United States: Issue 100: Agencies Propose ACA Regulations On Expatriate Plans And Excepted Benefits

On June 10, 2016, the Departments of Treasury, Health and Human Services and Labor (the "Departments") issued proposed regulations on excepted benefits and expatriate coverage. Comments are due August 9, 2016 and the proposed regulations, if finalized, will go into effect for plan years beginning on or after January 1, 2017.

Expatriate Plans

The proposed regulations would formalize rules under the Expatriate Health Coverage Clarification Act of 2014 (the "EHCCA"). Consistent with prior guidance (see Issue 59) the proposed rules provide that an "expatriate health plan" is not subject to the ACA, the Patient Centered Outcomes Research Institute fee (PCROI fee) and the Transitional Reinsurance Program fee (TRP fee). Health coverage provided by an expatriate health plan constitutes minimum essential coverage for purposes of the individual mandate.

Because expatriate health plan coverage constitutes minimum essential coverage, Form 1094 and 1095 reporting applies, though an expatriate health plan can distribute Forms 1095 to participants electronically other than to those participants who explicitly refuse to receive the statement electronically. Upon becoming effective, the participant will have to receive a notice of his or her right to refuse electronic delivery at least 30 days before the deadline for the first Form 1095 the plan intends to provide to the participant electronically.

Finally, expatriate health plans are exempt from the ACA's so-called "market reforms" (e.g., adult child coverage mandate, prohibition on lifetime and annual dollar limits, etc.), subject to the caveat that the plans must comply with certain of these standards (e.g., adult child coverage) to even meet the definition of a qualifying expatriate health plan.

What is an Expatriate Health Plan?

An expatriate health plan is a plan where substantially all (95%) of the primary enrollees (i.e., not a spouse or dependent) are qualified expatriates. An individual is not a primary enrollee if the individual is not a national of the U.S. and resides in his or her country of citizenship. The expatriate health plan must be issued by an expatriate health insurance issuer or administered by an expatriate health plan administrator. (The proposed regulations contain very specific requirements on who can serve in these roles; however, one requirement is that the insurer be licensed to sell insurance in the U.S. In the case of an administrator, the administrator must be in the same controlled group as, or contract with, an insurer licensed to sell insurance in the U.S.)

The proposed regulations would require that an expatriate health plan cover inpatient hospital services, outpatient facility services, physician services and emergency services. Dependent children, if eligible, must be eligible until at least age 26. The plan sponsor must reasonably believe the coverage provides "minimum value." For this purpose, the sponsor can rely on reasonable representations of the issuer or administrator unless the sponsor knows or has reason to know the benefits fail to satisfy the minimum value requirements.

As noted above, qualifying expatriate plans are exempt from the ACA's market reforms. Thus, for example, expatriate health plans can impose preexisting condition exclusions. An expatriate health plan imposing preexisting condition exclusions must provide enrollees an opportunity to demonstrate that they had creditable coverage to offset the preexisting condition exclusion. Since plans are no longer are required to issue certificates of creditable coverage the proposed regulations state that an email from a prior issuer, plan administrator or plan sponsor could suffice to demonstrate prior coverage.

Who is a Qualified Expatriate?

As noted above, an expatriate health plan covers qualified expatriates. The proposed regulations describe two categories of qualified expatriates that relate to the employment relationship:

  1. Inbound employees: an individual who is not a national of the United States, whose skills, qualifications, job duties or expertise has caused the individual's employer to transfer or assign the individual to the U.S. for a specific and temporary purpose or assignment tied to the individual's employment and who the plan sponsor reasonably determines requires access to health insurance and other support in multiple countries (because the individual is expected to travel outside the U.S. at least one time per year). A qualified expatriate also must be offered other multinational benefits on a periodic basis (more than a one-time de minimis benefit) such as tax equalization, compensation for cross-border moving expenses or compensation to enable the expatriate to return to his or her home country.
  2. Outbound employees: a national of the United States who works outside the U.S. for at least 180 days during a consecutive 12-month period that overlaps with the plan year. The plan has to cover certain services such as inpatient and outpatient services in the country where the individual is present in connection with his or her employment.

