benefits are consistent with prevailing industry
practice and will not result in significant cost to health insurance
issuers of these products.
The Departments believe that any costs incurred by issuers of
short-term, limited-duration insurance and hospital indemnity and other
fixed indemnity insurance to include the required notice in application
or enrollment materials will be negligible since the Departments have
provided the exact text for the notice. Further, the Departments note
that issuers of hospital indemnity and other fixed indemnity insurance
in the individual market already provide a similar notice.
As a result, the Departments have concluded that the impacts of
these proposed regulations are not economically significant. 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.
C. Paperwork Reduction Act
1. Department of the Treasury
The collection of information in these proposed regulations are in
26 CFR 1.6055-2(a)(8) and 301.6056-2(a)(8). The collection of
information in these proposed regulations relates to statements
required to be furnished to a responsible individual under section 6055
of the Code and statements required to be furnished to an employee
under section 6056 of the Code. The collection of information in these
proposed regulations would, in accordance with the EHCCA, permit a
furnisher to furnish the required statements electronically unless the
recipient has explicitly refused to consent to receive the statement in
an electronic format. The collection of information contained in this
notice of proposed rulemaking will be taken into account and submitted
to the Office of Management and Budget in accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3507(d)) in connection with the next
review of the collection of information for IRS Form 1095-B (OMB #
1545-2252) and IRS Form 1095-C (OMB # 1545-2251).
Comments on the collection of information should be sent to the
Office of Management and Budget, Attn: Desk Officer for the Department
of the Treasury, Office of Information and Regulatory Affairs,
Washington, DC 20503, with copies to the Internal Revenue Service,
Attn: IRS Reports Clearance Officer, SE:CAR:MP:T:T:SP, Washington, DC
20224. Comments on the collection of information should be received by
August 9, 2016. Comments are sought on whether the proposed collection
of information is necessary for the proper performance of the IRS,
including whether the information will have practical utility; the
accuracy of the estimated burden associated with the proposed
collection of information; how the quality, utility, and clarity of the
information to be collected may be enhanced; how the burden of
complying with the proposed collection of information may be minimized,
including through the application of automated collection techniques
and other forms of information technology; and estimates of capital or
start-up costs and costs of operation, maintenance, and purchase of
service to provide information. Comments on the collection of
information should be received by August 9, 2016.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a valid
control number assigned by the Office of Management and Budget.
Books or records relating to a collection of information must be
retained as long as their contents may become material in the
administration of any internal revenue law. Generally, tax returns and
tax return information are confidential, as required by 26 U.S.C. 6103.
2. Department of the Treasury, Department of Labor, and Department of
Health and Human Services
The proposed regulations provide that to be considered hospital or
other fixed indemnity excepted benefits in the group market for plan
years beginning on or after January 1, 2017, a notice must be included
in any application or enrollment materials provided to participants at
or before the time participants are given the opportunity to enroll in
the coverage, indicating that the coverage is a supplement to, rather
than a substitute for major medical coverage and that a lack of minimum
essential coverage may result in an additional tax payment. The
proposed regulations also provide that to be considered short-term,
limited-duration insurance for policy years beginning on or after
January 1, 2017, a notice must be prominently displayed in the contract
and in any application materials, stating that the coverage is not
minimum essential coverage and that failure to have minimum essential
coverage may result in an additional tax payment. The Departments have
provided the exact text for these notice requirements and the language
will not need to be customized. The burden associated with these
notices is not subject to the Paperwork Reduction Act of 1995 in
accordance with 5 CFR 1320.3(c)(2) because they do not contain a
``collection of information'' as defined in 44 U.S.C. 3502(11).
D. Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes
[[Page 38036]]
certain requirements with respect to Federal rules that are subject to
the notice and comment requirements of section 553(b) of the
Administrative Procedure Act (5 U.S.C. 551 et seq.) and that are likely
to have a significant economic impact on a substantial number of small
entities. Unless an agency certifies that a proposed rule is not likely
to have a significant economic impact on a substantial number of small
entities, section 603 of RFA requires that the agency present an
initial regulatory flexibility analysis at the time of the publication
of the notice of proposed rulemaking describing the impact of the rule
on small entities and seeking public comment on such impact. Small
entities include small businesses, organizations and governmental
jurisdictions.
The RFA generally defines a ``small entity'' as (1) a proprietary
firm meeting the size standards of the Small Business Administration
(SBA) (13 CFR 121.201); (2) a nonprofit organization that is not
dominant in its field; or (3) a small government jurisdiction with a
population of less than 50,000. (States and individuals are not
included in the definition of ``small entity.'') The Departments use as
their measure of significant economic impact on a substantial number of
small entities a change in revenues of more than 3 to 5 percent.
These proposed regulations are not likely to impose additional
costs on small entities. According to SBA size standards, entities with
average annual receipts of $38.5 million or less would be considered
small entities for these North American Industry Classification System
codes. The Departments believe that, since the majority of small
issuers belong to larger holding groups, many if not all are likely to
have non-health lines of business that would result in their revenues
exceeding $38.5 million. Therefore, the Departments certify that the
proposed regulations will not have a significant impact on a
substantial number of small entities. In addition, section 1102(b) of
the Social Security Act requires agencies to prepare a regulatory
impact analysis if a rule may have a significant economic impact on the
operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 604 of the RFA.
These proposed regulations would not affect small rural hospitals.
Therefore, the Departments have determined that these proposed
regulations would not have a significant impact on the operations of a
substantial number of small rural hospitals.
E. Special Analysis--Department of the Treasury
Certain IRS regulations, including this one, are exempt from the
requirements of Executive Order 12866, as supplemented and reaffirmed
by Executive Order 13563. Therefore, a regulatory impact assessment is
not required. It also has been determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C. Chapter 5) does not apply to
these regulations. For applicability of RFA, see paragraph D of this
section III.
Pursuant to section 7805(f) of the Code, these regulations have
been submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on their impact on small business.
F. Unfunded Mandates Reform Act
For purposes of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.
1501 et seq.), as well as Executive Order 12875, these proposed rules
do not include any Federal mandate that may result in expenditures by
State, local, or tribal governments, or the private sector, which may
impose an annual burden of $146 million adjusted for inflation since
1995.
G. Federalism--Department of Labor and Department of Health and Human
Services
Executive Order 13132 outlines fundamental principles of
federalism. It requires adherence to specific criteria by Federal
agencies in formulating and implementing policies that have
``substantial direct effects'' on the States, the relationship between
the national government and States, or on the distribution of power and
responsibilities among the various levels of government. Federal
agencies promulgating regulations that have these federalism
implications must consult with State and local officials, and describe
the extent of their consultation and the nature of the concerns of
State and local officials in the preamble to the final regulation.
In the Departments' view, these proposed regulations do not have
federalism implications, because they do not have direct effects on the
States, the relationship between the national government and States, or
on the distribution of power and responsibilities among various levels
of government.
H. Congressional Review Act
These proposed regulations are subject to the Congressional Review
Act provisions of the Small Business Regulatory Enforcement Fairness
Act of 1996 (5 U.S.C. 801 et seq.), and, if finalized, will be
transmitted to the Congress and to the Comptroller General for review
in accordance with such provisions.
I. Statement of Availability of IRS Documents
IRS Revenue Procedures, Revenue Rulings notices, and other guidance
cited in this document are published in the Internal Revenue Bulletin
(or Cumulative Bulletin) and are available from the Superintendent of
Documents, U.S. Government Printing Office, Washington, DC 20402, or by
visiting the IRS Web site at http://www.irs.gov.
IV. Statutory Authority
The Department of the Treasury regulations are proposed to be
adopted pursuant to the authority contained in sections 7805 and 9833
of the Code.
The Department of Labor regulations are proposed pursuant to the
authority contained in 29 U.S.C. 1135,and 1191c; Secretary of Labor's
Order 1-2011, 77 FR 1088 (Jan. 9, 2012).
The Department of Health and Human Services regulations are
proposed to be adopted pursuant to the authority contained in sections
2701 through 2763, 2791, and 2792 of the PHS Act (42 U.S.C. 300gg
through 300gg-63, 300gg-91, and 300gg-92), as amended.
List of Subjects
26 CFR Part 1
Income taxes.
26 CFR Part 46
Excise taxes, Health care, Health insurance, Pensions, Reporting
and recordkeeping requirements.
26 CFR Part 54
Pension and excise taxes.
26 CFR Part 57
Health insurance providers fee.
26 CFR Part 301
Procedure and administration.
29 CFR Part 2590
Continuation coverage, Disclosure, Employee benefit plans, Group
health plans, Health care, Health insurance, Medical child support,
Reporting and recordkeeping requirements.
45 CFR Parts 144, 146 and 147
Health care, Health insurance, Reporting and recordkeeping
requirements.
45 CFR Part 148
Administrative practice and procedure, Health care, Health
[[Page 38037]]
insurance, Penalties, Reporting and recordkeeping requirements.
45 CFR Part 158
Health insurance, Medical loss ratio, Reporting and rebate
requirements.
John Dalrymple,
Deputy Commissioner for Services and Enforcement, Internal Revenue
Service.
Signed this 1st day of June 2016.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration,
Department of Labor.
Dated: June 2, 2016.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
Dated: June 3, 2016.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
DEPARTMENT OF THE TREASURY
Internal Revenue Service
Proposed Amendments to the Regulations
Accordingly, 26 CFR parts 1, 46, 54, 57, and 301 are proposed to be
amended as follows:
PART 1--INCOME TAXES
0
1. The authority citation for part 1 continues to read in part as
follows:
Authority: 26 U.S.C. 7805.* * *
0
2. Section 1.162-31 is amended by adding paragraph (b)(5)(v) to read as
follows:
Sec. 1.162-31 The $500,000 deduction limitation for remuneration
provided by certain health insurance providers.
* * * * *
(b) * * *
(5) * * *
(v) Expatriate health plan coverage. For purposes of this section,
amounts received in payment for expatriate health plan coverage, as
defined in Sec. 54.9831-1(f)(3), are not premiums.
* * * * *
0
3. Section 1.5000A-2 is amended by adding paragraphs (c)(1)(i)(D) and
(d)(3) to read as follows:
Sec. 1.5000A-2 Minimum essential coverage.
