The Patient Protection and Affordable Care Act and Expatriate Insurance Frequently Asked Questions February 2015

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1 The Patient Protection and Affordable Care Act and Expatriate Insurance Frequently Asked Questions February 2015 The Patient Protection and Affordable Care Act (PPACA) presents challenges for multinational employers and globally mobile employees in terms of both applicability and compliance. Because of the intersection of the PPACA with other U.S. laws, such as the Public Health Service Act, (PHS), ERISA, Mental Health Parity and the Internal Revenue Code, combined with PPACA s differing requirements on plans, employers, and individuals, answers to seemingly straightforward questions must be evaluated against a number of factors. Impacts differ based on circumstances such as whether the employer is a U.S. employer or non-u.s. employer, whether the employer employs full-time workers in the U.S. or U.S. citizens working abroad, the funding type of the plan, and whether the plan is issued in the U.S. or outside the U.S. While there is not a one-size-fits-all solution to PPACA compliance for multinational employers, it is important to work with a global health service company that understands these challenges and requirements. Cigna has been actively engaged in helping policymakers and legislators in Washington understand the challenges faced by multinational employers and globally mobile employees. To that end, in December 2014, Congress passed into law The Expatriate Health Coverage Clarification Act of 2014 (the law ) which caps a long journey led by Cigna to secure permanent and necessary relief from many PPACA requirements for U.S. based expatriate plans. The passage of the law is a hugely important step in the process, however, we will not completely understand its full impacts until HHS and the other agencies promulgate implementing guidance. It is important to note that the law is not a complete exemption from all PPACA requirements. The law makes permanent and expands upon the existing transitional relief for U.S. issued fully insured plans, it extends relief to U.S. self-funded plans, and it protects expatriate plans from most of the benefit mandates and tax provisions of PPACA. But other elements of PPACA still apply, including but not limited to the employer mandate and the individual mandate. Also, the law imposes requirements employers, insurers, plans and customers must meet to qualify for relief. Additionally, non-u.s. expatriate plans, while not impacted by PPACA benefit requirements or the new law, will still have employer and individual mandate considerations and are best served by working with a health service company that understands the complex impacts on non-u.s. plans. It remains imperative that multi-national employers and their brokers and consultants work with a health service company that not only qualifies as an expatriate health insurance insurer as defined by the law, as Cigna does, but that also understands the implications of the law and has the expertise to design plans which allow clients to take advantage of the significant relief it provides. As Cigna led the advocacy efforts which resulted in the passage of the law, we are best equipped to help clients and intermediary partners navigate the new landscape. The following document is designed to help clients and intermediary partners navigate the law and learn about PPACA impacts and challenges facing multinational employers. While we expect guidance interpreting the law, the following represents our current understanding. 1

2 1. Are expatriate plans exempt from PPACA? No plan with US touch points is completely exempt from all PPACA requirements. Which PPACA provisions may apply to plans depends on many factors such as where the plan is sitused (in the U.S. or out of the U.S.), the type of employer, the funding arrangement, the citizenship and work location of the employees, and the length of assignment of the employees covered on the plan. All of these factors play a role in determining if a plan can take advantage of the relief provided in the law. Non U.S. Sitused-Plans (foreign-issued employer sponsored plans) Generally, plans sitused outside the U.S. if they are non-erisa plans are exempt from PPACA market reform requirements which include benefit requirements such as the prohibition on annual limits, preventive care with no cost share, etc. In most but not all cases, the PPACA taxes would also not apply. This is true for both fullyinsured and self-funded plans. Therefore, these plans are not impacted by the new law because they were not subject to these requirements prior to its passage. However, even if the plan itself is not subject to PPACA, most American citizens covered on these plans and/or foreign nationals living and working in the U.S. covered on