Expatriate Health Plans, Expatriate Health Plan Issuers, and Qualified Expatriates; Excepted Benefits; Lifetime and Annual Limits; and Short-Term, Limited-Duration Insurance, 38019-38048 [2016-13583]

Download as PDF Vol. 81 Friday, No. 112 June 10, 2016 Part VI Department of the Treasury Internal Revenue Service 26 CFR Parts 1, 46, et al. Department of Labor Employee Benefits Security Administration asabaliauskas on DSK3SPTVN1PROD with PROPOSALS 29 CFR Part 2590 Department of Health and Human Services 45 CFR Parts 144, 146, et al. Expatriate Health Plans, Expatriate Health Plan Issuers, and Qualified Expatriates; Excepted Benefits; Lifetime and Annual Limits; and ShortTerm, Limited-Duration Insurance; Proposed Rule VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 PO 00000 Frm 00001 Fmt 4717 Sfmt 4717 E:\FR\FM\10JNP3.SGM 10JNP3 38020 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules 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 ShortTerm, Limited-Duration Insurance 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. AGENCY: 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, limitedduration 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 shortterm, limited-duration insurance. In addition, this document proposes to asabaliauskas on DSK3SPTVN1PROD with PROPOSALS SUMMARY: VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 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: https:// 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, PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 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 (https://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 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.’’ E:\FR\FM\10JNP3.SGM 10JNP3 asabaliauskas on DSK3SPTVN1PROD with PROPOSALS Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules 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. 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, limitedduration 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 VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 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. 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 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. PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 38021 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 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 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 https://www.dol.gov/ebsa/pdf/faq-aca13.pdf and https://www.cms.gov/CCIIO/Resources/Fact-SheetsandFAQs/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-Sheetsand-FAQs/aca_implementation_faqs18.html. E:\FR\FM\10JNP3.SGM 10JNP3 asabaliauskas on DSK3SPTVN1PROD with PROPOSALS 38022 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules 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 nongrandfathered 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, 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). VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 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). 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 employersponsored plan. Section 5000A(f)(2) of the Code and 26 CFR 1.5000A–2(c) provide that an eligible employersponsored 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 PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 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 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. 7 See 26 CFR 1.6055–2(a)(2)(i) and 301.6056– 2(a)(2)(i). E:\FR\FM\10JNP3.SGM 10JNP3 asabaliauskas on DSK3SPTVN1PROD with PROPOSALS Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules 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 VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 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. 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 8 These are emergency services comparable to emergency services offered under a governmentwide comprehensive health plan under the Federal Employees Health Benefits (FEHB) program prior to the enactment of the ACA. PO 00000 Frm 00005 Fmt 4701 Sfmt 4702 38023 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 thirdparty 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 12month 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 E:\FR\FM\10JNP3.SGM 10JNP3 38024 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules 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. asabaliauskas on DSK3SPTVN1PROD with PROPOSALS 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 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 9 See 10 45 26 CFR 601.601(d)(2)(ii)(B). CFR 158.120(d)(4). VerDate Sep<11>2014 21:47 Jun 09, 2016 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. 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 The Consolidated Appropriations Act, 2016, Public Law 114–113, Division P, Title II, § 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 11 See Jkt 238001 PO 00000 26 CFR 601.601(d)(2)(ii)(B). Frm 00006 Fmt 4701 Sfmt 4702 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 longterm 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 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 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 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). 14 26 CFR 54.9831–1(c)(4)(i), 29 CFR 2590.732(c)(4)(i), 45 CFR 146.145(b)(4)(i). E:\FR\FM\10JNP3.SGM 10JNP3 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules asabaliauskas on DSK3SPTVN1PROD with PROPOSALS 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 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 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 15 Frequently Asked Questions about Affordable Care Act Implementation (Part XI), available at https://www.dol.gov/ebsa/faqs/faq-aca11.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheetsand-FAQs/aca_implementation_faqs11.html. 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). 