The proposed regulations also describe a third category of qualified expatriate not pertaining to an employment relationship, which, in general, includes members of a group traveling or relocating internationally for a tax-exempt or social welfare purposes.

Who is a National of the United States? A national includes U.S. citizens and non-citizen nationals. The proposed regulations cross-reference the definition in the Immigration and Nationality Act and note by illustration that an individual born in American Samoa is a national of the United States at birth.

Are Expatriate Plans Subject to the Cadillac Tax? The EHCCA provides that the Cadillac Tax applies to employer-sponsored coverage of a qualified expatriate who is assigned, rather than transferred, to work in the U.S. These proposed regulations do not address the interaction of the EHCCA and the Cadillac Tax because the IRS anticipates that this issue will be addressed in future guidance.

How do these regulations impact prior guidance on expatriate plans?

Prior to the issuance of these proposed regulations, HHS had a process where plan sponsors could apply to have their expatriate coverage recognized as minimum essential coverage. Additionally, the Departments had issued transitional guidance describing characteristics of expatriate plans considered to be minimum essential coverage and to be in compliance with the ACA's market reforms (specifically, plans in which enrollment is limited to primary insureds for whom there is a good faith expectation that such individuals will reside outside of their home country or outside of the U.S. for at least six months of a 12-month period).

The regulations specifically note that the application process will remain in effect as an alternative to qualifying under the EHCCA. The regulations do not specifically address the transition guidance, but because it was issued as transition relief pending issuance of these regulations, presumably plans relying on this guidance could no longer do so, effective for plan or policy years beginning on or after January 1, 2017.

Excepted Benefits

Excepted benefits are exempt from most of the Affordable Care Act's insurance market reforms and other federal mandates. Excepted benefits do not constitute "minimum essential coverage," so enrollment in an excepted benefit will not render an employee ineligible for a tax credit on the Health Insurance Marketplaces.

Hospital Indemnity and Other Fixed Indemnity Coverages

The proposed regulations elaborate on a category of excepted benefits referred to as noncoordinated excepted benefits, which include hospital indemnity and other fixed indemnity insurance contracts, and contracts providing coverage for a specified disease or illness (such as cancer-only policies). Both types of benefits must meet the following criteria to qualify as an excepted benefit:

  1. The benefits must be provided under a separate policy, certificate or contract of insurance;
  2. No coordination is allowed between the provision of such benefits and any exclusion under any group health plan maintained by the same plan sponsor;
  3. The benefits must be paid without regard to whether benefits are provided under any group health plan maintained by the same plan sponsor; and
  4. In the group health plan market, the insurance must pay a fixed dollar amount per day or other time period (e.g., $100 per day) of hospitalization or illness, regardless of the amount incurred.

Hospital indemnity and other fixed indemnity contracts pay the policyholder a set amount upon a certain occurrence (such as hospitalization) without regard to the policyholder's actual out-of-pocket costs. It is intended to be more of an income replacement benefit than health insurance coverage. With regard to the fourth criteria above, some insurers' contracts provide benefits that vary depending on the type of occurrence. For example, the contract might pay the participant 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 the amounts vary by the type of service. The Departments were concerned that these variations cause the contracts to fail to meet the "per day" (or other time period) requirement. They also were concerned that some policies, which otherwise met the excepted benefit requirements, nonetheless provided fairly comprehensive benefits and had been marketed as constituting minimum essential coverage.

To address these concerns, the proposed regulations would clarify that the amount of benefits should not vary based on the types of items or services rendered. By way of example, the regulations note that a policy providing 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 would not qualify as an excepted benefit. Further, the regulations require any application or enrollment materials to include a statement in 14 point font informing the policyholder 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.