these plans will be subject to the PPACA s individual mandate requirement unless they qualify for an exemption. For example, U.S. citizens who qualify as bona fide foreign residents, residents of certain U.S. territories, and persons in the U.S. on A & G visa types are exempt from the mandate and deemed to have minimum essential coverage (MEC) for tax purposes. Foreign-issued employer sponsored plans (fully insured and ASO) can be considered MEC for covered expatriates and their dependents provided the employer and/or insurer meet certain conditions including the completion of MEC reporting (known as 6055 reporting) to both the IRS and covered individuals. Please see Question 6 for more information on the individual mandate. Additionally, foreign employers need to be mindful of the employer mandate. Foreign employers with a parent or subsidiary in the U.S. and/or 50 or more full-time employees or full-time equivalent employees working in the U.S. may be subject to the employer mandate and required to complete employer taxreporting (known as 6056 reporting) for applicable employees. Please see Question 7 for information on the employer mandate. U.S. Sitused Plans (U.S.-issued employer sponsored plans) As a result of the new law, U.S.-sitused expatriate plans (ASO and fully-insured) are exempt from PPACA s market reform requirements, many administrative requirements, fees and most taxes. These include benefit requirements such as the prohibition on limits, OOP maximum limits, and preventive care with no cost share, etc. Additionally, such plans are exempted from other provisions such as therequirement to provide a Summary of Benefits and Coverage (SBC), the Transitional Reinsurance Program (TRP), PCORI/CERF fees, the U.S. annual health insurer fee (HIT) after 2015 and the 40% nondeductible high-cost Cadillac plan excise tax* beginning in *Certain categories of inpatriates to the U.S. may still be subject to the Cadillac tax. Regulatory guidance is needed to clarify which persons may be within scope. While the law does not exempt employers and individuals from the employer and individual mandates, it does deem U.S. issued expatriate plans that meet the criteria to be MEC for purposes of these mandates. The law imposes requirements employers, insurers, plans and covered employees must meet to qualify for relief. Employer-sponsored U.S.-issued expatriate plans that do not meet the criteria in the law are not eligible for relief and would be required to comply with all applicable PPACA requirements (including those noted above) as if 2

3 they were a U.S. domestic plan. Such plans would need to comply with all PPACA requirements applicable to large group plans for either grandfathered or non-grandfathered plans depending upon the group s status. 2. What are the requirements for a U.S. issued expatriate plan to qualify for the relief provided by the Expatriate Health Coverage Clarification Act of 2014? Much like the previous transitional relief, the law requires U.S. issued expatriate plans to meet certain conditions to qualify. Insurance carriers must also meet certain conditions to qualify as providers of expatriate plans. The law also creates categories of qualified expatriates with different requirements for each category. While the requirements might seem onerous at first glance, most U.S. issued expatriate plans issued by reputable medical carriers already meet most, if not all, of these requirements. Cigna meets the definition of an expatriate health plan issuer as outlined in the law. U.S. Issued Plan Requirements (fully insured and ASO): Substantially all of the primary enrollees are qualified expatriates (see definitions below) but the employer does not include locally hired non-us nationals (sometimes called key local nationals ) in determining the substantially all test; Substantially all of the benefits provided are not excepted benefits (as defined in HIPAA); The plan provides inpatient hospital services, outpatient facility services, physician services and emergency services (coverage of emergency services including application of a prudent layperson standard); The plan sponsor reasonably believes that the benefits provided by the expatriate health plan satisfy standards that are not less than the current 60% minimum value standard required of domestic plans to meet the employer mandate requirement. The 60% MV test already applied to most large employers due to the employer mandate; For expatriates living and working in the U.S. ( inpatriates ), the plan provides coverage in the U.S., in the country or countries from which the individual was transferred or previously assigned (with flexibility as needed in light of the individual s existing coverage), and potentially in such other country or countries as the Secretaries of HHS, Treasury, and Labor may designate. For all other expatriates, the plan