17 See EBSA Field Assistance Bulletin No. 2007– 04 (available at https://www.dol.gov/ebsa/regs/ fab2007-4.html); CMS Insurance Standards Bulletin 08–01 (available at https://www.cms.gov/CCIIO/ Resources/Files/Downloads/hipaa_08_01_508.pdf); and IRS Notice 2008–23 (available at https:// www.irs.gov/irb/2008-07_IRB/ar09.html). VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 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). 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 18 Frequently Asked Questions about Affordable Care Act Implementation (Part XXIII), available at https://www.dol.gov/ebsa/pdf/faq-aca23.pdf and https://www.cms.gov/CCIIO/Resources/Fact-Sheetsand-FAQs/Downloads/Supplmental-FAQ_2-13-15final.pdf. PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 38025 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. 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, limitedduration 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 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 nongrandfathered 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 19 26 CFR 54.9801–2, 29 CFR 2590.701–2, 45 CFR 144.103. E:\FR\FM\10JNP3.SGM 10JNP3 38026 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules not required to provide EHB may select from among any of the 51 basebenchmark 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 II. Overview of the Proposed Regulations A. Expatriate Health Plans asabaliauskas on DSK3SPTVN1PROD with PROPOSALS 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. 20 26 CFR 54.9815–2711(c), 29 CFR 2590.715– 2711(c), 45 CFR 147.126(c). VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 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 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. PO 00000 Frm 00008 Fmt 4701 Sfmt 4702 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. 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 E:\FR\FM\10JNP3.SGM 10JNP3 asabaliauskas on DSK3SPTVN1PROD with PROPOSALS Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules 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. 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 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). 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. VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 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. 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 PO 00000 Frm 00009 Fmt 4701 Sfmt 4702 38027 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 E:\FR\FM\10JNP3.SGM 10JNP3 38028 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules asabaliauskas on DSK3SPTVN1PROD with PROPOSALS 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/HealthInsurance-Market-Reforms/minimumessential-coverage.html. 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 nonUnited States issuer that is not otherwise minimum essential coverage 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-andGuidance/Downloads/mec-guidance-10-312013.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-andGuidance/Downloads/mec-guidance-10-312013.pdf. See also CMS Insurance Standards Bulletin Series. CCIIIO Sub-Regulatory Guidance: Minimum Essential Coverage. VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 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 PO 00000 Frm 00010 Fmt 4701 Sfmt 4702 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 12month period that overlaps with the policy year (or in the case of a policy year that is less than 12 months, at least 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. E:\FR\FM\10JNP3.SGM 10JNP3 asabaliauskas on DSK3SPTVN1PROD with PROPOSALS Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules 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)). 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 VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 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 PO 00000 Frm 00011 Fmt 4701 Sfmt 4702 38029 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 E:\FR\FM\10JNP3.SGM 10JNP3 38030 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules guidance promulgated under section 4980I of the Code. asabaliauskas on DSK3SPTVN1PROD with PROPOSALS 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 employersponsored 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 VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 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. 29 45 PO 00000 CFR 153.400(a)(1)(iii). Frm 00012 Fmt 4701 Sfmt 4702 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 E:\FR\FM\10JNP3.SGM 10JNP3 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules asabaliauskas on DSK3SPTVN1PROD with PROPOSALS 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 travelrelated 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 VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 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. 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 30 26 PO 00000 CFR 57.2(h)(4). Frm 00013 Fmt 4701 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. 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 31 45 Sfmt 4702 38031 E:\FR\FM\10JNP3.SGM CFR 148.220(b)(4)(iv). 10JNP3 38032 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules asabaliauskas on DSK3SPTVN1PROD with PROPOSALS 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 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). VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 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. Short-Term, Limited-Duration Insurance Under existing regulations, shortterm, 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, shortterm, limited-duration insurance is no longer the only means to obtain transitional coverage. The Departments recently have become aware that short-term, limitedduration 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 33 26 CFR 54.9801–2, 29 CFR 2590.702–2, 45 CFR 144.103. 34 See e.g., Mathews, Anna W. ‘‘Sales of ShortTerm Health Policies Surge,’’ The Wall Street Journal April 10, 2016, available at https:// www.wsj.com/articles/sales-of-short-term-healthpolicies-surge-1460328539. PO 00000 Frm 00014 Fmt 4701 Sfmt 4702 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. 