* * * * *
(c) * * *
(1) * * *
(i) * * *
(D) A group health plan that is an expatriate health plan within
the meaning of Sec. 54.9831-1(f)(3) of this chapter if the
requirements of Sec. 54.9831-1(f)(3)(i) of this chapter are met by
providing coverage for qualified expatriates described in Sec.
54.9831-1(f)(6)(i) or (ii) of this chapter.
* * * * *
(d) * * *
(3) Certain expatriate health plans. An expatriate health plan
within the meaning of Sec. 54.9831-1(f)(3) of this chapter that is not
an eligible employer-sponsored plan under paragraph (c)(1)(i)(D) of
this section is a plan in the individual market.
* * * * *
0
4. Section 1.6055-2 is amended by adding paragraph (a)(8) to read as
follows:
Sec. 1.6055-2 Electronic furnishing of statements.
(a) * * *
(8) Special rule for expatriate health plan coverage--(i) In
general. In the case of an individual covered under an expatriate
health plan (within the meaning of Sec. 54.9831-1(f)(3) of this
chapter), the recipient is treated as having consented under paragraph
(a)(2) of this section unless the recipient has explicitly refused to
consent to receive the statement in an electronic format. The refusal
to consent may be made electronically or in a paper document. A
recipient's request for a paper statement is treated as an explicit
refusal to receive the statement in electronic format. A furnisher
relying on this paragraph (a)(8) must satisfy the requirements of
paragraphs (a)(3) through (7) of this section, except that the
statement required under paragraph (a)(3) must be provided at least 30
days prior to the time for furnishing under Sec. 1.6055-1(g)(4)(i)(A)
of this chapter of the first statement that the furnisher intends to
furnish electronically to the recipient, and the other requirements of
paragraph (a)(3) are modified to reflect that the statement will be
furnished electronically unless the recipient explicitly refuses to
consent to receive the statement in an electronic format.
(ii) Manner and time of notifying recipient. The IRS may specify in
other guidance published in the Internal Revenue Bulletin the manner
and timing for the initial notification of recipients that the
statement required under paragraph (a)(3) of this section will be
furnished electronically unless the recipient explicitly refuses to
consent to receive the statement in an electronic format. See Sec.
601.601(d)(2)(ii)(B) of this chapter.
(iii) Effective/applicability date. The provisions of this
paragraph (a)(8) apply as of January 1, 2017.
* * * * *
PART 46--EXCISE TAXES, HEALTH CARE, HEALTH INSURANCE, PENSIONS,
REPORTING AND RECORDKEEPING
0
5. The authority citation for part 46 continues to read as follows:
Authority: 26 U.S.C. 7805.
0
6. Section 46.4377-1 is amended by redesignating paragraph (c) as
paragraph (d) and adding new paragraph (c) to read as follows:
Sec. 46.4377-1. Definitions and special rules.
* * * * *
(c) Treatment of expatriate health plans. For policy years and plan
years that end after January 1, 2017, the fees imposed by sections 4375
and 4376 do not apply to an expatriate health plan within the meaning
of Sec. 54.9831-1(f)(3).
* * * * *
PART 54--PENSION AND EXCISE TAXES
0
7. The authority citation for part 54 continues to read in part as
follows:
Authority: 26 U.S.C. 7805* * *
0
8. Section 54.9801-2 is amended by:
0
a. Adding in alphabetical order definitions for ``expatriate health
insurance issuer'', ``expatriate health plan'', and ``qualified
expatriate;''
0
b. Revising the definition of ``short-term, limited-duration
insurance''; and
0
c. Adding in alphabetical order a definition for ``travel insurance''.
The additions and revisions read as follows:
Sec. 54.9801-2 Definitions.
* * * * *
Expatriate health insurance issuer means an expatriate health
insurance issuer within the meaning of Sec. 54.9831-1(f)(2).
Expatriate health plan means an expatriate health plan within the
meaning of Sec. 54.9831-1(f)(3).
* * * * *
Qualified expatriate means a qualified expatriate within the
meaning of Sec. 54.9831-1(f)(6).
Short-term, limited-duration insurance means health insurance
coverage provided pursuant to a contract with an issuer that:
(1) Has an expiration date specified in the contract (taking into
account any extensions that may be elected by the policyholder with or
without the issuer's consent) that is less than 3 months after the
original effective date of the contract; and
(2) Displays prominently in the contract and in any application
materials provided in connection with
[[Page 38038]]
enrollment in such coverage in at least 14 point type the following:
``THIS IS NOT QUALIFYING HEALTH COVERAGE (``MINIMUM ESSENTIAL
COVERAGE'') THAT SATISFIES THE HEALTH COVERAGE REQUIREMENT OF THE
AFFORDABLE CARE ACT. IF YOU DON'T HAVE MINIMUM ESSENTIAL COVERAGE, YOU
MAY OWE AN ADDITIONAL PAYMENT WITH YOUR TAXES.''
* * * * *
Travel insurance means insurance coverage for personal risks
incident to planned travel, which may include, but is not limited to,
interruption or cancellation of trip or event, loss of baggage or
personal effects, damages to accommodations or rental vehicles, and
sickness, accident, disability, or death occurring during travel,
provided that the health benefits are not offered on a stand-alone
basis and are incidental to other coverage. For this purpose, the term
travel insurance does not include major medical plans that provide
comprehensive medical protection for travelers with trips lasting 6
months or longer, including, for example, those working overseas as an
expatriate or military personnel being deployed.
* * * * *
0
9. Section 54.9815-2711 is amended by revising paragraph (c) to read as
follows:
Sec. 54.9815-2711 No lifetime or annual limits.
* * * * *
(c) Definition of essential health benefits. The term ``essential
health benefits'' means essential health benefits under section 1302(b)
of the Patient Protection and Affordable Care Act and applicable
regulations. For this purpose, a group health plan or a health
insurance issuer that is not required to provide essential health
benefits under section 1302(b) must define ``essential health
benefits'' in a manner that is consistent with--
(1) One of the EHB-benchmark plans applicable in a State under 45
CFR 156.110, and includes coverage of any additional required benefits
that are considered essential health benefits consistent with 45 CFR
155.170(a)(2); or
(2) One of the three Federal Employees Health Benefit Program
(FEHBP) options as defined by 45 CFR 156.100(a)(3), supplemented, as
necessary, to meet the standards in 45 CFR 156.110.
* * * * *
Sec. 54.9831-1 [Amended]
0
10. Section 54.9831-1 is amended in paragraph (b)(1) by removing the
reference ``54.9812-1T'' and adding in its place the reference
``54.9812-1, 54.9815-1251 through 54.9815-2719A,'' and in paragraph
(c)(1) by removing the reference ``54.9811-1T, 54.9812-1T'' with the
phrase ``54.9811-1, 54.9812-1, 54.9815-1251 through 54.9815-2719A''.
0
11. Section 54.9831-1 is amended:
0
a. In paragraph (c)(2)(vii) by removing ``and'' at the end;
0
b. In paragraph (c)(2)(viii) by adding ``and'' at the end;
0
c. Adding paragraph (c)(2)(ix);
0
d. Revising paragraph (c)(4)(i);
0
e. Adding paragraph (c)(4)(ii)(D);
0
f. Revising paragraphs (c)(4)(iii) and (c)(5)(i)(C); and
0
g. Adding paragraph (f).
The revisions and additions read as follows:
Sec. 54.9831-1 Special rules relating to group health plans.
* * * * *
(c) * * *
(2) * * *
(ix) Travel insurance within the meaning of Sec. 54.9801-2 of this
section.
* * * * *
(4) Noncoordinated benefits--(i) Excepted benefits that are not
coordinated. Coverage for only a specified disease or illness (for
example, cancer-only policies) or hospital indemnity or other fixed
indemnity insurance is excepted only if the coverage meets each of the
conditions specified in paragraph (c)(4)(ii) of this section.
(ii) * * *
(D) To be hospital indemnity or other fixed indemnity insurance,
the insurance must pay a fixed dollar amount per day (or per other time
period, such as per week) of hospitalization or illness (for example,
$100/day) without regard to the amount of expenses incurred or the type
of items or services received and--
(1) The plan or issuer must provide, in any application or
enrollment materials provided to participants at or before the time
participants are given the opportunity to enroll in the coverage, a
notice that prominently displays in at least 14 point type the
following language: ``THIS IS A SUPPLEMENT TO HEALTH INSURANCE AND IS
NOT A SUBSTITUTE FOR MAJOR MEDICAL COVERAGE. THIS IS NOT QUALIFYING
HEALTH COVERAGE (``MINIMUM ESSENTIAL COVERAGE'') THAT SATISFIES THE
HEALTH COVERAGE REQUIREMENT OF THE AFFORDABLE CARE ACT. IF YOU DON'T
HAVE MINIMUM ESSENTIAL COVERAGE, YOU MAY OWE AN ADDITIONAL PAYMENT WITH
YOUR TAXES.''
(2) If participants are required to reenroll (in either paper or
electronic form) for renewal or reissuance, the notice described in
paragraph (c)(4)(ii)(D)(1) of this section must be displayed in the
reenrollment materials that are provided to the participants at or
before the time participants are given the opportunity to reenroll in
the coverage.
(3) If a notice satisfying the requirements of this paragraph
(c)(4)(ii)(D) is timely provided to a participant, the obligation to
provide the notice is satisfied for both the plan and the issuer.
(iii) Examples. The rules of this paragraph (c)(4) are illustrated
by the following examples:
Example 1. (i) Facts. An employer sponsors a group health plan
that provides coverage through an insurance policy. The policy
provides benefits only for hospital stays at a fixed percentage of
hospital expenses up to a maximum of $100 a day.
(ii) Conclusion. In this Example 1, because the policy pays a
percentage of expenses incurred rather than a fixed dollar amount
per day (or per other time period, such as per week), the policy is
not hospital indemnity or other fixed indemnity insurance that is an
excepted benefit under this paragraph (c)(4). This is the result
even if, in practice, the policy pays the maximum of $100 for every
day of hospitalization.
Example 2. (i) Facts. An employer sponsors a group health plan
that provides coverage through an insurance policy. The policy
provides benefits for doctors' visits at $50 per visit,
hospitalization at $100 per day, various surgical procedures at
different dollar rates per procedure, and prescription drugs at $15
per prescription.