provides coverage in the country or countries in which the individual is present in connection with the individual s employment and potentially in such other country or countries as the Secretaries of HHS, Treasury and Labor may designate; If the plan provides dependent coverage of children, the plan makes such dependent coverage available to dependents up to 26 years of age (unless such individual is the child of a child receiving dependent coverage). This requirement already applied due to the employer mandate; The plan or coverage continues to meet pre-aca provisions such as ERISA, Mental Health Parity & the Public Health Service Act; and The plan is issued by an expatriate health insurance issuer that meets the qualifications in the law (see below). 3

4 Insurer/Plan Issuer Requirements: Has licenses to sell insurance in more than two countries; 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; Maintains call centers, directly or through third party contracts in three or more countries and accepts calls from customers in eight or more languages; Processes at least $1,000,000 in claims in foreign currency equivalents each year; Makes available for sale global evacuation/repatriation coverage; Maintains legal and compliance resources in three or more countries; and Offers reimbursements for items or services under such plan or coverage in local currency in eight or more countries. Qualified Expatriate Definitions: A. Inpatriates: In respect of expatriates who are in-bound to the U.S. ( inpatriates ), the term qualified expatriate means a primary insured: Whose skills, qualifications, job duties or expertise is of a type that has caused his or her employer to transfer or assign him or her to the U.S. for a specific and temporary purpose tied to his or her employment In connection with the transfer or assignment is reasonably determined by the plan sponsor to require access to health insurance and other related services and support in multiple countries Is offered other multi-national benefits on a periodic basis during the assignment such as tax equalization, moving expenses or paid home leave/visits. (This is not a definitive or set list the inpat must be offered some other assignment related benefits in addition to health insurance in connection with the assignment.) B. U.S. Expatriates In respect of U.S. outbound expatriates, the term qualified expatriate means a primary insured: Who is working outside of the U.S. for a period of at least 180 days in a consecutive 12 month period that overlaps with the plan year. C. Discretionary Groups The Secretaries of HHS, Labor, and Treasury may designate groups of similarly situated individuals, such as groups consisting of students, to be expatriate plans. 4

5 3. Does Cigna qualify as an expatriate health plan issuer as defined in the Expatriate Health Coverage Clarification Act? Yes, the Cigna meets the requirements as specified in the law to qualify as an expatriate health plan issuer. 4. When does the Expatriate Health Coverage Clarification Act of 2014 take effect? Subject to regulatory clarification, we believe the benefit relief provided by the law would be immediate but employers would have until their first renewal on or after July 1, 2015 to make any required changes to their plan to qualify for relief. We believe that the tax / fees relief, such as the Health Industry Fee, would apply after the client s first renewal on or after July 1, Are IGO s, Embassy Groups and Foreign Missions/Diplomatic Agencies exempt from PPACA? It depends. The Internal Revenue Service (IRS) and U.S. Department of State have determined that foreign missions and certain public international organizations (IGOs) designated by executive order are exempt from provisions of PPACA due to U.S. laws and treaty obligations. An organization may be exempt from employer requirements such as the employer mandate, if, for example, it is a foreign mission and the country has a reciprocal tax agreement with the U.S., or if the entity is an IGO or other international organization designated as exempt by executive order. Generally, however, even if a foreign mission, IGO, or embassy is exempt from the employer mandate penalties and 6056 reporting requirements, the employees and their dependents working for the foreign mission, IGO, or embassy who would otherwise need MEC are not exempt from the individual mandate requirement unless they meet an existing exemption such (as the bona-fide foreign resident exemption) or hold A or G visas or select student visas. Therefore, it is critical that any exempt organization understands that their employees may still be subject to the MEC requirement. Accordingly, these entities may want to sponsor MEC coverage for their use and provide the 6055 MEC reporting to protect their employees from potential penalties. For organizations which do not meet the definition of a foreign mission or embassy and those IGOs which are not exempt via executive order, whether PPACA applies and which provisions apply will depend upon whether the plan is written in the U.S. or outside the U.S. and whether the employer is subject to the employer mandate. Please see Question Will employer-sponsored expatriate plans qualify as Minimum Essential Coverage (MEC) for purposes of the individual mandate? In most cases yes, but not always. The requirements that will need to be met for the plan to qualify as MEC may differ depending upon whether the plan is U.S.