There have been seismic reforms to the US healthcare system. Here, John Kaye, director of sales and client management at Cigna, sets out some of the key points brokers and their clients need to be aware of.
Since it was signed into US law in 2010, the Patient Protection and Affordable Care Act (PPACA) has created quite a stir – and not just in the US. The Act was introduced in an effort to reform the American healthcare system and at the same time, provide access to affordable health insurance and improve the quality of healthcare. But it has not just impacted US employers – it has had a notable effect on international companies around the world with expatriates living and working in the US.
Late last year, the US Congress passed a new law called the Expatriate Health Coverage Clarification Act. This was designed to deliver relief from certain PPACA provisions for US issued plans covering expatriates. The act brings relief from a number of fees including: The Transitional Reinsurance Program (TRP), Comparative Effectiveness Research Fee (CERF), Patient-Centered Outcomes Research Institute (PCORI) fees, and the US annual health insurer fee (HIT).
Initially, many believed that the reform would only affect US-based companies. However it does present challenges for multinational employers, who are not necessarily based in the US, and globally-mobile employees. Cigna has seen many instances where local reform initially focuses on the native population. The impact on foreign nationals residing in the country is later considered, and amendments are made.
The new law required that all employees living or working in the US must obtain health insurance by 2014, unless they qualify for an exemption, or pay a monthly fee for each month that they were without coverage. For those employers who cover US citizens abroad or foreign nationals living and working in the US, certain PPACA requirements must be considered. The two that have the biggest impact are the employer and individual mandates.
First, there is the employer mandate. This requires global companies with employees working in the US access to health insurance which meets the new standards. Coverage which meets a minimum value standard is considered affordable, and must be offered to fulltime employees working in the US and their dependant children, up to the age of 26.
The employer mandate also imposes tax penalties on employers’ operations in the US who do not offer medical coverage to full time workers in the US which meets these standards. For plan years beginning in 2015, the penalty is the lesser of $2,000 for each full-time employee or $3,000 per employee who receives a tax subsidy.
Second, there is the individual mandate. Legal US residents and citizens must obtain or maintain Minimum Essential Coverage (MEC) for themselves and their dependants. If they do not obtain MEC (or an exemption) the individual will have to pay a tax penalty. The global employer has a responsibility to ensure their expats are well-informed before they go on assignment.
But the employers’ responsibilities do not just end there. To monitor compliance with the individual and employer mandates, PPACA requires annual reporting by employers and insurers. This will have a large impact over the coming years, as clients will need to keep track of their employees in the US on a monthly basis.
Employers that are subject to the employer mandate are also requiredto annually report to the Internal Revenue Service (IRS) on the coverage offered to their full-time employees and their dependent children. Employers sponsoring self-insured group health plans, and health insurers providing insured coverage, must report on the MEC they provide for all covered individuals starting in 2015 (reporting 2015 data in 2016).
Cigna is working with employers globally, not just those operating within the US, in respect of the reporting requirements.
The primary focus is to ensure the correct data is captured in a timely and appropriate manner, enabling the US government bodies to utilise it. The impact on organisations will differ based on circumstances. While there is not a one-size-fits-all solution to PPACA compliance for multinational employers, it is important to work with a global health services company that understands these challenges and requirements and can help multinational clients navigate this complex environment.
EVERYTHING YOU NEED TO KNOW ABOUT PPACA
The following FAQs are designed to help you understand how PPACA impacts multinational employers.
What are the benefits of the Expatriate Health Care Clarification Act?
* The law provides relief from the PPACA benefit requirements/market reforms for US issued fully insured and US self-funded plans.
* It provides US-based expatriate plans with permanent relief from the TRP, PCORI/CERF fees, the US annual health insurer fee (HIT) after 2015, and the 40% non-deductible high-cost “Cadillac” plan excise tax beginning in 2018.
* It defines the “United States” to mean the 50 states, District of Columbia, and Puerto Rico, which allows clients using US-issued expatriate plans to cover US citizens in all of the territories except Puerto Rico and still qualify for relief.
* The law recognises coverage needs for key local nationals outside the US by not counting them towards the total number of qualified expatriates on the plan.
* It provides permanent Summary of Benefits and Coverage (SBC) relief for both US-issued fully insured and US self-insured plans.
* All US-issued fully insured and self-insured employer-sponsored expatriate plans meeting the definition in the law qualify as MEC for purposes of the individual mandate and as eligible employer-sponsored plans for purposesof the employer mandate.
* It removes US employer-sponsored expatriate plans from the large/small group definition change in 2016 which could have prevented employers in the 50 to 99 employee category from accessing global expatriate cover.
2. When does the Expatriate Health Coverage Clarification Act of 2014 take effect?
* We believe the benefit relief provided by the law would be immediate but employers would have until their first renewal on or after July 1, 2015 to make any required changes to their plan to qualify for relief. We believe that the tax/fee relief, such as the Health Industry Fee, would apply after the client’s first renewal, on or after July 1, 2015.
3. What if the plan is not US issued? Does the Health Care Clarification Act still apply?
* No. Plans which are issued or used outside the US were generally not subject to PPACA’s market reforms or taxes. The Healthcare Clarification Act of 2014 was designed to provide relief to those US-issued expatriate plans which were subject to those market reforms and taxes. So, the requirements and benefits in the Act apply only to US-issued plans. However, employers using either US-issued or non-US issued plans will still be subject to the employer mandate requirements if they are an Applicable Large Employer (ALE) and the covered individuals and dependents will still be subject to the individual mandate if they are US citizens (who do not qualify as foreign residents), or legal US residents.
4. What are the insurer/plan issuer requirements?
Insurers providing US issued expatriate plans must:
* Have licenses to sell insurance in 2+ countries
* Maintain direct pay provider networks (direct or third party) in 8+ countries
* Have call centres (direct or third party) in 3+ countries
* Accept customer calls in 8+ languages
* Process at least $1m in claims in foreign currency equivalents each year
* Make available global evacuation/ repatriation coverage
* Have legal/compliance resources in 3+ countries
* Reimburse claims in local currency in 8+ countries
5. What key considerations should be taken into account?
This law does not exclude:
* Employers who would otherwise be considered an ALE from the employer mandate and reporting requirements.
* Insurers and self-insured clients from the MEC reporting requirements
* This law applies only to US-issued plans. Employers using non US-issued expatriate plans for foreign nationals in the US and/or US expatriates abroad should be mindful of both the employer and individual mandates and the impacts and requirements those impose on plans. Individuals continue to be subject to the individual mandate.
This is an extremely complicated and challenging set of provisions. The insurance sector is also experiencing more regulation, which impacts expatriate health insurance. Organisations must select a suitable partner that can ensure regulations are met. Change is ongoing, so the ability to adapt and adjust is vital.
For more information on PPACA and how Cigna can help your business, visit www.cignaglobalhealth.com
“Cigna” refers to Cigna Corporation and/or its subsidiaries and affiliates. Products and services are provided by these subsidiaries, affiliates and other contracted companies and not by Cigna Corporation. This material is provided for informational purposes only. It is believed accurate as of the date of publication and is subject to change. Such material is not binding nor does it form any part of any Cigna policy terms and conditions. No liability is assumed by Cigna for any misunderstanding arising from your interpretation of this document. Such material should not be relied upon as legal, medical or tax advice. Please consult with your independent legal, medical and/or tax advisors.
* For plan years beginning in 2015, the penalty is $2,000 for each full-time employee minus the first 80 employees. For plan years beginning in 2016, employers can exclude 30 employees from the penalty calculation.
* Certain categories of inpatriates to the US may be subject to the Cadillac tax.