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, limitedduration 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, limitedduration 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 E:\FR\FM\10JNP3.SGM 10JNP3 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules asabaliauskas on DSK3SPTVN1PROD with PROPOSALS definition of short-term, limitedduration 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, limitedduration 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. 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 35 80 FR 72192. VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 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 basebenchmark 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 EHBbenchmark 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. 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 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 basebenchmark 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 basebenchmark plan, and takes into account any additions to the base-benchmark plan, such as supplementation under 45 CFR 156.110, and Staterequired benefit mandates in accordance with 45 CFR 155.170. PO 00000 Frm 00015 Fmt 4701 Sfmt 4702 38033 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 E:\FR\FM\10JNP3.SGM 10JNP3 38034 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules 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, limitedduration 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)). asabaliauskas on DSK3SPTVN1PROD with PROPOSALS 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. VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 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 PO 00000 Frm 00016 Fmt 4701 Sfmt 4702 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, limitedduration 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, limitedduration 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 37 NAIC, 2014 Supplemental Health Care Exhibit Report, Volume 1 (2015), available at https:// 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. E:\FR\FM\10JNP3.SGM 10JNP3 asabaliauskas on DSK3SPTVN1PROD with PROPOSALS Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules 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. 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 VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 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 PO 00000 Frm 00017 Fmt 4701 Sfmt 4702 38035 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 E:\FR\FM\10JNP3.SGM 10JNP3 asabaliauskas on DSK3SPTVN1PROD with PROPOSALS 38036 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules 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. VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 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 PO 00000 Frm 00018 Fmt 4701 Sfmt 4702 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 https://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 E:\FR\FM\10JNP3.SGM 10JNP3 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules 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 1. The authority citation for part 1 continues to read in part as follows: ■ Authority: 26 U.S.C. 7805.* * * 2. Section 1.162–31 is amended by adding paragraph (b)(5)(v) to read as follows: ■ § 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 § 54.9831–1(f)(3), are not premiums. * * * * * ■ 3. Section 1.5000A–2 is amended by adding paragraphs (c)(1)(i)(D) and (d)(3) to read as follows: asabaliauskas on DSK3SPTVN1PROD with PROPOSALS § 1.5000A–2 Minimum essential coverage. * * * * * (c) * * * (1) * * * (i) * * * (D) A group health plan that is an expatriate health plan within the meaning of § 54.9831–1(f)(3) of this chapter if the requirements of § 54.9831–1(f)(3)(i) of this chapter are met by providing coverage for qualified VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 expatriates described in § 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 § 54.9831–1(f)(3) of this chapter that is not an eligible employersponsored plan under paragraph (c)(1)(i)(D) of this section is a plan in the individual market. * * * * * ■ 4. Section 1.6055–2 is amended by adding paragraph (a)(8) to read as follows: 38037 PART 46—EXCISE TAXES, HEALTH CARE, HEALTH INSURANCE, PENSIONS, REPORTING AND RECORDKEEPING 5. The authority citation for part 46 continues to read as follows: ■ Authority: 26 U.S.C. 7805. 6. Section 46.4377–1 is amended by redesignating paragraph (c) as paragraph (d) and adding new paragraph (c) to read as follows: ■ § 46.4377–1. Definitions and special rules. * * * * (c) Treatment of expatriate health plans. For policy years and plan years § 1.6055–2 Electronic furnishing of that end after January 1, 2017, the fees statements. imposed by sections 4375 and 4376 do not apply to an expatriate health plan (a) * * * within the meaning of § 54.9831–1(f)(3). (8) Special rule for expatriate health * * * * plan coverage—(i) In general. In the case * of an individual covered under an PART 54—PENSION AND EXCISE expatriate health plan (within the TAXES meaning of § 54.9831–1(f)(3) of this chapter), the recipient is treated as ■ 7. The authority citation for part 54 having consented under paragraph (a)(2) continues to read in part as follows: of this section unless the recipient has Authority: 26 U.S.C. 7805* * * explicitly refused to consent to receive ■ 8. Section 54.9801–2 is amended by: the statement in an electronic format. ■ a. Adding in alphabetical order The refusal to consent may be made electronically or in a paper document. A definitions for ‘‘expatriate health recipient’s request for a paper statement insurance issuer’’, ‘‘expatriate health plan’’, and ‘‘qualified expatriate;’’ is treated as an explicit refusal to ■ b. Revising the definition of ‘‘shortreceive the statement in electronic term, limited-duration insurance’’; and format. A furnisher relying on this ■ c. Adding in alphabetical