-issued or non-u.s.-issued and the funding type. U.S.-Issued expatriate plans The Expatriate Health Coverage Clarification Act deems fully-insured and self-insured U.S.-issued group plans which meet the requirements in the law as MEC for employees who are qualified expatriates and their dependents. Non U.S- issued or Foreign Issued Expatriate Plans ASO plans, whether sponsored by a U.S. or non-u.s. employer, should qualify as MEC. Fully-insured, foreign-issued expatriate plans may qualify as MEC for the following covered individuals*: o Individuals who, for a month, are physically absent from the U.S. for at least one day of that month. 5

6 o Expatriates who are physically present in the U.S. for an entire month if the coverage provides health benefits within the U.S. while the individuals are on expatriate status. *Fully-insured employer sponsored foreign issued plans do not appear to qualify as MEC for U.S. local nationals as the definitions above specifically refer to expatriates physically present in the U.S. on expatriate status. In order for foreign-issued plans to be considered MEC for the individuals who meet the criteria above, the employer must (i) provide a notice to participants that the plan is MEC, and (ii) provide MEC reporting to the IRS and covered participants. MEC reporting must be completed in early 2016 for the 2015 plan year and in the first quarter of all subsequent years. MEC reporting is the requirement of the carrier for fully-insured plans and the employer for selfinsured plans. 7. Does the Expatriate Health Coverage Clarification Act of 2014 exempt employers from the employer mandate? No. The Expatriate Health Coverage Clarification Act of 2014 does not exempt employers from the employer mandate or other employer requirements. However, the employer mandate applies only to those employers that are considered Applicable Larger Employers (ALE) and does not apply to those that are not considered ALEs or to those that are exempt for other reasons (see Question 5). The employer mandate continues to apply to any employer (U.S. or non-u.s.) that is considered an ALE. The test for whether an employer is an ALE is complicated and not as simple as whether the company is a U.S. or non-u.s. employer. Please see our companion document titled Overview of the Controlled Group Rules for Purposes of Determining Employer Mandate Obligations under the Affordable Care Act which outlines the control group rules. Any employer can be considered an ALE if it has 50 or more full-time employees or full-time equivalent employees working in the U.S. for it or any of the companies or subsidiaries in the ALE s control group. Employers are generally not required to count employees working outside the U.S., i.e. U.S. expats working abroad, although to the extent an employer is subject to the employer mandate, it may be required to offer affordable and minimum value coverage to U.S. employees working abroad for less than 12 months, or risk employer mandate penalties. ALE Example While there may be only 10 U.S. in-bound expatriates ( inpatriates ) employed full-time and covered on an expatriate policy issued to a company in Germany, if the U.S. subsidiary of that German company employs 40 full-time employees in the U.S., the German company would be considered an ALE because the controlled group has 50 fulltime/full-time equivalent employees in the U.S. across the two companies and, therefore, the German Company would be subject to the employer mandate, penalties and reporting requirements. Alternately, if the German company with the 10 inpatriates does not have any subsidiaries or a parent company with employees in the U.S. (or if the companies together have less than 50 full-time/full-time equivalent employees), it will not be subject to the employer mandate, penalties or reporting requirements. The employee counts are further complicated by the method the employer chooses to count and report employees for purposes of the reporting requirements. An insurer or administrative service company is not able to advise employers if they are an applicable ALE for purposes of the employer mandate. Non-US employers that are part of a U.S. control group should coordinate with their operations in the U.S. to identify any impacts. 6

