EBIA Weekly Newsletter

Proposed Regulations Address Expatriate Health Plans, Excepted Benefits, and More

   June 16, 2016

Expatriate Health Plans, Expatriate Health Plan Issuers, and Qualified Expatriates; Excepted Benefits; Lifetime and Annual Limits; and Short-Term, Limited-Duration Insurance, 26 CFR Parts 1, 46, 54, 57, and 301; 29 CFR Part 2590; 45 CFR Parts 144, 146, 147, 148, and 158, 81 Fed. Reg. 38019 (June 10, 2016)

Available at https://www.gpo.gov/fdsys/pkg/FR-2016-06-10/pdf/2016-13583.pdf

Visit the Health Care Reform Community on Checkpoint to join the discussion on this development (for Checkpoint subscribers to EBIA’s Health Care Reform manual).

The DOL, HHS, and IRS have jointly issued proposed regulations addressing various health care reform provisions, including expatriate health plans, excepted benefits, and the definition of essential health benefits (EHB) for purposes of the prohibition on lifetime and annual dollar limits. The regulations are proposed to be applicable for plan years beginning on or after January 1, 2017, although reliance is permitted pending the applicability of final regulations. To the extent that final regulations are more restrictive, they will be applied without retroactive effect. Here are highlights:

  • Expatriate Health Plans. Consistent with prior guidance (see our Checkpoint article), the proposed regulations would provide that many health care reform requirements do not apply to expatriate health plans that meet detailed eligibility and coverage standards, including requirements to cover inpatient hospital and outpatient facility services, provide minimum value, and comply with most HIPAA portability provisions in effect before health care reform. Coverage under a qualifying expatriate health plan would count as minimum essential coverage for both individual mandate and employer shared responsibility purposes, as well as related reporting. Application of the tax on high-cost health coverage (the “Cadillac tax”) to expatriate plans is not addressed, since the IRS anticipates addressing the issue in future guidance.
  • Excepted Benefits. Proposals address various types of excepted benefits. As background, excepted benefits are exempt from certain requirements under HIPAA’s portability provisions (e.g., special enrollment), health care reform (e.g., age 26 mandate, enhanced claim and appeal rules, and annual dollar-limit prohibition), and other federal laws.

    • Supplemental Coverage. The proposed regulations would incorporate prior FAQ guidance (see our Checkpoint article) allowing certain supplemental health insurance that does not include coverage of EHB—as defined in the state where the coverage is issued—to qualify as excepted benefits.
    • Fixed Indemnity Coverage. The agencies expressed concern that some group health plans providing fixed indemnity coverage that qualifies as an excepted benefit have incorrectly led some participants to believe that the coverage constitutes minimum essential coverage. The proposed regulations would require, as a condition to excepted benefit status, that application or enrollment materials for group hospital or other fixed indemnity insurance alert enrollees and potential enrollees that the coverage is supplemental to major medical coverage, and that a lack of minimum essential coverage may result in individual mandate penalties. Two examples echo January 2013 FAQ guidance (see our Checkpoint article), highlighting that group policies purporting to provide fixed indemnity coverage but paying benefits based on the type of items or services (instead of per period) are not excepted benefits. Comments are requested on whether the excepted benefit conditions for fixed indemnity coverage should be more substantively aligned between the group and individual markets—for example, by also limiting payment in the individual market to a per-period basis. (Regulations finalized in 2014 allow individual fixed indemnity policies paying benefits on a per-service basis to qualify as an excepted benefit (see our Checkpoint article).)
    • Specified Disease Coverage. Comments are sought on whether to limit the number of diseases or illnesses that may be covered or whether disclosures should be required that these policies are not minimum essential coverage.
  • Short-Term, Limited-Duration Insurance. The proposed regulations would require the expiration date (taking into account possible extensions) of short-term coverage to be less than three months after its original effective date. (According to the agencies, limiting the duration of such coverage improves coordination with the individual mandate penalty, which includes an exemption for gaps in coverage of less than three continuous months.) Enrollment materials would have to include a notice that the short-term coverage is not minimum essential coverage.
  • EHB for Purposes of Lifetime and Annual Dollar Limits. Employer-sponsored self-insured and insured large group health plans are not required to cover EHB but are barred from imposing annual or lifetime dollar limits on EHB they do offer. Current rules allow plans to define EHB by reference to any of the 51 benchmark plans identified by the states or the District of Columbia, or one of the three largest Federal Employees Health Benefit Program plans (see our Checkpoint article). Noting that the base-benchmark plan selected by a state (or applied by default) may not reflect the complete definition of EHB in the state, the regulations propose to add cross-references to the EHB regulations requiring supplementation of benchmark plans and ensuring the inclusion of certain state-required benefit mandates.

EBIA Comment: These proposed regulations address several important health care reform implementation topics and reflect a continued concern that consumers may not fully understand the implications of limited coverage that remains available after health care reform. Insurers, plan sponsors, and advisors will want to familiarize themselves with the proposals as they wait for final regulations. For more information, see EBIA’s Health Care Reform manual at Sections V.F (“Excepted Benefits: Certain Health FSAs, Dental, Vision, and Others”), V.M (“Expatriate Health Plans”), and IX.A (“Lifetime and Annual Dollar Limits”). See also EBIA’s HIPAA Portability, Privacy & Security manual at Section VI.F (“Excepted Benefits: Certain Health FSAs, Dental, Vision, and Others”) and EBIA’s Self-Insured Health Plans manual at Section V.D (“Health Care Reform and Other Federal Laws”).

Contributing Editors: EBIA Staff.