The Global Compliance Advantage Understanding PPACA Compliance for Global Plans Elaine McCarthy, Product Director John Kaye, Sales & Client Management Director May 13, 2014 Cigna is uniquely positioned to help clients navigate the change and optimize savings.
We don t sleep so you can Global Resources TODAY S AGENDA Spotting issues before they become problems Proactive Advocacy Putting up with politics so you don t have to PPACA Update Solving the most complex compliance puzzles Structuring Global Plans To Deal Effectively With PPACA Challenges Enablers, Advocates, Mitigators, Connectors, Partners, Solvers Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. 2014 Cigna 2
CIGNA COMPLIANCE & LEGAL -- WE DON T SLEEP SO YOU CAN GLOBAL RESOURCES Legal, Compliance and Government Affairs professionals: 245 Dedicated to Global Employer Segment: 31 (excluding shared resources) Locations of Legal and Compliance Resources: Bahrain, Belgium, China, England, Hong Kong, India, Indonesia, Korea, Scotland, Singapore, Spain, Taiwan, Thailand, Turkey, United States Enablers, Advocates, Mitigators, Connectors, Partners, Solvers Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. 2014 Cigna 3
COMPLIANCE EVOLUTION Protective Tax Advantage (onshoring) Mandatory Healthcare Developing Brazil South Africa Russia Switzerland Russia India Australia Mexico UAE- Abu Dhabi KSA Australia Czech Republic Australia USA Switzerland South Korea UK UAE- Dubai Options.. Ignore, Localise, Co-ordinate, Mitigate, Comply 4
SOLID, SUSTAINABLE AND CREATIVE SOLUTIONS FOR GLOBAL COMPLIANCE CHALLENGES Local licenses Regional top-up solutions US health care reform Enablers, Advocates, Mitigators, Connectors, Partners, Solvers 5
SOLVING THE MOST COMPLEX COMPLIANCE PUZZLES COUNTRY UPDATES RUSSIA: New CignaLinks Russia launched in 2013 to provide compliant cover for Russian branch offices with both expatriate and local employees enabling the employer to benefit from tax advantages MIDDLE EAST: New Joint venture launched in 2013. New TPA licensed in Bahrain and licenses in other jurisdictions underway. CHINA: Hosted members of the Chinese Insurance Regulatory Commission for a discussion of U.S. Healthcare Reform and continue to consult on matters related to healthcare and insurance reforms in China. INDIA: New Joint venture launched and the first approval of an expatriate product in all of India is currently underway. Enablers, Advocates, Mitigators, Connectors, Partners, Solvers Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. 2014 Cigna 6
SOLVING THE MOST COMPLEX COMPLIANCE PUZZLES COUNTRY UPDATES Russia Middle East China India New CignaLinks Russia launched in 2013 to provide compliant cover for Russian branch offices with both expatriate and local employees enabling the employer to benefit from tax advantages New Joint venture launched in 2013. New TPA licensed in Bahrain and licenses in other jurisdictions underway Hosted members of the Chinese Insurance Regulatory Commission for a discussion of U.S. Healthcare Reform and continue to consult on matters related to healthcare and insurance reforms in China. New Joint venture launched and the first approval of an expatriate product in all of India is currently underway. Enablers, Advocates, Mitigators, Connectors, Partners, Solvers 7
CIGNA LEGAL SPOTTING ISSUES BEFORE THEY BECOME PROBLEMS PROACTIVE ADVOCACY Significant efforts in pressing the US government for relief for globally mobile individuals and their employers from nonsensical PPACA requirements have resulted in numerous releases and relief to employers, and movement of legislation through the House of Representatives The only health insurer to issue public comments on the importance of including insurance services to the Trans Pacific Partnership The only health insurer to issue public comments on the importance of including insurance services to the Trans Atlantic Trade and Investment Partnership Met with senior members of the United States Trade Representative s Office to ensure that the free of movement of globally mobile employees is not hampered by provincial local insurance requirements. Secured expansion of EU Freedom of Service rights in Czech Republic Enablers, Advocates, Mitigators, Connectors, Partners, Solvers Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. 2014 Cigna 8
PPACA Putting Up With Politics So You Don t Have Too