(ii) Conclusion. In this Example 2, for doctors' visits,
surgery, and prescription drugs, payment is not made on a per-period
basis, but instead is based on whether a procedure or item is
provided, such as whether an individual has surgery or a doctor
visit or is prescribed a drug, and the amount of payment varies
based on the type of procedure or item. Because benefits related to
office visits, surgery, and prescription drugs are not paid based on
a fixed dollar amount per day (or per other time period, such as per
week), as required under paragraph (c)(4) of this section, the
policy is not hospital indemnity or other fixed indemnity insurance
that is an excepted benefit under this paragraph (c)(4).
Example 3. (i) Facts. An employer sponsors a group health plan
that provides coverage through an insurance policy. The policy
provides benefits for certain services at a fixed dollar amount per
day, but the dollar amount varies by the type of service.
(ii) Conclusion. In this Example 3, because the policy provides
benefits in a different amount per day depending on the type of
service, rather than one specific dollar amount per day regardless
of the type of service, the policy is not hospital indemnity or
other fixed indemnity insurance that is an excepted benefit under
this paragraph (c)(4).
[[Page 38039]]
(5) * * *
(i) * * *
(C) Similar supplemental coverage provided to coverage under a
group health plan. To be similar supplemental coverage, the coverage
must be specifically designed to fill gaps in the primary coverage. The
preceding sentence is satisfied if the coverage is designed to fill
gaps in cost sharing in the primary coverage, such as coinsurance or
deductibles, or the coverage is designed to provide benefits for items
and services not covered by the primary coverage and that are not
essential health benefits in the State where the coverage is issued, or
the coverage is designed to both fill such gaps in cost sharing under,
and cover such benefits not covered by, the primary coverage. Similar
supplemental coverage does not include coverage that becomes secondary
or supplemental only under a coordination-of-benefits provision.
* * * * *
(f) Expatriate health plans and expatriate health insurance
issuers--(1) In general. With respect to coverage under an expatriate
health plan, the requirements of section 9815 of the Code and
implementing rules and regulations (incorporating sections 2701 through
2728 of the Public Health Service Act) do not apply to--
(i) An expatriate health plan (as defined in paragraph (f)(3) of
this section),
(ii) An employer, solely in its capacity as plan sponsor of an
expatriate health plan, and
(iii) An expatriate health insurance issuer (as defined in
paragraph (f)(2) of this section) with respect to coverage under an
expatriate health plan.
(2) Definition of expatriate health insurance issuer--(i) In
general. Expatriate health insurance issuer means a health insurance
issuer, within the meaning of Sec. 54.9801-2, that issues expatriate
health plans and that in the course of its normal business operations--
(A) Maintains network provider agreements that provide for direct
claims payments, with health care providers in eight or more countries;
(B) Maintains call centers in three or more countries, and accepts
calls from customers in eight or more languages;
(C) Processed at least $1 million in claims in foreign currency
equivalents during the preceding calendar year, determined using the
Treasury Department's currency exchange rate in effect on the last day
of the preceding calendar year;
(D) Makes global evacuation/repatriation coverage available;
(E) Maintains legal and compliance resources in three or more
countries; and
(F) Has licenses or other authority to sell insurance in more than
two countries, including in the United States.
(ii) Additional rules. For purposes of meeting the requirements of
this paragraph (f)(2), two or more entities, including one entity that
is the expatriate health insurance issuer, that are members of the
expatriate health insurance issuer's controlled group (as determined
under Sec. 57.2(c) of this chapter) are treated as one expatriate
health insurance issuer. Alternatively, the requirements of this
paragraph (f)(2) may be satisfied through contracts between an
expatriate health insurance issuer and third parties.
(3) Definition of expatriate health plan. Expatriate health plan
means a plan that satisfies the requirements of paragraphs (f)(3)(i)
through (iii) of this section.
(i) Substantially all qualified expatriates requirement.
Substantially all primary enrollees in the expatriate health plan must
be qualified expatriates. For purposes of this paragraph (f)(3)(i), the
primary enrollee is the individual covered by the plan or policy whose
eligibility for coverage is not due to that individual's status as the
spouse, dependent, or other beneficiary of another covered individual.
Notwithstanding the foregoing, an individual is not a primary enrollee
if the individual is not a national of the United States and the
individual resides in his or her country of citizenship. A plan
satisfies the requirement of this paragraph (f)(3)(i) for a plan or
policy year only if, on the first day of the plan or policy year, less
than 5 percent of the primary enrollees (or less than 5 primary
enrollees if greater) are not qualified expatriates.
(ii) Substantially all benefits not excepted benefits requirement.
Substantially all of the benefits provided under the plan or coverage
must be benefits that are not excepted benefits described in Sec.
54.9831-1(c).
(iii) Additional requirements. To qualify as an expatriate health
plan, the plan or coverage must also meet the following requirements:
(A) The plan or coverage provides coverage for inpatient hospital
services, outpatient facility services, physician services, and
emergency services (comparable to emergency services coverage that was
described in and offered under section 8903(1) of title 5, United
States Code for plan year 2009) in the following locations--
(1) In the case of individuals described in paragraph (f)(6)(i) of
this section, in the United States and in the country or countries from
which the individual was transferred or assigned, and such other
country or countries the Secretary of Health and Human Services, in
consultation with the Secretary of the Treasury and Secretary of Labor,
may designate;
(2) In the case of individuals described in paragraph (f)(6)(ii) of
this section, in the country or countries in which the individual is
present in connection with his employment, and such other country or
countries the Secretary of Health and Human Services, in consultation
with the Secretary of the Treasury and Secretary of Labor, may
designate; or
(3) In the case of individuals described in paragraph (f)(6)(iii)
of this section, in the country or countries the Secretary of Health
and Human Services, in consultation with the Secretary of the Treasury
and Secretary of Labor, may designate.
(B) The plan sponsor reasonably believes that benefits provided by
the plan or coverage satisfy the minimum value requirements of section
36B(c)(2)(C)(ii). For this purpose, a plan sponsor is permitted to rely
on the reasonable representations of the issuer or administrator
regarding whether benefits offered by the issuer or group health plan
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.
(C) In the case of a plan or coverage that provides dependent
coverage of children, such coverage must be available until an
individual attains age 26, unless an individual is the child of a child
receiving dependent coverage.
(D) The plan or coverage is:
(1) In the case of individuals described in paragraph (f)(6)(i) or
(ii) of this section, a group health plan (including health insurance
coverage offered in connection with a group health plan), issued by an
expatriate health insurance issuer or administered by an expatriate
health plan administrator. A group health plan will not fail to be an
expatriate health plan merely because any portion of the coverage is
provided through a self-insured arrangement.
(2) In the case of individuals described in paragraph (f)(6)(iii)
of this section, health insurance coverage issued by an expatriate
health insurance issuer.
(E) The plan or coverage offers reimbursements for items or
services in
[[Page 38040]]
local currency in eight or more countries.
(F) The plan or coverage satisfies the provisions of Chapter 100
and regulations thereunder as in effect on March 22, 2010. For this
purpose, the plan or coverage is not required to comply with section
9801(e) (relating to certification of creditable coverage) and
underlying regulations. However, to the extent the plan or coverage
imposes a preexisting condition exclusion, the plan or coverage must
ensure that individuals with prior creditable coverage who enroll in
the plan or coverage have an opportunity to demonstrate that they have
creditable coverage offsetting the preexisting condition exclusion.
(iv) Example. The rule of paragraph (f)(3)(i) of this section is
illustrated by the following example:
Example. (i) Facts. Business has health plan X for 250 U.S.
citizens working outside of the United States in Country Y. All of
the U.S. citizens working in Country Y satisfy the requirements to
be qualified expatriates under Sec. 54.9831-1(f)(6)(ii). In
addition to the 250 U.S. citizens, Business employs 100 citizens of
Country Y who reside in Country Y and do not satisfy the
requirements to be qualified expatriates under Sec. 54.9831-
1(f)(6)(ii). Health plan X covers both the U.S. citizens and
citizens of Country Y.
(ii) Conclusion. Health plan X satisfies the requirement of
Sec. 54.9831-1(f)(3)(i) that substantially all primary enrollees of
an expatriate health plan be qualified expatriates because 100
percent of the primary enrollees are qualified expatriates. The 100
citizens of Country Y who reside in Country Y are not treated as
primary enrollees for purposes of the substantially all requirement
of Sec. 54.9831-1(f)(3)(i) because they are not nationals of the
United States and they reside in the country of their citizenship.
(4) Definition of expatriate health plan administrator--(i) In
general. Expatriate health plan administrator means an administrator
that in the course of its regular business operations--
(A) Maintains network provider agreements that provide for direct
claims payments, with health care providers in eight or more countries,
(B) Maintains call centers, in three or more countries, and accepts
calls from customers in eight or more languages,
(C) Processed at least $1 million in claims in foreign currency
equivalents during the preceding calendar year, determined using the
Treasury Department's currency exchange rate in effect on the last day
of the preceding calendar year,
(D) Makes global evacuation/repatriation coverage available,
(E) Maintains legal and compliance resources in three or more
countries, and
(F) Has licenses or other authority to sell insurance in more than
two countries, including in the United States.
(ii) Additional rules. For purposes of meeting the requirements of
this paragraph (f)(4), two or more entities, including one entity that
is the expatriate health plan administrator, that are members of the
expatriate health plan administrator's controlled group (as determined
under Sec. 57.2(c) of this chapter) are treated as one expatriate
health plan administrator. Alternatively, the requirements of this
paragraph (f)(4) may be satisfied through contracts between an
expatriate health plan administrator and third parties.
(5) Definition of group health plan. Group health plan, for
purposes of this section, means a group health plan as defined in Sec.
54.9831-1(a).
(6) Definition of qualified expatriate. Qualified expatriate, for
purposes of this section, means an individual who is described in
paragraph (f)(6)(i), (ii), or (iii) of this section.