order a paragraph (a)(8) must satisfy the definition for ‘‘travel insurance’’. requirements of paragraphs (a)(3) The additions and revisions read as through (7) of this section, except that the statement required under paragraph follows: (a)(3) must be provided at least 30 days § 54.9801–2 Definitions. prior to the time for furnishing under * * * * * § 1.6055–1(g)(4)(i)(A) of this chapter of Expatriate health insurance issuer the first statement that the furnisher means an expatriate health insurance intends to furnish electronically to the recipient, and the other requirements of issuer within the meaning of § 54.9831– 1(f)(2). paragraph (a)(3) are modified to reflect Expatriate health plan means an that the statement will be furnished expatriate health plan within the electronically unless the recipient meaning of § 54.9831–1(f)(3). explicitly refuses to consent to receive * * * * * the statement in an electronic format. Qualified expatriate means a qualified (ii) Manner and time of notifying expatriate within the meaning of recipient. The IRS may specify in other § 54.9831–1(f)(6). guidance published in the Internal Short-term, limited-duration Revenue Bulletin the manner and insurance means health insurance timing for the initial notification of coverage provided pursuant to a recipients that the statement required contract with an issuer that: under paragraph (a)(3) of this section (1) Has an expiration date specified in will be furnished electronically unless the contract (taking into account any the recipient explicitly refuses to extensions that may be elected by the consent to receive the statement in an policyholder with or without the electronic format. See issuer’s consent) that is less than 3 § 601.601(d)(2)(ii)(B) of this chapter. months after the original effective date (iii) Effective/applicability date. The of the contract; and provisions of this paragraph (a)(8) apply (2) Displays prominently in the as of January 1, 2017. contract and in any application * * * * * materials provided in connection with PO 00000 Frm 00019 Fmt 4701 Sfmt 4702 * E:\FR\FM\10JNP3.SGM 10JNP3 38038 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules 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. * * * * * ■ 9. Section 54.9815–2711 is amended by revising paragraph (c) to read as follows: § 54.9815–2711 limits. No lifetime or annual asabaliauskas on DSK3SPTVN1PROD with PROPOSALS * * * * * (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. * * * * * § 54.9831–1 [Amended] 10. Section 54.9831–1 is amended in paragraph (b)(1) by removing the reference ‘‘54.9812–1T’’ and adding in ■ VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 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’’. ■ 11. Section 54.9831–1 is amended: ■ a. In paragraph (c)(2)(vii) by removing ‘‘and’’ at the end; ■ b. In paragraph (c)(2)(viii) by adding ‘‘and’’ at the end; ■ c. Adding paragraph (c)(2)(ix); ■ d. Revising paragraph (c)(4)(i); ■ e. Adding paragraph (c)(4)(ii)(D); ■ f. Revising paragraphs (c)(4)(iii) and (c)(5)(i)(C); and ■ g. Adding paragraph (f). The revisions and additions read as follows: (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: § 54.9831–1 Special rules relating to group health plans. 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). * * * * * (c) * * * (2) * * * (ix) Travel insurance within the meaning of § 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.’’ PO 00000 Frm 00020 Fmt 4701 Sfmt 4702 E:\FR\FM\10JNP3.SGM 10JNP3 asabaliauskas on DSK3SPTVN1PROD with PROPOSALS Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules (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 § 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; VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 (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 § 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 § 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— PO 00000 Frm 00021 Fmt 4701 Sfmt 4702 38039 (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 selfinsured 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 E:\FR\FM\10JNP3.SGM 10JNP3 38040 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules 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: asabaliauskas on DSK3SPTVN1PROD with PROPOSALS 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 § 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 § 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 § 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 § 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, VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 (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 § 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 § 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 PO 00000 Frm 00022 Fmt 4701 Sfmt 4702 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 6month 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. E:\FR\FM\10JNP3.SGM 10JNP3 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules citizens and non-citizen nationals. Thus, for example, an individual born in American Samoa is a national of the United States at birth. ■ 12. Section 54.9833–1 is amended by adding a sentence at the end to read as follows: § 54.9833–1 Effective dates. * * * Notwithstanding the previous sentence, the definition of ‘‘short-term limited duration insurance’’ in §§ 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 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)). * * * 14. Section 57.2 is amended by revising paragraph (n) to read as follows: ■ § 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 § 54.9831–1(f)(6)) enrolled in an expatriate health plan (within the meaning of § 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. * * * * * ■ 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: asabaliauskas on DSK3SPTVN1PROD with PROPOSALS * § 57.4 Fee calculation. * * * * * (b) * * * (2) * * * This presumption does not apply to excluded premiums for qualified expatriates in expatriate health plans as described in § 57.2(n)(2). (3) Manner of