PPACA QUIZ TRUE, FALSE OR IT DEPENDS A U.S. expat in Dubai will owe the individual mandate penalty because her employer provided health coverage is not U.S. issued? It Depends if she doesn t qualify for the bona fide foreign resident exemption or her employer does not comply with the reporting requirements for non-u.s. plans, the penalty may be due Foreign nationals in the U.S. are eligible for taxpayer funded subsidies to buy health coverage on the exchange? It Depends Foreign nationals in the U.S. legally are eligible for subsidies unless they have eligible employer sponsored coverage which would make them ineligible unless the coverage was deemed not affordable or doesn t meet minimum value Cigna Corp can be penalized in 2015 for not providing PPACA compliant coverage to our U.S. citizens considered locally hired foreigners? It Depends but probably not as an employer can t be penalized for employees whose hours worked are outside the US and do not receive U.S. sourced income Inpatriates (foreign nationals in the U.S.) must have PPACA compliant benefits? It Depends if the contract is U.S. issued it must comply with applicable PPACA requirements (insured expat plans do have some relief) but if the plan is a foreign-issued plan it is not required to comply with PPACA 10
THE GLOBAL REACH OF PPACA Non-U.S. Multi- Nationals U.S. and non-u.s. brokers U.S. multinationals U.S. expats PPACA Global health care professionals Trailing Dependents Inpatriates Non-U.S. expats IGO/NGO Workers Third country nationals 11
HOW PPACA IMPACTS INTERNATIONAL/EXPATRIATE PLANS Jurisdictional linkages PPACA requirements Plans/Insurers Applies to plans regulated by a state Applies to any health insurance issuer licensed in the United States (regardless of citizenship of employees covered) Any group health plan as defined in ERISA Imposes annual fees for United States Health Risk Employers U.S. employers subject to penalties in 2015 if: Coverage not provided to 70% of full-time employees Plan does not provide minimum value Coverage is not affordable Individuals Applies tax penalties to individuals who do not meet minimum essential coverage requirements Applies to U.S. citizens and legal U.S. residents Bona fide permanent residents of foreign countries and U.S. territories deemed to meet minimum essential coverage requirements 12
WHY THE NEED FOR ADVOCACY Applying PPACA requirements to international/expatriate plans Applying PPACA disadvantages requirements multinational to international/expatriate businesses and plans expatriate disadvantages employees. multinational businesses and expatriate employees. U.S. multinationals U.S. are multinationals disadvantaged are in disadvantaged the international in marketplace the international as they marketplace must as purchase PPACA they compliant must purchase policies for PPACA their expatriates compliant policies while their for their foreign expatriates competitors while do not. their foreign competitors do not. PPACA compliant Expatriate plans may plans not be provide cost-effective, coverage especially to global populations for third country nationals, may not provide compliant PPACA compliant global coverage plans may and not may be not cost-effective, comply with especially local laws. for third Employers may have country to purchase nationals, multiple may not policies provide with compliant overlapping global coverage coverage or and risk may non-compliance with not comply one or more with local nations laws. laws Employers staffing Employers a job internationally may have to may purchase select an multiple employee policies of non-u.s. with overlapping citizenry instead of an American coverage due or to risk the non-compliance higher cost of insuring with one the or American. more nations laws Employers may need Employers to split may policies need and to split contracts policies based and on contracts the citizenship based on or the work location of expatriates citizenship versus or one work global location plan of expatriates versus one global plan Policies subject to Policies tax even subject when to covering tax even non-u.s. when covering based employees non-u.s. based employees Discrimination provisions Discrimination and Cadillac provisions tax may and Cadillac disproportionately tax may disproportionately impact expatriate impact plans. expatriate plans. Employer concerns 13