7 8. What are the employer mandate requirements and penalties generally? U.S. and non-u.s. employers that are considered Applicable Large Employers (ALEs) (see Question 7) have to meet three criteria to avoid the employer mandate penalties. Requirement 1: Offer medical coverage to employees ALEs must make a qualifying offer of coverage: To at least 70% of all full-time employees (FTEs) working in the U.S. in 2015 and 95% in subsequent years. The offer of coverage must be made to the FTEs and their dependent children up to age 26. PPACA specifically excludes spouses as dependents. If the employer does not meet this test, and one of the FTEs goes to and qualifies for tax subsidized coverage on a public exchange (such as Healthcare.gov), then the employer will be subject to a $2,000 per FTE fine, but can subtract the first 80 FTEs in 2015 and the first 30 FTEs in subsequent years. This requirement and penalty is commonly referred to as the A penalty. The employer would not incur the penalty if coverage was offered to at least 70% of the employees and dependents in 2015 and 95% in subsequent years. Thus, the employer does have some protection that a small percent of employees with no or inadequate coverage would not trigger the A penalty. Additionally, an employer is not penalized for employees who were provided a qualifying offer but did not choose to enroll. There is no requirement to offer coverage to non-employees, part time employees, retirees or spouses. Requirements 2 and 3: Coverage must meet minimum value and affordability tests If an ALE offers coverage, at least one of the plans offered to FTEs and dependent children to age 26 must meet both the minimum value (MV) and affordability tests. Minimum value very generally means that a plan must cover 60% of the costs of covered services. Plans can be compared to government provided safe harbor plan designs or run through the government s minimum value calculator. The affordability test requires that the employee s contribution to the premium for self-only coverage does not exceed 9.5% of: Employee's current W-2 wages (reduced by any salary reductions under a 401(k) plan or cafeteria plan) Employee s current year monthly wages (hourly rate x 130 hours per month), OR Federal Poverty Level for a single individual If at least one plan does not meet both the MV and affordability tests and any of those FTEs apply for and receive subsidized coverage on a public exchange, the employer will incur what is commonly referred to as the B penalty. For each FTE who receives subsidized coverage on the exchange, the employer would pay a penalty of the lesser of $3,000 per employee receiving the tax credit or $2,000 per FTE, but can subtract the first 80 FTEs in 2015 and the first 30 FTEs in 2016 and beyond. As mentioned, an employer need only offer at least one plan that meets both tests outlined above and can then offer other plans which do not meet one or both. Employers cannot be penalized for offering other plan options as long as one plan option meets the two tests. An employer can also not be penalized if employees who had an option to select a MV/affordable plan choose either not to enroll or choose an option that does not meet the tests. Thus, perhaps the simplest way to think about the employer penalty is that employers subject to the penalty need to make an offer of coverage (MEC) that meets the minimum value and affordability tests to at least 70% of their fulltime employees (and dependents) working in the U.S. in 2015 and 95% in 2016 and subsequent years to avoid the A 7

8 penalty. Any full-time worker in the U.S. without MEC could, in theory, trigger a B penalty but would have to apply and qualify for tax subsidies on a U.S. public insurance exchange. In addition to the requirements and associated penalties, employers must also comply with the employer mandate reporting requirements known as 6056 reporting which require reporting in early 2016 for 2015 plan years. ASO plan sponsors are also responsible for MEC reporting also known as 6055 reporting. It is important to remember that companies within an employer s control group must aggregate the number of fulltime employees for purposes of determining whether they are an ALE but the reporting and penalties, if incurred, are the responsibility of the individual member ALE company. For more information on the employer mandate, please visit: 9. Are employers with full-time or full-time equivalent employees subject to the employer mandate penalties and related tax reporting requirements? Employers with 50 to 99 full-time employees or full-time equivalent employees (determined across the employer s IRC section 414 controlled group) may be eligible for transition relief for 2015 if they meet certain requirements. Under the terms of the relief, a qualifying employer will not be liable for any employer mandate penalties for any