(i) Individuals transferred or assigned by their employer to work
in the United States. An individual is described in this paragraph
(f)(6)(i) only if such individual has the skills, qualifications, job
duties, or expertise that has caused the individual's employer to
transfer or assign the individual to the United States for a specific
and temporary purpose or assignment that is tied to the individual's
employment with such employer. This paragraph (f)(6)(i) applies only to
an individual who the plan sponsor has reasonably determined requires
access to health coverage and other related services and support in
multiple countries, and is offered other multinational benefits on a
periodic basis (such as tax equalization, compensation for cross-border
moving expenses, or compensation to enable the individual to return to
the individual's home country), and does not apply to any individual
who is a national of the United States. For purposes of this paragraph
(f)(6)(i), an individual who is not expected to travel outside the
United States at least one time per year during the coverage period
would not reasonably require access to health coverage and other
related services and support in multiple countries. Furthermore, the
offer of a one-time de minimis benefit would not meet the standard for
the offer of other multinational benefits on a periodic basis.
(ii) Individuals working outside the United States. An individual
is described in this paragraph (f)(6)(ii) only if the individual is a
national of the United States who is working outside the United States
for at least 180 days in a consecutive 12-month period that overlaps
with a single plan year, or across two consecutive plan years.
(iii) Individuals within a group of similarly situated individuals.
(A) An individual is described in this paragraph (f)(6)(iii) only if:
(1) The individual is a member of a group of similarly situated
individuals that is formed for the purpose of traveling or relocating
internationally in service of one or more of the purposes listed in
section 501(c)(3) or (4), or similarly situated organizations or
groups. For example, a group of students that is formed for purposes of
traveling and studying abroad for a 6-month period is described in this
paragraph (f)(6)(iii);
(2) In the case of a group organized to travel or relocate outside
the United States, the individual is expected to travel or reside
outside the United States for at least 180 days in a consecutive 12-
month period that overlaps with the policy year (or in the case of a
policy year that is less than 12 months, at least half the policy
year);
(3) In the case of a group organized to travel or relocate within
the United States, the individual is expected to travel or reside in
the United States for not more than 12 months;
(4) The individual is not traveling or relocating internationally
in connection with an employment-related purpose; and
(5) The group meets the test for having associational ties under
section 2791(d)(3)(B) through (F) of the PHS Act (42 U.S.C. 300gg-
91(d)(3)(B) through (F)).
(B) This paragraph (f)(6)(iii) does not apply to a group that is
formed primarily for the sale or purchase of health insurance coverage.
(C) If a group of similarly situated individuals satisfies the
requirements of this paragraph (f)(6)(iii), the Secretary of Health and
Human Services, in consultation with the Secretary and the Secretary of
Labor, has determined that the group requires access to health coverage
and other related services and support in multiple countries.
(7) Definition of United States. Solely for purposes of this
paragraph (f), United States means the 50 States, the District of
Columbia, and Puerto Rico.
(8) National of the United States. For purposes of this paragraph
(f), national of the United States, when referring to an individual,
has the meaning used in the Immigration and Nationality Act (8 U.S.C.
1101 et seq.) and includes U.S.
[[Page 38041]]
citizens and non-citizen nationals. Thus, for example, an individual
born in American Samoa is a national of the United States at birth.
0
12. Section 54.9833-1 is amended by adding a sentence at the end to
read as follows:
Sec. 54.9833-1 Effective dates.
* * * Notwithstanding the previous sentence, the definition of
``short-term limited duration insurance'' in Sec. Sec. 54.9801-2 and
5.9831-1(c)(5)(i)(C) and (f) apply for policy years and plan years
beginning on or after January 1, 2017.
PART 57--HEALTH INSURANCE PROVIDERS FEE
0
13. The authority citation for part 57 continues to read in part as
follows:
Authority: 26 U.S.C. 7805; sec. 9010, Pub. L. 111-148 (124
Stat. 119 (2010)). * * *
0
14. Section 57.2 is amended by revising paragraph (n) to read as
follows:
Sec. 57.2 Explanation of terms.
* * * * *
(n) United States health risk.--(1) In general. The term United
States health risk means the health risk of any individual who is--
(i) A United States citizen;
(ii) A resident of the United States (within the meaning of section
7701(b)(1)(A)); or
(iii) Located in the United States (within the meaning of paragraph
(i) of this section) during the period such individual is so located.
(2) Qualified expatriates, spouses, and dependents. The term United
States health risk does not include the health risk of any individual
who is a qualified expatriate (within the meaning of Sec. 54.9831-
1(f)(6)) enrolled in an expatriate health plan (within the meaning of
Sec. 54.9831-1(f)(3)). For purposes of this paragraph, a qualified
expatriate includes any spouse, dependent, or any other individual
enrolled in the expatriate health plan.
* * * * *
0
15. Section 57.4 is amended by adding a sentence to the end of
paragraph (b)(2) and adding paragraph (b)(3) to read as follows:
Sec. 57.4 Fee calculation.
* * * * *
(b) * * *
(2) * * * This presumption does not apply to excluded premiums for
qualified expatriates in expatriate health plans as described in Sec.
57.2(n)(2).
(3) Manner of determining excluded premiums for qualified
expatriates in expatriate health plans. The IRS may specify in other
guidance published in the Internal Revenue Bulletin the manner of
determining excluded premiums for qualified expatriates in expatriate
health plans as described in Sec. 57.2(n)(2).
* * * * *
0
16. Section 57.10 is amended by revising paragraph (a) and adding
paragraph (c) to read as follows:
Sec. 57.10 Effective/applicability dates.
(a) In general. Except as provided in paragraphs (b) and (c) of
this section, Sec. Sec. 57.1 through 57.9 apply to any fee that is due
on or after September 30, 2014.
* * * * *
(c) Qualified expatriates in expatriate health plans. Section
57.2(n)(2), the last sentence of Sec. 57.4(b)(2), and Sec. 57.4(b)(3)
apply to any fee that is due on or after the date the final regulations
are published in the Federal Register. Until the date the final
regulations are published in the Federal Register, taxpayers may rely
on these rules for any fee that is due on or after September 30, 2018.
PART 301--PROCEDURE AND ADMINSTRATION
0
17. The authority citation for part 301 continues to read in part as
follows:
Authority: 26 U.S.C. 7805 * * *
0
18. Section 301.6056-2 is amended by adding paragraph (a)(8) to read as
follows:
Sec. 301.6056-2. Electronic furnishing of statements.
(a) * * *
(8) Special rule for expatriate health plan coverage--(i) In
general. In the case of an individual covered under an expatriate
health plan (within the meaning of Sec. 54.9831-1(f)(3) of this
chapter), the recipient is treated as having consented under paragraph
(a)(2) of this section unless the recipient has explicitly refused to
consent to receive the statement in an electronic format. The refusal
to consent may be made electronically or in a paper document. A
recipient's request for a paper statement is treated as an explicit
refusal to receive the statement in electronic format. A furnisher
relying on this paragraph (a)(8) must satisfy the requirements of
paragraphs (a)(3) through (7) of this section, except that the
statement required under paragraph (a)(3) must be provided at least 30
days prior to the time for furnishing under Sec. 301.6056-
1(g)(4)(i)(A) of this chapter of the first statement that the furnisher
intends to furnish electronically to the recipient, and the other
requirements of paragraph (a)(3) are modified to reflect that the
statement will be furnished electronically unless the recipient
explicitly refuses consent to receive the statement in an electronic
format.
(ii) Manner and time of notifying recipient. The IRS may specify in
other guidance published in the Internal Revenue Bulletin the manner
and timing for the initial notification of recipients that the
statement required under paragraph (a)(3) of this section will be
furnished electronically unless the recipient explicitly refuses to
consent to receive the statement in an electronic format. See Sec.
601.601(d)(2)(ii)(B) of this chapter.
(iii) Effective/applicability date. The provisions of this
paragraph (a)(8) apply as of January 1, 2017.
* * * * *
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Chapter XXV
For the reasons stated in the preamble, the Department of Labor
proposes to amend 29 CFR part 2590 as set forth below:
PART 2590--RULES AND REGULATIONS FOR GROUP HEALTH PLANS
0
19. The authority citation for part 2590 is revised to read as follows:
Authority: 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169, 1181-
1183, 1181 note, 1185, 1185a, 1185b, 1191, 1191a, 1191b, and 1191c;
sec. 101(g), Pub. L. 104-191, 110 Stat. 1936; sec. 401(b), Pub. L.
105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 512(d), Pub. L.
110-343, 122 Stat. 3881; sec. 1001, 1201, and 1562(e), Pub. L. 111-
148, 124 Stat. 119, as amended by Pub. L. 111-152, 124 Stat. 1029;
Division M, Pub. L. 113-235, 128 Stat. 2130; Secretary of Labor's
Order 1-2011, 77 FR 1088 (Jan. 9, 2012).
0
20. Section 2590.701-2 is amended by:
0
a. Adding in alphabetical order definitions for ``expatriate health
insurance issuer'', ``expatriate health plan'', and ``qualified
expatriate'';
0
b. Revising the definition of ``short-term, limited-duration
insurance''; and
0
c. Adding in alphabetical order a definition for ``travel insurance''.
The additions and revisions read as follows:
Sec. 2590.701-2 Definitions.
* * * * *
Expatriate health insurance issuer means an expatriate health
insurance issuer within the meaning of Sec. 2590.732(f)(2).
[[Page 38042]]
Expatriate health plan means an expatriate health plan within the
meaning of Sec. 2590.732(f)(3).
* * * * *
Qualified expatriate means a qualified expatriate within the
meaning of Sec. 2590.732(f)(6).
Short-term, limited-duration insurance means health insurance
coverage provided pursuant to a contract with an issuer that:
(1) Has an expiration date specified in the contract (taking into
account any extensions that may be elected by the policyholder with or
without the issuer's consent) that is less than 3 months after the
original effective date of the contract; and
(2) Displays prominently in the contract and in any application
materials provided in connection with enrollment in such coverage in at
least 14 point type the following: ``THIS IS NOT QUALIFYING HEALTH
COVERAGE (``MINIMUM ESSENTIAL COVERAGE'') THAT SATISFIES THE HEALTH
COVERAGE REQUIREMENT OF THE AFFORDABLE CARE ACT. IF YOU DON'T HAVE
MINIMUM ESSENTIAL COVERAGE, YOU MAY OWE AN ADDITIONAL PAYMENT WITH YOUR
TAXES.''