TRANSITIONAL RELIEF FOR U.S. ISSUED EXPATRIATE PLANS Advocacy Update Breaking News: HR bill 4414 called the Expatriate Health Coverage Clarification Act passed the U.S. House of Representatives in late April after failing to pass two weeks prior. We increased the number of Republicans and Democrats who voted for passage and have bi-partisan support in the Senate Next steps: We need agreement from Democratic leadership in the Senate to allow a vote They will likely require editing of the House bill It would need to pass the Senate and be signed into law by the President Current language in the bill: Would exempt expatriate plans (fully insured and ASO plans from PPACA Would exempt plans and employers who use them from the tax provisions Would exempt employers using expatriate plans from the employer mandate Would deem expatriate plans as MEC for the purposes of the Individual mandate. 14
TRANSITIONAL RELIEF FOR U.S. ISSUED EXPATRIATE PLANS Many PPACA Provisions Delayed Through 2016 On March 8, 2013, the Departments of Labor, Health and Human Services and Treasury announced that compliance with Patient Protection and Affordable Care Act (PPACA) provisions in sub-sections A & C is being delayed for U.S. issued expatriate plans with plan years ending on or before December 31, 2015. On January 9, 2014, the departments issued another FAQ which extended the delay another year (for plans ending on or before December 31, 2016), extended applicability to sub-section D and clarified the definition of an expatriate plan An insured group health plan whose enrollment is limited to individuals who are expected to reside outside of their home country or outside of the United States for at least six months of a 12-month period and their covered dependents. The 12-month period can be within a single plan year or across two consecutive plan years. All federal requirements that were in place before PPACA, including Mental Health Parity, the Health Insurance Portability and Accountability Act (HIPAA) and the Employee Retirement Income Security Act (ERISA), will continue to apply to expatriate plans. Expatriate coverage, as defined above, will qualify as minimum essential coverage for purposes of the individual mandate. 15
TRANSITIONAL RELIEF CATEGORIES Relief Granted in These Categories No lifetime dollar limits Annual dollar limits 100% preventive care (including women s preventive) Dependent coverage to age 26 Doctor choice/patient protections No preexisting conditions (under age 19) MLR reporting and rebates Preventive care/women s health Appeals Prohibition on rescissions Prohibition on discrimination in favor of highly compensated individuals Summary of benefits and coverage Guaranteed issue Guaranteed renewability Elimination of pre-existing condition limitations for all Reinsurance tax Cost share limitations (out of pocket limit) Clinical trials Fall prevention Prohibition of discrimination by health status Rating reforms Excessive waiting periods 16
TRANSITIONAL RELIEF FOR EXPATRIATE PLANS Relief Does Not Apply Fees and taxes: The guidance did not provide relief from the tax provisions, however, the Comparative Effectiveness Research Fee (CERF) and reinsurance taxes were addressed in prior guidance: Funding impact: this definition, in referring to insured plans, excludes self-insured/aso plans. Self-insured expatriate plans must comply with all PPACA requirements with the exception of relief provided outside the FAQ (Comparative Effectiveness Research Fee, SBC delay, employer mandate delay) Employer penalties: The FAQ does not give employers relief from penalties if expatriate plans offered do not meet affordability or minimum value tests and/or it appears if the plan issued is not issued by a U.S. insurer Individual mandate penalties: No blanket relief given but existing exemptions (bona-fide foreign resident, hardship, etc., still apply) Reporting and administrative simplification requirements: transitional relief is not extended to employers and insurers for provisions in those categories Foreign-Issued plans: The FAQ applies only to U.S. issued eligible employer-sponsored plans but separate rules were issued for foreign issued plans as they relate to MEC 17
18
MANDATE IMPLICATIONS Employer Mandate Considerations Recent relief provides that applicable large employers will not be assessed penalties for 2015 plan years if employers offer coverage to at least 75% of its full time employees and 95% in subsequent years Hours of service for which an employee receives foreign sourced income are not considered FTEs and thus the employer is not required to offer coverage and they are not counted when determining if the employer meets the 95% test Hours of service do not include hours of service to the extent the compensation for those hours of service constitutes foreign source income, consistent with the rules of Federal taxation for determining whether compensation for services is attributable to services performed within or outside the United States. Thus, hours of service generally do not include hours of service worked outside the United States. This rule applies without regard to the residency or citizenship status of the individual. Therefore, employees working overseas generally will not have hours of service, and will not qualify as full-time employees either for purposes of determining an employer s status as an applicable large employer or for purposes of determining and calculating any potential liability under section 4980H. However, all hours of service for which an individual receives U.S. source income are hours of service for purposes of section 4980H. 19