calendar month of 2015 if it meets certain requirements. Such employers will, however, still need to engage in the required 6056 reporting (see question 11). To qualify for the one-year delay in the application of employer mandate penalties, an employer must meet the following criteria: Not reduce number of employees, or hours of employees in 2014 unless for bona fide reasons Not materially reduce coverage in effect as of February 9, 2014 Engage in 6056 tax reporting Regarding the second criteria listed above, the IRS has provided a series of safe harbors under which certain actions will not result in a material reduction in coverage. These include: Do not narrow or reduce classes of employees to whom coverage was offered on February 9, 2014 Do not reduce benefits or exclude previously covered benefits unless plan provides minimum value on February 9, 2014 and after the change will continue to provide minimum value Employer contribution must remain either (i) at least 95% of the dollar amount that was offered on February 9, 2014, or (ii) the same or a higher percentage of the premium cost that was covered by the employer on February 9, Is there any relief from the employer mandate penalties for non-calendar year plans? Yes, but only for qualifying employers. Very generally, for employers that have maintained a non-calendar year plan since prior to December 27, 2012, not amended their plans since December 27, 2012 to start at a later date, and offered the plan on a sufficiently broad basis, such employers are not subject to any employer mandate penalties for any full-time employees (whether offered or currently covered) so long as they offer compliant coverage as of the first day of their 2015 plan year. 8

9 Specifically, in order to qualify for the relief for non-calendar year plans, the employer must be able to satisfy each of the following criteria: The employer must have been sponsoring a non-calendar year plan continuously since before December 27, 2012 AND The non-calendar year plan was not amended after December 27, 2012 to begin at a later date AND, EITHER: The non-calendar year plan was offered to at least 33% of all employees at last open enrollment, or at least 25% of all employees enrolled in the plan OR The non-calendar year plan was offered to at least 50% of all full-time employees (using 130-hour rule) at last open enrollment, or at least 33% of all full-time employees enrolled in the plan 11. Does the Expatriate Health Coverage Clarification Act exempt expatriates and their dependents from the individual mandate? No. Anyone subject to the individual mandate is not exempt as a result of the new law. However, the law does deem U.S. issued employer sponsored qualified expatriate plans to qualify as MEC. Please see Question 6 for more information on which plans qualify as MEC for purposes of the individual mandate. 12. Are expatriate employees subject to the individual mandate? It depends. Under PPACA, all U.S. citizens, nationals, and resident aliens are required to have minimum essential coverage, unless they are exempt. Exempt U.S. citizens include U.S. citizens who reside outside of the U.S. and are considered bona fide foreign residents. This exemption applies to: A U.S. citizen who has a tax home in a foreign country, and Has been a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire taxable year; or Is present in a foreign country or countries during at least 330 full days in a twelve month period. See details under the IRS foreign earned income exclusion test. Foreign nationals living and working in the U.S. who are resident aliens must also have MEC unless they are in the U.S. on A, G or other select student visas. Persons considered non-resident aliens are exempt. There are a number of other exemptions such as financial hardship exemptions for which an individual might qualify. A full list of these exemptions can be found here. 13. What are the penalties for failure to satisfy the individual mandate? The penalties are effective beginning with the 2014 plan year and are payable the next year when taxpayers file their tax returns. The penalties are as follows: 2014: The greater of $95 per adult and $45 per child (up to a family maximum of $285) OR 1.0% of taxable income over the filing threshold capped at the maximum amount equal to the average premium for a bronze plan ($12,240). 9