* * * * *
Travel insurance means insurance coverage for personal risks
incident to planned travel, which may include, but is not limited to,
interruption or cancellation of trip or event, loss of baggage or
personal effects, damages to accommodations or rental vehicles, and
sickness, accident, disability, or death occurring during travel,
provided that the health benefits are not offered on a stand-alone
basis and are incidental to other coverage. For this purpose, the term
travel insurance does not include major medical plans that provide
comprehensive medical protection for travelers with trips lasting 6
months or longer, including, for example, those working overseas as an
expatriate or military personnel being deployed.
* * * * *
0
21. Section 2590.715-2711 is amended by revising paragraph (c) to read
as follows:
Sec. 2590.715-2711 No lifetime or annual limits.
* * * * *
(c) Definition of essential health benefits. The term ``essential
health benefits'' means essential health benefits under section 1302(b)
of the Patient Protection and Affordable Care Act and applicable
regulations. For this purpose, a group health plan or a health
insurance issuer that is not required to provide essential health
benefits under section 1302(b) must define ``essential health
benefits'' in a manner that is consistent with--
(1) One of the EHB-benchmark plans applicable in a State under 45
CFR 156.110, and includes coverage of any additional required benefits
that are considered essential health benefits consistent with 45 CFR
155.170(a)(2); or
(2) One of the three Federal Employees Health Benefit Program
(FEHBP) options as defined by 45 CFR 156.100(a)(3), supplemented, as
necessary, to meet the standards in 45 CFR 156.110.
* * * * *
0
22. Section 2590.732 is amended:
0
a. In paragraph (c)(2)(vii) by removing ``and'' at the end;
0
b. In paragraph (c)(2)(viii) by adding ``and'' at the end;
0
c. Adding paragraph (c)(2)(ix);
0
d. Revising paragraph (c)(4)(i);
0
e. Adding paragraph (c)(4)(ii)(D);
0
f. Revising paragraphs (c)(4)(iii) and (c)(5)(i)(C); and
0
g. Adding paragraph (f).
The revisions and additions read as follows:
Sec. 2590.732 Special rules relating to group health plans.
* * * * *
(c) * * *
(2) * * *
(ix) Travel insurance, within the meaning of Sec. 2590.701-2 of
this part.
* * * * *
(4) Noncoordinated benefits--(i) Excepted benefits that are not
coordinated. Coverage for only a specified disease or illness (for
example, cancer-only policies) or hospital indemnity or other fixed
indemnity insurance is excepted only if the coverage meets each of the
conditions specified in paragraph (c)(4)(ii) of this section.
(ii) * * *
(D) To be hospital indemnity or other fixed indemnity insurance,
the insurance must pay a fixed dollar amount per day (or per other time
period, such as per week) of hospitalization or illness (for example,
$100/day) without regard to the amount of expenses incurred or the type
of items or services received and--
(1) The plan or issuer must provide, in any application or
enrollment materials provided to participants at or before the time
participants are given the opportunity to enroll in the coverage, a
notice that prominently displays in at least 14 point type the
following language: ``THIS IS A SUPPLEMENT TO HEALTH INSURANCE AND IS
NOT A SUBSTITUTE FOR MAJOR MEDICAL COVERAGE. THIS IS NOT QUALIFYING
HEALTH COVERAGE (``MINIMUM ESSENTIAL COVERAGE'') THAT SATISFIES THE
HEALTH COVERAGE REQUIREMENT OF THE AFFORDABLE CARE ACT. IF YOU DON'T
HAVE MINIMUM ESSENTIAL COVERAGE, YOU MAY OWE AN ADDITIONAL PAYMENT WITH
YOUR TAXES.''
(2) If participants are required to reenroll (in either paper or
electronic form) for renewal or reissuance, the notice described in
paragraph (c)(4)(ii)(D)(1) of this section must be displayed in the
reenrollment materials that are provided to the participants at or
before the time participants are given the opportunity to reenroll in
the coverage.
(3) If a notice satisfying the requirements of this paragraph
(c)(4)(ii)(D) is timely provided to a participant, the obligation to
provide the notice is satisfied for both the plan and the issuer.
(iii) Examples. The rules of this paragraph (c)(4) are illustrated
by the following examples:
Example 1. (i) Facts. An employer sponsors a group health plan
that provides coverage through an insurance policy. The policy
provides benefits only for hospital stays at a fixed percentage of
hospital expenses up to a maximum of $100 a day.
(ii) Conclusion. In this Example 1, because the policy pays a
percentage of expenses incurred rather than a fixed dollar amount
per day (or per other time period, such as per week), the policy is
not hospital indemnity or other fixed indemnity insurance that is an
excepted benefit under this paragraph (c)(4). This is the result
even if, in practice, the policy pays the maximum of $100 for every
day of hospitalization.
Example 2. (i) Facts. An employer sponsors a group health plan
that provides coverage through an insurance policy. The policy
provides benefits for doctors' visits at $50 per visit,
hospitalization at $100 per day, various surgical procedures at
different dollar rates per procedure, and prescription drugs at $15
per prescription.
(ii) Conclusion. In this Example 2, for doctors' visits,
surgery, and prescription drugs, payment is not made on a per-period
basis, but instead is based on whether a procedure or item is
provided, such as whether an individual has surgery or a doctor
visit or is prescribed a drug, and the amount of payment varies
based on the type of procedure or item. Because benefits related to
office visits, surgery, and prescription drugs are not paid based on
a fixed dollar amount per day (or per other time period, such as per
week), as required under paragraph (c)(4) of this section, the
policy is not hospital indemnity or other fixed indemnity insurance
that is an excepted benefit under this paragraph (c)(4).
Example 3. (i) Facts. An employer sponsors a group health plan
that provides coverage
[[Page 38043]]
through an insurance policy. The policy provides benefits for
certain services at a fixed dollar amount per day, but the dollar
amount varies by the type of service.
(ii) Conclusion. In this Example 3, because the policy provides
benefits in a different amount per day depending on the type of
service, rather than one specific dollar amount per day regardless
of the type of service, the policy is not hospital indemnity or
other fixed indemnity insurance that is an excepted benefit under
this paragraph (c)(4).
(5) * * *
(i) * * *
(C) Similar supplemental coverage provided to coverage under a
group health plan. To be similar supplemental coverage, the coverage
must be specifically designed to fill gaps in the primary coverage. The
preceding sentence is satisfied if the coverage is designed to fill
gaps in cost sharing in the primary coverage, such as coinsurance or
deductibles, or the coverage is designed to provide benefits for items
and services not covered by the primary coverage and that are not
essential health benefits in the State where the coverage is issued, or
the coverage is designed to both fill such gaps in cost sharing under,
and cover such benefits not covered by, the primary coverage. Similar
supplemental coverage does not include coverage that becomes secondary
or supplemental only under a coordination-of-benefits provision.
* * * * *
(f) Expatriate health plans and expatriate health insurance
issuers--(1) In general. With respect to coverage under an expatriate
health plan, the requirements of section 715 of ERISA and implementing
rules and regulations (incorporating sections 2701 through 2728 of the
Public Health Service Act) do not apply to--
(i) An expatriate health plan (as defined in paragraph (f)(3) of
this section),
(ii) An employer, solely in its capacity as plan sponsor of an
expatriate health plan, and
(iii) An expatriate health insurance issuer (as defined in
paragraph (f)(2) of this section) with respect to coverage under an
expatriate health plan.
(2) Definition of expatriate health insurance issuer--(i) In
general. Expatriate health insurance issuer means a health insurance
issuer, within the meaning of Sec. 2590.701-2, that issues expatriate
health plans and that in the course of its normal business operations--
(A) Maintains network provider agreements that provide for direct
claims payments, with health care providers in eight or more countries;
(B) Maintains call centers in three or more countries, and accepts
calls from customers in eight or more languages;
(C) Processed at least $1 million in claims in foreign currency
equivalents during the preceding calendar year, determined using the
Treasury Department's currency exchange rate in effect on the last day
of the preceding calendar year;
(D) Makes global evacuation/repatriation coverage available;
(E) Maintains legal and compliance resources in three or more
countries; and
(F) Has licenses or other authority to sell insurance in more than
two countries, including in the United States.
(ii) Additional rules. For purposes of meeting the requirements of
this paragraph (f)(2), two or more entities, including one entity that
is the expatriate health insurance issuer, that are members of the
expatriate health insurance issuer's controlled group (as determined
under 26 CFR 57.2(c)) are treated as one expatriate health insurance
issuer. Alternatively, the requirements of this paragraph (f)(2) may be
satisfied through contracts between an expatriate health insurance
issuer and third parties.
(3) Definition of expatriate health plan. Expatriate health plan
means a plan that satisfies the requirements of paragraphs (f)(3)(i)
through (iii) of this section.
(i) Substantially all qualified expatriates requirement.
Substantially all primary enrollees in the expatriate health plan must
be qualified expatriates. For purposes of this paragraph (f)(3)(i), the
primary enrollee is the individual covered by the plan or policy whose
eligibility for coverage is not due to that individual's status as the
spouse, dependent, or other beneficiary of another covered individual.
Notwithstanding the foregoing, an individual is not a primary enrollee
if the individual is not a national of the United States and the
individual resides in his or her country of citizenship. A plan
satisfies the requirement of this paragraph (f)(3)(i) for a plan or
policy year only if, on the first day of the plan or policy year, less
than 5 percent of the primary enrollees (or less than 5 primary
enrollees if greater) are not qualified expatriates.
(ii) Substantially all benefits not excepted benefits requirement.
Substantially all of the benefits provided under the plan or coverage
must be benefits that are not excepted benefits described in Sec.
2590.732(c).
(iii) Additional requirements. To qualify as an expatriate health
plan, the plan or coverage must also meet the following requirements:
(A) The plan or coverage provides coverage for inpatient hospital
services, outpatient facility services, physician services, and
emergency services (comparable to emergency services coverage that was
described in and offered under section 8903(1) of title 5, United
States Code for plan year 2009) in the following locations--
(1) In the case of individuals described in paragraph (f)(6)(i) of
this section, in the United States and in the country or countries from
which the individual was transferred or assigned, and such other
country or countries the Secretary of Health and Human Services, in
consultation with the Secretary of the Treasury and Secretary of Labor,
may designate;
(2) In the case of individuals described in paragraph (f)(6)(ii) of
this section, in the country or countries in which the individual is
present in connection with his employment, and such other country or
countries the Secretary of Health and Human Services, in consultation
with the Secretary of the Treasury and Secretary of Labor, may
designate; or
(3) In the case of individuals described in paragraph (f)(6)(iii)
of this section, in the country or countries the Secretary of Health
and Human Services, in consultation with the Secretary of the Treasury
and Secretary of Labor, may designate.