MANDATE IMPLICATIONS Employer Mandate Considerations A U.S. employer must count any employees working in the U.S. (including non-u.s. expatriates working in the U.S.) and receiving US sourced income for the purposes of calculating any applicable penalty U.S. issued plans for foreign nationals in the U.S. will need to meet the affordability and minimum value tests as these employees are eligible for premium subsidies and can trigger employer penalties The method used by a large employer to determine what employees qualify as full time and subject to the 70% rule can impact whether certain expatriates working outside the U.S. must be counted (i.e. a look back period) Global employers should decide upon an appropriate strategy so as not to inadvertently trigger penalties Still unclear if non-u.s. issued plans will be considered eligible employer sponsored plans for purposes of the Employer Mandate 20
INDIVIDUAL MANDATE: PENALTY FOR NOT MAINTAINING MINIMUM ESSENTIAL COVERAGE Family of Four $200,000 income $29,000 assumed tax-filing threshold* 2014 2015 2016 Greater of $285 ($95 per adult and $47.50 per child) or $1,710 (1% of income over tax-filing threshold) Greater of $975 ($325 per adult and $162.50 per child) or $3,420 (2% of income over tax-filing threshold) Greater of $2,085 ($695 per adult and $347.50 per child) or $4,275 (2.5% of income over tax-filing threshold) * Estimate based on $27,100 threshold in 2012; Source: Internal Revenue Service, Revenue Procedure 2011-52, downloaded January 10, 2012 from http://www.irs.gov/pub/irs-drop/rp-11-52.pdf 21
Individual Mandate Considerations All American citizens (no matter where they are living) and any legal U.S. residents must maintain Minimum Essential Coverage or will be subject to the tax penalty unless they qualify for an existing exemption within the law. Minimum Essential Coverage includes coverage provided by private insurance companies which are eligible employer-sponsored plans, which are plans offered in a state. U.S. expatriates who meet the bona fide foreign resident test are automatically deemed to meet the requirements of the individual mandate Decisions about whether someone s bona fide residence is outside the U.S. are based on intent, nature of trip and other non-objective standards An individual must show the IRS that they have been a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, and Ultimately, the IRS decides whether a person qualifies as a bona-fide foreign resident which means employers will not know who within their covered population qualifies and who does not until after tax returns are filed 22
Minimum Essential Minimum Coverage Essential Coverage (MEC) What Qualifies as MEC U.S. issued eligible employer sponsored coverage meets the MEC requirement for US taxpayers U.S. issued eligible employer sponsored expatriate coverage meets the MEC requirement for US taxpayers Bona-fide foreign residents are deemed to have MEC Bona fide residents of US possessions are deemed to have MEC Government provided programs such as Medicare and Medicaid Plans purchased in the individual market within in a state or through an exchange Individuals who meet certain criteria (religious, financial hardships and other criteria) are exempt from penalties 23
Minimum Essential Coverage (MEC) Foreign Issued Employer Sponsored Expatriate Coverage After releasing conflicting rules in March, July and August, HHS issued sub-regulatory guidance in October 2013 which clarified that foreign-issued employer sponsored plans (ASO and Fully- Insured) will be considered MEC for purposes of the individual mandate penalty provided certain conditions are met. Plans can be considered MEC for: Individuals who, for a month, are physically absent from the United States for at least one day of that month. Expatriates who are physically present in the United States for an entire month if the coverage provides health benefits within the United States while the individuals are on expatriate status. 24