10 2015: The greater of $325 per person (up to a family maximum of $975) OR 2.0% of taxable income over the filing threshold capped at the maximum amount equal to the average premium for a bronze plan (to be announced by the IRS in 2015). 2016: The greater of $695 per person (up to a family maximum of $2,085) OR 2.5% of taxable income threshold capped at the maximum amount equal to the average premium for a bronze plan (TBA by the IRS in 2016). After 2016: The same as 2016, but adjusted annually for cost-of-living increases. More information on the calculation of penalties can be found here. 14. What reporting is required for expatriate plans? The two reporting requirements most relevant to expatriate plans are the employer mandate reporting and the MEC reporting under IRC sections 6056 and 6055 respectively. Reporting occurs in the first quarter of the next calendar year (i.e., Q1 of 2016 for the 2015 calendar year). Employer Mandate Reporting Employers considered ALEs will be responsible for what is referred to as 6056 reporting. An employer needs to look at the number of full-time employees working in the U.S. across its control group of companies to determine whether it is an ALE. Each individual ALE member is responsible for complying with the employer reporting requirement and is liable to the IRS for any penalties that may result. The employer is required to report the requisite information to both the IRS and to individuals named in the report (i.e. full-time employees to whom an offer of coverage was or was not extended). Employers generally report those full-time employees working in the U.S. (regardless of citizenship) and do not report employees working outside the U.S. An ALE is not required to report U.S. citizens or other employees working outside of the U.S. provided they do not have U.S. sourced income. There are two reports required for each ALE member. The first is Form1095-C which is the actual return filed with the IRS and provided to each individual full-time U.S.-based employee (similar to the way in which a Form W2 is distributed). A corresponding Form 1094-C is used to transmit the Forms 1095-C to the IRS. Examples of data required to be reported on the Form 1095-C include: Employer contact and tax information, including a contact person s name and phone number Certification that full-time employees (FTEs) and dependents were offered an opportunity to enroll in MEC, by calendar month Number of FTEs for each month, and months for which MEC was available for each FTE Each FTE s share of lowest cost monthly premium for self-only coverage of minimum value plan, by calendar month Name address and Social Security Number (SSN)/Tax Identification Number (TIN) for each FTE, and each month of coverage Individual Mandate or MEC Reporting All entities that provide MEC for individuals must complete MEC reporting, also referred to as 6055 reporting. Starting with 2015 health coverage, insurers providing fully-insured coverage and employers that self-insure their group health plans must provide the IRS and covered individuals with information about minimum essential coverage. This information confirms each person s enrollment for each month of coverage as required by the individual 10

11 mandate. With very limited exceptions, all U.S. citizens and all legal U.S. residents regardless of citizenship are required to show proof of having MEC. Therefore, unlike the employer reporting, it is not limited to only persons living and working in the U.S. Both U.S.-issued and non-u.s.-issued employer sponsored plans can be considered MEC (see Question 3 for details on the requirements for non-u.s.-issued plans). This reporting requirement applies to all size employer plans. The 2015 reporting is first due in early 2016 in tandem with other tax-filing documentation. The forms that will be used for reporting purposes are Form1095-B and a corresponding transmittal Form 1094-B. For employers that are ALEs and subject to 6056 reporting (see above), and who sponsor self-funded plans, they will need to engage in combined reporting. Per the IRS rules, such employers will need to include the information on part of the Form 1095-C that would otherwise be reported on Form 1095-B. For employers with fully-insured coverage, the insurer is responsible for the completion of the forms. The information that will need to be reported for purposes of MEC or 6055 reporting include: Name, address, and the Employer Identification Number (EIN) of reporting entity Name address and SSN/TIN of each responsible individual (primary insured) Name and SSN of each covered individual (including spouse and dependents) Months of coverage during calendar year For insured group health plans, name, address, and EIN of employer sponsoring the plan Because social security numbers (SSNs) or tax identification numbers (TINs) are required data elements, insurers have to collect this data from employers and plan participants. Both employers and plan participants have a vested interest in providing this data as it will shield them from tax penalties. Insurers conducted outreach to fully-insured employers and plan participants for missing SSNs and TINs in 2014 and early The insurer must make three documented attempts to obtain this information or face penalties. If after three attempts, the insurer cannot obtain an SSN or a TIN, the information for the