(B) The plan sponsor reasonably believes that benefits provided by
the plan or coverage satisfy the minimum value requirements of Internal
Revenue Code section 36B(c)(2)(C)(ii). For this purpose, a plan sponsor
is permitted to rely on the reasonable representations of the issuer or
administrator regarding whether benefits offered by the issuer or group
health plan 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.
(C) In the case of a plan or coverage that provides dependent
coverage of children, such coverage must be available until an
individual attains age 26, unless an individual is the child of a child
receiving dependent coverage.
(D) The plan or coverage is:
(1) In the case of individuals described in paragraph (f)(6)(i) or
(ii) of this section, a group health plan (including health insurance
coverage offered in connection with a group health plan), issued by an
expatriate health insurance issuer or administered by an expatriate
health plan administrator. A group health plan will not fail to be an
expatriate health plan
[[Page 38044]]
merely because any portion of the coverage is provided through a self-
insured arrangement.
(2) In the case of individuals described in paragraph (f)(6)(iii)
of this section, health insurance coverage issued by an expatriate
health insurance issuer.
(E) The plan or coverage offers reimbursements for items or
services in local currency in eight or more countries.
(F) The plan or coverage satisfies the provisions of this part as
in effect on March 22, 2010. For this purpose, the plan or coverage is
not required to comply with section 701(e) (relating to certification
of creditable coverage) and underlying regulations. However, to the
extent the plan or coverage imposes a preexisting condition exclusion,
the plan or coverage must ensure that individuals with prior creditable
coverage who enroll in the plan or coverage have an opportunity to
demonstrate that they have creditable coverage offsetting the
preexisting condition exclusion.
(iv) Example. The rule of paragraph (f)(3)(i) of this section is
illustrated by the following example:
Example. (i) Facts. Business has health plan X for 250 U.S.
citizens working outside of the United States in Country Y. All of
the U.S. citizens working in Country Y satisfy the requirements to
be qualified expatriates under Sec. 2590.732(f)(6)(ii). In addition
to the 250 U.S. citizens, Business employs 100 citizens of Country Y
who reside in Country Y and do not satisfy the requirements to be
qualified expatriates under Sec. 2590.732(f)(6)(ii). Health plan X
covers both the U.S. citizens and citizens of Country Y.
(ii) Conclusion. Health plan X satisfies the requirement of
Sec. 2590.732(f)(3)(i) that substantially all primary enrollees of
an expatriate health plan be qualified expatriates because 100
percent of the primary enrollees are qualified expatriates. The 100
citizens of Country Y who reside in Country Y are not treated as
primary enrollees for purposes of the substantially all requirement
of Sec. 2590.732(f)(3)(i) because they are not nationals of the
United States and they reside in the country of their citizenship.
(4) Definition of expatriate health plan administrator--(i) In
general. Expatriate health plan administrator means an administrator
that in the course of its regular business operations--
(A) Maintains network provider agreements that provide for direct
claims payments, with health care providers in eight or more countries,
(B) Maintains call centers, in three or more countries, and accepts
calls from customers in eight or more languages,
(C) Processed at least $1 million in claims in foreign currency
equivalents during the preceding calendar year, determined using the
Treasury Department's currency exchange rate in effect on the last day
of the preceding calendar year,
(D) Makes global evacuation/repatriation coverage available,
(E) Maintains legal and compliance resources in three or more
countries, and
(F) Has licenses or other authority to sell insurance in more than
two countries, including in the United States.
(ii) Additional rules. For purposes of meeting the requirements of
this paragraph (f)(4), two or more entities, including one entity that
is the expatriate health plan administrator, that are members of the
expatriate health plan administrator's controlled group (as determined
under 26 CFR 57.2(c)) are treated as one expatriate health plan
administrator. Alternatively, the requirements of this paragraph (f)(4)
may be satisfied through contracts between an expatriate health plan
administrator and third parties.
(5) Definition of group health plan. Group health plan, for
purposes of this section, means a group health plan as defined in Sec.
2590.732(a).
(6) Definition of qualified expatriate. Qualified expatriate, for
purposes of this section, means an individual who is described in
paragraph (f)(6)(i), (ii) or (iii) of this section.
(i) Individuals transferred or assigned by their employer to work
in the United States. An individual is described in this paragraph
(f)(6)(i) only if such individual has the skills, qualifications, job
duties, or expertise that has caused the individual's employer to
transfer or assign the individual to the United States for a specific
and temporary purpose or assignment that is tied to the individual's
employment with such employer. This paragraph (f)(6)(i) applies only to
an individual who the plan sponsor has reasonably determined requires
access to health coverage and other related services and support in
multiple countries, and is offered other multinational benefits on a
periodic basis (such as tax equalization, compensation for cross-border
moving expenses, or compensation to enable the individual to return to
the individual's home country), and does not apply to any individual
who is a national of the United States. For purposes of this paragraph
(f)(6)(i), an individual who is not expected to travel outside the
United States at least one time per year during the coverage period
would not reasonably require access to health coverage and other
related services and support in multiple countries. Furthermore, the
offer of a one-time de minimis benefit would not meet the standard for
the offer of other multinational benefits on a periodic basis.
(ii) Individuals working outside the United States. An individual
is described in this paragraph (f)(6)(ii) only if the individual is a
national of the United States who is working outside the United States
for at least 180 days in a consecutive 12-month period that overlaps
with a single plan year, or across two consecutive plan years.
(iii) Individuals within a group of similarly situated individuals.
(A) An individual is described in this paragraph (f)(6)(iii) only if:
(1) The individual is a member of a group of similarly situated
individuals that is formed for the purpose of traveling or relocating
internationally in service of one or more of the purposes listed in
Internal Revenue Code section 501(c)(3) or (4), or similarly situated
organizations or groups. For example, a group of students that is
formed for purposes of traveling and studying abroad for a 6-month
period is described in this paragraph (f)(6)(iii);
(2) In the case of a group organized to travel or relocate outside
the United States, the individual is expected to travel or reside
outside the United States for at least 180 days in a consecutive 12-
month period that overlaps with the policy year (or in the case of a
policy year that is less than 12 months, at least half the policy
year);
(3) In the case of a group organized to travel or relocate within
the United States, the individual is expected to travel or reside in
the United States for not more than 12 months;
(4) The individual is not traveling or relocating internationally
in connection with an employment-related purpose; and
(5) The group meets the test for having associational ties under
section 2791(d)(3)(B) through (F) of the PHS Act (42 U.S.C. 300gg-
91(d)(3)(B) through (F)).
(B) This paragraph (f)(6)(iii) does not apply to a group that is
formed primarily for the sale or purchase of health insurance coverage.
(C) If a group of similarly situated individuals satisfies the
requirements of this paragraph (f)(6)(iii), the Secretary of Health and
Human Services, in consultation with the Secretary and the Secretary of
the Treasury, has determined that the group requires access to health
coverage and other related services and support in multiple countries.
(7) Definition of United States. Solely for purposes of this
paragraph (f),
[[Page 38045]]
United States means the 50 States, the District of Columbia, and Puerto
Rico.
(8) National of the United States. For purposes of this paragraph
(f), national of the United States, when referring to an individual,
has the meaning used in the Immigration and Nationality Act (8 U.S.C.
1101 et seq.) and includes U.S. citizens and non-citizen nationals.
Thus, for example, an individual born in American Samoa is a national
of the United States at birth.
0
23. Section 2590.736 is amended by adding a sentence at the end to read
as follows:
Sec. 2590.736 Applicability dates.
* * * Notwithstanding the previous sentences, the definition of
``short-term, limited-duration insurance'' in Sec. Sec. 2590.701-2 and
2590.732(c)(5)(i)(C) and (f) apply for plan years beginning on or after
January 1, 2017.
DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Chapter 1
For the reasons stated in the preamble, the Department of Health
and Human Services proposes to amend 45 CFR parts 144, 146, 147, 148,
and 158 as set forth below:
PART 144--REQUIREMENTS RELATING TO HEALTH INSURANCE COVERAGE
0
24. The authority citation for part 144 continues to read as follows:
Authority: Secs. 2701 through 2763, 2791, and 2792 of the Public
Health Service Act, 42 U.S.C. 300gg through 300gg-63, 300gg-91, and
300gg-92.
0
25. Section 144.103 is amended by:
0
a. Adding in alphabetical order definitions for ``expatriate health
insurance issuer'', ``expatriate health plan'', and ``qualified
expatriate'';
0
b. Revising the definition of ``short-term, limited-duration
insurance''; and
0
c. Adding in alphabetical order a definition for ``travel insurance''.
The additions and revision read as follows:
Sec. 144.103 Definitions.
* * * * *
Expatriate health insurance issuer means an expatriate health
insurance issuer within the meaning of Sec. 147.170(b) of this
subchapter.
Expatriate health plan means an expatriate health plan within the
meaning of Sec. 147.170(c) of this subchapter.
* * * * *
Qualified expatriate means a qualified expatriate within the
meaning of Sec. 147.170(f) of this subchapter.
Short-term, limited-duration insurance means health insurance
coverage provided pursuant to a contract with an issuer that:
(1) Has an expiration date specified in the contract (taking into
account any extensions that may be elected by the policyholder with or
without the issuer's consent) that is less than 3 months after the
original effective date of the contract; and
(2) Displays prominently in the contract and in any application
materials provided in connection with enrollment in such coverage in at
least 14 point type the following: ``THIS IS NOT QUALIFYING HEALTH
COVERAGE (``MINIMUM ESSENTIAL COVERAGE'') THAT SATISFIES THE HEALTH
COVERAGE REQUIREMENT OF THE AFFORDABLE CARE ACT. IF YOU DON'T HAVE
MINIMUM ESSENTIAL COVERAGE, YOU MAY OWE AN ADDITIONAL PAYMENT WITH YOUR
TAXES.''