determining excluded premiums for qualified expatriates in VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 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 § 57.2(n)(2). * * * * * ■ 16. Section 57.10 is amended by revising paragraph (a) and adding paragraph (c) to read as follows: § 57.10 Effective/applicability dates. (a) In general. Except as provided in paragraphs (b) and (c) of this section, §§ 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 § 57.4(b)(2), and § 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 17. The authority citation for part 301 continues to read in part as follows: ■ Authority: 26 U.S.C. 7805 * * * 18. Section 301.6056–2 is amended by adding paragraph (a)(8) to read as follows: ■ § 301.6056–2. statements. Electronic furnishing of (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 § 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 § 301.6056–1(g)(4)(i)(A) of this chapter of the first statement that the furnisher intends to furnish electronically to the PO 00000 Frm 00023 Fmt 4701 Sfmt 4702 38041 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 § 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 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). 20. Section 2590.701–2 is amended by: ■ a. Adding in alphabetical order definitions for ‘‘expatriate health insurance issuer’’, ‘‘expatriate health plan’’, and ‘‘qualified expatriate’’; ■ b. Revising the definition of ‘‘shortterm, limited-duration insurance’’; and ■ c. Adding in alphabetical order a definition for ‘‘travel insurance’’. The additions and revisions read as follows: ■ § 2590.701–2 * Definitions. * * * * Expatriate health insurance issuer means an expatriate health insurance issuer within the meaning of § 2590.732(f)(2). E:\FR\FM\10JNP3.SGM 10JNP3 38042 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules asabaliauskas on DSK3SPTVN1PROD with PROPOSALS Expatriate health plan means an expatriate health plan within the meaning of § 2590.732(f)(3). * * * * * Qualified expatriate means a qualified expatriate within the meaning of § 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. * * * * * ■ 21. Section 2590.715–2711 is amended by revising paragraph (c) to read as follows: § 2590.715–2711 limits. No lifetime or annual * * * * * (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 VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 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. * * * * * ■ 22. Section 2590.732 is amended: ■ a. In paragraph (c)(2)(vii) by removing ‘‘and’’ at the end; ■ b. In paragraph (c)(2)(viii) by adding ‘‘and’’ at the end; ■ c. Adding paragraph (c)(2)(ix); ■ d. Revising paragraph (c)(4)(i); ■ e. Adding paragraph (c)(4)(ii)(D); ■ f. Revising paragraphs (c)(4)(iii) and (c)(5)(i)(C); and ■ g. Adding paragraph (f). The revisions and additions read as follows: 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: § 2590.732 Special rules relating to group health plans. 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 * * * * * (c) * * * (2) * * * (ix) Travel insurance, within the meaning of § 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 PO 00000 Frm 00024 Fmt 4701 Sfmt 4702 E:\FR\FM\10JNP3.SGM 10JNP3 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules asabaliauskas on DSK3SPTVN1PROD with PROPOSALS 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 § 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; VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 (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 § 2590.732(c). (iii) Additional requirements. To qualify as an expatriate health plan, the PO 00000 Frm 00025 Fmt 4701 Sfmt 4702 38043 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 E:\FR\FM\10JNP3.SGM 10JNP3 38044 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules merely because any portion of the coverage is provided through a selfinsured 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: asabaliauskas on DSK3SPTVN1PROD with PROPOSALS 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 § 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 § 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 § 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 § 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 VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 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 § 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. PO 00000 Frm 00026 Fmt 4701 Sfmt 4702 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), E:\FR\FM\10JNP3.SGM 10JNP3 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules 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. ■ 23. Section 2590.736 is amended by adding a sentence at the end to read as follows: § 2590.736 Applicability dates. * * * Notwithstanding the previous sentences, the definition of ‘‘short-term, limited-duration insurance’’ in §§ 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 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. 25. Section 144.103 is amended by: a. Adding in alphabetical order definitions for ‘‘expatriate health insurance issuer’’, ‘‘expatriate health plan’’, and ‘‘qualified expatriate’’; ■ b. Revising the definition of ‘‘shortterm, limited-duration insurance’’; and ■ c. Adding in alphabetical order a definition for ‘‘travel insurance’’. The additions and revision read as follows: ■ ■ § 144.103 Definitions. asabaliauskas on DSK3SPTVN1PROD with PROPOSALS * * * * * Expatriate health insurance issuer means an expatriate health insurance issuer within the meaning of § 147.170(b) of this subchapter. Expatriate health plan means an expatriate health plan within the meaning of § 147.170(c) of this subchapter. * * * * * Qualified expatriate means a qualified expatriate within the meaning of § 147.170(f) of this subchapter. VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 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 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. 