covered individuals may be sent to the IRS with only a date of birth. This presumably puts the individual and their dependents at risk of a fine as the IRS will not have the SSN or TIN to compare with a taxpayer s tax filing. More information and IRS forms: As mentioned above, there are two forms required for each set of information being reported, a transmittal form that serves as a cover letter as well as forms providing data on the individual or employer mandate. The instructions and respective forms to be completed and filed are as follows: Instructions for employers to file Form 1094-C (a transmittal/cover sheet) to the IRS only, and Form 1095-C to both the IRS and named individuals. If its plan is insured, the employer will only complete Parts I and II of Form 1095-C. Instructions for insurers to send Form 1094-B (a transmittal /cover sheet) to the IRS only, and Form 1095-B to both the IRS and named individuals for insured coverage only. Employer fact sheet: Employer fact sheet 15. Are non-u.s.-issued plans required to cover PPACA mandated benefits? It depends. ERISA plans are subject to PPACA requirements and must comply, although U.S.-issued, fully-insured, employer-sponsored expatriate plans are exempt from most benefit requirements under The Expatriate Health Coverage Clarification Act of Non-ERISA plans written on non-u.s. entities are not required to cover PPACA mandated benefits for U.S. citizens or foreign nationals working in the U.S. 11

12 PPACA benefit requirements attach to the plan, not to a person s citizenship. However, many American expatriates and U.S. located inpatriates covered on non-u.s.-issued plans may believe they are entitled to these benefits by virtue of their citizenship or work location and some employers might wish to take this into consideration, but is not a requirement. While foreign plans in general may not be subject to PPACA market reform requirements and fees/taxes, plan participants who are U.S. citizens or inpatriates to the U.S. may be subject to the individual mandate and will need to have minimum essential coverage unless they qualify for an exemption. As discussed above, foreign-issued group expatriate plans can be MEC provided they meet certain conditions (see Question 6). Because foreign-issued group expatriate plans can be MEC, if they so qualify, they may also suffice for purposes of the employer mandate provided they meet the minimum value and affordability tests and offer coverage for dependents of employees working in the U.S. up to age 26. Guidance provided by HHS in October 2013 indicates that self-funded foreign plans will be considered MEC for purposes of the employer mandate; however, the guidance was silent on foreign-issued fully insured plans. The IRS is expected to clarify this issue in final regulations. Non-U.S. plans covering inpatriates to the U.S. may need to update the coverage provided to include dependent coverage up to the end of the month in which a dependent turns 26 to avoid employer mandate penalties (see Question 5). 16. What factors should an employer consider in respect of an expatriate plan? There are many factors employers need to consider. The composition of the employee group, their locations and whether the employer is subject to ERISA will all impact the decisions employers need to make about where to situs their plan and what requirements will apply. The work locations of expatriate employees will often dictate or limit where a policy is issued thus making it important to partner with a global health service company with multiple license options. Whether the employer is subject to PPACA s employer mandate and whether any of the expatriate employees are subject to the individual mandate are also important considerations. Because of the complexities of PPACA, it is important that clients work with a global health service company that is experienced in these issues and prepared to assist them in evaluating challenges and assisting with compliance requirements. Cigna's long history and commitment to providing globally compliant solutions remains among our core strengths and competitive advantages. Our advocacy on the issue of expatriate plan PPACA compliance coupled with an extensive license base makes us well-suited to work with multinationals to develop compliant solutions to global PPACA challenges. We urge all clients and potential clients to take advantage of learning what may be the best solutions for each particular set of facts and circumstances by contacting their Cigna Client Manager or New Business Manager. All Cigna products and services are provided exclusively by or through operating subsidiaries of Cigna Corporation, including Cigna Health and Life Insurance Company. The Cigna name, logo, and other Cigna marks are owned by Cigna Intellectual Property, Inc. 12

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