* * * * *
Travel insurance means insurance coverage for personal risks
incident to planned travel, which may include, but is not limited to,
interruption or cancellation of trip or event, loss of baggage or
personal effects, damages to accommodations or rental vehicles, and
sickness, accident, disability, or death occurring during travel,
provided that the health benefits are not offered on a stand-alone
basis and are incidental to other coverage. For this purpose, the term
travel insurance does not include major medical plans that provide
comprehensive medical protection for travelers with trips lasting 6
months or longer, including, for example, those working overseas as an
expatriate or military personnel being deployed.
* * * * *
PART 146--REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET
0
26. The authority citation for part 146 continues to read as follows:
Authority: Secs. 2702 through 2705, 2711 through 2723, 2791, and
2792 of the Public Health Service Act (42 U.S.C. 300gg-1 through
300gg-5, 300gg-11 through 300gg-23, 300gg-91, and 300gg-92.
0
27. Section 146.145 is amended by:
0
a. Adding paragraph (b)(2)(ix);
0
b. Revising paragraph (b)(4)(i);
0
c. Adding paragraph (b)(4)(ii)(D); and
0
d. Revising paragraph (b)(5)(i)(C).
The additions and revisions read as follows:
Sec. 146.145 Special rules relating to group health plans.
* * * * *
(b) * * *
(2) * * *
(ix) Travel insurance, within the meaning of Sec. 144.103 of this
subchapter.
* * * * *
(4) Noncoordinated benefits--(i) Excepted benefits that are not
coordinated. Coverage for only a specified disease or illness (for
example, cancer-only policies) or hospital indemnity or other fixed
indemnity insurance is excepted only if the coverage meets each of the
conditions specified in paragraph (b)(4)(ii) of this section.
(ii) * * *
(D) To be hospital indemnity or other fixed indemnity insurance,
the insurance must pay a fixed dollar amount per day (or per other time
period, such as per week) of hospitalization or illness (for example,
$100/day) without regard to the amount of expenses incurred or the type
of items or services received and--
(1) The plan or issuer must provide, in any application or
enrollment materials provided to participants at or before the time
participants are given the opportunity to enroll in the coverage, a
notice that prominently displays in at least 14 point type the
following language: ``THIS IS A SUPPLEMENT TO HEALTH INSURANCE AND IS
NOT A SUBSTITUTE FOR MAJOR MEDICAL COVERAGE. THIS IS NOT QUALIFYING
HEALTH COVERAGE (``MINIMUM ESSENTIAL COVERAGE'') THAT SATISFIES THE
HEALTH COVERAGE REQUIREMENT OF THE AFFORDABLE CARE ACT. IF YOU DON'T
HAVE MINIMUM ESSENTIAL COVERAGE, YOU MAY OWE AN ADDITIONAL PAYMENT WITH
YOUR TAXES.''
(2) If participants are required to reenroll (in either paper or
electronic form) for renewal or reissuance, the notice described in
paragraph (b)(4)(ii)(D)(1) of this section must be displayed in the
reenrollment materials that are provided to the participants at or
before the time participants are given the opportunity to reenroll in
the coverage.
(3) If a notice satisfying the requirements of this paragraph
(b)(4)(ii)(D) is timely provided to a participant, the obligation to
provide the notice is satisfied for both the plan and the issuer.
(iii) Examples. The rules of this paragraph (b)(4) are illustrated
by the following examples:
Example 1. (i) Facts. An employer sponsors a group health plan
that provides coverage through an insurance policy. The policy
[[Page 38046]]
provides benefits only for hospital stays at a fixed percentage of
hospital expenses up to a maximum of $100 a day.
(ii) Conclusion. In this Example 1, because the policy pays a
percentage of expenses incurred rather than a fixed dollar amount
per day (or per other time period, such as per week), the policy is
not hospital indemnity or other fixed indemnity insurance that is an
excepted benefit under this paragraph (b)(4). This is the result
even if, in practice, the policy pays the maximum of $100 for every
day of hospitalization.
Example 2. (i) Facts. An employer sponsors a group health plan
that provides coverage through an insurance policy. The policy
provides benefits for doctors' visits at $50 per visit,
hospitalization at $100 per day, various surgical procedures at
different dollar rates per procedure, and prescription drugs at $15
per prescription.
(ii) Conclusion. In this Example 2, for doctors' visits,
surgery, and prescription drugs, payment is not made on a per-period
basis, but instead is based on whether a procedure or item is
provided, such as whether an individual has surgery or a doctor
visit or is prescribed a drug, and the amount of payment varies
based on the type of procedure or item. Because benefits related to
office visits, surgery, and prescription drugs are not paid based on
a fixed dollar amount per day (or per other time period, such as per
week), as required under paragraph (b)(4) of this section, the
policy is not hospital indemnity or other fixed indemnity insurance
that is an excepted benefit under this paragraph (b)(4).
Example 3. (i) Facts. An employer sponsors a group health plan
that provides coverage through an insurance policy. The policy
provides benefits for certain services at a fixed dollar amount per
day, but the dollar amount varies by the type of service.
(ii) Conclusion. In this Example 3, because the policy provides
benefits in a different amount per day depending on the type of
service, rather than one specific dollar amount per day regardless
of the type of service, the policy is not hospital indemnity or
other fixed indemnity insurance that is an excepted benefit under
this paragraph (b)(4).
(5) * * *
(i) * * *
(C) Similar supplemental coverage provided to coverage under a
group health plan. To be similar supplemental coverage, the coverage
must be specifically designed to fill gaps in the primary coverage. The
preceding sentence is satisfied if the coverage is designed to fill
gaps in cost sharing in the primary coverage, such as coinsurance or
deductibles, or the coverage is designed to provide benefits for items
and services not covered by the primary coverage and that are not
essential health benefits in the State where the coverage is issued, or
the coverage is designed to both fill such gaps in cost sharing under,
and cover such benefits not covered by, the primary coverage. Similar
supplemental coverage does not include coverage that becomes secondary
or supplemental only under a coordination-of-benefits provision.
* * * * *
PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND
INDIVIDUAL HEALTH INSURANCE MARKETS
0
28. The authority citation for part 147 continues to read as follows:
Authority: Secs. 2701 through 2763, 2791, and 2792 of the Public
Health Service Act (42 U.S.C. 300gg through 300gg-63, 300gg-91, and
300gg-92), as amended.
0
29. Section 147.126 is amended by revising paragraph (c) to read as
follows:
Sec. 147.126 No lifetime or annual limits.
* * * * *
(c) Definition of essential health benefits. The term ``essential
health benefits'' means essential health benefits under section 1302(b)
of the Patient Protection and Affordable Care Act and applicable
regulations. For this purpose, a group health plan or a health
insurance issuer that is not required to provide essential health
benefits under section 1302(b) must define ``essential health
benefits'' in a manner that is consistent with--
(1) One of the EHB-benchmark plans applicable in a State under 45
CFR 156.110, and includes coverage of any additional required benefits
that are considered essential health benefits consistent with 45 CFR
155.170(a)(2); or
(2) One of the three Federal Employees Health Benefit Program
(FEHBP) options as defined by 45 CFR 156.100(a)(3), supplemented, as
necessary, to meet the standards in 45 CFR 156.110.
* * * * *
0
30. Section 147.170 is added to read as follows:
Sec. 147.170 Expatriate health plans and expatriate health insurance
issuers.
(a) In general. With respect to coverage under an expatriate health
plan, the requirements of (including any amendment made by) the Patient
Protection and Affordable Care Act and of title I and subtitle B of
title II of the Health Care and Education and Reconciliation Act of
2010, and implementing rules and regulations do not apply to--
(1) An expatriate health plan (as defined in paragraph (c) of this
section),
(2) An employer, solely in its capacity as plan sponsor of an
expatriate health plan, and
(3) An expatriate health insurance issuer (as defined in paragraph
(b) of this section) with respect to coverage under an expatriate
health plan.
(b) Definition of expatriate health insurance issuer--(1) In
general. Expatriate health insurance issuer means a health insurance
issuer, within the meaning of Sec. 144.103 of this subchapter, that
issues expatriate health plans and that in the course of its normal
business operations--
(i) Maintains network provider agreements that provide for direct
claims payments, with health care providers in eight or more countries;
(ii) Maintains call centers in three or more countries, and accepts
calls from customers in eight or more languages;
(iii) Processed at least $1 million in claims in foreign currency
equivalents during the preceding calendar year, determined using the
Treasury Department's currency exchange rate in effect on the last day
of the preceding calendar year;
(iv) Makes global evacuation/repatriation coverage available;
(v) Maintains legal and compliance resources in three or more
countries; and
(vi) Has licenses or other authority to sell insurance in more than
two countries, including in the United States.
(2) Additional rules. For purposes of meeting the requirements of
this paragraph (b), two or more entities, including one entity that is
the expatriate health insurance issuer, that are members of the
expatriate health insurance issuer's controlled group (as determined
under 26 CFR 57.2(c)) are treated as one expatriate health insurance
issuer. Alternatively, the requirements of this paragraph (b) may be
satisfied through contracts between an expatriate health insurance
issuer and third parties.
(c) Definition of expatriate health plan. Expatriate health plan
means a plan that satisfies the requirements of paragraphs (c)(1)
through (3) of this section.
(1) Substantially all qualified expatriates requirement.
Substantially all primary enrollees in the expatriate health plan must
be qualified expatriates. For purposes of this paragraph (c)(1), the
primary enrollee is the individual covered by the plan or policy whose
eligibility for coverage is not due to that individual's status as the
spouse, dependent, or other beneficiary of another covered individual.
Notwithstanding the foregoing, an individual is not a primary enrollee
if the individual is not a national of the United States and the
individual resides in his or her country of citizenship. A plan
satisfies the requirement of this
[[Page 38047]]
paragraph (c)(1) for a plan or policy year only if, on the first day of
the plan or policy year, less than 5 percent of the primary enrollees
(or less than 5 primary enrollees if greater) are not qualified
expatriates.
(2) Substantially all benefits not excepted benefits requirement.
Substantially all of the benefits provided under the plan or coverage
must be benefits that are not excepted benefits described in Sec.