27. Section 146.145 is amended by: a. Adding paragraph (b)(2)(ix); b. Revising paragraph (b)(4)(i); c. Adding paragraph (b)(4)(ii)(D); and d. Revising paragraph (b)(5)(i)(C). The additions and revisions read as follows: ■ ■ ■ ■ ■ § 146.145 Special rules relating to group health plans. * PO 00000 * * Frm 00027 * Fmt 4701 * Sfmt 4702 38045 (b) * * * (2) * * * (ix) Travel insurance, within the meaning of § 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 E:\FR\FM\10JNP3.SGM 10JNP3 38046 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules asabaliauskas on DSK3SPTVN1PROD with PROPOSALS 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 VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 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 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. 29. Section 147.126 is amended by revising paragraph (c) to read as follows: ■ § 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. * * * * * ■ 30. Section 147.170 is added to read as follows: § 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 PO 00000 Frm 00028 Fmt 4701 Sfmt 4702 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 § 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 E:\FR\FM\10JNP3.SGM 10JNP3 asabaliauskas on DSK3SPTVN1PROD with PROPOSALS Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules 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 § 146.145(b) and § 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. VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 (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 selfinsured 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 § 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 § 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 § 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 PO 00000 Frm 00029 Fmt 4701 Sfmt 4702 38047 enrollees for purposes of the substantially all requirement of § 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 § 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 E:\FR\FM\10JNP3.SGM 10JNP3 38048 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules asabaliauskas on DSK3SPTVN1PROD with PROPOSALS 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 VerDate Sep<11>2014 21:47 Jun 09, 2016 Jkt 238001 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 31. The authority citation for part 148 continues to read as follows: ■ PO 00000 Frm 00030 Fmt 4701 Sfmt 9990 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. 32. Section 148.220 is amended by adding paragraph (a)(9) to read as follows: ■ § 148.220 Excepted benefits. * * * * * (a) * * * (9) Travel insurance, within the meaning of § 144.103 of this subchapter. * * * * * PART 158—ISSUER USE OF PREMIUM REVENUE: REPORTING AND REBATE REQUIREMENTS 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. 34. Section 158.120 is amended by revising paragraph (d)(4) to read as follows: ■ § 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 § 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 E:\FR\FM\10JNP3.SGM 10JNP3

Agencies

[Federal Register Volume 81, Number 112 (Friday, June 10, 2016)]
[Proposed Rules]
[Pages 38019-38048]
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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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: https://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 (https://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.
---------------------------------------------------------------------------

    \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 https://www.dol.gov/ebsa/pdf/faq-aca13.pdf and https://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).
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \9\ See 26 CFR 601.601(d)(2)(ii)(B).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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\
---------------------------------------------------------------------------

    \11\ See 26 CFR 601.601(d)(2)(ii)(B).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \14\ 26 CFR 54.9831-1(c)(4)(i), 29 CFR 2590.732(c)(4)(i), 45 CFR 
146.145(b)(4)(i).
---------------------------------------------------------------------------

    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 https://www.dol.gov/ebsa/faqs/faq-aca11.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs11.html.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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 https://www.dol.gov/ebsa/regs/fab2007-4.html); CMS Insurance 
Standards Bulletin 08-01 (available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/hipaa_08_01_508.pdf); and IRS Notice 2008-
23 (available at https://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 https://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.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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\
---------------------------------------------------------------------------

    \20\ 26 CFR 54.9815-2711(c), 29 CFR 2590.715-2711(c), 45 CFR 
147.126(c).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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)).
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \29\ 45 CFR 153.400(a)(1)(iii).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \30\ 26 CFR 57.2(h)(4).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \31\ 45 CFR 148.220(b)(4)(iv).
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \33\ 26 CFR 54.9801-2, 29 CFR 2590.702-2, 45 CFR 144.103.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \34\ See e.g., Mathews, Anna W. ``Sales of Short-Term Health 
Policies Surge,'' The Wall Street Journal April 10, 2016, available 
at https://www.wsj.com/articles/sales-of-short-term-health-policies-surge-1460328539.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \35\ 80 FR 72192.
---------------------------------------------------------------------------

    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 https://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 https://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
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