To be clear, these rules do not prohibit the types of benefits outlined above, with payments varying depending on the type of service or on a basis on than per diem. Those policies simply do not qualify as excepted benefits, meaning they are reportable on Forms 1094/1095 and are subject to the ACA's market reforms (including, notably, the prohibition on annual and lifetime dollar limits).

Comments Requested: With regard to noncoordinated benefits covering a specific disease or illness, the Departments are seeking comments about policies covering multiple specified diseases or illnesses. The Departments' concern is consumers having a misimpression that they are purchasing comprehensive medical coverage. The Departments are soliciting comments on protections that may be needed to ensure coverages providing benefits for multiple diseases or illnesses are not mistaken for comprehensive medical coverage.

Travel Insurance

The Departments propose to use their rulemaking authority to designate travel-related products that provide only incidental health benefits as excepted benefits. Such products include coverage for personal risks such as interruption or cancellation of a trip or event, lost baggage, rental car damage, and sickness, accident, disability or death occurring during travel. To be an excepted benefit, the regulations propose that health benefits cannot be offered on a stand-alone basis and must be incidental to other coverage. The benefit also could not provide major medical coverage for travelers on trips lasting 6 months or longer.

What Other Types of Excepted Benefits Have the Departments Addressed in Connection with the ACA?

Dental and Vision: dental and vision plans are considered excepted benefits if the benefits offered are limited in scope and are either issued under a separate policy or are not otherwise considered integral to the medical plan. Issue 74. Dental and vision excepted benefits include any self-funded dental/vision benefits under which the claims for the benefits are administered under a contract separate from the claims administration for any other benefits under the plan or where participants can opt-out of those benefits. See Issue 74 and Issue 87.

Employee Assistance Program: employee assistance programs can provide a limited amount of medical benefits and still qualify as an excepted benefit if, among other things, they do not require premiums for participation and do not coordinate with another group health plan. See Issue 74 and Issue 87.

Supplemental Insurance Coverage: insurance contracts designed to fill gaps in primary coverage (such as coinsurance or deductibles) which are issued by a carrier not providing primary health coverage under the employer's plan. The proposed regulations confirm prior FAQ guidance that coverage is not supplemental if it provides benefits that are essential health benefits in the state where the policy is marketed. See Issue 91.

Wraparound Coverage: meaningful coverage beyond cost-sharing that wraps around a primary offering, which could be an individual insurance policy such as a Marketplace policy. Employers could offer this to members of its workforce who are not eligible for the employer's affordable, minimum value coverage (such as non-full-time employees). See Issue 91.

Short-Term, Limited-Duration Coverage

Short-term, limited-duration coverage is not an excepted benefit, but is outside of the scope of the ACA by statute. This type of policy generally provides coverage that lasts fewer than 12 months and is intended to bridge gaps between health insurance enrollments, such as when transitioning from one job to another. This type of coverage, in the Departments' view, has become less critical after the ACA now that preexisting condition exclusions are no longer permitted. Also, the Departments have recently been aware that short-term, limited-duration insurance is being purchased as a primary form of health coverage and some issuers provide renewals extending the coverage beyond 12 months. The proposed regulations would revise the definition of short-term, limited duration insurance so the coverage must be less than 3 months in duration, including renewals, and require a notice in the contract and application materials informing the individual that it is not minimum essential coverage.

Self-funded plans must select a benchmark plan for purposes of determining whether any annual or lifetime limits it imposes affect essential health benefits. See Issue 90. The proposed regulations make a minor clarification to the definition of "essential health benefits."

Action Items

  1. If your plan includes a benefit intended to qualify as a fixed hospital or other fixed indemnity policy, review to ensure the reimbursements do not vary depending on type of service and are made on a per diem basis.
  2. If your company offers expatriate plans that are intended to constitute minimum essential coverage, check with your carrier that the plan meets minimum value and that the carrier is a qualified expatriate health insurance issuer. Confirm that substantially all of those covered under the expatriate plan are qualified expatriates.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.