146.145(b) and Sec. 148.220 of this subchapter.
(3) Additional requirements. To qualify as an expatriate health
plan, the plan or coverage must also meet the following requirements:
(i) The plan or coverage provides coverage for inpatient hospital
services, outpatient facility services, physician services, and
emergency services (comparable to emergency services coverage that was
described in and offered under section 8903(1) of title 5, United
States Code for plan year 2009) in the following locations--
(A) In the case of individuals described in paragraph (f)(1) of
this section, in the United States and in the country or countries from
which the individual was transferred or assigned, and such other
country or countries the Secretary of Health and Human Services, in
consultation with the Secretary of the Treasury and Secretary of Labor,
may designate;
(B) In the case of individuals described in paragraph (f)(2) of
this section, in the country or countries in which the individual is
present in connection with his employment, and such other country or
countries the Secretary of Health and Human Services, in consultation
with the Secretary of the Treasury and Secretary of Labor, may
designate; or
(C) In the case of individuals described in paragraph (f)(3) of
this section, in the country or countries the Secretary of Health and
Human Services, in consultation with the Secretary of the Treasury and
Secretary of Labor, may designate.
(ii) The plan sponsor reasonably believes that benefits provided by
the plan or coverage satisfy the minimum value requirements of section
36B(c)(2)(C)(ii) of the Internal Revenue Code. For this purpose, a plan
sponsor is permitted to rely on the reasonable representations of the
issuer or administrator regarding whether benefits offered by the
issuer or group health plan 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.
(iii) In the case of a plan or coverage that provides dependent
coverage of children, such coverage must be available until an
individual attains age 26, unless an individual is the child of a child
receiving dependent coverage.
(iv) The plan or coverage is:
(A) In the case of individuals described in paragraphs (f)(1) or
(f)(2) of this section, a group health plan (including health insurance
coverage offered in connection with a group health plan), issued by an
expatriate health insurance issuer or administered by an expatriate
health plan administrator. A group health plan will not fail to be an
expatriate health plan merely because any portion of the coverage is
provided through a self-insured arrangement.
(B) In the case of individuals described in paragraph (f)(3) of
this section, health insurance coverage issued by an expatriate health
insurance issuer.
(v) The plan or coverage offers reimbursements for items or
services in local currency in eight or more countries.
(vi) The plan or coverage satisfies the provisions of title XXVII
of the Public Health Service Act (42 U.S.C. 300gg et seq.) and
regulations thereunder as in effect on March 22, 2010. For this
purpose, the plan or coverage is not required to comply with section
2701(e) (relating to certification of creditable coverage) and
underlying regulations. However, to the extent the plan or coverage
imposes a preexisting condition exclusion, the plan or coverage must
ensure that individuals with prior creditable coverage who enroll in
the plan or coverage have an opportunity to demonstrate that they have
creditable coverage offsetting the preexisting condition exclusion.
(v) Example. The rule of paragraph (c)(1) of this section is
illustrated by the following example:
Example. (i) Facts. Business has health plan X for 250 U.S.
citizens working outside of the United States in Country Y. All of
the U.S. citizens working in Country Y satisfy the requirements to
be qualified expatriates under Sec. 147.170(f)(2). In addition to
the 250 U.S. citizens, Business employs 100 citizens of Country Y
who reside in Country Y and do not satisfy the requirements to be
qualified expatriates under Sec. 147.170(f). Health plan X covers
both the U.S. citizens and citizens of Country Y.
(ii) Conclusion. Health plan X satisfies the requirement of
Sec. 147.170(c)(1) that substantially all primary enrollees of an
expatriate health plan be qualified expatriates because 100 percent
of the primary enrollees are qualified expatriates. The 100 citizens
of Country Y who reside in Country Y are not treated as primary
enrollees for purposes of the substantially all requirement of Sec.
147.170(c)(1) because they are not nationals of the United States
and they reside in the country of their citizenship.
(d) Definition of expatriate health plan administrator--(1) In
general. Expatriate health plan administrator means an administrator
that in the course of its regular business operations--
(i) Maintains network provider agreements that provide for direct
claims payments, with health care providers in eight or more countries,
(ii) Maintains call centers, in three or more countries, and
accepts calls from customers in eight or more languages,
(iii) Processed at least $1 million in claims in foreign currency
equivalents during the preceding calendar year, determined using the
Treasury Department's currency exchange rate in effect on the last day
of the preceding calendar year,
(iv) Makes global evacuation/repatriation coverage available,
(v) Maintains legal and compliance resources in three or more
countries, and
(vi) Has licenses or other authority to sell insurance in more than
two countries, including in the United States.
(2) Additional rules. For purposes of meeting the requirements of
this paragraph (d), two or more entities, including one entity that is
the expatriate health plan administrator, that are members of the
expatriate health plan administrator's controlled group (as determined
under 26 CFR 57.2(c)) are treated as one expatriate health plan
administrator. Alternatively, the requirements of this paragraph (d)
may be satisfied through contracts between an expatriate health plan
administrator and third parties.
(e) Definition of group health plan. Group health plan, for
purposes of this section, means a group health plan as defined in Sec.
146.145(a) of this subchapter.
(f) Definition of qualified expatriate. Qualified expatriate, for
purposes of this section, means an individual who is described in
paragraph (f)(1), (2), or (3) of this section.
(1) Individuals transferred or assigned by their employer to work
in the United States. An individual is described in this paragraph
(f)(1) only if such individual has the skills, qualifications, job
duties, or expertise that has caused the individual's employer to
transfer or assign the individual to the United States for a specific
and temporary purpose or assignment that is tied to the individual's
employment with such
[[Page 38048]]
employer. This paragraph (f)(1) applies only to an individual who the
plan sponsor has reasonably determined requires access to health
coverage and other related services and support in multiple countries,
and is offered other multinational benefits on a periodic basis (such
as tax equalization, compensation for cross-border moving expenses, or
compensation to enable the individual to return to the individual's
home country), and does not apply to any individual who is a national
of the United States. For purposes of this paragraph (f)(1), an
individual who is not expected to travel outside the United States at
least one time per year during the coverage period would not reasonably
require access to health coverage and other related services and
support in multiple countries. Furthermore, the offer of a one-time de
minimis benefit would not meet the standard for the offer of other
multinational benefits on a periodic basis.
(2) Individuals working outside the United States. An individual is
described in this paragraph (f)(2) only if the individual is a national
of the United States who is working outside the United States for at
least 180 days in a consecutive 12-month period that overlaps with a
single plan year, or across two consecutive plan years.
(3) Individuals within a group of similarly situated individuals.
(i) An individual is described in this paragraph (f)(3) only if:
(A) The individual is a member of a group of similarly situated
individuals that is formed for the purpose of traveling or relocating
internationally in service of one or more of the purposes listed in
section 501(c)(3) or (4) of the Internal Revenue Code, or similarly
situated organizations or groups. For example, a group of students that
is formed for purposes of traveling and studying abroad for a 6-month
period is described in this paragraph (f)(3);
(B) In the case of a group organized to travel or relocate outside
the United States, the individual is expected to travel or reside
outside the United States for at least 180 days in a consecutive 12-
month period that overlaps with the policy year (or in the case of a
policy year that is less than 12 months, at least half the policy
year);
(C) In the case of a group organized to travel or relocate within
the United States, the individual is expected to travel or reside in
the United States for not more than 12 months;
(D) The individual is not traveling or relocating internationally
in connection with an employment-related purpose; and
(E) The group meets the test for having associational ties under
section 2791(d)(3)(B) through (F) of the Public Health Service Act (42
U.S.C. 300gg-91(d)(3)(B) through (F)).
(ii) This paragraph (f)(3) does not apply to a group that is formed
primarily for the sale or purchase of health insurance coverage.
(iii) If a group of similarly situated individuals satisfies the
requirements of this paragraph (f)(3), the Secretary, in consultation
with the Secretary of the Treasury and the Secretary of Labor, has
determined that the group requires access to health coverage and other
related services and support in multiple countries.
(g) Definition of United States. Solely for purposes of this
section, United States means the 50 States, the District of Columbia,
and Puerto Rico.
(h) National of the United States. For purposes of this section,
national of the United States, when referring to an individual, has the
meaning used in the Immigration and Nationality Act (8 U.S.C. 1101 et
seq.) and includes U.S. citizens and non-citizen nationals. Thus, for
example, an individual born in American Samoa is a national of the
United States at birth.
(i) Applicability date. The provisions of this section apply for
plan years (in the individual market, policy years) beginning on or
after January 1, 2017.
PART 148--REQUIREMENTS FOR THE INDIVIDUAL HEALTH INSURANCE MARKET
0
31. The authority citation for part 148 continues to read as follows:
Authority: Secs. 2701 through 2763, 2791, and 2792 of the Public
Health Service Act (42 U.S.C. 300gg through 300gg-63, 300gg-91, and
300gg-92), as amended.
0
32. Section 148.220 is amended by adding paragraph (a)(9) to read as
follows:
Sec. 148.220 Excepted benefits.
* * * * *
(a) * * *
(9) Travel insurance, within the meaning of Sec. 144.103 of this
subchapter.
* * * * *
PART 158--ISSUER USE OF PREMIUM REVENUE: REPORTING AND REBATE
REQUIREMENTS
0
33. The authority citation for part 158 continues to read as follows:
Authority: Section 2718 of the Public Health Service Act (42
U.S.C. 300gg-18), as amended.
0
34. Section 158.120 is amended by revising paragraph (d)(4) to read as
follows:
Sec. 158.120 Aggregate Reporting.
* * * * *
(d) * * *
(4) An issuer with group policies that provide coverage to
employees, substantially all of whom are: Working outside their country
of citizenship; working outside of their country of citizenship and
outside the employer's country of domicile; or non-U.S. citizens
working in their home country, must aggregate and report the experience
from these policies on a national basis, separately for the large group
market and small group market, and separately from other policies,
except that coverage offered by an issuer with respect to an expatriate
health plan (within the meaning of Sec. 147.170(c) of this subchapter)
is not subject to the reporting and rebate requirements of 45 CFR part
158.
* * * * *
[FR Doc. 2016-13583 Filed 6-8-16; 11:15 am]
BILLING CODE 4830-01-P; 4510-29-P; 4120-01-P