MINIMUM ESSENTIAL COVERAGE (MEC) Conditions for Foreign Plans to be Considered Minimum Essential Coverage Fully-insured foreign expatriate plans (not regulated by a State) can be considered MEC for US citizens and foreign nationals in the US automatically provided that: Plans covering foreign nationals in the US and/or trailing dependents provide benefits and access to care in the US Employers offering foreign expatriate plans must send a notice to all employees indicating the plan is MEC. While no official language has been provided HHS has indicated that this statement can be inserted into existing plan documents Employers offering foreign expatriate plans must agree to provide employer reporting in 2016 for the 2015 plan year These plans do not appear to be required to offer PPACA benefits/mandates required of US issued plans 25
Structuring Global Plans in Light of PPACA Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. 2014 Cigna 2
STRATEGIES FOR DEALING WITH UNCERTAINTIES Weigh the Costs / Benefits / Risks Pay or Play Employers need to make a decision Clients should consider the benefit and costs of PPACA when structuring plans US expat plans will meet MEC requirements US expat plans have some relief until 2017 plan year Using U.S. plans for an entire population (non-us risks) subjects the plan to all applicable PPACA mandates for the non-us risks on your plan How many US citizens and/or foreign nationals in the US? What is the penalty risk? How many TCN s on the plan? Do these employees expect PPACA benefits? Can employer penalties be triggered? Non-U.S. plans can be considered MEC in certain circumstances but unclear if non-u.s. plans are sufficient to avoid Employer Penalties Does it make sense to use a combination of on-shore and off-shore licenses? Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. 2014 Cigna 27
PPACA CASE EXAMPLE Client Strategies U.S. headquartered company fully insured and written on U.S. paper Employs 2000 expatriates 500 expats are U.S. citizens 500 are inpats to the U.S. 1000 are TCN s Could be subject to the employer penalty for the 500 inpats and 500 U.S. citizens depending upon counting method used Plan is considered MEC for the 500 U.S. citizen expats and 500 inpats Some U.S. expats may also qualify for bona-fide foreign resident exemption Plan is PPACA compliant (as applicable to expat plans) for all covered individuals Company could choose to: Keep entire plan on US paper avoids all risk of penalties but also subjects the plan for TCNs to higher cost of benefit mandates and taxes Carve out TCNs and use a non-us plan Carve out TCNs and U.S. expats on non-us plan Write off-shore but agree to employer reporting requirements for 2015 so plan is considered MEC but potentially trigger employer penalty (unclear at this time) Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. 2014 Cigna 28
PPACA CASE EXAMPLE Client Strategies UK headquartered Company but with a US subsidiary using non-us plan Employs 1200 expatriates 200 expats are U.S. citizens 500 are inpats to the U.S. 400 are TCN s Could be subject to the employer penalty for the 500 inpats 200 U.S. citizen expats and 500 inpats are potentially subject to the individual mandate penalty because the non-us issued plan is not MEC Some U.S. expats may qualify for bona-fide foreign resident exemption Inpats won t qualify for bona-fide foreign resident exemption higher penalty risk Company could choose to: Write entire plan on US paper avoids all risk of penalties Carve out US expats and inpats to US paper and leave TCNs on non-us plan Carve out only inpats since they generate employer penalty risk Stay off-shore but agree to employer reporting requirements for 2015 so plan is considered MEC Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. 2014 Cigna 29
Questions Offered by: Connecticut General Life Insurance Company or Cigna Health and Life Insurance Company. Cigna and the Tree of Life logo are registered service marks of Cigna Intellectual Property, Inc., licensed for use by Cigna Corporation and its operating subsidiaries. All products and services are provided by or through such operating subsidiaries and not by Cigna Corporation. Such operating subsidiaries include Connecticut General Life Insurance Company, Cigna Health and Life Insurance Company, and HMO or service company subsidiaries of Cigna Health Corporation and Cigna Dental Health, Inc. 872972 11/13 2014 Cigna. Some content provided under license.